Monarch Casino & Resort Posts Q2 2023 Results

Operator Monarch Casino & Resort, Inc. (NASDAQ: MCRI) reported a 7% annual increase in net revenue for Q2 2023, reaching $123.7 million. That’s according to its latest official quarterly report.

The Reno-based company’s net income for the quarter was $22.4 million. This translates to a profit of $1.14 per share.

However, these results fell short of Wall Street expectations. The average estimate of three analysts surveyed in a recent report by Zacks Investment Research predicted earnings of $1.18 per share.

As well as its namesake resort in Black Hawk, Colorado, Monarch also operates the Atlantis Casino Resort in Reno (pictured).

“Our financial results for the 2023 second quarter reflect our strong market position in Black Hawk and a year over year improvement in the operating performance at Atlantis,” said Cochairman and CEO of Monarch John Farahi in the report press release.

In addition to its financial results, Monarch Casino & Resort revealed that it is considering expanding its two-property portfolio through acquisitions.

Monarch also hit headlines back in March when its Colorado casino venue was the target of the biggest casino theft in the state’s history, totalling losses of $500,000.

Financial Position

Monarch Casino closed Q2 with $35.1 million in cash, and a $41 million line of credit. This is a substantial amount for a company with a market capitalization of $1.41 billion.

It also listed capital expenditures of $10.3 million over the quarter, much of which was spent upgrading the Atlantis property’s second hotel tower.

Monarch’s statement also contained a cash dividend announcement for shareholders of $0.30 per share which will be payable on September 15, 2023. That’s on top of the yearly cash dividend of $1.20 per share.

The company’s revenues have bounced back from 2020’s difficult year under COVID-19 pandemic restrictions. Some $123.7 million in net revenues in Q2 2023 is just shy of double the $62 million earned in the same period in 2019.

This state of affairs is comfortable, but also suggests that the operator might need to issue debt or sell equity to facilitate any potential acquisition.

Prudent Acquisitions

Analysts believe that Monarch’s management is highly selective, which benefits investors. But the current high-interest rate environment does not favor debt-fueled mergers and acquisition activity.

Monarch’s balance sheet flexibility could provide unique buying opportunities in a potential downturn, said Stifel analyst Jeffrey Stantial.

He also suggested that the operator could be a takeover target due to its quality assets and unclear long-term succession plans.

Farahi, however, was cautiously optimistic about his company’s prospects.

“We continue to evaluate potential acquisition opportunities where we can employ our developmental and operational expertise in a financially prudent manner,” he said.

If Monarch decides to expand beyond its current markets, the field of prospective sensible targets becomes smaller. The company is likely to continue looking at underinvested assets in quality markets characterized by stable supply, reasonable tax rates, and local economic growth drivers.

Northern Nevada and Colorado’s three gaming markets of Black Hawk, Central City, and Cripple Creek fit these criteria.