Quarterly Report for Quarter Ending June 30, 2025 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

​

Unless otherwise indicated, "Monarch," "Company," "we," "our," and "us" refer to Monarch Casino & Resort, Inc. and its subsidiaries.

​

CAUTIONARY NOTE ON FORWARD-LOOKING STATEMENTS

​

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as: "believes," "expects," "anticipates," "estimates," "plans," "intends," "objectives," "goals," "aims," "projects," "forecasts," "possible," "seeks," "may," "will," "could," "should," "might," "likely," "enable," or similar words or expressions, as well as statements containing phrases such as "in our view," or "we cannot assure you," "although no assurance can be given." Examples of forward-looking statements include, among others, statements we make regarding: (i) our belief regarding the exposure of our cash and accounts receivable to credit risk; (ii) our expectations regarding the litigation and any appeal relating to the construction of the Monarch Black Hawk expansion and related liens recorded by the general contractor and certain subcontractors against the Monarch Black Hawk; (iii) our expectations regarding our business prospects, strategies, estimates and outlook; (iv) our expectations regarding the positioning of our properties to benefit from future macro and local economic growth; (v) our expectations regarding future capital requirements; (vi) our anticipated sources of funds and adequacy of such funds to meet our debt obligations and capital requirements; and (vii) our expectations regarding legal and other matters.

​

Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on our current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. Our actual results and financial condition may differ materially from those indicated in the forward-looking statements. Therefore, you should not rely on any of these forward-looking statements. Important factors that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements include, among others, the impact of the events occurring in the Middle East and the conflict taking place in Israel, as well as those risks discussed in Part I, Item 1A-Risk Factors and throughout Part II, Item 7-Management's Discussion and Analysis of Financial Condition and Results of our Annual Report on Form 10-K for the year ended December 31, 2024, and in Part II, Item 1A-Risk Factors and elsewhere of this Form 10-Q. In addition, you should consult other disclosures made by us (such as in our other filings with the Securities and Exchange Commission ("SEC") or in Company press releases) for other factors that may cause actual results to differ materially from those projected by us. You should read this Form 10-Q, and the documents that we reference in this Form 10-Q and have filed with the SEC, and our Annual Report on Form 10-K for the year ended December 31, 2024, with the understanding that our actual future results, levels of activity, performance, and events and circumstances may be materially different from what we expect.

​

Any forward-looking statement made by us in this Form 10-Q is based only on information currently available to us and speaks only as of the date on which it is made. We undertake no obligation to publicly update or revise any forward-looking statements as a result of future developments, events or conditions, except as required by law. New risks emerge from time to time and it is not possible for us to predict all such risk factors, nor can we assess the impact of all such risk factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ significantly from those forecast in any forward-looking statements.

​

OVERVIEW

​

Monarch was incorporated in the state of Nevada in 1993. We own and operate the Atlantis Casino Resort Spa, a hotel and casino in Reno, Nevada (the "Atlantis") and Monarch Casino Resort Spa Black Hawk (the "Monarch Black Hawk"), a casino in Black Hawk, Colorado. In addition, we own separate parcels of land located next to the Atlantis and a parcel of land with an industrial warehouse located between Denver, Colorado and Monarch Black Hawk.

​

We earn revenues, operating income and cash flow from Atlantis and Monarch Black Hawk, primarily through our casino, food and beverage, and hotel operations. We focus on delivering exceptional service and value to our guests. Our hands-on management style focuses on customer services and cost efficiencies.

​

Atlantis: We continuously upgrade our property. With quality gaming, hotel and dining products, we believe the Atlantis is well positioned to benefit from future macro and local economic growth. Reno remains a healthy local-oriented market, but at the same time a very competitive market. The market's employment growth is broad based and we expect this positive indicator will support the continued strength of our business at Atlantis. At the same time, the tight employment environment has created labor challenges, including wage inflation, which we continue to actively manage. In addition, we are facing increased competition from the continued growth of California tribal gaming and an extremely competitive promotional environment in Northern Nevada. The increase in the labor costs and the other inflationary pressures, combined with continued aggressive marketing programs by our competitors, has applied pressure on Atlantis' revenue growth, operating costs and profit margins.

​

Monarch Black Hawk: Monarch Black Hawk is the first property encountered by visitors arriving from Denver and other major population centers via Colorado State Highway 119. The Denver metro economy remains strong with higher than the national average per capita personal income. At the beginning of 2022, we completed the master planned renovation and expansion, transforming the property into a world-class resort. Monarch Black Hawk is positioned to leverage the expanded operation, the elimination of betting limits and new game types in Black Hawk, Colorado, as well as to benefit from the growing state-wide online and retail sports betting. Monarch Black Hawk also is experiencing labor challenges, resulting from the distance to the staffing filter markets of Golden, Colorado and the Denver Metro area. We continue to attract high-value players from Denver and Boulder metro areas, who had previously traveled to other markets, such as Las Vegas, for a high-end casino entertainment experience. We believe that the quality of our expanded product and exceptional guest service will meet the demand of the high-end segment of the market and will grow revenue and accelerate market share.

​

KEY PERFORMANCE INDICATORS

​

We use the following Key Performance Indicators ("KPI") to manage our operation and measure our performance:

​

Gaming revenue KPI: Our management reviews on a consistent basis the volume metrics and hold percentage metrics for each gaming area. The main volume measurements are slot coin-in, table games drop, sportsbook write and keno write. Slot coin-in represents the dollar amount wagered in slot machines, including free promotional wagers. Table games drop represents the total amount of cash and net markers deposited in the table drop box. Keno write and sportsbook write represents the dollar amount wagered at our counters, along with sportsbook write made through our mobile wagering system. Volume metrics are important in managing the business, as our gaming win is affected by actual hold percentage, which in general varies from the expected hold percentage and historical hold percentage. Gaming win represents the amount of wagers retained by us. Hold percentage represents win as a percentage of slot coin-in, table game drop, sportsbook write, or keno write. Our win and hold percentages are calculated before discounts, commissions, deferring revenue associated with our loyalty programs and allocating casino revenues related to goods and services provided to patrons on a complimentary basis.

​

Food and Beverage revenue KPI: The main KPIs in managing our food and beverage ("F&B") operations are covers and average revenue per cover. A cover represents the number of guests served and is an indicator of volume. Average revenue per cover represents the average amount spent per food and beverage outlets' served guests. Changes in the average revenue per cover might be an indicator for changes in menu offerings, changes in menu prices or may indicate changes in our guests' preferences and purchasing habits.

​

Hotel revenue KPI:The main KPIs used in managing our hotel operation are the occupancy rate (a volume indicator), which is the average percentage of available hotel rooms occupied during a period, and the average daily rate ("ADR", a price indicator), which is the average price per sold room. Available rooms exclude those rooms unavailable for occupancy during the period due to renovation, development, or other requirements. Sold rooms include rooms where the guests do not show up for their stay and lose their deposit. The calculations of the occupancy rate and ADR include the impact of rooms provided on a complimentary basis. Revenue per available room ("RevPAR") represents total hotel revenue per available room and is a representation of the occupancy rate, ADR and miscellaneous hotel sales.

​

Operating margins: Our management is consistently focused on controlling expenses and finding cost savings, without affecting the quality of the product we offer and our guests' services and experience. We measure our performance using expense margin, which is a percentage of direct expenses, including labor, cost of product and any other operating expenses related to the gaming, food and beverage, or hotel operation to the net gaming, food and beverage, or hotel revenues. Selling, general and administrative ("SG&A") margin represents SG&A expenses for a period as a percentage of total net revenue for a period. In managing the food and beverage operation, we use Cost Of Goods Sold ("COGS") percentage, which represents a percentage of product cost to the food and beverage revenue and is a measurement of commodity prices and menu sales prices.

​

Our management evaluates the KPI as compared to prior periods, the peer group, or market, as well as for any trends.

​

RESULTS OF OPERATIONS

​

Comparison of Operating Results for the Three-Month Periods Ended June 30, 2025 and 2024

​

For the three months ended June 30, 2025, our net income totaled $27.0 million, or $1.44 per diluted share, compared to net income of $22.7 million, or $1.19 per diluted share, for the same period in 2024, reflecting a 19.1% and 21.0% increase in net income and diluted earnings per share, respectively. Net revenues in the three months ended June 30, 2025, totaled $136.9 million, an increase of $8.8 million, or 6.8%, compared to the three months ended June 30, 2024. Income from operations for the three months ended June 30, 2025, totaled $34.9 million compared to income from operations of $29.5 million for the same period in 2024.

​

Casino revenue increased 12.1% in the second quarter of 2025 compared to the second quarter of 2024. The increase in casino revenue was driven primarily by the continued increase in market share at our properties. Casino operating expense as a percentage of casino revenue decreased to 35.7% for the three months ended June 30, 2025, compared to 37.7% for the three months ended June 30, 2024, primarily due to better labor management and operational efficiency.

​

Food and beverage revenue for the second quarter of 2025 increased 1.1% compared to the second quarter of 2024 due to 4.0% increase in food and beverage revenue per cover, partially offset by a decrease in food and beverage covers by 2.8%.Food and beverage operating expense as a percentage of food and beverage revenue in the second quarter of 2025 decreased to 70.3% compared to 73.8% in the second quarter of 2024 due primarily to decrease in labor expense and increase in revenue per cover.

​

Hotel revenue decreased 3.1% in the second quarter of 2025 compared to the same quarter of 2024 primarily as a result of decrease in occupancy percentage to 79.6% during the second quarter of 2025 compared to 85.5% during the second quarter of 2024 resulting from lower convention group business in the current year than in the prior year. ADR increased by $4.08 ($189.42 in the second quarter of 2025 and $185.34 in the second quarter of 2024). Hotel RevPAR was $162.57 and $172.06 for the three months ended June 30, 2025 and 2024, respectively. Hotel operating expense as a percentage of hotel revenue increased to 34.3% in the second quarter of 2025 compared to 33.5% for the comparable prior year period primarily due to lower revenue.

​

Other revenue increased 7.7% in the second quarter of 2025 compared to the same prior year period primarily due to increases in spa and commission revenues at both properties.

​

SG&A expense increased to $26.8 million in the second quarter of 2025 from $26.2 million in the second quarter of 2024. As a percentage of net revenue, SG&A expense decreased to 19.6% in the second quarter of 2025 compared to 20.4% in the same period in 2024.

​

Depreciation and amortization expense increased to $13.6 million for the three months ended June 30, 2025, compared to $12.4 million for the same prior year period, due to new assets placed into service with the ongoing renovation at Atlantis.

​

We recognized $0.9 million and $0.1 million for the three months ended June 30, 2025 and 2024, respectively, in professional service fees relating to our construction litigation.

​

In the second quarter of 2025, we recognized $0.4 million of interest income, net of interest expense. In the second quarter of 2024, we recognized $0.2 million of interest expense, net of interest income. See further discussion of our Amended Credit Facility in the LIQUIDITY AND CAPITAL RESOURCES section below.

​

Comparison of Operating Results for the Six-Month Periods Ended June 30, 2025 and 2024

​

For the six months ended June 30, 2025, we had a net income of $46.9 million, or $2.50 per diluted share, compared to net income of $41.0 million, or $2.12 per diluted share for the same period in 2024, reflecting a 14.4% and 17.9% increase in net income and diluted earnings per share, respectively. Net revenues in the six months ended June 30, 2025, totaled $262.3 million, an increase of 5.0%, compared to the six months ended June 30, 2024. Income from operations for the six months ended June 30, 2025 totaled $60.2 million compared to $53.3 million income from operations for the same period in 2024.

​

Casino revenue increased 8.6% in the first six months of 2025 compared to the first six months of 2024 and was driven by an increase in market share at both properties. Casino operating expense as a percentage of casino revenue decreased to 36.7% for the six months ended June 30, 2025 compared to 37.8% for the six months ended June 30, 2024 primarily as a result of decrease in labor expense as a percentage of revenue and decrease in promotional allowances.

​

Food and beverage revenue for the first six months of 2025 increased 0.3% compared to the 2024 same period due to a 2.1% increase in food and beverage revenue per cover, partially offset by a decrease of food and beverage covers by 1.8%. Food and beverage operating expense as a percentage of food and beverage revenue decreased in the first six months of 2025 to 72.2% from 74.3% for the same period in 2024 primarily as a result of operational improvenents and eficiancies.

​

Hotel revenue decreased 1.9% in the first six months of 2025 compared to the first six months of 2024 primarily due to a decrease in occupancy from 82.2% during the first six months of 2024 to 80.2% during the same period of 2025 partially offset by an increase in ADR by $7.22, from $183.54 in the first six months of 2024 to $190.76 in the first six months of 2025. RevPAR was $164.91 for the first six months of 2025 and $162.96 for the first six months of 2024. Hotel operating expense as a percentage of hotel revenue increased to 35.9% in the first six months of 2025 compared to 34.5% for the comparable prior year period primarily as a result of lower revenue.

​

Other revenue increased 8.4% in the first six months of 2025 compared to the same prior year period.

​

SG&A expense increased to $54.0 million in the first six months of 2025 from $53.3 million in the first six months of 2024 primarily due to: $1.1 million increase in labor expense, partially offset by $0.4 million decrease in advertising and marketing expense. As a percentage of net revenue, SG&A expense decreased to 20.6% in the first six months of 2025 compared to 21.3% in the same period in 2024.

​

Depreciation and amortization expense increased to $26.8 million for the six months ended June 30, 2025 compared to $24.9 million for the same prior year period, due to new assets placed into service with the ongoing renovation at Atlantis.

​

During the first six months of 2025 we recognized $1.4 million in professional services fees relating to our construction litigation. During the first six months of 2024, we recognized $0.6 million in professional services fees relating to our construction litigation and $0.1 million in loss on disposal of assets..

​

During the first six months of 2025, we recognized $0.7 million of interest income, net of interest expense. During the first six months of 2024, we expensed $0.2 million of interest, net of interest income. See further discussion of our Amended Credit Facility in the LIQUIDITY AND CAPITAL RESOURCES section below.

​

CAPITAL SPENDING AND DEVELOPMENT

​

We seek to continually upgrade and maintain our facilities in order to present a fresh, high quality product to our guests.

​

Cash paid for capital expenditures for the six-month periods ended June 30, 2025 and 2024 totaled $28.4 million and $30.7 million, respectively. During each of the six-month periods ended June 30, 2025 and 2024, our capital expenditures related primarily to the redesign and upgrade of hotel rooms in the third tower at Atlantis, and the acquisition of gaming, and other equipment to upgrade and replace existing equipment at Atlantis and Monarch Black Hawk.

​

LIQUIDITY AND CAPITAL RESOURCES

​

Our principal sources of liquidity have been cash provided by operations and, for capital expansion projects, borrowings available under our Amended Credit Facility.

​

For the six months ended June 30, 2025, net cash provided by operating activities totaled $70.6 million, compared to net cash provided by operating activities of $62.6 million in the same prior year period. This increase was primarily a result of an increase in net income and an increase in depreciation expense.

​

Net cash used in investing activities totaled $28.4 million and $30.7 million during each of the six months ended June 30, 2025 and 2024, respectively. Net cash used in investing activities during each of the first six months of 2025 and 2024 consisted primarily of cash used for the redesign and upgrade of hotel rooms in the third tower at Atlantis and the acquisition of gaming and other equipment at both properties.

​

Net cash used in financing activities in the first six months of 2025 totaled $29.4 million and consisted of $20.0 million cash used for purchase of Company stock under the Repurchase Plan and $11.0 million used for payment of dividends, partially offset by $1.6 million of net proceeds from stock options exercise. Net cash used in financing activities in the first six months of 2024 totaled $41.8 million and consisted of $50.4 million cash used for purchase of Company stock under the Repurchase Plan and $11.2 million used for payment of dividends, partially offset by $17.5 million of borrowings under the Amended Credit Facility, net of the payments to the lender under the Amended Credit Facility, and $2.3 million of net proceeds from stock options exercise.

​

Sixth Amended Credit Facility

​

On December 31, 2024, the Company entered into the Amended and Restated Credit Agreement (the "Amended Credit Facility") with Wells Fargo Bank, N.A., as administrative agent. The Amended Credit Facility amends and restates the Company's $100.0 million credit facility, dated as of February 1, 2023 (the "Prior Facility").

​

The Amended Credit Facility extends the maturity date to January 1, 2028 and removes the lien on real property under the Prior Facility. As of June 30, 2025, the Company had no outstanding principal balance under the Amended Credit Facility, a $0.6 million standby letter of credit and $99.4 million remained available for borrowing.

​

In addition to other customary covenants for a facility of this nature, as of June 30, 2025, we were required to maintain a Total Leverage Ratio (as defined in the Amended Credit Facility) of no more than 1.5:1 and Fixed Charge Coverage Ratio (as defined in the Amended Credit Facility) of at least 1.1:1.0. As of June 30, 2025, our Total Leverage Ratio and Fixed Charge Coverage Ratio were 0.0:1.0 and 77.0:1.0, respectively.

​

On February 24, 2025, Wells Fargo Bank agreed to waive its right to declaring an event of default under the Amended Credit Facility arising out of the February 14, 2025 judgment on the litigation between Monarch and PCL, so long as we strictly comply with each and every other provision of the Amended Credit Facility. We believe that we are in full compliance.

​

The interest rate under the Amended Credit Facility is either SOFR (the Secured Overnight Financing Rate) plus a margin of 1.25%, or a base rate (as defined in the Amended Credit Facility) plus a margin ranging of 0.25% per annum. The Commitment Fee Percentage (as defined in the Amended Credit Facility) was revised to be 0.25% per annum.

​

We believe that our anticipated operating cash flows will be sufficient to sustain operations for the twelve months from the filing of this Form 10-Q for the quarter ended June 30, 2025 and fulfill our capital expenditure plans and authorized dividend distributions. However financial, economic, competitive, regulatory, and other factors, many of which are beyond our control, could negatively impact our operations. If we are unable to generate sufficient cash flow in the upcoming months or if our cash needs exceed our borrowing capacity under the Amended Credit Facility, we could be required to adopt one or more alternatives, such as reducing, delaying or eliminating planned capital expenditures, selling assets, restructuring debt or issuing additional equity.

​

For a discussion regarding our material commitments for capital expenditures, see the CAPITAL SPENDING AND DEVELOPMENT section above.

​

CRITICAL ACCOUNTING POLICIES

​

A description of our critical accounting policies and estimates can be found in Item 7 - "Management's Discussion and Analysis of Financial Condition and Results of Operations" of our 2024 Form 10-K. For a more extensive discussion of our accounting policies, see Note 1. "Summary of Significant Accounting Policies" in the Notes to the Consolidated Financial Statements in our 2024 Form 10-K filed with the SEC on March 3, 2025.

​