Red Rock Resorts, Inc. (RRR) Earnings Call Transcript & Summary

Good morning, everyone, and welcome to the 2021 Annual Meeting of Red Rock Resorts. We are pleased you could take the time to join us today. We hope each of you is healthy and safe. I'm Frank Fertitta III, Chairman of the Board of Directors and Chief Executive Officer of the company. I'd now like to introduce the other members of our Board of Directors and certain key officers who are also in attendance today at the meeting. The other members of the Board of Directors are Lorenzo Fertitta, Robert Cashell, Robert Lewis and Dr. James Nave. The following officers of the company are also in attendance at today's meeting, Stephen Cootey, Chief Financial Officer; Jeffrey Welch, Chief Legal Officer; Robert Finch, Chief Operating Officer of the company. And also present today is Robert Bruning from Ernst & Young, the company's independent accountants. I would now like to call the 2021 Annual Meeting of the Stockholders of Red Rock Resorts to order. Prior to this meeting, the company provided its stockholders a notice and agenda of the matters to be considered at the annual meeting. We will now proceed with the items to be voted upon by the stockholders. Jeffrey Welch will review the items to be considered by the stockholders and other information that is relevant to the proceedings today.

Thank you, Frank. The following information is intended to satisfy our legal obligations and is very important. Stockholders who are voting by proxy do not need to vote today unless they wish to change the vote on their proxies. We would like to advise you that we have received sufficient proxies prior to the beginning of the meeting to know that each of the proposals being considered today that the Board of Directors recommended in favor of as reflected in the proxy will pass and the shareholder proposal that the Board of Directors recommended against is reflected in the proxy will fail. However, if you have not yet voted and you wish to do so at today's meeting, you must do so by voting electronically, pursuant to the instructions provided on the proxy that was delivered to stockholders of record prior to meeting. At this time, we will proceed with the stockholder voting. A list of the holders of shares of Class A common stock and Class B common stock of the company as of the close of business on April 6, 2021, the record date for this meeting, is available at the company's headquarters. All matters to be considered by the stockholders at this meeting will be voted on by the holders of Class A common stock and Class B common stock as a single class. On April 22, 2021, the notice of the annual meeting was mailed to each holder of record of each class of common stock at the close of business on April 6, 2021, which, as noted, was the record date for this meeting. Broadridge Financial Solutions will act as the inspector today and will file the proof of notice of this meeting with the minutes. As of the close of business on the record date, there were 70,968,321 outstanding shares of Class A common stock and 45,985,804 shares of Class B common stock entitled to vote. As of a record date, an aggregate of 71,568,321 shares of Class A common stock and Class B common stock were entitled to one vote per share and an aggregate for the 45,385,804 shares of Class B common stock were entitled to 10 votes per share. We have determined that there are present, in person or by proxy, holders of shares of Class A common stock and Class B common stock representing a majority of the voting power of the share common stock outstanding. Accordingly, a quorum is present. This meeting has been called to consider and act upon 4 matters, each of which is described in the notice of annual meeting that all of you have received and one of which is a shareholder proposal. I will introduce the first 3 proposals and a shareholder representative who is present will introduce the shareholder proposal. The first order of business to come before the meeting is the election of directors. The 5 nominees for election to the Board for a 1-year term of office are Mr. Frank J. Fertitta III; Mr. Lorenzo J. Fertitta; Mr. Robert A. Cashell, Jr.; Mr. Robert E. Lewis; and Dr. James E. Nave, DVM. Important information concerning the background and qualifications of the nominees is in the proxy materials made available to stockholders. The Board recommends a vote in favor of each of the nominees to the Board. The second item of business to come before the meeting is a nonbinding advisory vote required, pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act, to approve the compensation paid to our named executive officers as disclosed in our proxy statement, more commonly known as say on pay. As discussed in the proxy statement, we believe our executive compensation programs and policies provide fair, reasonable and competitive levels of compensation to our executive officers. The Board recommends a vote on a nonbinding advisory basis for the compensation paid to our named executive officers as disclosed in the proxy statement. The third order of business to come before the meeting is the ratification of the selection of Ernst & Young LLP as the company's independent registered public accounting firm for the fiscal year ended December 31, 2021. The Board recommends a vote in favor of the ratification of the selection of Ernst & Young LLP as the company's independent registered public accounting firm for the fiscal year ended December 31, 2021. Proposal #4 is a shareholder proposal made by the New York State Common Retirement Fund. The full text of that proposal is set forth in the proxy statement for this meeting. I understand a representative of the proposing shareholder will present the proposal. And I would like to now invite that representative to do so and would have the presentation be limited to no more than 2 minutes at most.

Good afternoon. My name is John White, and on behalf of the New York State Common Retirement Fund, I'm here to advance proposal 4, the one vote, one share proposal. This proposal seeks to ensure that all Red Rock Resorts shareholders, regardless of what class of stock they own, have an equal voice in our company's governance. Our company gives certain shareholders 10 votes per Class B share, while other holders of Class B shares as well as holders of Class A stock are entitled to 1 vote per share. These Class B shareholders with 10x the votes per share include the Chairman of the Board and CEO and the Vice Chairman of the Board. They control approximately 90% of the voting power in our company, even though they own only 46% of the economic interest in it. The remaining shareholders who own a majority of the economic interest in the company cannot hold management accountable through their votes as shareholders. Without equal voting rights, public shareholders cannot hold management accountable for either the company's financial performance or environmental, social and governance issues. The current structuring denies the majority of shareholders any meaningful input and oversight of management. They can't make changes to the entrenched Red Rock Board. This has insulated our company from having to answer for its actions and has hurt investor confidence in company management. To ensure meaningful oversight and the long-term success of our company, proponents call on shareholders to support proposal 4 and ask the Red Rock Resorts Board to support a capital restructuring that gives each share an equal vote. Thank you.

The Board of Directors recommends a vote against this proposal for the reasons set forth in the proxy statement. The polls for voting on matters before this meeting are now open. If you have voted by proxy, your vote has already been recorded. If you have not already done so, please submit your vote electronically now according to the instructions included in the proxy card that was mailed to you. [Voting]

Each of the nominees for election to the Board of Directors has received the plurality of the votes of the shares entitled to vote. On the basis of the vote of the stockholders of the company, the nominees for director are declared elected. In addition, one, the compensation paid to our named executive officers has been approved by holders of the majority of the votes represented by the shares of Class A common stock and Class B common stock present at the meeting and entitled to vote for such matter. Two, the appointment of Ernst & Young LLP as the company's independent registered public accountants has been approved by a majority of the votes represented by the shares of Class A common stock and Class B common stock present at the meeting and entitled to vote for such matter. Three, the shareholder proposal to eliminate the company's dual class share structure has been rejected by a majority of the votes represented by the shares of Class A common stock and Class B common stock present at the meeting and entitled to vote for such matter. As a result, one, the compensation paid to our named executive officers is approved; two, Ernst & Young LLP is appointed as the company's independent auditor; and three, the shareholder proposal regarding elimination of the company's dual class share structure is not approved. As soon as practicable, following the adjournment of the meeting, we will have a final tabulation of the votes cast at the meeting and we will report the final results in a filing with the Securities and Exchange Commission.

Thank you, Jeff. This concludes the formal portion of the meeting, and the 2021 Annual Stockholders Meeting of Red Rock Resorts is now adjourned. I'd like to express my sincere appreciation to the stockholders who attended the meeting today as well as those who submitted their proxies but were unable to be present. Thank you all for your support of the company and stay safe and stay well.