Red Rock Resorts, Inc. (RRR)

ITEM 7.     MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with the Consolidated Financial Statements and notes thereto included in Item 8. Financial Statements and Supplementary Data within this Annual Report on Form 10-K.

Overview

Red Rock was formed as a Delaware corporation in 2015 to own an indirect equity interest in, and manage, Station Casinos LLC, a Nevada limited liability company (“Station LLC”). Station LLC is a gaming, development and management company established in 1976 that owns and operates seven major gaming and entertainment facilities and 12 smaller casinos (three of which are 50% owned) in the Las Vegas regional market. In December 2023, we opened Durango Casino & Resort (“Durango”). As of December 31, 2024, we offered 16,447 slot machines, 320 table games and 3,030 hotel rooms in the Las Vegas market.

We own all of the outstanding voting interests in Station LLC and have an indirect equity interest in Station LLC through our ownership of limited liability company interests in Station Holdco (“LLC Units”), which owns all of the economic interests in Station LLC. At December 31, 2024, we held 58% of the economic interests and 100% of the voting power in Station Holdco, subject to certain limited exceptions, and we are designated as the sole managing member of both Station Holdco and Station LLC. We control and operate all of the business and affairs of Station Holdco and Station LLC, and conduct all of our operations through these entities. Other than assets and liabilities related to income taxes and the tax receivable agreement, our only material assets are our equity interest in Station Holdco, our voting interest in Station LLC and a note receivable from Station LLC. We have no operations outside of our management of Station Holdco and Station LLC.

Our Consolidated Financial Statements reflect the consolidation of Station LLC and its consolidated subsidiaries, and Station Holdco. The financial position and results of operations attributable to LLC Units we do not own are reported separately as noncontrolling interest.

Our principal source of revenue and operating income is gaming. Our non-gaming offerings include restaurants, hotels and other entertainment amenities. Approximately 80% of our casino revenue is generated from slot play. The majority of our revenue is cash-based and, as a result, fluctuations in our revenues have a direct impact on our cash flows from operations. Because our business is capital intensive and we utilize debt to fund many of our capital initiatives, we rely heavily on the ability of our properties to generate operating cash flow to repay debt financing and fund capital expenditures.

A significant portion of our business is dependent upon customers who live and/or work in the Las Vegas metropolitan area. As of December 2024, the unemployment rate in the Las Vegas metropolitan area was 5.9%, up from 5.3% in December 2023. Statewide, the unemployment rate for December 2024 was 5.7%, as compared to 5.4% in December 2023. The median price of an existing single-family home in Las Vegas was $475,000 at December 31, 2024, up 5.6% as compared to December 31, 2023, according to the Las Vegas Realtors®. In addition, the Las Vegas metropolitan area population continues to grow, posting a 1.9% growth rate in 2024 over the prior year. In light of uncertainty in the economic outlook stemming from inflation, higher interest rates, increased geo-political and regional conflicts, and the current administration’s view of the regulatory environment and agencies, we cannot predict whether the trends in unemployment, housing prices or population growth in the Las Vegas area will continue.

We have continued to experience favorable customer trends, including strong carded slot play, strong customer engagement and robust spend per visit across the majority of our properties. These trends, in combination with our operational discipline and our focus on our core local guests, as well as regional and out of town guests, continued to drive consistent operating results in 2024. However, we cannot predict whether these trends will continue, nor can we predict the extent to which the impacts of inflation and interest rate fluctuations may affect our business in the future.

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Our Key Performance Indicators

We use certain key indicators to measure our performance.

Gaming revenue measures:

•Slot handle, table game drop and race and sports write are measures of volume. Slot handle represents the dollar amount wagered in slot machines, and table game drop represents the total amount of cash and net markers issued that are deposited in table game drop boxes.

•Win represents the amount of wagers retained by us.

•Hold represents win as a percentage of slot handle, table game drop or race and sports write.

As our customers are primarily Las Vegas residents, our hold percentages are generally consistent from period to period. Fluctuations in our casino revenue are primarily due to the volume and spending levels of customers at our properties.

Food and beverage revenue measures:

•Average guest check is a measure of food sales volume and product offerings at our restaurants, and represents the average amount spent per customer visit.

•Number of guests served is an indicator of volume.

Room revenue measures:

•Occupancy is calculated by dividing occupied rooms, including complimentary rooms, by rooms available.

•Average daily rate (“ADR”) is calculated by dividing room revenue, which includes the retail value of complimentary rooms, by rooms occupied, including complimentary rooms.

•Revenue per available room is calculated by dividing room revenue by rooms available.

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Information about our results of operations is included herein and in the notes to our Consolidated Financial Statements.

Results of Operations

The following table presents information about our results of operations for the year ended December 31, 2024 compared to 2023 (dollars in thousands). Information about our results of operations for the year ended December 31, 2023 compared to 2022 can be found in Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on February 21, 2024.

________________________________________________

n/m = not meaningful

We view each of our Las Vegas casino properties as an individual operating segment. We aggregate all of our Las Vegas operating segments into one reportable segment because all of our Las Vegas properties offer similar products, cater to the same customer base, have the same regulatory and tax structure, share the same marketing programs, are directed by a centralized management structure and have similar economic characteristics. We also aggregate our Native American management activities into one reportable segment. There was no Native American management activity for the years ended December 31, 2024 and 2023. The results of operations of our Las Vegas operations are discussed in the remaining sections below.

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Net Revenues. Net revenues for the year ended December 31, 2024 increased by $214.9 million to $1.94 billion as compared to $1.72 billion for the year ended December 31, 2023. The primary contributor to our year over year increase is our Durango property which opened on December 5, 2023. The opening of Durango resulted in cannibalization at our other properties in line with our expectations, primarily at Red Rock. In addition, certain of our properties experienced disruption from traffic improvements and construction disruption associated with renovations and new amenities. We achieved year over year growth of 12.8%, 14.9%, 9.5% and 5.9% in casino revenue, food and beverage, room and other revenues, respectively.

Operating Income. For the year ended December 31, 2024 our operating income was $568.7 million. For the year ended December 31, 2023 our operating income was $558.7 million. Our Durango property primarily drove the increase in operating income for the year ended December 31, 2024, as compared to the prior year. Additional information about factors impacting our operating income is discussed below.

Casino.  As described under Net Revenues above, our casino revenues increased by 12.8% for the year ended December 31, 2024 as compared to 2023. For 2024, slot handle increased by 9.5%, table games drop increased by 41.4% and race and sports write was flat, all as compared to 2023. Our slot hold for 2024 was consistent compared to 2023, while our table games hold decreased 1.1% and our race and sports hold decreased 1.4%, both as compared to 2023. Casino expenses increased by 20.6% for the year ended December 31, 2024 as compared to the prior year, primarily due to the opening of our Durango property.

Food and Beverage.  Food and beverage includes revenue and expenses from restaurants, bars and catering. For the year ended December 31, 2024, food and beverage revenue increased by 14.9% as compared to 2023, primarily due to additional food and beverage offerings. For 2024, the average guest check increased by 10.4% and the number of restaurant guests served increased by 8.6% as compared to 2023. Food and beverage expenses for the year ended December 31, 2024 as compared to the prior year increased by 20.6%, primarily due to the opening of our Durango property.

Room. For the year ended December 31, 2024 as compared to 2023, room revenues increased by 9.5% and room expenses increased by 15.8%. The increase in room revenues and expenses for the year ended December 31, 2024 as compared to 2023, was primarily due to the opening of our Durango property.

Information about our hotel operations is presented below:

Our ADR improved by 2.2% and our revenue per available room improved by 2.7% for 2024 as compared to 2023. Our occupancy rate for the year ended December 31, 2024 was in-line with the prior year.

Other. Other primarily represents revenues from tenant leases, retail outlets, bowling, spas and entertainment, and their corresponding expenses. For the year ended December 31, 2024, other revenues increased by 5.9% as compared to the prior year, primarily driven by additional leased outlets. Other expenses decreased by 5.8% as compared to the prior year.

Selling, General and Administrative (“SG&A”).  SG&A expenses increased by 15.4% to $432.3 million for the year ended December 31, 2024 as compared to $374.5 million for the prior year. The increase in SG&A expenses as compared to the prior year was primarily due to expenses associated with the opening of our Durango property and higher employee-related costs as a result of wage increases. As a percentage of net revenue, SG&A expenses for the year ended December 31, 2024 were effectively flat as compared to the prior year as we continued to focus on operational efficiencies and cost control.

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Depreciation and Amortization.  Depreciation and amortization expense for the year ended December 31, 2024 increased to $187.1 million as compared to $132.5 million for 2023. The increase for 2024 was primarily due to higher depreciation expense associated with Durango’s assets placed in service in December 2023.

Write-downs and other, net. Write-downs and other, net, include gains and losses on asset disposals, demolition and other costs associated with properties that were permanently closed, development and preopening expenses, business innovation and technology enhancements, contract termination costs and non-routine items. For the year ended December 31, 2024, write-downs and other, net was an expense of $6.7 million, primarily comprising business innovation development expenses of $3.5 million, $1.3 million in development and preopening expenses (including refunds for previously expensed development costs of $5.8 million) and loss on asset disposals of $1.2 million. For the year ended December 31, 2023, write-downs and other, net was an expense of $32.0 million, primarily comprising $53.4 million in development and preopening expenses, $10.1 million of demolition costs associated with properties that were permanently closed and $4.0 million in business innovation development expenses, partially offset by net gains on land sales of $38.6 million.

Interest Expense, net.  The following table presents summarized information about our interest expense (amounts in thousands):

Interest expense, net, for the year ended December 31, 2024 was $228.8 million, an increase of 26.4% as compared to $181.0 million for 2023. The increase in interest expense, net was primarily due to capitalized interest in the prior year as well as an increase in borrowings for the current year. At December 31, 2024, $1.7 billion of borrowings under the credit agreements were based on variable interest rates, primarily the Secured Overnight Financing Rate (“SOFR”), plus applicable margins of 1.50% to 2.00%, and the SOFR rate applicable to our outstanding SOFR-based borrowings was 4.36% to 4.38%. We expect that interest rates on our credit facility will continue to vary in response to macroeconomic conditions. Based on our outstanding borrowings at December 31, 2024, an assumed 1% increase in variable interest rates would cause our annual interest rate cost to increase by approximately $17.1 million.

On March 14, 2024, we completed a series of refinancing transactions pursuant to which we entered into an amended and restated credit agreement (the “Credit Agreement”) for the New Term Loan B Facility (as defined below) and issued $500.0 million of 6.625% senior notes due 2032 (the “6.625% Senior Notes”). On December 18, 2024, Station LLC entered into the first amendment to the Credit Agreement (the “Amendment”) to reduce the interest rate margins applicable to the New Term Loan B Facility. See “Financial Condition, Capital Resources and Liquidity” below and Note 8 to the Consolidated Financial Statements for additional information about the refinancing transactions as well as our other long-term debt.

Net Income Attributable to Noncontrolling Interests. Net income attributable to noncontrolling interests for the years ended December 31, 2024 and 2023 represented the portion of net income attributable to the ownership interest in Station Holdco not held by us.

Provision for Income Tax. For the years ended December 31, 2024 and 2023, we recognized income tax expense of $36.9 million and $43.0 million, respectively. Station Holdco is treated as a partnership for income tax reporting and Station Holdco’s members are liable for federal, state and local income taxes based on their share of Station Holdco’s taxable income. We are not liable for income tax on the noncontrolling interests’ share of Station Holdco’s taxable income or benefit from a taxable loss, and therefore our effective tax rate of 11.2% and 11.3% for the years ended December 31, 2024 and 2023, respectively, was less than the statutory rate.

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Adjusted EBITDA

Adjusted EBITDA for the years ended December 31, 2024 and 2023 and a reconciliation of our consolidated net income to Adjusted EBITDA are presented below (amounts in thousands). We have two reportable segments, the Las Vegas operations segment includes all of our Las Vegas area casino properties and the Native American management segment includes our Native American management activities. There was no Native American management activity in the current or prior year.

The year-over-year changes in Adjusted EBITDA were due to the factors described under Results of Operations above.

Adjusted EBITDA is a non-GAAP measure that is presented solely as a supplemental disclosure. We believe that Adjusted EBITDA is a widely used measure of operating performance in our industry and is a principal basis for valuation of gaming companies. We believe that in addition to net income, Adjusted EBITDA is a useful financial performance measurement for assessing our operating performance because it provides information about the performance of our ongoing core operations. Adjusted EBITDA for the years ended December 31, 2024 and 2023 includes net income plus depreciation and amortization, share-based compensation, write-downs and other, net (including gains and losses on asset disposals, development and preopening expense, business innovation and technology enhancements, demolition costs and non-routine items), interest expense, net, loss on extinguishment/modification of debt, change in fair value of derivative instruments and provision for income tax.

To evaluate Adjusted EBITDA and the trends it depicts, the components should be considered. Each of these components can significantly affect our results of operations and should be considered in evaluating our operating performance, and the impact of these components cannot be determined from Adjusted EBITDA. Adjusted EBITDA does not represent net income or cash flows from operating, investing or financing activities as defined by accounting principles generally accepted in the United States of America (“GAAP”) and should not be considered as an alternative to net income as an indicator of our operating performance. Additionally, Adjusted EBITDA does not consider capital expenditures and other investing activities and should not be considered as a measure of our liquidity. It should be noted that not all gaming companies that report EBITDA or adjustments to this measure may calculate EBITDA or such adjustments in the same manner as we do, and therefore, our measure of Adjusted EBITDA may not be comparable to similarly titled measures used by other gaming companies.

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Holding Company Financial Information

The indentures governing the 4.50% Senior Notes, the 4.625% Senior Notes and the 6.625% Senior Notes contain certain covenants that require Station LLC to furnish to the holders of the respective series of notes certain annual and quarterly financial information relating to Station LLC and its subsidiaries. The obligation to furnish such information may be satisfied by providing consolidated financial information of the Company along with additional disclosure explaining the differences between such information and the financial information of Station LLC and its subsidiaries on a standalone basis. The following financial information about the Company and its consolidated subsidiaries exclusive of Station LLC and its subsidiaries (the “Holding Company”), is furnished to explain the differences between the financial information of the Holding Company and the financial information of Station LLC and its subsidiaries for the periods presented in this report. The primary differences between the financial information of the Holding Company and that of Station LLC relate to income taxes, the liability associated with the tax receivable agreement (“TRA”) and a note receivable from Station LLC.

At December 31, 2024, the difference between the balance sheet for Station LLC and its consolidated subsidiaries and the balance sheet for the Holding Company is that the Holding Company had cash of $4.2 million, $56.4 million of deferred tax assets, net, and a $53.9 million note receivable from Station LLC, which are solely assets of the Holding Company, and liabilities that are solely the Holding Company’s, consisting of a $20.4 million liability under the TRA, of which $1.4 million is expected to be paid in the next twelve months and $5.5 million of other liabilities. The Holding Company’s $53.9 million intercompany note receivable from Station LLC is eliminated in consolidation. At December 31, 2023, the Holding Company had cash of $0.2 million, $14.4 million of income tax receivable, $43.4 million of deferred tax assets, net, $34.0 million note receivable from Station LLC, a $22.1 million liability under the TRA, of which $1.7 million was current and $3.3 million of other liabilities.

For the years ended December 31, 2024 and 2023, the difference between the statement of income for Station LLC and its consolidated subsidiaries and the statement of income for the Holding Company is that the Holding Company had a net loss of $34.6 million and $42.0 million, respectively, primarily representing provision for income tax.

Financial Condition, Capital Resources and Liquidity

The following financial condition, capital resources and liquidity discussion contains certain forward-looking statements with respect to our business, financial condition, results of operations, dispositions, acquisitions, expansion projects and issuances of debt and equity, which involve risks and uncertainties that cannot be predicted or quantified, and consequently, actual results may differ materially from those expressed or implied herein. Such risks and uncertainties include, but are not limited to, the risks described in Item 1A. Risk Factors.

At December 31, 2024, we had $164.4 million in cash and cash equivalents, and Station LLC’s borrowing availability under its revolving credit facility was $897.7 million, which was net of $155.0 million in outstanding borrowings and $47.3 million in outstanding letters of credit and similar obligations. Station LLC maintains its borrowing availability under its revolving credit facility, subject to continued compliance with the terms of the credit facility. See Note 8 to the Consolidated Financial Statements for more information about our long-term debt.

On March 14, 2024, Station LLC entered into the Credit Agreement, which amended and restated the existing credit agreement and pursuant to which Station LLC repaid all loans outstanding under the existing credit agreement and (a) incurred (i) a new senior secured term “B” loan facility in an aggregate principal amount of $1.57 billion (the “New Term Loan B Facility” and the term “B” loans funded thereunder, the “New Term B Loan”) and (ii) a new senior secured revolving credit facility in an aggregate principal amount of $1.1 billion (the “New Revolving Credit Facility” and, together with the New Term Loan B Facility, the “Credit Facilities”), and (b) made certain other amendments to the existing credit agreement, including the extinguishment of the existing term loan “A” facility. The New Revolving Credit Facility will mature on March 14, 2029 and the New Term Loan B Facility will mature on March 14, 2031. Borrowings under the Credit Facilities bear interest at a rate per annum, at our option, equal to either the forward-looking Secured Overnight Financing Rate term (“Term SOFR”) or a base rate determined by reference to the highest of (i) the federal funds rate plus 0.50%, (ii) the administrative agent’s “prime rate” and (iii) the one-month Term SOFR plus 1.00%, in each case plus an applicable margin.

On December 18, 2024, Station LLC entered into the Amendment to reduce the interest rate margins applicable to the Company’s existing New Term Loan B Facility. Such applicable margin is 2.00% per annum in the case of any Term SOFR loan and 1.00% in the case of any base rate loan. Prior to the Amendment, the New Term Loan B Facility applicable margin was 2.25% per annum in the case of any Term SOFR loan and 1.25% in the case of any base rate loan.

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In April 2024, we entered into two zero cost interest rate collars to manage our exposure to interest rate movements associated with our variable interest rate debt. The interest rate collars, which have a total notional amount of $750.0 million, include a Term SOFR cap of 5.25% and a weighted average Term SOFR floor of 2.89%. The interest rate collars became effective in April 2024 and will mature in April 2029. See Note 9 to the Consolidated Financial Statements for additional information about our derivative instruments.

In addition, on March 14, 2024, we issued $500.0 million in aggregate principal amount of 6.625% Senior Notes due 2032, pursuant to an indenture dated as of March 14, 2024, by and among Station LLC, the guarantors party thereto and Deutsche Bank Trust Company Americas, as trustee. Interest on the 6.625% Senior Notes is paid every six months in arrears on March 15 and September 15, and commenced on September 15, 2024.

See Note 8 to the Consolidated Financial Statements for additional information about our long-term debt.

Our primary capital requirements for the near term are expected to be related to the operation and maintenance of our properties, debt service payments, dividends and distributions. Our anticipated uses of cash for 2025 include (i) approximately $375.0 million to $425.0 million for capital expenditures, (ii) approximately $20.0 million for construction advances on the North Fork Project (iii) required principal and interest payments totaling approximately $52.9 million and $201.2 million, respectively, on Station LLC’s indebtedness, (iv) dividends to our Class A common stockholders, and (v) distributions to noncontrolling interest holders of Station Holdco, including “tax distributions”, which may be made quarterly when required and in amounts that may vary from quarter to quarter. Other payment obligations include salaries, wages and employee benefits, service contracts, property taxes, insurance, federal income taxes and other obligations.

At December 31, 2024, $1.7 billion of the borrowings under our credit agreements were based on variable rates, primarily SOFR. We cannot predict the SOFR or base rate interest rates that will be in effect in the future, and actual rates will vary, which will impact our interest cost. Based on our outstanding borrowings at December 31, 2024, an assumed 1% increase in variable interest rates would cause our annual interest cost to increase by approximately $17.1 million. See Item 7A. Quantitative and Qualitative Disclosures about Market Risk for additional information.

On February 11, 2025, we announced that Red Rock will pay a quarterly cash dividend of $0.25 per share of Class A common stock, to be paid on March 31, 2025 to shareholders of record as of March 17, 2025. Prior to the payment of the dividend, Station Holdco will make a cash distribution to all LLC Unit holders, including Red Rock, of $0.25 per LLC Unit, a portion of which will be paid to the other unit holders of Station Holdco.

We are obligated to make payments under the TRA, which is described in Note 2 to the Consolidated Financial Statements. At December 31, 2024, such obligations with respect to previously consummated transactions totaled $20.4 million. Future payments in respect of any subsequent exchanges of LLC Units for Class A common stock would be in addition to these amounts and are expected to be substantial. The timing of payments under the TRA may vary. The payments that we are required to make will generally reduce the amount of overall cash that might have otherwise been available to us, but we expect the cash tax savings we will realize from the utilization of the related deferred tax assets to fund the required payments.

On May 2, 2024, our board of directors extended the expiration date of the equity repurchase program to December 31, 2025. Our board of directors has authorized $600.0 million for repurchases of Class A common stock under our equity repurchase program. We are not obligated to repurchase any shares under the program. Subject to applicable laws and the provisions of any agreements restricting our ability to do so, repurchases may be made at our discretion from time to time through open market purchases, negotiated transactions or tender offers, depending on market conditions and other factors. During the year ended December 31, 2024, we repurchased 75,000 shares of our Class A common stock in open market transactions at a weighted-average price of $52.29 per share. At December 31, 2024, we had $309.0 million of remaining repurchases authorized under the program. From time to time, we may also seek to repurchase our outstanding indebtedness. Any such purchases may be funded by existing cash balances or the incurrence of debt, including borrowings under our credit facility. The amount and timing of any repurchase will be based on business and market conditions, capital availability, compliance with debt covenants and other considerations.

We expect that cash on hand, cash generated from operations and, to the extent necessary, borrowings available under the Credit Facilities will be sufficient to fund our operations and capital requirements and service our outstanding indebtedness for the next twelve months and beyond. We regularly assess our projected cash requirements for capital expenditures, repayment of debt obligations, and payment of other general corporate and operational needs. In the long term, we expect that we will fund our capital requirements with a combination of cash generated from operations, borrowings under the credit facility and the issuance of debt or equity as market conditions may permit. However, our cash flow and ability to obtain debt or equity financing on terms that are satisfactory to us, or at all, may be affected by a variety of factors, including competition,

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general economic and business conditions and financial markets. As a result, we cannot provide any assurance that we will generate sufficient income and liquidity to meet all of our liquidity requirements or other obligations.

Following is a summary of our cash flow information (amounts in thousands):

Cash Flows from Operations

Our operating cash flows primarily consist of operating income generated by our properties (excluding depreciation and other non-cash charges), interest paid and changes in working capital accounts such as inventories, prepaid expenses, receivables and payables. The majority of our revenue is generated from our slot machine and table game play, which is conducted primarily on a cash basis. Our food and beverage, room and other revenues are also primarily cash-based. As a result, fluctuations in our revenues have a direct impact on our cash flow from operations.

Net cash provided by operating activities for the years ended December 31, 2024 and 2023 totaled $548.3 million and $494.3 million, respectively. Cash flow from operating activities for the year ended December 31, 2024 included $209.7 million in interest payments and $30.3 million cash paid for income taxes, compared to $170.5 million and $21.1 million, respectively, for the prior year. For the year ended December 31, 2024, we also paid $11.4 million in fees and costs related to debt modification. In addition, our operating cash flows for the year ended December 31, 2024 increased as compared to the prior year due to our Durango property and changes in working capital accounts. Information about our operating activities is presented within Results of Operations above.

Cash Flows from Investing Activities

For the years ended December 31, 2024 and 2023, cash paid for capital expenditures totaled $283.9 million and $699.5 million, respectively. Capital expenditures for the year ended December 31, 2024 primarily related to various renovation projects. Capital expenditures for the year ended December 31, 2023 were primarily related to the Durango project. For the year ended December 31, 2023, cash inflows from investing activities included net cash proceeds of $52.2 million from the sale of our Texas Station and Fiesta Rancho land parcels.

Cash Flows from Financing Activities

As described above, during the year ended December 31, 2024, Station LLC entered into an amended and restated credit agreement pursuant to which it repaid all loans outstanding under the existing credit agreement, borrowed $1,570.0 million under the New Term Loan B Facility and borrowed $155.0 million under the New Revolving Credit Facility, net of repayments. Station LLC also issued $500.0 million in principal amount of 6.625% Senior Notes due 2032 and paid $23.6 million in debt issuance costs. In addition, we paid $118.4 million in dividends to holders of our Class A common stock and $126.7 million in cash distributions to the noncontrolling interest holders of Station Holdco. We also paid $13.8 million related to tax withholding on share-based compensation during the year.

For the year ended December 31, 2023, we borrowed $476.5 million under the revolving credit facility, and we paid $58.6 million in dividends to holders of our Class A common stock, $76.7 million in cash distributions to the noncontrolling interest holders of Station Holdco and we paid $14.7 million related to tax withholding on share-based compensation.

Restrictive Covenants

Certain customary covenants are included in both the Credit Agreement governing the Credit Facilities and the indentures governing Station LLC’s senior notes that, among other things and subject to certain exceptions, restrict Station LLC’s ability and the ability of its restricted subsidiaries to incur or guarantee additional debt; create liens on collateral; engage in mergers, consolidations or asset dispositions; pay distributions; make investments, loans or advances; engage in certain transactions with affiliates or subsidiaries; engage in lines of business other than its core business and related businesses; or issue certain preferred units.

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The Credit Facility also includes certain financial ratio covenants that Station LLC is required to maintain throughout the term of the Credit Facility, measured as of the end of each quarter. These financial ratio covenants include a maximum total secured leverage ratio of 5.00 to 1.00. A breach of the financial ratio covenants shall only become an event of default if not cured and a Covenant Facility Acceleration has occurred. We believe Station LLC was in compliance with all applicable covenants at December 31, 2024.

Off-Balance Sheet Arrangements

At December 31, 2024, we had no variable interests in unconsolidated entities that provide off-balance sheet financing, liquidity, market risk or credit risk support, or that engage in leasing, hedging or research and development arrangements with us, nor did we have retained or contingent interests in assets transferred to an unconsolidated entity. At December 31, 2024, we had outstanding letters of credit and similar obligations totaling $47.3 million.

Native American Development

We have development and management agreements with the North Fork Rancheria of Mono Indians, a federally recognized Native American tribe located near Fresno, California, pursuant to which we will assist the Mono in developing, financing and operating a gaming and entertainment facility to be located on Highway 99 north of the city of Madera, California. See Note 6 to the Consolidated Financial Statements for additional information.

Regulation and Taxes

We are subject to extensive regulation by Nevada gaming authorities, as well as regulation by gaming authorities in the other jurisdictions in which we operate, including the NIGC and the California Gambling Control Commission. We will also be subject to regulation, which may or may not be similar to that in Nevada, by any other jurisdiction in which we may conduct gaming activities in the future. For a more complete description of our regulatory requirements, see Item 1. Business—Regulation and Licensing.

The gaming industry represents a significant source of tax revenue, particularly to the State of Nevada and its counties and municipalities. From time to time, various state and federal legislators and officials have proposed changes in tax law, or in the administration of such law, affecting the gaming industry. The Nevada legislature meets every two years for 120 days and when special sessions are called by the Governor. The current legislative session began on February 3, 2025. There are currently no specific legislative proposals to increase taxes on gaming revenue, but there are no assurances that an increase in taxes on gaming or other revenue will not be proposed and passed by the Nevada legislature in the future.

Long-term Debt

A description of our indebtedness is included in Note 8 to the Consolidated Financial Statements.

Critical Accounting Policies and Estimates

The preparation of consolidated financial statements in conformity with GAAP requires us to make estimates and judgments that are subject to an inherent degree of uncertainty. Certain accounting estimates and assumptions may have a material impact on our financial statements due to the subjectivity and judgment involved and the susceptibility of such estimates and assumptions to change. We base our estimates on historical experience, information that is currently available to us and various other assumptions that we believe are reasonable under the circumstances, and we evaluate our estimates on an ongoing basis. Actual results may differ from our estimates, and such differences could have a material effect on our consolidated financial statements. Our significant accounting policies are described in Note 2 to the Consolidated Financial Statements. Following is a discussion of our accounting policies that involve critical estimates and assumptions.

Long-Lived Assets

Our business is capital intensive and a significant portion of our capital is invested in property and equipment, finite-lived intangible assets and other long-lived assets. We review long-lived assets for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. We evaluate the recoverability of our long-lived assets by estimating the future cash flows the asset is expected to generate, and comparing these estimated cash flows, on an undiscounted basis, to the carrying amount of the asset. If the carrying amount is greater, the asset is considered to be impaired, and we recognize an impairment charge equal to the amount by which the carrying amount of the asset exceeds its fair value.

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We test our long-lived assets for impairment at the reporting unit level, and each of our operating properties is considered a separate reporting unit.

Inherent in the calculation of fair values are various estimates and assumptions, including estimates of future cash flows expected to be generated by an asset or asset group. We base our cash flow estimates on the current regulatory, political and economic climates in the areas where we operate, recent operating information and projections for our properties. These estimates could be negatively impacted by changes in federal, state or local regulations, economic downturns, changes in consumer preferences, or events affecting various forms of travel and access to our properties. Future cash flow estimates are, by their nature, subjective and actual results may differ materially from our estimates. The most significant assumptions used in determining cash flow estimates include forecasts of future operating results, Adjusted EBITDA margins, tax rates, capital expenditures, working capital requirements, long-term growth rates and terminal year free cash flows. Cash flow estimates and their impact on fair value are sensitive to changes in many of these assumptions. If our estimates of future cash flows are not met, we may be required to record impairment charges in the future.

Property and Equipment. At December 31, 2024, the carrying amount of our property and equipment was approximately $2.8 billion, which represents 68.8% of our total assets. We make estimates and assumptions when accounting for property and equipment. We compute depreciation using the straight-line method over the estimated useful lives of the assets, and our depreciation expense is dependent on the assumptions we make about the estimated useful lives of our assets. We estimate the useful lives of our property and equipment based on our experience with similar assets and our estimate of the usage of the asset. Whenever events or circumstances occur that change the estimated useful life of an asset, we account for the change prospectively. We must also make judgments about the capitalization of costs. Costs of major improvements are capitalized, while costs of normal repairs and maintenance are charged to expense as incurred. If an asset or asset group is disposed or retired before the end of its previously estimated useful life, we may be required to accelerate our depreciation expense or recognize a loss on disposal.

Goodwill. At December 31, 2024, our goodwill totaled $195.7 million, approximately 87% of which is associated with one of our properties. We test our goodwill for impairment annually as of October 1, and whenever events or circumstances indicate that it is more likely than not that impairment may have occurred. Impairment testing for goodwill is performed at the reporting unit level, and we consider each of our operating properties to be a separate reporting unit.

When performing goodwill impairment testing, we either conduct a qualitative assessment to determine whether it is more likely than not that the asset is impaired, or elect to bypass this qualitative assessment and perform a quantitative test for impairment. Under the qualitative assessment, we consider both positive and negative factors, including macroeconomic conditions, industry events, financial performance and other changes in facts and circumstances, and make a determination of whether it is more likely than not that the fair value of goodwill is less than its carrying amount. If, after assessing the qualitative factors, we determine it is more likely than not the asset is impaired, we then perform a quantitative test in which the estimated fair value of the reporting unit is compared with its carrying amount, including goodwill. If the carrying amount of the reporting unit exceeds its estimated fair value, an impairment loss is recognized in an amount equal to the excess, limited to the amount of goodwill allocated to the reporting unit.

When performing the quantitative test, we estimate the fair value of each reporting unit using the expected present value of future cash flows along with value indications based on our current valuation multiple and multiples of comparable publicly traded companies. The estimation of fair value requires management to make estimates, judgments and assumptions, including estimating expected future cash flows and selecting appropriate discount rates, valuation multiples and market comparables. Application of alternative estimates and assumptions could produce different results.

If the fair value of any of our properties with goodwill should decline in the future, we may be required to recognize a goodwill impairment charge, which could be material. A property’s fair value may decline as a result of a decrease in the property’s actual or projected operating results or changes in other assumptions and judgments used in the estimation process, including the discount rate and market multiple.

Indefinite-Lived Intangible Assets. Our indefinite-lived intangible assets primarily represent the value of our brands. At December 31, 2024, the carrying amount of our indefinite-lived intangible assets totaled $76.5 million. Indefinite-lived intangible assets are not amortized unless management determines that their useful life is no longer indefinite. We test our indefinite-lived intangible assets for impairment annually as of October 1, and whenever events or changes in circumstances indicate that an asset may be impaired, by comparing the carrying amount of the asset to its estimated fair value. If the carrying amount of the asset exceeds its estimated fair value, we recognize an impairment charge equal to the excess. We estimate the fair value of our brands using a derivation of the income approach to valuation based on the present value of estimated royalties

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avoided through ownership of the assets. The fair values of our indefinite-lived intangible assets are subject to change as a result of changes in projected operating results. Accordingly, any decrease in the projected operating results of a property could require us to recognize an impairment charge, which could be material.

Native American Development Costs. We incur certain costs associated with our development and management agreements with Native American tribes that are reimbursable by the tribes. The reimbursable costs are recognized as long-term assets as incurred, and primarily include advances associated with the acquisition of land and development of the tribal gaming facility. We earn interest on the reimbursable advances. The repayment of the advances and the related interest may come from the proceeds of the gaming facility’s third-party financing, from cash flows generated from the gaming facility’s operations, or from a combination of both, and the repayment is typically subordinated to debt service obligations under the gaming facility’s third-party financing. Due to the uncertainty surrounding the timing and amount of the repayment, we do not recognize interest on the advances until the carrying amount of the advances has been recovered and the interest is received. Accordingly, the recoverability of our development costs is highly dependent upon the tribe’s success in obtaining third-party financing and our ability to operate the project successfully upon its completion. Our evaluation of the recoverability of our Native American development costs requires us to apply a significant amount of judgment.

We evaluate the recoverability of our Native American development costs taking into consideration all available information. Among other things, we consider the status of the project, the impact of contingencies, the achievement of milestones, existing or potential litigation, and regulatory matters when evaluating the recoverability of our Native American development costs. We estimate the future cash flows of a Native American development project based on consideration of all positive and negative evidence about its cash flow potential including, but not limited to, the likelihood that the project will be successfully completed, the status of required approvals, and the status and timing of the construction of the project, as well as current and projected economic, political, regulatory and competitive conditions that may adversely impact the project’s operating results. In certain circumstances, we may discontinue funding of a project due to a revision of its expected potential, or otherwise determine that our advances are not recoverable and as a result, we may be required to write off the entire carrying amount of our advances.

Litigation, Claims and Assessments

We are defendants in various lawsuits relating to routine matters incidental to our business and we assess the potential for any lawsuits or claims brought against us on an ongoing basis. For ongoing litigation and potential claims, we use judgment in determining the probability of loss and whether a reasonable estimate of loss, if any, can be made. We accrue a liability when we believe a loss is probable and the amount of the loss can be reasonably estimated. As the outcome of litigation is inherently uncertain, it is possible that certain matters may be resolved for materially different amounts than previously accrued or disclosed.

Income Taxes

We are taxed as a corporation and pay corporate federal, state and local taxes on income allocated to us by Station Holdco. Station Holdco operates as a partnership for federal, state and local tax reporting and holds 100% of the economic interests in Station LLC. The members of Station Holdco are liable for any income taxes resulting from income allocated to them by Station Holdco as a pass-through entity.

We recognize deferred tax assets and liabilities based on the differences between the book value of assets and liabilities for financial reporting purposes and those amounts applicable for income tax purposes using enacted tax rates in effect for the year in which the differences are expected to reverse. Deferred tax assets represent future tax deductions or credits. Realization of the deferred tax assets ultimately depends on the existence of sufficient taxable income of the appropriate character in either the carryback or carryforward period.

Each reporting period, we analyze the likelihood that our deferred tax assets will be realized. A valuation allowance is recorded if, based on the weight of all available positive and negative evidence, it is more likely than not that some portion, or all, of a deferred tax asset will not be realized. If we subsequently determine that there is sufficient evidence to indicate a deferred tax asset will be realized, the associated valuation allowance is reversed. On an annual basis, we perform a comprehensive analysis of all forms of positive and negative evidence based on year end results. During each interim period, we update our annual analysis for significant changes in the positive and negative evidence.

We record uncertain tax positions on the basis of a two-step process in which (1) we determine whether it is more likely than not the tax positions will be sustained on the basis of the technical merits of the position, and (2) for those tax positions meeting the more likely than not recognition threshold, we recognize the largest amount of tax benefit that is more

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than 50% likely to be realized upon ultimate settlement with the related tax authority. We do not believe that we have any tax positions for which it is reasonably possible that we will be required to record a significant liability for unrecognized tax benefits within the next twelve months.

ITEM 7.     MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with the Consolidated Financial Statements and notes thereto included in Item 8. Financial Statements and Supplementary Data within this Annual Report on Form 10-K.

Overview

Red Rock was formed as a Delaware corporation in 2015 to own an indirect equity interest in, and manage, Station Casinos LLC, a Nevada limited liability company (“Station LLC”). Station LLC is a gaming, development and management company established in 1976 that owns and operates seven major gaming and entertainment facilities and ten smaller casinos (three of which are 50% owned) in the Las Vegas regional market. In December 2023, we opened Durango at the intersection of Durango Drive and Interstate 215 in the southwest Las Vegas valley, and in February 2023, we opened our tenth smaller casino, Wildfire Fremont. As of December 31, 2023, we offered 16,333 slot machines, 317 table games and 3,030 hotel rooms in the Las Vegas market. In 2022, we permanently closed our Texas Station, Fiesta Henderson, Fiesta Rancho and Wild Wild West properties. A subsidiary of Station LLC also previously managed Graton Resort in northern California on behalf of a Native American tribe through February 5, 2021.

We own all of the outstanding voting interests in Station LLC and have an indirect equity interest in Station LLC through our ownership of limited liability company interests in Station Holdco (“LLC Units”), which owns all of the economic interests in Station LLC. At December 31, 2023, we held 58% of the economic interests and 100% of the voting power in Station Holdco, subject to certain limited exceptions, and we are designated as the sole managing member of both Station Holdco and Station LLC. We control and operate all of the business and affairs of Station Holdco and Station LLC, and conduct all of our operations through these entities. Other than assets and liabilities related to income taxes and the tax receivable agreement, our only material assets are our equity interest in Station Holdco, our voting interest in Station LLC and a note receivable from Station LLC. We have no operations outside of our management of Station Holdco and Station LLC.

Our Consolidated Financial Statements reflect the consolidation of Station LLC and its consolidated subsidiaries, and Station Holdco. The financial position and results of operations attributable to LLC Units we do not own are reported separately as noncontrolling interest.

Our principal source of revenue and operating income is gaming, and our non-gaming offerings include restaurants, hotels and other entertainment amenities. Approximately 80% to 85% of our casino revenue is generated from slot play. The majority of our revenue is cash-based and as a result, fluctuations in our revenues have a direct impact on our cash flows from operations. Because our business is capital intensive and we utilize debt to fund many of our capital initiatives, we rely heavily on the ability of our properties to generate operating cash flow to repay debt financing and fund capital expenditures.

A significant portion of our business is dependent upon customers who live and/or work in the Las Vegas metropolitan area. As of December 2023, the unemployment rate in the Las Vegas metropolitan area was 5.3%, down from 5.4% in December 2022. Statewide, the unemployment rate for December 2023 was 5.4%, as compared to 5.2% in December 2022. The median price of an existing single-family home in Las Vegas was $449,900 at December 31, 2023 up 5.9% as compared to December 31, 2022, according to the Las Vegas Realtors®. In addition, Las Vegas remains one of the fastest growing metropolitan areas in the United States, posting a 2.1% growth rate in 2023. In light of uncertainty in the economic outlook stemming from inflation, higher interest rates, increased energy costs and increased geo-political and regional conflicts, we cannot predict whether the trend in unemployment or the trend in housing prices in the Las Vegas area will continue.

We have continued to experience favorable customer trends, including consistent visitation from our guests and strong spend per visit across the majority of our properties. These trends, in combination with our operational discipline and our focus on our core local guests, as well as regional and out of town guests, continued to drive consistent operating results in 2023. However, we cannot predict whether these trends will continue, nor can we predict the extent to which the impacts of inflation, increased energy costs and interest rate fluctuations may affect our business in the future.

Our Key Performance Indicators

We use certain key indicators to measure our performance.

Gaming revenue measures:

•Slot handle, table game drop and race and sports write are measures of volume. Slot handle represents the dollar amount wagered in slot machines, and table game drop represents the total amount of cash and net markers issued that are deposited in table game drop boxes.

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•Win represents the amount of wagers retained by us.

•Hold represents win as a percentage of slot handle, table game drop or race and sports write.

As our customers are primarily Las Vegas residents, our hold percentages are generally consistent from period to period. Fluctuations in our casino revenue are primarily due to the volume and spending levels of customers at our properties.

Food and beverage revenue measures:

•Average guest check is a measure of food sales volume and product offerings at our restaurants, and represents the average amount spent per customer visit.

•Number of guests served is an indicator of volume.

Room revenue measures:

•Occupancy is calculated by dividing occupied rooms, including complimentary rooms, by rooms available.

•Average daily rate (“ADR”) is calculated by dividing room revenue, which includes the retail value of complimentary rooms, by rooms occupied, including complimentary rooms.

•Revenue per available room is calculated by dividing room revenue by rooms available.

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Information about our results of operations is included herein and in the notes to our Consolidated Financial Statements.

Results of Operations

The following table presents information about our results of operations for the year ended December 31, 2023 compared to 2022 (dollars in thousands). Information about our results of operations for the year ended December 31, 2022 compared to 2021 can be found in Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on February 24, 2023.

________________________________________________

n/m = not meaningful

We view each of our Las Vegas casino properties as an individual operating segment. We aggregate all of our Las Vegas operating segments into one reportable segment because all of our Las Vegas properties offer similar products, cater to the same customer base, have the same regulatory and tax structure, share the same marketing programs, are directed by a centralized management structure and have similar economic characteristics. We also aggregate our Native American

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management activities into one reportable segment. The results of operations for our Native American management segment are discussed in the section entitled Management Fee Revenue below and the results of operations of our Las Vegas operations are discussed in the remaining sections below.

Net Revenues. Net revenues for the year ended December 31, 2023 increased by $60.3 million to $1.72 billion as compared to $1.66 billion for the year ended December 31, 2022. Contributing to our year over year increase is our Durango property which opened on December 5, 2023. We achieved year over year growth of 0.5%, 10.8%, 11.3% and 8.4% in casino revenue, food and beverage, room and other revenues, respectively. There was no revenue from our Native American management activity for the year ended December 31, 2023, resulting in a decrease in management fee revenue.

Operating Income. For the year ended December 31, 2023 our operating income was $558.7 million. For the year ended December 31, 2022 our operating income was $561.3 million and included the impact of impairment charges of $80.0 million related primarily to the permanent closure of our Texas Station, Fiesta Rancho and Fiesta Henderson properties in June 2022. Additional information about factors impacting our operating income is discussed below.

Casino.  Casino revenues increased by $6.1 million for the year ended December 31, 2023 as compared to 2022. For 2023, slot handle was consistent as compared to 2022, table games drop increased by 9.2% and race and sports write decreased by 3.8%. Our hold percentages for 2023 were consistent compared to 2022. Casino expenses increased by 5.2% for the year ended December 31, 2023 as compared to the prior year, primarily due to higher employee-related costs.

Food and Beverage.  Food and beverage includes revenue and expenses from restaurants, bars and catering. For the year ended December 31, 2023, food and beverage revenue increased by 10.8% as compared to 2022, primarily due to an increase in our catering and group business. For 2023, the average guest check increased by 6.1%, while the number of restaurant guests served decreased by 4.0% as compared to 2022. Food and beverage expenses for the year ended December 31, 2023 as compared to the prior year increased by 8.8%, primarily due to higher employee-related costs, associated catering costs and costs of sales.

Room. For the year ended December 31, 2023 as compared to 2022, room revenues increased by 11.3% and room expenses increased by 5.9%. Room expenses were higher for the year ended December 31, 2023 as compared to 2022 commensurate with the higher revenues and increased occupancy.

Information about our hotel operations is presented below:

Our ADR improved by 10.9%, our revenue per available room improved by 16.8% and our occupancy rate improved by 4.4 percentage points for 2023 as compared to 2022 due to improved demand.

Other. Other primarily represents revenues from tenant leases, retail outlets, bowling, spas and entertainment and their corresponding expenses. For the year ended December 31, 2023, other revenues increased by 8.4% as compared to the prior year, primarily driven by leased outlets, bowling and spas. Other expenses were consistent as compared to the prior year.

Management Fee Revenue. For the year ended December 31, 2023, management fees represented fees earned from the management of our joint ventures. For the year ended December 31, 2022, management fees represented fees earned from our previous agreement with a Native American tribe to manage Graton Resort, as well as fees earned from the management of our joint ventures. We ceased to manage Graton Resort on February 5, 2021.

Selling, General and Administrative (“SG&A”).  SG&A expenses increased by 6.1% to $374.5 million for the year ended December 31, 2023 as compared to $353.0 million for the prior year. The increase in SG&A expenses as compared to the prior year was primarily due to higher employee-related costs, repairs and maintenance and utilities, partially offset by a decrease in legal expenses. As a percentage of net revenue, SG&A expenses for the year ended December 31, 2023 were effectively flat as compared to the prior year as we continued to focus on operational efficiencies and cost control.

Depreciation and Amortization.  Depreciation and amortization expense for the year ended December 31, 2023 increased to $132.5 million as compared to $128.4 million for 2022. The increase for 2023 was primarily due to higher depreciation expense for development projects placed into service, including Durango, partially offset by a decrease in

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depreciation expense for the closed properties. We ceased recognizing depreciation expense for Texas Station, Fiesta Rancho and Fiesta Henderson in June 2022 and Wild Wild West in September 2022.

Write-downs and other, net. Write-downs and other, net, include gains and losses on asset disposals, demolition and others costs associated with our closed properties, preopening and development expenses, business innovation and technology enhancements, contract termination costs and non-routine items. For the year ended December 31, 2023, write-downs and other, net was a loss of $32.0 million, comprising $53.4 million in preopening and development expenses, $10.1 million of demolition costs associated with the permanently closed properties, $4.0 million in business innovation development, and other, partially offset by net gains on land sales of $38.6 million. For the year ended December 31, 2022, write-downs and other, net was a gain of $47.7 million, comprising net gains on capital asset transactions of $79.0 million (including gains on land sales of $76.3 million), partially offset by preopening expense of $3.7 million for Durango, $9.3 million of demolition costs associated with the closed properties, $9.2 million in business innovation development, $6.7 million in artist performance agreement termination costs associated with Palms, and other.

Asset Impairment. There were no asset impairment charges for the year ended December 31, 2023. For the year ended December 31, 2022, we recognized asset impairment charges totaling $80.0 million, primarily to write off the facilities and certain related assets at Texas Station, Fiesta Rancho and Fiesta Henderson, which we permanently closed in June 2022.

Interest Expense, net.  The following table presents summarized information about our interest expense (amounts in thousands):

Interest expense, net, for the year ended December 31, 2023 was $181.0 million, an increase of 39.4% as compared to $129.9 million for 2022. The increase in interest expense, net was due to higher variable interest rates applicable to our credit facility as well increased borrowings under our revolving credit facility, primarily associated with the Durango development project. At December 31, 2023, $2.1 billion of borrowings under the credit agreements were based on variable interest rates, primarily the Secured Overnight Financing Rate (“SOFR”), plus applicable margins of 1.50% to 2.25%, and the SOFR rate applicable to our outstanding SOFR-based borrowings was 5.46%. We expect that interest rates on our credit facility may continue to vary in response to macroeconomic conditions. Based on our outstanding borrowings at December 31, 2023, an assumed 1% increase in variable interest rates would cause our annual interest rate cost to increase by approximately $21.2 million. Additional information about our long-term debt is included in Note 8 to the Consolidated Financial Statements.

Net Income Attributable to Noncontrolling Interests. Net income attributable to noncontrolling interests for the years ended December 31, 2023 and 2022 represented the portion of net income attributable to the ownership interest in Station Holdco not held by us.

Provision for Income Tax. For the years ended December 31, 2023 and 2022, we recognized income tax expense of $43.0 million and $44.5 million, respectively. Station Holdco is treated as a partnership for income tax reporting and Station Holdco’s members are liable for federal, state and local income taxes based on their share of Station Holdco’s taxable income. We are not liable for income tax on the noncontrolling interests’ share of Station Holdco’s taxable income or benefit from a taxable loss, and therefore our effective tax rate of 11.3% for the year ended December 31, 2023 was less than the statutory rate.

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Adjusted EBITDA

Adjusted EBITDA for the years ended December 31, 2023 and 2022 for our two reportable segments and a reconciliation of our consolidated net income to Adjusted EBITDA are presented below (amounts in thousands). The Las Vegas operations segment includes all of our Las Vegas area casino properties and the Native American management segment includes our Native American management activities.

The year-over-year changes in Adjusted EBITDA were due to the factors described under Results of Operations above.

Adjusted EBITDA is a non-GAAP measure that is presented solely as a supplemental disclosure. We believe that Adjusted EBITDA is a widely used measure of operating performance in our industry and is a principal basis for valuation of gaming companies. We believe that in addition to net income, Adjusted EBITDA is a useful financial performance measurement for assessing our operating performance because it provides information about the performance of our ongoing core operations. Adjusted EBITDA includes net income plus depreciation and amortization, share-based compensation, write-downs and other, net (including gains and losses on asset disposals, demolition costs, preopening and development, business innovation and technology enhancements, contract termination costs and non-routine items), asset impairment, interest expense, net, provision for income tax and other.

To evaluate Adjusted EBITDA and the trends it depicts, the components should be considered. Each of these components can significantly affect our results of operations and should be considered in evaluating our operating performance, and the impact of these components cannot be determined from Adjusted EBITDA. Adjusted EBITDA does not represent net income or cash flows from operating, investing or financing activities as defined by accounting principles generally accepted in the United States of America (“GAAP”) and should not be considered as an alternative to net income as an indicator of our operating performance. Additionally, Adjusted EBITDA does not consider capital expenditures and other investing activities and should not be considered as a measure of our liquidity. It should be noted that not all gaming companies that report EBITDA or adjustments to this measure may calculate EBITDA or such adjustments in the same manner as we do, and therefore, our measure of Adjusted EBITDA may not be comparable to similarly titled measures used by other gaming companies.

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Holding Company Financial Information

The indentures governing the 4.50% Senior Notes and the 4.625% Senior Notes contain certain covenants that require Station LLC to furnish to the holders of the notes certain annual and quarterly financial information relating to Station LLC and its subsidiaries. The obligation to furnish such information may be satisfied by providing consolidated financial information of the Company along with additional disclosure explaining the differences between such information and the financial information of Station LLC and its subsidiaries on a standalone basis. The following financial information about the Company and its consolidated subsidiaries exclusive of Station LLC and its subsidiaries (the “Holding Company”), is furnished to explain the differences between the financial information of the Holding Company and the financial information of Station LLC and its subsidiaries for the periods presented in this report. The primary differences between the financial information of the Holding Company and that of Station LLC relate to income taxes, the liability associated with the tax receivable agreement (“TRA”) and a note receivable from Station LLC.

At December 31, 2023, the difference between the balance sheet for Station LLC and its consolidated subsidiaries and the balance sheet for the Holding Company is that the Holding Company had cash of $0.2 million, $14.4 million of income tax receivable, $43.4 million of deferred tax assets, net, and a $34.0 million note receivable from Station LLC, which are solely assets of the Holding Company, and liabilities that are solely the Holding Company’s, consisting of a $22.1 million liability under the TRA, of which $1.7 million is expected to be paid in the next twelve months and $3.3 million of other liabilities. The Holding Company’s $34.0 million intercompany note receivable from Station LLC is eliminated in consolidation. At December 31, 2022, the Holding Company had cash of $15.3 million, $75.7 million of deferred tax assets, net, $0.3 million of prepaid expenses, a $28.6 million liability under the TRA, of which $6.6 million was current, $1.7 million of other current liabilities and $1.8 million of other long-term liabilities.

For the years ended December 31, 2023 and 2022, the difference between the statement of income for Station LLC and its consolidated subsidiaries and the statement of income for the Holding Company is that the Holding Company had a net loss of $42.0 million and $46.0 million, respectively, primarily representing provision for income tax.

Financial Condition, Capital Resources and Liquidity

The following financial condition, capital resources and liquidity discussion contains certain forward-looking statements with respect to our business, financial condition, results of operations, dispositions, acquisitions, expansion projects and issuances of debt and equity, which involve risks and uncertainties that cannot be predicted or quantified, and consequently, actual results may differ materially from those expressed or implied herein. Such risks and uncertainties include, but are not limited to, the risks described in Item 1A. Risk Factors.

At December 31, 2023, we had $137.6 million in cash and cash equivalents, and Station LLC’s borrowing availability under its revolving credit facility was $479.3 million, which was net of $512.0 million in outstanding borrowings and $39.8 million in outstanding letters of credit and similar obligations. Station LLC maintains its borrowing availability under its revolving credit facility, subject to continued compliance with the terms of the credit facility. See Note 8 to the Consolidated Financial Statements for more information about our long-term debt.

Our primary capital requirements for the near term are expected to be related to the operation and maintenance of our properties, debt service payments, dividends and distributions. Our anticipated uses of cash for 2024 include (i) approximately $140.0 million to $180.0 million for capital expenditures, (ii) required principal and interest payments totaling $26.1 million and $217.9 million, respectively, on Station LLC’s indebtedness, (iii) dividends to our Class A common stockholders, and (iv) distributions to noncontrolling interest holders of Station Holdco, including “tax distributions”, which may be made quarterly when required and in amounts that may vary from quarter to quarter. Other payment obligations include salaries, wages and employee benefits, service contracts, property taxes, insurance, federal income taxes and other obligations.

At December 31, 2023, $2.1 billion of the borrowings under our credit agreements were based on variable rates, primarily SOFR. We cannot predict the SOFR or base rate interest rates that will be in effect in the future, and actual rates will vary, which will impact our interest cost. Based on our outstanding borrowings at December 31, 2023, an assumed 1% increase in variable interest rates would cause our annual interest cost to increase by approximately $21.2 million. See Item 7A. Quantitative and Qualitative Disclosures about Market Risk for additional information.

In February 2025, our Revolving Credit Facility and Term Loan A with outstanding balances of $512.0 million and $153.6 million, respectively, will become due. We are currently in discussions with our lenders and we believe it is probable that these obligations will be refinanced on a long-term basis in 2024.

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On February 7, 2024, we announced that Red Rock will pay a quarterly cash dividend of $0.25 per share of Class A common stock, to be paid on March 29, 2024 to shareholders of record as of March 15, 2024. Prior to the payment of the dividend, Station Holdco will make a cash distribution to all LLC Unit holders, including Red Rock, of $0.25 per LLC Unit, a portion of which will be paid to the other unit holders of Station Holdco. In addition, on February 7, 2024, we announced that Red Rock would pay a special cash dividend of $1.00 per share of Class A common stock, to be paid on March 4, 2024 to shareholders of record as of February 22, 2024. Prior to the payment of the special dividend, Station Holdco will make a cash distribution to all LLC Unit holders, including Red Rock, of $1.00 per unit, a portion of which will be paid to the other unit holders of Station Holdco.

We are obligated to make payments under the TRA, which is described in Note 2 to the Consolidated Financial Statements. At December 31, 2023, such obligations with respect to previously consummated transactions totaled $22.1 million. Future payments in respect of any subsequent exchanges of LLC Units for Class A common stock would be in addition to these amounts and are expected to be substantial. The timing of payments under the TRA may vary. The payments that we are required to make will generally reduce the amount of overall cash that might have otherwise been available to us, but we expect the cash tax savings we will realize from the utilization of the related deferred tax assets to fund the required payments.

Our board of directors has authorized $600 million for repurchases of Class A common stock under our equity repurchase program through June 30, 2024. We are not obligated to repurchase any shares under the program. Subject to applicable laws and the provisions of any agreements restricting our ability to do so, repurchases may be made at our discretion from time to time through open market purchases, negotiated transactions or tender offers, depending on market conditions and other factors. We made no repurchases of Class A common stock during the year ended December 31, 2023 under the program. At December 31, 2023, we had $312.9 million of remaining repurchases authorized under the program. From time to time, we may also seek to repurchase our outstanding indebtedness. Any such purchases may be funded by existing cash balances or the incurrence of debt, including borrowings under our credit facility. The amount and timing of any repurchase will be based on business and market conditions, capital availability, compliance with debt covenants and other considerations.

We expect that cash on hand, cash generated from operations and, to the extent necessary, borrowings available under the existing credit facility and proceeds from the planned refinancing of our credit facility will be sufficient to fund our operations and capital requirements and service our outstanding indebtedness for the next twelve months and beyond. We regularly assess our projected cash requirements for capital expenditures, repayment of debt obligations, and payment of other general corporate and operational needs. In the long term, we expect that we will fund our capital requirements with a combination of cash generated from operations, borrowings under the credit facility and the issuance of debt or equity as market conditions may permit. However, our cash flow and ability to obtain debt or equity financing on terms that are satisfactory to us, or at all, may be affected by a variety of factors, including competition, general economic and business conditions and financial markets. As a result, we cannot provide any assurance that we will generate sufficient income and liquidity to meet all of our liquidity requirements or other obligations.

Following is a summary of our cash flow information (amounts in thousands):

Cash Flows from Operations

Our operating cash flows primarily consist of operating income generated by our properties (excluding depreciation and other non-cash charges), interest paid and changes in working capital accounts such as inventories, prepaid expenses, receivables and payables. The majority of our revenue is generated from our slot machine and table game play, which is conducted primarily on a cash basis. Our food and beverage, room and other revenues are also primarily cash-based. As a result, fluctuations in our revenues have a direct impact on our cash flow from operations.

Net cash provided by operating activities for the years ended December 31, 2023 and 2022 totaled $494.3 million and $542.2 million, respectively. Cash flow from operating activities for the year ended December 31, 2023 included $170.5 million in interest payments and $21.1 million cash paid for income taxes, compared to $120.2 million and $31.4 million, respectively,

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for the prior year period. The continuation of favorable customer trends and our focus on cost control drove strong operating results in 2023. Information about our operating activities is presented within Results of Operations above.

Cash Flows from Investing Activities

For the years ended December 31, 2023 and 2022, cash paid for capital expenditures totaled $699.5 million and $328.6 million, respectively, including capital expenditures related to the Durango project. For the year ended December 31, 2023, cash inflows from investing activities included net cash proceeds of $52.2 million from the sale of our Texas Station and Fiesta Rancho land parcels. For the year ended December 31, 2022, cash inflows from investing activities included net cash proceeds of $118.1 million from the sale of land parcels in Las Vegas and Henderson. In addition, we paid $232.8 million during 2022 to purchase additional development land in the Las Vegas valley.

Cash Flows from Financing Activities

For the year ended December 31, 2023, we borrowed $476.5 million under the Revolving Credit Facility, and we paid $76.7 million in cash distributions to the noncontrolling interest holders of Station Holdco, $14.7 million related to tax withholding on share-based compensation and $58.6 million in dividends to holders of our Class A common stock.

For the year ended December 31, 2022, we paid $141.5 million to repurchase approximately 3.7 million shares of our Class A common stock in open market transactions, $152.4 million in cash distributions to the noncontrolling interest holders of Station Holdco and $116.7 million in cash dividends to holders of our Class A common stock, which included the payment of a special cash dividend of $1.00 per share in December 2022.

Restrictive Covenants

Certain customary covenants are included in both the credit agreement governing the credit facility and the indentures governing Station LLC’s senior notes that, among other things and subject to certain exceptions, restrict Station LLC’s ability and the ability of its restricted subsidiaries to incur or guarantee additional debt; create liens on collateral; engage in mergers, consolidations or asset dispositions; pay distributions; make investments, loans or advances; engage in certain transactions with affiliates or subsidiaries; engage in lines of business other than its core business and related businesses; or issue certain preferred units.

The credit facility also includes certain financial ratio covenants that Station LLC is required to maintain throughout the term of the credit facility, measured as of the end of each quarter. As most recently amended in February 2020, these financial ratio covenants include an interest coverage ratio of not less than 2.50 to 1.00 and a maximum consolidated total leverage ratio of 5.25 to 1.00 at December 31, 2023 and thereafter. A breach of the financial ratio covenants shall only become an event of default under the Term Loan B facility if the lenders providing the Term Loan A facility and the revolving credit facility take certain affirmative actions after the occurrence of a default of such financial ratio covenants. We believe Station LLC was in compliance with all applicable covenants at December 31, 2023.

Off-Balance Sheet Arrangements

At December 31, 2023, we had no variable interests in unconsolidated entities that provide off-balance sheet financing, liquidity, market risk or credit risk support, or that engage in leasing, hedging or research and development arrangements with us, nor did we have retained or contingent interests in assets transferred to an unconsolidated entity. At December 31, 2023, we had outstanding letters of credit and similar obligations totaling $39.8 million.

Inflation

Our business continues to experience the impact of inflation and higher interest rates and we expect the impact to continue in 2024. Commodity prices have increased and become more volatile, and we continue to experience price inflation in ordinary goods and services such as food costs, supplies, energy costs and construction costs. In addition, we have been impacted by a shortage of qualified workers which places additional upward pressure on wages and benefit costs as we seek to attract and retain qualified workers. We attempt to minimize the impact of inflation on our business by implementing cost controls, adjusting prices and optimizing our procurement strategy.

Native American Development

We have development and management agreements with the North Fork Rancheria of Mono Indians, a federally recognized Native American tribe located near Fresno, California, pursuant to which we will assist the Mono in developing, financing and operating a gaming and entertainment facility to be located on Highway 99 north of the city of Madera, California. See Note 6 to the Consolidated Financial Statements for additional information.

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Regulation and Taxes

We are subject to extensive regulation by Nevada gaming authorities, as well as regulation by gaming authorities in the other jurisdictions in which we operate, including the NIGC and the California Gambling Control Commission. We will also be subject to regulation, which may or may not be similar to that in Nevada, by any other jurisdiction in which we may conduct gaming activities in the future. For a more complete description of our regulatory requirements, see Item 1. Business—Regulation and Licensing.

The gaming industry represents a significant source of tax revenue, particularly to the State of Nevada and its counties and municipalities. From time to time, various state and federal legislators and officials have proposed changes in tax law, or in the administration of such law, affecting the gaming industry. The Nevada legislature meets every two years for 120 days and when special sessions are called by the Governor, and is not currently in session. The most recent special legislative session ended on June 14, 2023. There are currently no specific legislative proposals to increase taxes on gaming revenue, but there are no assurances that an increase in taxes on gaming or other revenue will not be proposed and passed by the Nevada legislature in the future.

Long-term Debt

A description of our indebtedness is included in Note 8 to the Consolidated Financial Statements.

Critical Accounting Policies and Estimates

The preparation of consolidated financial statements in conformity with GAAP requires us to make estimates and judgments that are subject to an inherent degree of uncertainty. Certain accounting estimates and assumptions may have a material impact on our financial statements due to the subjectivity and judgment involved and the susceptibility of such estimates and assumptions to change. We base our estimates on historical experience, information that is currently available to us and various other assumptions that we believe are reasonable under the circumstances, and we evaluate our estimates on an ongoing basis. Actual results may differ from our estimates, and such differences could have a material effect on our consolidated financial statements. Our significant accounting policies are described in Note 2 to the Consolidated Financial Statements. Following is a discussion of our accounting policies that involve critical estimates and assumptions.

Long-Lived Assets

Our business is capital intensive and a significant portion of our capital is invested in property and equipment, finite-lived intangible assets and other long-lived assets. We review long-lived assets for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. We evaluate the recoverability of our long-lived assets by estimating the future cash flows the asset is expected to generate, and comparing these estimated cash flows, on an undiscounted basis, to the carrying amount of the asset. If the carrying amount is greater, the asset is considered to be impaired, and we recognize an impairment charge equal to the amount by which the carrying amount of the asset exceeds its fair value. We test our long-lived assets for impairment at the reporting unit level, and each of our operating properties is considered a separate reporting unit.

Inherent in the calculation of fair values are various estimates and assumptions, including estimates of future cash flows expected to be generated by an asset or asset group. We base our cash flow estimates on the current regulatory, political and economic climates in the areas where we operate, recent operating information and projections for our properties. These estimates could be negatively impacted by changes in federal, state or local regulations, economic downturns, changes in consumer preferences, or events affecting various forms of travel and access to our properties. Future cash flow estimates are, by their nature, subjective and actual results may differ materially from our estimates. The most significant assumptions used in determining cash flow estimates include forecasts of future operating results, Adjusted EBITDA margins, tax rates, capital expenditures, working capital requirements, long-term growth rates and terminal year free cash flows. Cash flow estimates and their impact on fair value are sensitive to changes in many of these assumptions. If our estimates of future cash flows are not met, we may be required to record impairment charges in the future.

In 2022, we permanently closed our Texas Station, Fiesta Henderson, Fiesta Rancho and Wild Wild West properties. The closures were an indicator of potential impairment at those reporting units. Accordingly, we tested the long-lived assets of the reporting units for impairment by comparing each reporting unit’s estimated future undiscounted cash flows to its carrying amount. Our cash flow projections represented the expected net proceeds from the sale of the land and were based on market prices for similar assets.

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Property and Equipment. At December 31, 2023, the carrying amount of our property and equipment was approximately $2.8 billion, which represents 70.1% of our total assets. We make estimates and assumptions when accounting for property and equipment. We compute depreciation using the straight-line method over the estimated useful lives of the assets, and our depreciation expense is dependent on the assumptions we make about the estimated useful lives of our assets. We estimate the useful lives of our property and equipment based on our experience with similar assets and our estimate of the usage of the asset. Whenever events or circumstances occur that change the estimated useful life of an asset, we account for the change prospectively. We must also make judgments about the capitalization of costs. Costs of major improvements are capitalized, while costs of normal repairs and maintenance are charged to expense as incurred. If an asset or asset group is disposed or retired before the end of its previously estimated useful life, we may be required to accelerate our depreciation expense or recognize a loss on disposal.

Goodwill. At December 31, 2023, our goodwill totaled $195.7 million, approximately 86.8% of which is associated with one of our properties. We test our goodwill for impairment annually as of October 1, and whenever events or circumstances indicate that it is more likely than not that impairment may have occurred. Impairment testing for goodwill is performed at the reporting unit level, and we consider each of our operating properties to be a separate reporting unit.

When performing goodwill impairment testing, we either conduct a qualitative assessment to determine whether it is more likely than not that the asset is impaired, or elect to bypass this qualitative assessment and perform a quantitative test for impairment. Under the qualitative assessment, we consider both positive and negative factors, including macroeconomic conditions, industry events, financial performance and other changes in facts and circumstances, and make a determination of whether it is more likely than not that the fair value of goodwill is less than its carrying amount. If, after assessing the qualitative factors, we determine it is more likely than not the asset is impaired, we then perform a quantitative test in which the estimated fair value of the reporting unit is compared with its carrying amount, including goodwill. If the carrying amount of the reporting unit exceeds its estimated fair value, an impairment loss is recognized in an amount equal to the excess, limited to the amount of goodwill allocated to the reporting unit. As of our most recent quantitative test performed at October 1, 2020, the estimated fair value of each of our properties with goodwill exceeded its respective carrying value by a substantial amount. We performed qualitative tests at October 1, 2023 and 2022 given the continued improvement in our operating results since our last quantitative test.

When performing the quantitative test, we estimate the fair value of each reporting unit using the expected present value of future cash flows along with value indications based on our current valuation multiple and multiples of comparable publicly traded companies. The estimation of fair value requires management to make estimates, judgments and assumptions, including estimating expected future cash flows and selecting appropriate discount rates, valuation multiples and market comparables. Application of alternative estimates and assumptions could produce different results.

If the fair value of any of our properties with goodwill should decline in the future, we may be required to recognize a goodwill impairment charge, which could be material. A property’s fair value may decline as a result of a decrease in the property’s actual or projected operating results or changes in other assumptions and judgments used in the estimation process, including the discount rate and market multiple.

Indefinite-Lived Intangible Assets. Our indefinite-lived intangible assets primarily represent the value of our brands. At December 31, 2023, the carrying amount of our indefinite-lived intangible assets totaled $76.5 million. Indefinite-lived intangible assets are not amortized unless management determines that their useful life is no longer indefinite. We test our indefinite-lived intangible assets for impairment annually as of October 1, and whenever events or changes in circumstances indicate that an asset may be impaired, by comparing the carrying amount of the asset to its estimated fair value. If the carrying amount of the asset exceeds its estimated fair value, we recognize an impairment charge equal to the excess. We estimate the fair value of our brands using a derivation of the income approach to valuation based on the present value of estimated royalties avoided through ownership of the assets. The fair values of our indefinite-lived intangible assets are subject to change as a result of changes in projected operating results. Accordingly, any decrease in the projected operating results of a property could require us to recognize an impairment charge, which could be material.

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Native American Development Costs. We incur certain costs associated with our development and management agreements with Native American tribes that are reimbursable by the tribes. The reimbursable costs are recognized as long-term assets as incurred, and primarily include advances associated with the acquisition of land and development of the tribal gaming facility. We earn interest on the reimbursable advances. The repayment of the advances and the related interest may come from the proceeds of the gaming facility’s third-party financing, from cash flows generated from the gaming facility’s operations, or from a combination of both, and the repayment is typically subordinated to debt service obligations under the gaming facility’s third-party financing. Due to the uncertainty surrounding the timing and amount of the repayment, we do not recognize interest on the advances until the carrying amount of the advances has been recovered and the interest is received. Accordingly, the recoverability of our development costs is highly dependent upon the tribe’s success in obtaining third-party financing and our ability to operate the project successfully upon its completion. Our evaluation of the recoverability of our Native American development costs requires us to apply a significant amount of judgment.

We evaluate the recoverability of our Native American development costs taking into consideration all available information. Among other things, we consider the status of the project, the impact of contingencies, the achievement of milestones, existing or potential litigation, and regulatory matters when evaluating the recoverability of our Native American development costs. We estimate the future cash flows of a Native American development project based on consideration of all positive and negative evidence about its cash flow potential including, but not limited to, the likelihood that the project will be successfully completed, the status of required approvals, and the status and timing of the construction of the project, as well as current and projected economic, political, regulatory and competitive conditions that may adversely impact the project’s operating results. In certain circumstances, we may discontinue funding of a project due to a revision of its expected potential, or otherwise determine that our advances are not recoverable and as a result, we may be required to write off the entire carrying amount of our advances.

Litigation, Claims and Assessments

We are defendants in various lawsuits relating to routine matters incidental to our business and we assess the potential for any lawsuits or claims brought against us on an ongoing basis. For ongoing litigation and potential claims, we use judgment in determining the probability of loss and whether a reasonable estimate of loss, if any, can be made. We accrue a liability when we believe a loss is probable and the amount of the loss can be reasonably estimated. As the outcome of litigation is inherently uncertain, it is possible that certain matters may be resolved for materially different amounts than previously accrued or disclosed.

Income Taxes

We are taxed as a corporation and pay corporate federal, state and local taxes on income allocated to us by Station Holdco. Station Holdco operates as a partnership for federal, state and local tax reporting and holds 100% of the economic interests in Station LLC. The members of Station Holdco are liable for any income taxes resulting from income allocated to them by Station Holdco as a pass-through entity.

We recognize deferred tax assets and liabilities based on the differences between the book value of assets and liabilities for financial reporting purposes and those amounts applicable for income tax purposes using enacted tax rates in effect for the year in which the differences are expected to reverse. Deferred tax assets represent future tax deductions or credits. Realization of the deferred tax assets ultimately depends on the existence of sufficient taxable income of the appropriate character in either the carryback or carryforward period.

Each reporting period, we analyze the likelihood that our deferred tax assets will be realized. A valuation allowance is recorded if, based on the weight of all available positive and negative evidence, it is more likely than not that some portion, or all, of a deferred tax asset will not be realized. If we subsequently determine that there is sufficient evidence to indicate a deferred tax asset will be realized, the associated valuation allowance is reversed. On an annual basis, we perform a comprehensive analysis of all forms of positive and negative evidence based on year end results. During each interim period, we update our annual analysis for significant changes in the positive and negative evidence.

We record uncertain tax positions on the basis of a two-step process in which (1) we determine whether it is more likely than not the tax positions will be sustained on the basis of the technical merits of the position, and (2) for those tax positions meeting the more likely than not recognition threshold, we recognize the largest amount of tax benefit that is more than 50% likely to be realized upon ultimate settlement with the related tax authority. We do not believe that we have any tax positions for which it is reasonably possible that we will be required to record a significant liability for unrecognized tax benefits within the next twelve months.

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ITEM 7.     MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with the Consolidated Financial Statements and notes thereto included in Item 8. Financial Statements and Supplementary Data within this Annual Report on Form 10-K.

Overview

Red Rock was formed as a Delaware corporation in 2015 to own an indirect equity interest in, and manage, Station Casinos LLC, a Nevada limited liability company (“Station LLC”). Station LLC is a gaming, development and management company established in 1976 that owns and operates six major gaming and entertainment facilities and nine smaller casinos (three of which are 50% owned) in the Las Vegas regional market. In February 2023 we opened our tenth smaller casino, Wildfire Fremont. As of December 31, 2022, we offered 13,921 slot machines, 233 table games and 2,821 hotel rooms in the Las Vegas market. In June 2022, we permanently closed our Texas Station, Fiesta Henderson and Fiesta Rancho properties, which had been closed since March 2020 as a result of the COVID-19 pandemic. In addition, we permanently closed Wild Wild West in September 2022. In the first quarter of 2022, we commenced construction of Durango on our approximately 50-acre development site at the intersection of Durango Drive and Interstate 215 in the southwest Las Vegas valley. Durango is expected to open in the fourth quarter of 2023. A subsidiary of Station LLC also managed Graton Resort in northern California on behalf of a Native American tribe through February 5, 2021.

We own all of the outstanding voting interests in Station LLC and have an indirect equity interest in Station LLC through our ownership of limited liability company interests in Station Holdco (“LLC Units”), which owns all of the economic interests in Station LLC. At December 31, 2022, we held 58% of the economic interests and 100% of the voting power in Station Holdco, subject to certain limited exceptions, and we are designated as the sole managing member of both Station Holdco and Station LLC. We control and operate all of the business and affairs of Station Holdco and Station LLC, and conduct all of our operations through these entities. Other than assets and liabilities related to income taxes and the tax receivable agreement, our only material assets are our equity interest in Station Holdco and our voting interest in Station LLC. We have no operations outside of our management of Station Holdco and Station LLC.

Our Consolidated Financial Statements reflect the consolidation of Station LLC and its consolidated subsidiaries, and Station Holdco. The financial position and results of operations attributable to LLC Units we do not own are reported separately as noncontrolling interest.

Our principal source of revenue and operating income is gaming, and our non-gaming offerings include restaurants, hotels and other entertainment amenities. Approximately 80% to 85% of our casino revenue is generated from slot play. The majority of our revenue is cash-based and as a result, fluctuations in our revenues have a direct impact on our cash flows from operations. Because our business is capital intensive, we rely heavily on the ability of our properties to generate operating cash flow to repay debt financing and fund capital expenditures.

A significant portion of our business is dependent upon customers who live and/or work in the Las Vegas metropolitan area. As of December 2022, the unemployment rate in the Las Vegas metropolitan area was 5.4%, down from 6.0% in December 2021 and 34% in April 2020. Statewide, the unemployment rate for December 2022 was 5.2%, consistent with the prior year, reflecting a significant decrease from the statewide unemployment rate of 30% in April 2020. The median price of an existing single-family home in Las Vegas was $425,000 at December 31, 2022, unchanged from December 31, 2021, according to the Las Vegas Realtors®, but down 11.5% from the all-time high of $480,000 in June 2022. In addition, Las Vegas remains one of the fastest growing metropolitan areas in the United States, posting a 2.1% growth rate in 2022. In light of uncertainty in the economic outlook stemming from inflation, rising interest rates and increased energy costs, we cannot predict whether the recovery in unemployment or the downward trend in housing prices in the Las Vegas area will continue.

Subsequent to the reopening of most of our properties in June 2020, we have continued to experience favorable customer trends in 2022, including consistent visitation from our guests and strong spend per visit. These trends, in combination with our operational discipline and our focus on our core customers, as well as regional and out of town guests, continued to drive consistent operating results in 2022. However, we cannot predict whether these trends will continue, nor can we predict the extent to which the impacts of inflation, increased energy costs, rising interest rates and the COVID-19 pandemic and its related variants on the United States and Las Vegas economies may affect our business in the future.

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The COVID-19 pandemic and its related variants have had, and may continue to have, a detrimental impact on the United States and Las Vegas economies. We have taken steps to mitigate these and potential future effects of COVID-19 and its related variants on our results of operations through a combination of streamlining our business, optimizing our marketing initiatives, and reducing expenses.

Our Key Performance Indicators

We use certain key indicators to measure our performance.

Gaming revenue measures:

•Slot handle, table game drop and race and sports write are measures of volume. Slot handle represents the dollar amount wagered in slot machines, and table game drop represents the total amount of cash and net markers issued that are deposited in table game drop boxes.

•Win represents the amount of wagers retained by us.

•Hold represents win as a percentage of slot handle or table game drop.

As our customers are primarily Las Vegas residents, our hold percentages are generally consistent from period to period. Notwithstanding the impact of the COVID-19 pandemic, fluctuations in our casino revenue are primarily due to the volume and spending levels of customers at our properties.

Food and beverage revenue measures:

•Average guest check is a measure of food sales volume and product offerings at our restaurants, and represents the average amount spent per customer visit.

•Number of guests served is an indicator of volume.

Room revenue measures:

•Occupancy is calculated by dividing occupied rooms, including complimentary rooms, by rooms available.

•Average daily rate (“ADR”) is calculated by dividing room revenue, which includes the retail value of complimentary rooms, by rooms occupied, including complimentary rooms.

•Revenue per available room is calculated by dividing room revenue by rooms available.

Information about our results of operations is included herein and in the notes to our Consolidated Financial Statements.

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Results of Operations

The following table presents information about our results of operations for the year ended December 31, 2022 compared to 2021 (dollars in thousands). Information about our results of operations for the year ended December 31, 2021 as compared to 2020 can be found in Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on February 25, 2022.

____________________________________________________________

n/m = not meaningful

We view each of our Las Vegas casino properties as an individual operating segment. We aggregate all of our Las Vegas operating segments into one reportable segment because all of our Las Vegas properties offer similar products, cater to the same customer base, have the same regulatory and tax structure, share the same marketing programs, are directed by a centralized management structure and have similar economic characteristics. We also aggregate our Native American management activities into one reportable segment. The results of operations for our Native American management segment are

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discussed in the section entitled Management Fee Revenue below and the results of operations of our Las Vegas operations are discussed in the remaining sections below.

Net Revenues. Net revenues for the year ended December 31, 2022 increased by $45.9 million to $1.66 billion as compared to $1.62 billion for the year ended December 31, 2021. We achieved year over year growth of 15.3%, 14.3% and 13.5% in food and beverage, room and other revenues, respectively, while casino revenue decreased by 1.4%. Management fee revenue decreased as we ceased to manage Graton Resort in February 2021.

Operating Income. Operating income increased by $159.8 million to $561.3 million for 2022 as compared to $401.5 million for 2021. Our strong performance and the overall customer trends for the current year were consistent with the trends we have seen since our reopening in June 2020. For the years ended December 31, 2022 and December 31, 2021, operating income included the impact of impairment charges of $80.0 million and $177.7 million, respectively. For the year ended December 31, 2022, the impairment charges were related primarily to the permanent closure of our Texas Station, Fiesta Rancho and Fiesta Henderson properties in June 2022, which had remained closed since the beginning of the COVID-19 pandemic in March 2020. For the prior year, the impairment charge was related to Palms Casino Resort (“Palms”), which was sold in December 2021. In addition, operating income for 2022 and 2021 included $76.3 million and $20.9 million, respectively, of gains on land sales. Additional information about factors impacting our operating income is included below.

Casino.  Casino revenues decreased by 1.4% for the year ended December 31, 2022 as compared to 2021. Our casino revenues for 2021 were at record levels due to strong customer demand as we continued to recover from the negative effects of the COVID-19 pandemic. For 2022, slot handle and table games drop decreased slightly and race and sports write increased by 6.0%. Our hold percentages for 2022 were consistent compared to 2021. Casino expenses for the year ended December 31, 2022 increased by 1.5% as compared to the prior year, primarily due to higher employee-related costs.

Food and Beverage.  Food and beverage includes revenue and expenses from restaurants, bars and catering. For the year ended December 31, 2022, food and beverage revenue increased by 15.3% as compared to 2021, driven by the continued recovery of our catering and group business, as well as growth across all other categories of our food and beverage operations. For the year ended December 31, 2022, the average guest check at our restaurants increased by 18.3%, while the number of restaurant guests served decreased by 5.9% as compared to the prior year. Food and beverage expenses for the year ended December 31, 2022 increased by 14.7% as compared to the prior year, primarily due to higher employee-related costs and costs of sales.

Room. For the year ended December 31, 2022 as compared to 2021, room revenues increased by 14.3% and room expenses decreased by 6.0%. The results for the prior year included room revenues of $12.4 million, as well as associated costs, from the condominium rental program at Palms, which we sold in December 2021.

Information about our hotel operations is presented below:

Our ADR improved by 18.2%, our revenue per available room improved by 30.9% and our occupancy rate improved by 8.0 percentage points for 2022 as compared to 2021.

Other. Other primarily represents revenues from tenant leases, retail outlets, bowling, spas and entertainment and their corresponding expenses. For the year ended December 31, 2022, other revenues increased 13.5% as compared to the prior year, primarily driven by spa, bowling and leased outlets. Other expenses increased by 26.3%, as compared to the prior year, due to higher employee-related costs, entertainment expenses and cost of sales.

Management Fee Revenue. Management fee revenue primarily represents fees earned from our previous agreement with a Native American tribe to manage Graton Resort, as well as management fees earned from our three 50%-owned smaller properties. For the year ended December 31, 2022, management fee revenue decreased by 66.6% as compared to 2021, as we ceased to manage Graton Resort on February 5, 2021.

Selling, General and Administrative (“SG&A”).  SG&A expenses increased by 1.7% to $353.0 million for the year ended December 31, 2022 as compared to $347.1 million for the prior year. The increase in SG&A expenses was primarily due

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to higher employee costs and repairs and maintenance expense. As a percentage of net revenue, SG&A expenses for the year ended December 31, 2022 were effectively flat as compared to the prior year end as we continued to focus on operational efficiencies and cost control.

Depreciation and Amortization.  Depreciation and amortization expense for the year ended December 31, 2022 decreased to $128.4 million from $157.8 million for 2021 primarily due to the sale of Palms in 2021, for which we ceased recognizing depreciation and amortization expense as of April 1, 2021. In addition, as a result of the permanent closure of our Texas Station, Fiesta Rancho and Fiesta Henderson properties, we ceased recognizing depreciation and amortization expense for these properties as of June 30, 2022. Depreciation expense also decreased due to certain assets becoming fully depreciated.

Write-downs and other, net. Write-downs and other, net, include gains and losses on asset disposals, demolition costs associated with our permanently closed properties, development and preopening expenses, business innovation and technology enhancements, contract termination, severance and other. For the year ended December 31, 2022, write-downs and other, net was a gain of $47.7 million, comprising net gains on capital asset transactions of $79.0 million (including gains on land sales of $76.3 million), partially offset by preopening expense of $3.7 million for Durango, $9.3 million of demolition costs associated with the permanently closed properties, $9.2 million in business innovation development, $6.7 million in artist performance agreement termination costs associated with Palms, and other. For the year ended December 31, 2021, write-downs and other, net was a gain of $18.7 million, primarily representing gains on land sales.

Asset Impairment. For the year ended December 31, 2022, we recognized asset impairment charges totaling $80.0 million, primarily to write off the facilities and certain related assets at Texas Station, Fiesta Rancho and Fiesta Henderson, which we permanently closed in June 2022. For the year ended December 31, 2021, we recognized a $177.7 million loss on the sale of Palms, which we sold for $650 million in December 2021.

Interest Expense, net.  The following table presents summarized information about our interest expense (amounts in thousands):

Interest expense, net, for the year ended December 31, 2022 was $129.9 million, an increase of 25.9% as compared to $103.2 million for 2021. The increase in interest expense, net was due to higher variable interest rates applicable to our credit facility for the current year. At December 31, 2022, $1.8 billion of the borrowings under our credit agreements were based on variable rates, primarily LIBOR, plus applicable margins of 0.50% to 2.25%, and the LIBOR rate applicable to our outstanding LIBOR-based borrowings was 4.39%. We expect that interest rates may continue to increase in response to macroeconomic conditions. Based on our outstanding borrowings at December 31, 2022, an assumed 1% increase in variable interest rates would cause our annual interest cost to increase by approximately $18.0 million. Additional information about our long-term debt is included in Note 8 to the Consolidated Financial Statements.

Loss on Extinguishment/Modification of Debt, net. For the year ended December 31, 2021, we recognized a loss of $13.5 million on extinguishment of debt as a result of the redemption of our 5.00% Senior Notes.

Net Income Attributable to Noncontrolling Interests. Net income attributable to noncontrolling interests for the years ended December 31, 2022 and 2021 represented the portion of net income attributable to the ownership interest in Station Holdco not held by us.

(Provision) Benefit for Income Tax. For the years ended December 31, 2022 and 2021, we recognized income tax expense of $44.5 million and income tax benefit of $69.3 million, respectively. Station Holdco is treated as a partnership for income tax reporting and Station Holdco’s members are liable for federal, state and local income taxes based on their share of Station Holdco’s taxable income. We are not liable for income tax on the noncontrolling interests’ share of Station Holdco’s taxable income or benefit from a taxable loss, and therefore our effective tax rate of 10.2% for the year ended December 31, 2022 was less than the statutory rate. For the year ended December 31, 2021, we reversed the valuation allowance on our deferred tax assets that had been recognized in the prior year due to the uncertainty of realizing certain tax benefits as a result of the COVID-19 pandemic.

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Adjusted EBITDA

Adjusted EBITDA for the years ended December 31, 2022 and 2021 for our two reportable segments and a reconciliation of net income to Adjusted EBITDA are presented below (amounts in thousands). The Las Vegas operations segment includes all of our Las Vegas area casino properties and the Native American management segment includes our Native American management activities.

The year-over-year changes in Adjusted EBITDA were due to the factors described under Results of Operations above.

Adjusted EBITDA is a non-GAAP measure that is presented solely as a supplemental disclosure. We believe that Adjusted EBITDA is a widely used measure of operating performance in our industry and is a principal basis for valuation of gaming companies. We believe that in addition to net income, Adjusted EBITDA is a useful financial performance measurement for assessing our operating performance because it provides information about the performance of our ongoing core operations. Adjusted EBITDA includes net income plus depreciation and amortization, share-based compensation, write-downs and other, net (including gains and losses on asset disposals, demolition costs, severance, preopening, business innovation and technology enhancements, contract termination costs and non-routine items), asset impairment, interest expense, net, loss on extinguishment debt, net, provision (benefit) for income tax and other, which includes losses from assets held for sale.

To evaluate Adjusted EBITDA and the trends it depicts, the components should be considered. Each of these components can significantly affect our results of operations and should be considered in evaluating our operating performance, and the impact of these components cannot be determined from Adjusted EBITDA. Adjusted EBITDA does not represent net income or cash flows from operating, investing or financing activities as defined by accounting principles generally accepted in the United States of America (“GAAP”) and should not be considered as an alternative to net income as an indicator of our operating performance. Additionally, Adjusted EBITDA does not consider capital expenditures and other investing activities

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and should not be considered as a measure of our liquidity. It should be noted that not all gaming companies that report EBITDA or adjustments to this measure may calculate EBITDA or such adjustments in the same manner as we do, and therefore, our measure of Adjusted EBITDA may not be comparable to similarly titled measures used by other gaming companies.

In the third quarter of 2022, we changed our methodology for allocating corporate expenses to our reportable segments. Under the new methodology, only corporate costs that are primarily related to our operating properties are allocated to the properties. The new methodology was applied to all periods presented. For the year ended December 31, 2021, expenses of $13.9 million were reclassified from the Las Vegas Operations segment to Corporate and other to conform with the current year presentation. The reclassifications had no impact on Adjusted EBITDA.

Holding Company Financial Information

The indentures governing the 4.50% Senior Notes and the 4.625% Senior Notes contain certain covenants that require Station LLC to furnish to the holders of the notes certain annual and quarterly financial information relating to Station LLC and its subsidiaries. The obligation to furnish such information may be satisfied by providing consolidated financial information of the Company along with additional disclosure explaining the differences between such information and the financial information of Station LLC and its subsidiaries on a standalone basis. The following financial information about the Company and its consolidated subsidiaries exclusive of Station LLC and its subsidiaries (the “Holding Company”), is furnished to explain the differences between the financial information of the Holding Company and the financial information of Station LLC and its subsidiaries for the periods presented in this report. The primary differences between the financial information of the Holding Company and that of Station LLC relate to income taxes and the liability associated with the tax receivable agreement (“TRA”).

At December 31, 2022, the difference between the balance sheet for Station LLC and its consolidated subsidiaries and the balance sheet for the Holding Company is that the Holding Company had cash of $15.3 million, $75.7 million of deferred tax assets, net and $0.3 million of prepaid expenses, which are solely assets of the Holding Company, and liabilities that are solely the Holding Company’s, consisting of a $28.6 million liability under the TRA, of which $6.6 million is expected to be paid in the next twelve months, $1.7 million of other current liabilities and $1.8 million of other long-term liabilities that are solely liabilities of the Holding Company. At December 31, 2021, the Holding Company had cash of $3.3 million, $98.6 million of deferred tax assets, net, a $27.2 million noncurrent liability under the TRA and $2.1 million of other current liabilities.

For the year ended December 31, 2022, the difference between the statement of operations for Station LLC and its consolidated subsidiaries and the statement of operations for the Holding Company is that the Holding Company had a net loss of $46.0 million primarily representing provision for income tax. For the year ended December 31, 2021, the difference between the statement of operations for Station LLC and its consolidated subsidiaries and the statement of operations for the Holding Company is that the Holding Company had net income of $70.6 million primarily representing an income tax benefit related to the reversal of a valuation allowance against its deferred tax assets.

Financial Condition, Capital Resources and Liquidity

The following financial condition, capital resources and liquidity discussion contains certain forward-looking statements with respect to our business, financial condition, results of operations, dispositions, acquisitions, expansion projects and issuances of debt and equity, which involve risks and uncertainties that cannot be predicted or quantified, and consequently, actual results may differ materially from those expressed or implied herein. Such risks and uncertainties include, but are not limited to, the risks described in Item 1A. Risk Factors.

At December 31, 2022, we had $117.3 million in cash and cash equivalents, and Station LLC’s borrowing availability under its revolving credit facility was $852.2 million, which was net of $149.5 million in outstanding borrowings and $29.4 million in outstanding letters of credit and similar obligations. Station LLC maintains its borrowing availability under its revolving credit facility, subject to continued compliance with the terms of the credit facility. See Note 8 to the Consolidated Financial Statements for more information about our long-term debt.

Our primary capital requirements for the near term are expected to be related to the operation and maintenance of our properties, debt service payments and construction costs for Durango. Our anticipated uses of cash for 2023 include (i) approximately $550.0 million to $600.0 million for investment capital expenditures, including our Durango project, (ii) approximately $70.0 million to $90.0 million for maintenance capital expenditures at our existing properties, (iii) required principal and interest payments on Station LLC’s indebtedness totaling $26.1 million and $191.2 million, respectively, (iv) dividends to our Class A common stockholders, (v) distributions to noncontrolling interest holders of Station Holdco, including

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“tax distributions”, which may be made quarterly when required and in amounts that may vary from quarter to quarter, and (vi) Federal income taxes. Other payment obligations include salaries, wages and employee benefits, service contracts, property taxes, insurance and other obligations.

At December 31, 2022, $1.8 billion of the borrowings under our credit agreements were based on variable rates, primarily LIBOR. We expect that interest rates may continue to increase and may impact our interest cost. We cannot predict the LIBOR or base rate interest rates that will be in effect in the future, and actual rates will vary. Based on our outstanding borrowings at December 31, 2022, an assumed 1% increase in variable interest rates would cause our annual interest cost to increase by approximately $18.0 million. The LIBOR rates applicable to loans under our credit agreements will be discontinued on June 30, 2023. See Item 7A. Quantitative and Qualitative Disclosures about Market Risk for additional information.

On February 7, 2023, our board of directors declared a quarterly cash dividend of $0.25 per share of Class A common stock, to be paid on March 31, 2023 to shareholders of record as of March 15, 2023. Prior to the payment of the dividend, Station Holdco will make a cash distribution to all LLC Unit holders, including Red Rock, of $0.25 per LLC Unit, a portion of which will be paid to the other unit holders of Station Holdco.

We are obligated to make payments under the TRA, which is described in Note 2 to the Consolidated Financial Statements. At December 31, 2022, such obligations with respect to previously consummated transactions totaled $28.6 million. Future payments in respect of any subsequent exchanges of LLC Units for Class A common stock would be in addition to these amounts and are expected to be substantial. The timing of payments under the TRA may vary. The payments that we are required to make will generally reduce the amount of overall cash that might have otherwise been available to us, but we expect the cash tax savings we will realize from the utilization of the related deferred tax assets to fund the required payments.

Our board of directors has approved an equity repurchase program authorizing the repurchase of shares of our Class A common stock. In August 2022, our board of directors increased the aggregate repurchase authorization to $600 million and extended the authorization through June 30, 2024. We are not obligated to repurchase any shares under the program. Subject to applicable laws and the provisions of any agreements restricting our ability to do so, repurchases may be made at our discretion from time to time through open market purchases, negotiated transactions or tender offers, depending on market conditions and other factors. During the year ended December 31, 2022, we repurchased 3.7 million shares of our Class A common stock pursuant to the program for an aggregate price of $141.5 million in open market transactions. As of December 31, 2022, we had repurchased an aggregate of 7.2 million shares of our Class A common stock pursuant to the program and the remaining amount authorized for repurchases was $312.9 million. From time to time, we may also seek to repurchase our outstanding indebtedness. Any such purchases may be funded by existing cash balances or the incurrence of debt, including borrowings under our credit facility. The amount and timing of any repurchase will be based on business and market conditions, capital availability, compliance with debt covenants and other considerations.

We expect that cash on hand, cash generated from operations and, to the extent necessary, borrowings available under the credit facility, will be sufficient to fund our operations and capital requirements and service our outstanding indebtedness for the next twelve months and beyond. We regularly assess our projected cash requirements for capital expenditures, repayment of debt obligations, and payment of other general corporate and operational needs. In the long term, we expect that we will fund our capital requirements with a combination of cash generated from operations, borrowings under the credit facility and the issuance of debt or equity as market conditions may permit. However, our cash flow and ability to obtain debt or equity financing on terms that are satisfactory to us, or at all, may be affected by a variety of factors, including competition, general economic and business conditions and financial markets, all of which may be adversely impacted by the ongoing COVID-19 pandemic. As a result, we cannot provide any assurance that we will generate sufficient income and liquidity to meet all of our liquidity requirements or other obligations.

Following is a summary of our cash flow information (amounts in thousands):

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Cash Flows from Operations

Our operating cash flows primarily consist of operating income generated by our properties (excluding depreciation and other non-cash charges), interest paid and changes in working capital accounts such as inventories, prepaid expenses, receivables and payables. The majority of our revenue is generated from our slot machine and table game play, which is conducted primarily on a cash basis. Our food and beverage, room and other revenues are also primarily cash-based. As a result, fluctuations in our revenues have a direct impact on our cash flow from operations.

Net cash provided by operating activities for the year ended December 31, 2022 and 2021 totaled $542.2 million and $610.0 million, respectively. Cash flow from operating activities for the year ended December 31, 2022 included $120.2 million in interest payments and $31.4 million cash paid for income taxes, compared to $98.0 million and $4.1 million, respectively, for the prior year period. Favorable customer trends and the continuation of our cost reduction measures drove strong operating results in 2022. Information about our operating activities is presented within Results of Operations above.

Cash Flows from Investing Activities

For the year ended December 31, 2022 and 2021, cash paid for capital expenditures totaled $328.6 million and $61.3 million, respectively. Capital expenditures for the current year included amounts related to the Durango project. For the year ended December 31, 2022, cash inflows from investing activities included net cash proceeds of $118.1 million from the sale of land parcels in Las Vegas and Henderson. For the year ended December 31, 2021 cash inflows from investing activities included cash proceeds from the sale of Palms of $650.0 million, less transaction costs and other adjustments, and $35.4 million from the sale of land parcels in Reno and Las Vegas. In addition, we paid $232.8 million during 2022 to purchase additional development land in the Las Vegas valley.

Cash Flows from Financing Activities

For the year ended December 31, 2022, we paid $141.5 million to repurchase approximately 3.7 million shares of our Class A common stock in open market transactions, $152.4 million in cash distributions to the noncontrolling interest holders of Station Holdco and $116.7 million in cash dividends to holders of our Class A common stock, which included the payment of a special cash dividend of $1.00 per share in December 2022.

For the year ended December 31, 2021, we redeemed $530.3 million in outstanding principal amount of 5.00% Senior Notes and paid redemption premiums of $9.8 million. In November 2021, we issued $500.0 million in principal amount of 4.625% Senior Notes due 2031. For the year ended December 31, 2021, we also paid $500.2 million to repurchase approximately 10.4 million shares of our Class A common stock, which included $354.6 million for the 2021 equity tender. For the year ended December 31, 2021, we paid cash distributions totaling $237.2 million to the noncontrolling interest holders of Station Holdco and $203.8 million in cash dividends to holders of our Class A common stock, which included the payment of a special cash dividend of $3.00 per share in December 2021.

Restrictive Covenants

Certain customary covenants are included in both the credit agreement governing the credit facility and the indentures governing Station LLC’s senior notes that, among other things and subject to certain exceptions, restrict Station LLC’s ability and the ability of its restricted subsidiaries to incur or guarantee additional debt; create liens on collateral; engage in mergers, consolidations or asset dispositions; pay distributions; make investments, loans or advances; engage in certain transactions with affiliates or subsidiaries; engage in lines of business other than its core business and related businesses; or issue certain preferred units.

The credit facility also includes certain financial ratio covenants that Station LLC is required to maintain throughout the term of the credit facility, measured as of the end of each quarter. As most recently amended in February 2020, these financial ratio covenants include an interest coverage ratio of not less than 2.50 to 1.00 and a maximum consolidated total leverage ratio, with step-downs over the term of the credit facility, ranging from 5.75 to 1.00 at December 31, 2022 to 5.25 to 1.00 at December 31, 2023 and thereafter. A breach of the financial ratio covenants shall only become an event of default under the term loan B facility if the lenders providing the term loan A facility and the revolving credit facility take certain affirmative actions after the occurrence of a default of such financial ratio covenants. We believe Station LLC was in compliance with all applicable covenants at December 31, 2022.

Off-Balance Sheet Arrangements

At December 31, 2022, we had no variable interests in unconsolidated entities that provide off-balance sheet financing, liquidity, market risk or credit risk support, or that engage in leasing, hedging or research and development arrangements with

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us, nor did we have retained or contingent interests in assets transferred to an unconsolidated entity. At December 31, 2022, we had outstanding letters of credit and similar obligations totaling $29.4 million.

Inflation

Our business continues to experience the impact of inflation and rising interest rates and we expect the impact to continue in 2023. Commodity prices have increased and become more volatile, and we are experiencing price inflation in ordinary goods and services such as food costs, supplies, energy costs and construction costs. In addition, we have been impacted by a shortage of qualified workers which places additional upward pressure on wages and benefit costs as we seek to attract and retain qualified workers. We attempt to minimize the impact of inflation on our business by implementing cost controls, adjusting prices and optimizing our procurement strategy.

Native American Development

We have development and management agreements with the Mono, a federally recognized Native American tribe located near Fresno, California, pursuant to which we will assist the Mono in developing, financing and operating a gaming and entertainment facility to be located on Highway 99 north of the city of Madera, California. See Note 6 to the Consolidated Financial Statements for additional information.

Regulation and Taxes

We are subject to extensive regulation by Nevada gaming authorities, as well as regulation by gaming authorities in the other jurisdictions in which we operate, including the NIGC and the California Gambling Control Commission. We will also be subject to regulation, which may or may not be similar to that in Nevada, by any other jurisdiction in which we may conduct gaming activities in the future. For a more complete description of our regulatory requirements, see Item 1. Business—Regulation and Licensing.

The gaming industry represents a significant source of tax revenue, particularly to the State of Nevada and its counties and municipalities. From time to time, various state and federal legislators and officials have proposed changes in tax law, or in the administration of such law, affecting the gaming industry. The Nevada legislature meets every two years for 120 days and when special sessions are called by the Governor. The legislature is currently in session. There are currently no specific legislative proposals to increase taxes on gaming revenue, but there are no assurances that an increase in taxes on gaming or other revenue will not be proposed and passed by the Nevada legislature in the future.

Description of Certain Indebtedness

Long-term Debt

A description of our indebtedness is included in Note 8 to the Consolidated Financial Statements.

Critical Accounting Policies and Estimates

The preparation of consolidated financial statements in conformity with GAAP requires us to make estimates and judgments that are subject to an inherent degree of uncertainty. Certain accounting estimates and assumptions may have a material impact on our financial statements due to the subjectivity and judgment involved and the susceptibility of such estimates and assumptions to change. We base our estimates on historical experience, information that is currently available to us and various other assumptions that we believe are reasonable under the circumstances, and we evaluate our estimates on an ongoing basis. Actual results may differ from our estimates, and such differences could have a material effect on our consolidated financial statements. Our significant accounting policies are described in Note 2 to the Consolidated Financial Statements. Following is a discussion of our accounting policies that involve critical estimates and assumptions.

Long-Lived Assets

Our business is capital intensive and a significant portion of our capital is invested in property and equipment, finite-lived intangible assets and other long-lived assets. We review long-lived assets for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. We evaluate the recoverability of our long-lived assets by estimating the future cash flows the asset is expected to generate, and comparing these estimated cash flows, on an undiscounted basis, to the carrying amount of the asset. If the carrying amount is greater, the asset is considered to be impaired, and we recognize an impairment charge equal to the amount by which the carrying amount of the asset exceeds its fair value.

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We test our long-lived assets for impairment at the reporting unit level, and each of our operating properties is considered a separate reporting unit.

Inherent in the calculation of fair values are various estimates and assumptions, including estimates of future cash flows expected to be generated by an asset or asset group. We base our cash flow estimates on the current regulatory, political and economic climates in the areas where we operate, recent operating information and projections for our properties. These estimates could be negatively impacted by changes in federal, state or local regulations, economic downturns, changes in consumer preferences, or events affecting various forms of travel and access to our properties. Future cash flow estimates are, by their nature, subjective and actual results may differ materially from our estimates. The most significant assumptions used in determining cash flow estimates include forecasts of future operating results, Adjusted EBITDA margins, tax rates, capital expenditures, working capital requirements, long-term growth rates and terminal year free cash flows. Cash flow estimates and their impact on fair value are sensitive to changes in many of these assumptions. If our estimates of future cash flows are not met, we may be required to record impairment charges in the future.

In June 2022, we permanently closed our Texas Station, Fiesta Henderson and Fiesta Rancho properties, which had been closed since March 2020 as a result of the COVID-19 pandemic. In addition, we permanently closed Wild Wild West in September 2022. The closures were an indicator of potential impairment at those reporting units. Accordingly, we tested the long-lived assets of the reporting units for impairment by comparing each reporting unit’s estimated future undiscounted cash flows to its carrying amount. Our cash flow projections represented the expected net proceeds from the sale of the land and were based on market prices for similar assets.

Property and Equipment. At December 31, 2022, the carrying amount of our property and equipment was approximately $2.2 billion, which represents 65.6% of our total assets. We make estimates and assumptions when accounting for property and equipment. We compute depreciation using the straight-line method over the estimated useful lives of the assets, and our depreciation expense is dependent on the assumptions we make about the estimated useful lives of our assets. We estimate the useful lives of our property and equipment based on our experience with similar assets and our estimate of the usage of the asset. Whenever events or circumstances occur that change the estimated useful life of an asset, we account for the change prospectively. We must also make judgments about the capitalization of costs. Costs of major improvements are capitalized, while costs of normal repairs and maintenance are charged to expense as incurred. If an asset or asset group is disposed or retired before the end of its previously estimated useful life, we may be required to accelerate our depreciation expense or recognize a loss on disposal.

Goodwill. At December 31, 2022, our goodwill totaled $195.7 million, approximately 86.8% of which is associated with one of our properties. We test our goodwill for impairment annually as of October 1, and whenever events or circumstances indicate that it is more likely than not that impairment may have occurred. Impairment testing for goodwill is performed at the reporting unit level, and we consider each of our operating properties to be a separate reporting unit.

When performing goodwill impairment testing, we either conduct a qualitative assessment to determine whether it is more likely than not that the asset is impaired, or elect to bypass this qualitative assessment and perform a quantitative test for impairment. Under the qualitative assessment, we consider both positive and negative factors, including macroeconomic conditions, industry events, financial performance and other changes in facts and circumstances, and make a determination of whether it is more likely than not that the fair value of goodwill is less than its carrying amount. If, after assessing the qualitative factors, we determine it is more likely than not the asset is impaired, we then perform a quantitative test in which the estimated fair value of the reporting unit is compared with its carrying amount, including goodwill. If the carrying amount of the reporting unit exceeds its estimated fair value, an impairment loss is recognized in an amount equal to the excess, limited to the amount of goodwill allocated to the reporting unit. As of our most recent quantitative test performed at October 1, 2020, the estimated fair value of each of our properties with goodwill exceeded its respective carrying value by a substantial amount. We performed qualitative tests at October 1, 2022 and 2021 given the continued improvement in our operating results since our last quantitative test.

When performing the quantitative test, we estimate the fair value of each reporting unit using the expected present value of future cash flows along with value indications based on our current valuation multiple and multiples of comparable publicly traded companies. The estimation of fair value requires management to make estimates, judgments and assumptions, including estimating expected future cash flows and selecting appropriate discount rates, valuation multiples and market comparables. Application of alternative estimates and assumptions could produce different results.

If the fair value of any of our properties with goodwill should decline in the future, we may be required to recognize a goodwill impairment charge, which could be material. A property’s fair value may decline as a result of a decrease in the

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property’s actual or projected operating results or changes in other assumptions and judgments used in the estimation process, including the discount rate and market multiple.

Indefinite-Lived Intangible Assets. Our indefinite-lived intangible assets primarily represent the value of our brands. At December 31, 2022, the carrying amount of our indefinite-lived intangible assets totaled $76.5 million. Indefinite-lived intangible assets are not amortized unless management determines that their useful life is no longer indefinite. We test our indefinite-lived intangible assets for impairment annually as of October 1, and whenever events or changes in circumstances indicate that an asset may be impaired, by comparing the carrying amount of the asset to its estimated fair value. If the carrying amount of the asset exceeds its estimated fair value, we recognize an impairment charge equal to the excess. We estimate the fair value of our brands using a derivation of the income approach to valuation based on the present value of estimated royalties avoided through ownership of the assets. The fair values of our indefinite-lived intangible assets are subject to change as a result of changes in projected operating results. Accordingly, any decrease in the projected operating results of a property could require us to recognize an impairment charge, which could be material.

Native American Development Costs. We incur certain costs associated with our development and management agreements with Native American tribes that are reimbursable by the tribes. The reimbursable costs are recognized as long-term assets as incurred, and primarily include advances associated with the acquisition of land and development of the tribal gaming facility. We earn interest on the reimbursable advances. The repayment of the advances and the related interest may come from the proceeds of the gaming facility’s third-party financing, from cash flows generated from the gaming facility’s operations, or from a combination of both, and the repayment is typically subordinated to debt service obligations under the gaming facility’s third-party financing. Due to the uncertainty surrounding the timing and amount of the repayment, we do not recognize interest on the advances until the carrying amount of the advances has been recovered and the interest is received. Accordingly, the recoverability of our development costs is highly dependent upon the tribe’s success in obtaining third-party financing and our ability to operate the project successfully upon its completion. Our evaluation of the recoverability of our Native American development costs requires us to apply a significant amount of judgment.

We evaluate the recoverability of our Native American development costs taking into consideration all available information. Among other things, we consider the status of the project, the impact of contingencies, the achievement of milestones, existing or potential litigation, and regulatory matters when evaluating the recoverability of our Native American development costs. We estimate the future cash flows of a Native American development project based on consideration of all positive and negative evidence about its cash flow potential including, but not limited to, the likelihood that the project will be successfully completed, the status of required approvals, and the status and timing of the construction of the project, as well as current and projected economic, political, regulatory and competitive conditions that may adversely impact the project’s operating results. In certain circumstances, we may discontinue funding of a project due to a revision of its expected potential, or otherwise determine that our advances are not recoverable and as a result, we may be required to write off the entire carrying amount of our advances.

Litigation, Claims and Assessments

We are defendants in various lawsuits relating to routine matters incidental to our business and we assess the potential for any lawsuits or claims brought against us on an ongoing basis. For ongoing litigation and potential claims, we use judgment in determining the probability of loss and whether a reasonable estimate of loss, if any, can be made. We accrue a liability when we believe a loss is probable and the amount of the loss can be reasonably estimated. As the outcome of litigation is inherently uncertain, it is possible that certain matters may be resolved for materially different amounts than previously accrued or disclosed.

Income Taxes

We are taxed as a corporation and pay corporate federal, state and local taxes on income allocated to us by Station Holdco. Station Holdco operates as a partnership for federal, state and local tax reporting and holds 100% of the economic interests in Station LLC. The members of Station Holdco are liable for any income taxes resulting from income allocated to them by Station Holdco as a pass-through entity.

We recognize deferred tax assets and liabilities based on the differences between the book value of assets and liabilities for financial reporting purposes and those amounts applicable for income tax purposes using enacted tax rates in effect for the year in which the differences are expected to reverse. Deferred tax assets represent future tax deductions or credits. Realization of the deferred tax assets ultimately depends on the existence of sufficient taxable income of the appropriate character in either the carryback or carryforward period.

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Each reporting period, we analyze the likelihood that our deferred tax assets will be realized. A valuation allowance is recorded if, based on the weight of all available positive and negative evidence, it is more likely than not that some portion, or all, of a deferred tax asset will not be realized. If we subsequently determine that there is sufficient evidence to indicate a deferred tax asset will be realized, the associated valuation allowance is reversed. On an annual basis, we perform a comprehensive analysis of all forms of positive and negative evidence based on year end results. During each interim period, we update our annual analysis for significant changes in the positive and negative evidence.

We record uncertain tax positions on the basis of a two-step process in which (1) we determine whether it is more likely than not the tax positions will be sustained on the basis of the technical merits of the position, and (2) for those tax positions meeting the more likely than not recognition threshold, we recognize the largest amount of tax benefit that is more than 50% likely to be realized upon ultimate settlement with the related tax authority. We do not believe that we have any tax positions for which it is reasonably possible that we will be required to record a significant liability for unrecognized tax benefits within the next twelve months.

ITEM 7.     MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with the Consolidated Financial Statements and notes thereto included in Item 8. Financial Statements and Supplementary Data within this Annual Report on Form 10-K.

Overview

Red Rock was formed as a Delaware corporation in 2015 to own an indirect equity interest in, and manage, Station Casinos LLC, a Nevada limited liability company (“Station LLC”). Station LLC is a gaming, development and management company established in 1976 that owns and operates nine major gaming and entertainment facilities and ten smaller casinos (three of which are 50% owned) in the Las Vegas regional market. Three of our major properties had not reopened as of December 31, 2021 as discussed within Impact of COVID-19 below. Excluding the three closed properties, we currently offer approximately 13,894 slot machines, 240 table games and 3,081 hotel rooms in the Las Vegas market. A subsidiary of Station LLC also managed Graton Resort in northern California on behalf of a Native American tribe through February 5, 2021. In addition, we are currently developing a new casino resort to be called Durango, a Station Casinos Resort, on our approximately 50-acre development site at the intersection of Durango Drive and Interstate 215 in the southwest Las Vegas valley. We commenced construction of Durango in the first quarter of 2022, and we anticipate completion approximately 18 to 24 months after construction begins.

We own all of the outstanding voting interests in Station LLC and have an indirect equity interest in Station LLC through our ownership of limited liability company interests in Station Holdco (“LLC Units”), which owns all of the economic interests in Station LLC. At December 31, 2021, we held 58% of the economic interests and 100% of the voting power in Station Holdco, subject to certain limited exceptions, and we are designated as the sole managing member of both Station Holdco and Station LLC. We control and operate all of the business and affairs of Station Holdco and Station LLC, and conduct all of our operations through these entities. Other than assets and liabilities related to income taxes and the tax receivable agreement, our only assets are our equity interest in Station Holdco and our voting interest in Station LLC. We have no operations outside of our management of Station Holdco and Station LLC.

Our Consolidated Financial Statements reflect the consolidation of Station LLC and its consolidated subsidiaries, and Station Holdco. The financial position and results of operations attributable to LLC Units we do not own are reported separately as noncontrolling interest.

Our principal source of revenue and operating income is gaming, and our non-gaming offerings include restaurants, hotels and other entertainment amenities. Approximately 80% to 85% of our casino revenue is generated from slot play. The majority of our revenue is cash-based and as a result, fluctuations in our revenues have a direct impact on our cash flows from operations. Because our business is capital intensive, we rely heavily on the ability of our properties to generate operating cash flow to repay debt financing and fund capital expenditures.

A significant portion of our business is dependent upon customers who live and/or work in the Las Vegas metropolitan area. As of December 2021, the unemployment rate in the Las Vegas metropolitan area was 6.0%, down from a high of 34% in April 2020. Statewide, the unemployment rate for December 2021 declined to 5.2%, as compared to 30% in April 2020. The median price of an existing single-family home in Las Vegas was at an all-time high of $425,000 at December 31, 2021, up 23% as compared to the prior year according to the Las Vegas Realtors®, continuing a trend of significant increases in home values in Las Vegas since 2012. In addition, Las Vegas remains one of the fastest growing metropolitan areas in the United States, posting a 2.4% growth rate in 2021. Due to uncertainties surrounding the ongoing pandemic, we cannot predict whether the recovery in unemployment and the positive trends in housing prices and population growth in the Las Vegas area will continue.

Impact of COVID-19

During 2020, our business was negatively impacted by the global COVID-19 pandemic, including the temporary state-mandated closure of all of our properties from March 17, 2020 through June 3, 2020. Although the pandemic is ongoing, on June 1, 2021, many of the state-mandated occupancy and other operational restrictions were lifted. Certain operational restrictions continued, including a rule added in late July 2021 requiring all employees and guests to wear face coverings while indoors in public spaces, which was lifted on February 10, 2022.

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At December 31, 2021, our Texas Station, Fiesta Rancho and Fiesta Henderson properties had not reopened. We will continue to assess the performance of the reopened properties, as well as the recovery of the Las Vegas market and the economy as a whole, before considering whether to reopen some or all of the remaining properties, and we have no current plans to reopen any of these properties in 2022.

Subsequent to the reopening of most of our properties in June 2020, we saw favorable customer trends which continued throughout 2021, including strong visitation from our guests, including a younger demographic, increased spend per visit, more time spent on device, and increased return of our core customers. These positive trends, in combination with business optimization and cost reduction measures implemented in the second quarter of 2020, have continued to drive strong operating results in 2021. However, we cannot predict whether these trends will continue, nor can we predict the extent to which the impacts of COVID-19 and its related variants on the United States and Las Vegas economies may affect our business in the future.

The COVID-19 pandemic and its related variants have had, and may continue to have, a detrimental impact on the United States and Las Vegas economies. We have taken steps to mitigate these and potential future effects of COVID-19 and its related variants on our results of operations through a combination of streamlining our business, optimizing our marketing initiatives, and reducing expenses. We have implemented comprehensive health and cleanliness standards designed to provide the safest and most secure environment possible for our guests and employees.

As a result of the COVID-19 pandemic, the mandatory closure of all of our properties from March 17, 2020 through June 3, 2020, and the ongoing closure of three of our properties, our operating results for the year ended December 31, 2021 and those of the prior year are not comparable.

Our Key Performance Indicators

We use certain key indicators to measure our performance.

Gaming revenue measures:

•Slot handle, table game drop and race and sports write are measures of volume. Slot handle represents the dollar amount wagered in slot machines, and table game drop represents the total amount of cash and net markers issued that are deposited in table game drop boxes.

•Win represents the amount of wagers retained by us.

•Hold represents win as a percentage of slot handle or table game drop.

As our customers are primarily Las Vegas residents, our hold percentages are generally consistent from period to period. Notwithstanding the impact of the COVID-19 pandemic, fluctuations in our casino revenue are primarily due to the volume and spending levels of customers at our properties.

Food and beverage revenue measures:

•Average guest check is a measure of food sales volume and product offerings at our restaurants, and represents the average amount spent per customer visit.

•Number of guests served is an indicator of volume.

Room revenue measures:

•Occupancy is calculated by dividing occupied rooms, including complimentary rooms, by rooms available.

•Average daily rate (“ADR”) is calculated by dividing room revenue, which includes the retail value of complimentary rooms, by rooms occupied, including complimentary rooms.

•Revenue per available room is calculated by dividing room revenue by rooms available.

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Information about our results of operations is included herein and in the notes to our Consolidated Financial Statements.

Results of Operations

The following table presents information about our results of operations for the year ended December 31, 2021 compared to 2020 (dollars in thousands). Information about our results of operations for the year ended December 31, 2020 as compared to 2019 can be found in Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2020, filed with the SEC on February 23, 2021.

________________________________________________

n/m = not meaningful

We view each of our Las Vegas casino properties as an individual operating segment. We aggregate all of our Las Vegas operating segments into one reportable segment because all of our Las Vegas properties offer similar products, cater to

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the same customer base, have the same regulatory and tax structure, share the same marketing programs, are directed by a centralized management structure and have similar economic characteristics. We also aggregate our Native American management activities into one reportable segment. The results of operations for our Native American management segment are discussed in the section entitled Management Fee Revenue below and the results of operations of our Las Vegas operations are discussed in the remaining sections below.

Net Revenues. Net revenues for the year ended December 31, 2021 increased by $435.5 million to $1.62 billion as compared to $1.18 billion for the year ended December 31, 2020. Net revenues were higher across all revenue categories except management fee revenue, which decreased as we ceased to manage Graton Resort in February 2021. The improvement in net revenues was due to our continued recovery from the negative effects of the COVID-19 pandemic, despite the ongoing closure of three of our properties. As described above, all of our properties were closed from March 17, 2020 through June 3, 2020.

Operating Income. Operating income increased by $313.0 million to $401.5 million for 2021 as compared to $88.6 million for 2020. Our strong performance and the overall customer trends for the current year were consistent with the trends we have seen since our reopening in June 2020. For the year ended December 31, 2021, our operating income was negatively impacted by a $177.7 million loss on the sale of Palms Casino Resort (“Palms”). For the year ended December 31, 2020, our operating income was negatively impacted by the temporary closure of all of our properties as described under Impact of COVID-19 above, as well as the state-mandated occupancy, social distancing and other restrictions in place subsequent to our reopening. Additional information about factors impacting our operating income are discussed below.

Casino.  Casino revenues increased by 49.5% and casino expenses increased by 18.3% for the year ended December 31, 2021 as compared to 2020, as all of our properties were closed for part of the first quarter of 2020 and most of the second quarter of 2020. Subsequent to reopening on June 4, 2020 and throughout 2021, the higher volume and corresponding revenue we have experienced across all categories of casino operations was a result of strong and consistent visitation from our guests, including a younger demographic and the continued return of our core customers. For 2021, slot handle increased by 42.4%, table games drop increased by 33.1% and our hold percentages were consistent as compared to 2020. Race and sports write also increased by 60.8%, as many sporting events were postponed or cancelled in 2020. Casino expenses were higher for the year ended December 31, 2021 as compared to 2020 commensurate with the higher revenues, primarily due to gaming taxes.

Food and Beverage.  Food and beverage includes revenue and expenses from restaurants, bars and catering. For the year ended December 31, 2021, food and beverage revenue increased by 27.2% as compared to 2020. Since reopening in June 2020, all of our restaurants at our open properties are operating, with the exception of the buffets, which we expect to remain closed. The number of restaurant guests served increased by 38.8% and the average guest check increased by 10.9% for 2021 as compared to 2020, excluding the buffets. Food and beverage expenses for the year ended December 31, 2021 as compared to the prior year effectively remained flat, as the absence of buffet expenses and related employee costs was offset by increased costs of sales from a full year of operating all of our other restaurants at our open properties.

Room. Information about our hotel operations is presented below:

For the year ended December 31, 2021 as compared to 2020, room revenues increased by 65.4% and room expenses increased by 12.1%, as domestic travel and demand recovered from the effects of the COVID-19 pandemic. Our ADR improved by 29.0%, our revenue per available room improved by 47.9% and our occupancy rate improved by 9.6 percentage points for 2021 as compared to 2020. Room revenues for the prior year reflected the impact of decreased travel amid the pandemic and the temporary closure of all of our properties for part of the first quarter of 2020 and most of the second quarter of 2020. Room expenses were higher for the year ended December 31, 2021 as compared to 2020 commensurate with the higher revenues and increased occupancy.

Other. Other primarily represents revenues from tenant leases, retail outlets, bowling, spas and entertainment and their corresponding expenses. For the year ended December 31, 2021, other revenues and other expenses increased 36.4% and 10.9%, respectively, as compared to the prior year due to the easing of state-mandated occupancy, social distancing and other restrictions, which increased our ability to offer non-gaming amenities at our reopened properties. In addition, other revenues

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for the prior year were negatively impacted by the closure of all of our properties for part of the first quarter of 2020 and most of the second quarter of 2020.

Management Fee Revenue. Management fee revenue primarily represents fees earned from our agreement with a Native American tribe to manage Graton Resort. For 2021 as compared to 2020, management fee revenue decreased by 88.8% as we ceased to manage Graton Resort on February 5, 2021.

Selling, General and Administrative (“SG&A”).  SG&A expenses increased by 6.9% to $347.1 million for the year ended December 31, 2021 as compared to $324.6 million for the prior year. The increase in SG&A expenses as compared to the prior year was primarily due to higher employee costs. In addition, SG&A expenses were lower for the year ended December 31, 2020 because all of our properties were closed for part of the first quarter of 2020 and most of the second quarter of 2020. As a percentage of net revenue, SG&A expenses decreased by 6.0 percentage points for 2021 as compared to 2020.

Depreciation and Amortization.  Depreciation and amortization expense for the year ended December 31, 2021 decreased to $157.8 million as compared to $231.4 million for 2020. As a result of the sale of Palms, we ceased recognizing depreciation and amortization expense for the property as of April 1, 2021. Depreciation expense also decreased due to certain assets becoming fully depreciated. Amortization expense decreased primarily due to the Graton Resort management agreement becoming fully amortized in the fourth quarter of 2020.

Write-downs and other, net. Write-downs and other, net, include gains and losses on asset disposals, severance, preopening and redevelopment, business innovation and technology enhancements and non-routine expenses. For the year ended December 31, 2021, write-downs and other, net was a gain of $18.7 million, primarily representing gains on land sales. For the year ended December 31, 2020, write-downs and other, net was a loss of $36.5 million, which included net losses on asset disposals, including the write-off of assets due to the closure of the Company’s buffets; severance, including insurance benefits through September 2020 for employees who were terminated in connection with the Company’s workforce reduction in May 2020; and asset write-offs related to various technology projects.

Loss on Sale of Palms. For the year ended December 31, 2021, we recognized a $177.7 million loss on the sale of Palms, which we sold for $650 million in December 2021.

Interest Expense, net.  The following table presents summarized information about our interest expense (amounts in thousands):

Interest expense, net, for the year ended December 31, 2021 was $103.2 million as compared to $128.5 million for 2020. The decrease in interest expense, net was due to lower variable interest rates applicable to our credit facility as well as lower average outstanding indebtedness. Beginning in February 2020, the variable interest rates applicable to our credit facility declined and have remained very low through December 31, 2021 in response to economic and growth uncertainty in the financial markets due to the COVID-19 pandemic. Additional information about our long-term debt is included in Note 7 to the Consolidated Financial Statements.

(Loss) Gain on Extinguishment/Modification of Debt, net. For the year ended December 31, 2021, we recognized a loss of $13.5 million on extinguishment of debt as a result of the redemption of our 5.00% Senior Notes. For the year ended December 31, 2020, we recognized a net gain of $0.2 million comprising a gain of $12.7 million on repurchases of $96.6 million of our outstanding indebtedness, partially offset by a loss of $12.5 million related to amendments to our credit facility in February 2020.

Change in Fair Value of Derivative Instruments. Our interest rate swaps expired in July 2021. For the year ended December 31, 2021, we recognized a net loss of $0.2 million in the fair value of our interest rate swaps, as compared to a net loss of $21.6 million for 2020. The losses in the prior year were primarily due to downward movements in the forward interest rate curve.

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Benefit (Provision) for Income Tax. For the year ended December 31, 2021, we recognized an income tax benefit of $69.3 million as compared to income tax expense of $114.1 million for the prior year. For the year ended December 31, 2021, we reversed the valuation allowance on our deferred tax assets that had been recognized in the prior year due to the uncertainty of realizing certain tax benefits as a result of the COVID-19 pandemic. Station Holdco is treated as a partnership for income tax reporting and Station Holdco’s members are liable for federal, state and local income taxes based on their share of Station Holdco’s taxable income. Our effective tax rate of (24.3)% for 2021 was less than the statutory rate with differences primarily related to the reversal of the valuation allowance, as well as net income attributable to noncontrolling interest, tax credits and permanent items.

Net Income (Loss) Attributable to Noncontrolling Interests. Net income (loss) attributable to noncontrolling interests for the years ended December 31, 2021 and 2020 represented the portion of net income (loss) attributable to the ownership interest in Station Holdco not held by us.

Adjusted EBITDA

Adjusted EBITDA for the years ended December 31, 2021 and 2020 for our two reportable segments and a reconciliation of net income to Adjusted EBITDA are presented below (amounts in thousands). The Las Vegas operations segment includes all of our Las Vegas area casino properties and the Native American management segment includes our Native American management activities.

The year-over-year changes in Adjusted EBITDA were due to the factors described under Results of Operations above.

Adjusted EBITDA is a non-GAAP measure that is presented solely as a supplemental disclosure. We believe that Adjusted EBITDA is a widely used measure of operating performance in our industry and is a principal basis for valuation of gaming companies. We believe that in addition to net income (loss), Adjusted EBITDA is a useful financial performance measurement for assessing our operating performance because it provides information about the performance of our ongoing

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core operations. Adjusted EBITDA includes net income (loss) plus depreciation and amortization, share-based compensation, write-downs and other, net, loss on sale of Palms, operating losses from Palms assets held for sale, interest expense, net, loss (gain) on extinguishment/modification of debt, net, change in fair value of derivative instruments, (benefit) provision for income tax and other.

To evaluate Adjusted EBITDA and the trends it depicts, the components should be considered. Each of these components can significantly affect our results of operations and should be considered in evaluating our operating performance, and the impact of these components cannot be determined from Adjusted EBITDA. Adjusted EBITDA does not represent net income or cash flows from operating, investing or financing activities as defined by accounting principles generally accepted in the United States of America (“GAAP”) and should not be considered as an alternative to net income as an indicator of our operating performance. Additionally, Adjusted EBITDA does not consider capital expenditures and other investing activities and should not be considered as a measure of our liquidity. It should be noted that not all gaming companies that report EBITDA or adjustments to this measure may calculate EBITDA or such adjustments in the same manner as we do, and therefore, our measure of Adjusted EBITDA may not be comparable to similarly titled measures used by other gaming companies.

Holding Company Financial Information

The indentures governing the 4.50% Senior Notes and the 4.625% Senior Notes contain certain covenants that require Station LLC to furnish to the holders of the notes certain annual and quarterly financial information relating to Station LLC and its subsidiaries. The obligation to furnish such information may be satisfied by providing consolidated financial information of the Company along with additional disclosure explaining the differences between such information and the financial information of Station LLC and its subsidiaries on a standalone basis. The following financial information about the Company and its consolidated subsidiaries exclusive of Station LLC and its subsidiaries (the “Holding Company”), is furnished to explain the differences between the financial information of the Holding Company and the financial information of Station LLC and its subsidiaries for the periods presented in this report. The primary differences between the financial information of the Holding Company and that of Station LLC relate to income taxes and the liability relating to the tax receivable agreement (“TRA”).

At December 31, 2021, the difference between the balance sheet for Station LLC and its consolidated subsidiaries and the balance sheet for the Holding Company is that the Holding Company had cash of $3.3 million, $98.6 million of deferred tax assets, net, a $27.2 million noncurrent liability under the TRA and $2.1 million of other current liabilities that are solely liabilities of the Holding Company. At December 31, 2020, the Holding Company had a $27.4 million noncurrent liability under the TRA and $0.6 million of other current liabilities.

For the year ended December 31, 2021, the difference between the statement of operations for Station LLC and its consolidated subsidiaries and the statement of operations for the Holding Company is that the Holding Company had net income of $70.6 million primarily representing an income tax benefit related to the reversal of a valuation allowance against its deferred tax assets. For the year ended December 31, 2020, the difference between the statement of operations for Station LLC and its consolidated subsidiaries and the statement of operations for the Holding Company is that the Holding Company had a net loss of $114.2 million primarily representing a provision for income tax to establish a full valuation allowance against its deferred tax assets.

Financial Condition, Capital Resources and Liquidity

The following financial condition, capital resources and liquidity discussion contains certain forward-looking statements with respect to our business, financial condition, results of operations, dispositions, acquisitions, expansion projects and issuances of debt and equity, which involve risks and uncertainties that cannot be predicted or quantified, and consequently, actual results may differ materially from those expressed or implied herein. Such risks and uncertainties include, but are not limited to, the risks described in Item 1A. Risk Factors.

At December 31, 2021, we had $275.3 million in cash and cash equivalents, and Station LLC’s borrowing availability under its revolving credit facility was $1.0 billion, which was net of $29.4 million in outstanding letters of credit and similar obligations. Station LLC maintains its borrowing availability under its revolving credit facility, subject to continued compliance with the terms of the credit facility. See Note 7 to the Consolidated Financial Statements for more information about our long-term debt.

Our primary capital requirements for the near term are expected to be related to the operation and maintenance of our properties, debt service payments and construction costs for Durango. Our anticipated uses of cash for 2022 include (i) approximately $300.0 million to $400.0 million for investment capital expenditures, including the development of Durango, (ii)

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approximately $75.0 million to $100.0 million for maintenance capital expenditures at our existing properties, (iii) required principal and interest payments on Station LLC’s indebtedness totaling $25.9 million and $99.2 million, respectively, (iv) dividends to our Class A common stockholders, and (v) distributions to noncontrolling interest holders of Station Holdco, including “tax distributions”, which may be made quarterly when required and in amounts that may vary from quarter to quarter. Other payment obligations include salaries, wages and employee benefits, service contracts, property taxes, insurance and other obligations.

In February 2022, Station Holdco paid a distribution of $24.9 million to all LLC Unit holders, of which approximately $14.6 million was distributed to Red Rock and approximately $10.3 million was distributed to the other unit holders of Station Holdco. In addition, on February 18, 2022, our board of directors declared a quarterly cash dividend of $0.25 per share of Class A common stock, to be paid on March 31, 2022 to shareholders of record as of March 15, 2022. Prior to the payment of the dividend on March 31, 2022, Station Holdco will make a cash distribution to all LLC Unit holders, including Red Rock, of $0.25 per LLC Unit, a portion of which will be paid to the other unit holders of Station Holdco.

We are obligated to make payments under the TRA, which is described in Note 2 to the Consolidated Financial Statements. At December 31, 2021, such obligations with respect to previously consummated transactions totaled $27.2 million. Future payments in respect of any subsequent exchanges of LLC Units for Class A common stock would be in addition to these amounts and are expected to be substantial. The timing of payments under the TRA may vary. The payments that we are required to make will generally reduce the amount of overall cash that might have otherwise been available to us, but we expect the cash tax savings we will realize from the utilization of the related deferred tax assets to fund the required payments.

In February 2019, our board of directors approved an equity repurchase program authorizing the repurchase of up to an aggregate of $150 million of our Class A common stock. In February 2021, our board of directors approved an extension of the equity repurchase program through December 31, 2022. In September 2021, our board of directors approved an increase in the aggregate amount authorized under the equity repurchase program to $300 million. We are not obligated to repurchase any shares under the program. Subject to applicable laws and the provisions of any agreements restricting our ability to do so, repurchases may be made at our discretion from time to time through open market purchases, negotiated transactions or tender offers, depending on market conditions and other factors. For the year ended December 31, 2021, we repurchased 3,517,043 shares of our Class A common stock at a weighted-average price of $40.59 per share in open market transactions, and we have $154.4 million of remaining repurchases authorized under the program. In December 2021, we purchased 6,884,858 shares of our issued and outstanding Class A common stock for an aggregate purchase price of $354.6 million and a price per share of $51.50 (the “2021 Equity Tender”) pursuant to a "modified Dutch Auction" tender offer, and the shares were retired upon repurchase. The Class A share repurchases made under the tender offer were not a part of the Company’s publicly-announced equity repurchase program. From time to time, we may also seek to repurchase our outstanding indebtedness. Any such purchases may be funded by existing cash balances or the incurrence of debt, including borrowings under our credit facility. The amount and timing of any repurchase will be based on business and market conditions, capital availability, compliance with debt covenants and other considerations.

We expect that cash on hand, cash generated from operations and, to the extent necessary, borrowings available under the credit facility, will be sufficient to fund our operations and capital requirements and service our outstanding indebtedness for the next twelve months. We regularly assess our projected cash requirements for capital expenditures, repayment of debt obligations, and payment of other general corporate and operational needs. In the long term, we expect that we will fund our capital requirements with a combination of cash generated from operations, borrowings under the credit facility and the issuance of debt or equity as market conditions may permit. However, our cash flow and ability to obtain debt or equity financing on terms that are satisfactory to us, or at all, may be affected by a variety of factors, including competition, general economic and business conditions and financial markets, all of which may be adversely impacted by the ongoing COVID-19 pandemic. As a result, we cannot provide any assurance that we will generate sufficient income and liquidity to meet all of our liquidity requirements or other obligations.

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Following is a summary of our cash flow information (amounts in thousands):

Cash Flows from Operations

Our operating cash flows primarily consist of operating income generated by our properties (excluding depreciation and other non-cash charges), interest paid and changes in working capital accounts such as inventories, prepaid expenses, receivables and payables. The majority of our revenue is generated from our slot machine and table game play, which is conducted primarily on a cash basis. Our food and beverage, room and other revenues are also primarily cash-based. As a result, fluctuations in our revenues have a direct impact on our cash flow from operations.

Net cash provided by operating activities for the year ended December 31, 2021 totaled $610.0 million, compared to $212.8 million for 2020. An increase in gaming revenues, favorable customer trends and cost reduction measures implemented in the second quarter of 2020 drove strong operating results in 2021. For 2020, operating cash flows were negatively impacted by the onset of the COVID-19 pandemic, including the mandatory closure of all of our properties for part of the first quarter of 2020 and most of the second quarter of 2020, the effects of state-mandated occupancy and social distancing restrictions subsequent to reopening, reduced consumer confidence, discretionary spending and travel, and the continued closure of three of our properties.

Cash Flows from Investing Activities

For the year ended December 31, 2021, cash inflows from investing activities included cash proceeds from the sale of Palms of $650.0 million, less transaction costs and other adjustments, and $35.4 million from the sale of certain land parcels in Reno and Las Vegas. In addition, during 2021 and 2020, cash paid for capital expenditures totaled $61.3 million and $58.5 million, respectively.

Cash Flows from Financing Activities

For the year ended December 31, 2021, we redeemed $530.3 million in outstanding principal amount of 5.00% Senior Notes and paid redemption premiums of $9.8 million. In November 2021, we issued $500.0 million in principal amount of 4.625% Senior Notes due 2031. For the year ended December 31, 2021, we also paid $500.9 million to repurchase approximately 10.4 million shares of our Class A common stock, which included $354.6 million for the 2021 Equity Tender described above. For the year ended December 31, 2021, we paid cash distributions totaling $237.2 million to the noncontrolling interest holders of Station Holdco, and in December 2021, we paid a special cash dividend of $3.00 per share to holders of our Class A common stock.

For the year ended December 31, 2020, we reduced our outstanding indebtedness by $129.9 million. In February 2020, we issued $750.0 million in principal amount of 4.50% Senior Notes, the proceeds of which were used to repay a portion of the amounts outstanding under the credit facility, to pay fees and costs associated with the offering and for general corporate purposes. In March 2020, we drew $997.5 million under our revolving credit facility to secure our liquidity position and preserve financial flexibility amid the COVID-19 pandemic, all of which was repaid during 2020. In addition, for the year ended December 31, 2020, we paid $82.6 million to repurchase $96.6 million in principal amount of our outstanding indebtedness, primarily our senior notes. We also paid $7.3 million in dividends to Class A common stockholders and $4.6 million in cash distributions to noncontrolling interest holders of Station Holdco, as well as $22.9 million in fees and costs related to the amendment of the credit facility and the new senior notes.

Restrictive Covenants

Certain customary covenants are included in both the credit agreement governing the credit facility and the indentures governing Station LLC’s senior notes that, among other things and subject to certain exceptions, restrict Station LLC’s ability and the ability of its restricted subsidiaries to incur or guarantee additional debt; create liens on collateral; engage in mergers, consolidations or asset dispositions; pay distributions; make investments, loans or advances; engage in certain transactions with

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affiliates or subsidiaries; engage in lines of business other than its core business and related businesses; or issue certain preferred units.

The credit facility also includes certain financial ratio covenants that Station LLC is required to maintain throughout the term of the credit facility, measured as of the end of each quarter. As most recently amended in February 2020, these financial ratio covenants include an interest coverage ratio of not less than 2.50 to 1.00 and a maximum consolidated total leverage ratio, with step-downs over the term of the credit facility, ranging from 6.50 to 1.00 at December 31, 2021 to 5.25 to 1.00 at December 31, 2023 and thereafter. A breach of the financial ratio covenants shall only become an event of default under the term loan B facility if the lenders providing the term loan A facility and the revolving credit facility take certain affirmative actions after the occurrence of a default of such financial ratio covenants. We believe Station LLC was in compliance with all applicable covenants at December 31, 2021

Off-Balance Sheet Arrangements

At December 31, 2021, we had no variable interests in unconsolidated entities that provide off-balance sheet financing, liquidity, market risk or credit risk support, or that engage in leasing, hedging or research and development arrangements with us, nor did we have retained or contingent interests in assets transferred to an unconsolidated entity. Our derivative instruments expired in July 2021 as described in Note 8 to the Consolidated Financial Statements. At December 31, 2021, we had outstanding letters of credit and similar obligations totaling $29.4 million.

Inflation

We do not believe inflation has had a significant effect on our results of operations during 2021 or 2020. However, commodity prices have recently increased and become more volatile, and we are experiencing price inflation in food costs, supplies, energy costs and construction costs. In addition, we have been impacted by a shortage of qualified workers which places additional upward pressure on wages and benefit costs as we seek to attract and retain qualified workers. We attempt to minimize the impact of inflation on our business by implementing cost controls and adjusting prices.

Native American Development

We have development and management agreements with the Mono, a federally recognized Native American tribe located near Fresno, California, pursuant to which we will assist the Mono in developing, financing and operating a gaming and entertainment facility to be located on Highway 99 north of the city of Madera, California. See Note 5 to the Consolidated Financial Statements for additional information.

Regulation and Taxes

We are subject to extensive regulation by Nevada gaming authorities, as well as regulation by gaming authorities in the other jurisdictions in which we operate, including the NIGC and the California Gambling Control Commission. We will also be subject to regulation, which may or may not be similar to that in Nevada, by any other jurisdiction in which we may conduct gaming activities in the future. For a more complete description of our regulatory requirements, see Item 1. Business—Regulation and Licensing.

The gaming industry represents a significant source of tax revenue, particularly to the State of Nevada and its counties and municipalities. From time to time, various state and federal legislators and officials have proposed changes in tax law, or in the administration of such law, affecting the gaming industry. The Nevada legislature meets every two years for 120 days and when special sessions are called by the Governor. The legislature is not currently in session, and the most recent special legislative session ended on November 16, 2021. There are currently no specific legislative proposals to increase taxes on gaming revenue, but there are no assurances that an increase in taxes on gaming or other revenue will not be proposed and passed by the Nevada legislature in the future.

In January 2020, the Clark County Education Association (“CCEA”) filed a ballot initiative to increase the Nevada gaming tax by three percentage points, from 6.75 percent to 9.75 percent. Although CCEA subsequently withdrew the petition and no longer supports it, it is not clear that the petition can be withdrawn from the ballot following signature qualification. CCEA has commenced a legal challenge against the Secretary of State to withdraw the initiative. If the initiative is not withdrawn, it will be voted on during the November 8, 2022, general election. If the voters approve the ballot initiative, the gaming tax increase would become effective on January 1, 2023.

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Description of Certain Indebtedness

Long-term Debt

A description of our indebtedness is included in Note 7 to the Consolidated Financial Statements.

Critical Accounting Policies and Estimates

The preparation of consolidated financial statements in conformity with GAAP requires us to make estimates and judgments that are subject to an inherent degree of uncertainty. Certain accounting estimates and assumptions may have a material impact on our financial statements due to the significant levels of subjectivity and judgment involved and the susceptibility of such estimates and assumptions to change. We base our estimates on historical experience, information that is currently available to us and various other assumptions that we believe are reasonable under the circumstances, and we evaluate our estimates on an ongoing basis. Actual results may differ from our estimates, and such differences could have a material effect on our consolidated financial statements. Our significant accounting policies are described in Note 2 to the Consolidated Financial Statements. Following is a discussion of our accounting policies that involve critical estimates and assumptions.

Long-Lived Assets

Our business is capital intensive and a significant portion of our capital is invested in property and equipment, finite-lived intangible assets and other long-lived assets. We review long-lived assets for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. We evaluate the recoverability of our long-lived assets by estimating the future cash flows the asset is expected to generate, and comparing these estimated cash flows, on an undiscounted basis, to the carrying amount of the asset. If the carrying amount is greater, the asset is considered to be impaired, and we recognize an impairment charge equal to the amount by which the carrying amount of the asset exceeds its fair value. We test our long-lived assets for impairment at the reporting unit level, and each of our operating properties is considered a separate reporting unit.

Inherent in the calculation of fair values are various estimates and assumptions, including estimates of future cash flows expected to be generated by an asset or asset group. We base our cash flow estimates on the current regulatory, political and economic climates in the areas where we operate, recent operating information and projections for our properties. These estimates could be negatively impacted by changes in federal, state or local regulations, economic downturns, changes in consumer preferences, or events affecting various forms of travel and access to our properties. Future cash flow estimates are, by their nature, subjective and actual results may differ materially from our estimates. The most significant assumptions used in determining cash flow estimates include forecasts of future operating results, Adjusted EBITDA margins, tax rates, capital expenditures, working capital requirements, long-term growth rates and terminal year free cash flows. Cash flow estimates and their impact on fair value are highly sensitive to changes in many of these assumptions. If our estimates of future cash flows are not met, we may be required to record impairment charges in the future.

In December 2021, Station LLC sold all of its equity interests in Palms Casino Resort, (“Palms”) to a third-party buyer for aggregate consideration of $650.0 million. The transaction resulted in a loss on sale of $177.7 million, which included an asset impairment charge to reduce the carrying amount of Palms’ net assets to their estimated fair value less costs to sell.

As of December 31, 2021, our Texas Station, Fiesta Henderson and Fiesta Rancho properties had not reopened, and we have no current plans to reopen any of these properties in 2022. We determined these ongoing closures to be an indicator of potential impairment at those reporting units. Accordingly, we tested the long-lived assets of those reporting units for impairment by comparing the estimated future undiscounted cash flows of those properties to the carrying amounts of the reporting units. Our cash flow projections were based on a number of assumptions that are highly judgmental due to the uncertainties surrounding the ongoing pandemic, including economic conditions, the projected timing of reopening of the properties, potential changes in regulations, such as operational and travel restrictions, and consumer preferences. Based on our undiscounted cash flow analysis, no impairment charges were recognized. However, we cannot predict the future impact or duration of the ongoing negative effects of the COVID-19 pandemic and as a result, cannot reasonably predict the probability or amount of impairment losses that may be incurred in future periods.

Property and Equipment. At December 31, 2021, the carrying amount of our property and equipment was approximately $2.0 billion, which represents 64.0% of our total assets. We make estimates and assumptions when accounting for property and equipment. We compute depreciation using the straight-line method over the estimated useful lives of the assets, and our depreciation expense is highly dependent on the assumptions we make about the estimated useful lives of our assets. We estimate the useful lives of our property and equipment based on our experience with similar assets and our estimate of the usage of the asset. Whenever events or circumstances occur that change the estimated useful life of an asset, we account

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for the change prospectively. We must also make judgments about the capitalization of costs. Costs of major improvements are capitalized, while costs of normal repairs and maintenance are charged to expense as incurred. If an asset or asset group is disposed or retired before the end of its previously estimated useful life, we may be required to accelerate our depreciation expense or recognize a loss on disposal.

Finite-Lived Intangible Assets. Our finite-lived intangibles assets primarily include assets related to our customer relationships and management contracts. We amortize our finite-lived intangible assets over their estimated useful lives using the straight-line method. We periodically evaluate the remaining useful lives of our finite-lived intangible assets to determine whether events and circumstances warrant a revision to the remaining period of amortization. Whenever events or circumstances occur that change the estimated remaining useful life of an asset, we account for the change prospectively.

Goodwill. We test our goodwill for impairment annually as of October 1, and whenever events or circumstances indicate that it is more likely than not that impairment may have occurred. Impairment testing for goodwill is performed at the reporting unit level, and we consider each of our operating properties to be a separate reporting unit.

When performing goodwill impairment testing, we either conduct a qualitative assessment to determine whether it is more likely than not that the asset is impaired, or elect to bypass this qualitative assessment and perform a quantitative test for impairment. Under the qualitative assessment, we consider both positive and negative factors, including macroeconomic conditions, industry events, financial performance and other changes in facts and circumstances, and make a determination of whether it is more likely than not that the fair value of goodwill is less than its carrying amount. If, after assessing the qualitative factors, we determine it is more likely than not the asset is impaired, we then perform a quantitative test in which the estimated fair value of the reporting unit is compared with its carrying amount, including goodwill. If the carrying amount of the reporting unit exceeds its estimated fair value, an impairment loss is recognized in an amount equal to the excess, limited to the amount of goodwill allocated to the reporting unit.

When performing the quantitative test, we estimate the fair value of each reporting unit using the expected present value of future cash flows along with value indications based on our current valuation multiple and multiples of comparable publicly traded companies. The estimation of fair value requires management to make critical estimates, judgments and assumptions, including estimating expected future cash flows and selecting appropriate discount rates, valuation multiples and market comparables. Application of alternative estimates and assumptions could produce significantly different results.

At December 31, 2021, our goodwill totaled $195.7 million. Approximately 86.8% of our goodwill is associated with one of our properties. As of our most recent annual goodwill testing date, the estimated fair value of each of our properties with goodwill exceeded its respective carrying value by a significant amount. If the fair value of any of these properties should decline in the future, we may be required to recognize a goodwill impairment charge, which could be material. A property’s fair value may decline as a result of a decrease in the property’s actual or projected operating results or changes in other significant assumptions and judgments used in the estimation process, including the discount rate and market multiple.

Indefinite-Lived Intangible Assets. Our indefinite-lived intangible assets primarily represent the value of our brands. At December 31, 2021, the carrying amount of our indefinite-lived intangible assets totaled $77.5 million. Indefinite-lived intangible assets are not amortized unless management determines that their useful life is no longer indefinite. We test our indefinite-lived intangible assets for impairment annually as of October 1, and whenever events or changes in circumstances indicate that an asset may be impaired, by comparing the carrying amount of the asset to its estimated fair value. If the carrying amount of the asset exceeds its estimated fair value, we recognize an impairment charge equal to the excess. We estimate the fair value of our brands using a derivation of the income approach to valuation based on the present value of estimated royalties avoided through ownership of the assets. The fair values of our indefinite-lived intangible assets are highly sensitive to changes in projected operating results. Accordingly, any decrease in the projected operating results of a property could require us to recognize an impairment charge, which could be material.

Native American Development Costs. We incur certain costs associated with our development and management agreements with Native American tribes which are reimbursable by the tribes, and we capitalize these costs as long-term assets. The assets are typically transferred to the tribe at such time as the tribe secures financing, or the gaming facility is completed. We earn a return on the costs incurred for the acquisition and development of Native American projects. Due to the uncertainty surrounding the timing and amount of the stated return, we recognize the return when it is received. Development costs and the related return are typically repaid by the tribe from a project’s financing or from operating cash flows of the casino after opening. Accordingly, the recoverability of our development costs is highly dependent upon the tribe’s success in obtaining financing and our ability to operate the project successfully upon its completion. Our evaluation of the recoverability of our Native American development costs requires us to apply a significant amount of judgment.

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We evaluate our Native American development costs for impairment whenever events or changes in circumstances indicate that the carrying amount of the project might not be recoverable, taking into consideration all available information. Among other things, we consider the status of the project, any contingencies, the achievement of milestones, any existing or potential litigation and regulatory matters when evaluating our Native American projects for impairment. If an indicator of impairment exists, we compare the estimated future cash flows of the asset, on an undiscounted basis, to the carrying amount of the asset. If the undiscounted expected future cash flows for a project do not exceed its carrying amount, the asset is written down to its estimated fair value. We estimate a project’s fair value using a discounted cash flow model and market comparables, when available. Our estimate of the undiscounted future cash flows of a Native American development project is based on consideration of all positive and negative evidence about the future cash flow potential of the project including, but not limited to, the likelihood that the project will be successfully completed, the status of required approvals, and the status and timing of the construction of the project, as well as current and projected economic, political, regulatory and competitive conditions that may adversely impact the project’s operating results. In certain circumstances, we may discontinue funding of a project due to a revision of its expected potential, or otherwise determine that our advances are not recoverable and as a result, we may be required to write off the entire carrying amount of a project.

Litigation, Claims and Assessments

We are defendants in various lawsuits relating to routine matters incidental to our business and we assess the potential for any lawsuits or claims brought against us on an ongoing basis. For ongoing litigation and potential claims, we use judgment in determining the probability of loss and whether a reasonable estimate of loss, if any, can be made. We accrue a liability when we believe a loss is probable and the amount of the loss can be reasonably estimated. As the outcome of litigation is inherently uncertain, it is possible that certain matters may be resolved for materially different amounts than previously accrued or disclosed.

Income Taxes

We are taxed as a corporation and pay corporate federal, state and local taxes on income allocated to us by Station Holdco. Station Holdco operates as a partnership for federal, state and local tax reporting and holds 100% of the economic interests in Station LLC. The members of Station Holdco are liable for any income taxes resulting from income allocated to them by Station Holdco as a pass-through entity.

We recognize deferred tax assets and liabilities based on the differences between the book value of assets and liabilities for financial reporting purposes and those amounts applicable for income tax purposes using enacted tax rates in effect for the year in which the differences are expected to reverse. Deferred tax assets represent future tax deductions or credits. Realization of the deferred tax assets ultimately depends on the existence of sufficient taxable income of the appropriate character in either the carryback or carryforward period.

Each reporting period, we analyze the likelihood that our deferred tax assets will be realized. A valuation allowance is recorded if, based on the weight of all available positive and negative evidence, it is more likely than not that some portion, or all, of a deferred tax asset will not be realized. If we subsequently determine that there is sufficient evidence to indicate a deferred tax asset will be realized, the associated valuation allowance is reversed. On an annual basis, we perform a comprehensive analysis of all forms of positive and negative evidence based on year end results. During each interim period, we update our annual analysis for significant changes in the positive and negative evidence.

We record uncertain tax positions on the basis of a two-step process in which (1) we determine whether it is more likely than not the tax positions will be sustained on the basis of the technical merits of the position, and (2) for those tax positions meeting the more likely than not recognition threshold, we recognize the largest amount of tax benefit that is more than 50% likely to be realized upon ultimate settlement with the related tax authority. We do not believe that we have any tax positions for which it is reasonably possible that we will be required to record a significant liability for unrecognized tax benefits within the next twelve months.