Wynn Resorts, Limited (NASDAQ:WYNN) Q1 2023 Earnings Call Transcript May 9, 2023

Wynn Resorts, Limited beats earnings expectations. Reported EPS is $0.29, expectations were $-0.01.

Operator: Welcome to the Wynn Resorts First Quarter 2023 Earnings Call. All participants are in a listen-only mode until the question-and-answer session of today’s conference. [Operator Instructions] This call is being recorded. If you have any objections, you may disconnect at this time. I will now turn the line over to Cameron — I’m sorry, to Julie Cameron-Doe, Chief Financial Officer. Please go ahead.

Julie Cameron-Doe: Thank you, operator, and good afternoon, everyone. On the call with me today are Craig Billings and Brian Gullbrants in Las Vegas. Also on the line are Linda Chen, Frederic Luvisutto and Jenny Holaday. I want to remind you that, we may make forward-looking statements under safe harbor federal securities laws, and those statements may or may not come true. I will now turn the call over to Craig Billings.

Craig Billings: Thanks, Julie. Afternoon, everyone, and thanks for joining us today. Before we get into the specifics of the quarter, I’m pleased to say that after three years of suspension, today, we announced that we are resuming payment of a quarterly dividend, initially $0.25 per share. We have a number of growth projects in flight that require capital and will ultimately add meaningful EBITDA to our business. But with Macau returning to profitability and North America continuing to perform well above historical levels, we have sufficient financial flexibility to also return capital to shareholders. I also want to express appreciation to our 27,000-plus team, who were once again recently recognized by Forbes Travel Guide with 24 Five Star Awards, the most of any independent hotel company in the world.

Thank you for all that you do. Turning to Las Vegas. I have to tell you, it’s a fascinating time in our business. Despite the confluence of high inflation, high interest rates, bank failures and increasingly difficult year-over-year comps, Wynn Las Vegas delivered an all-time record in Q1 with $232 million of adjusted property EBITDA, supported by a consumer that continues to feel flush. We also subsequently delivered the best April in the history of the property. We continue to invest heavily in people, programming and the building to further distance ourselves as the clear leader in luxury in Vegas. Looking ahead, we currently have a strong pipeline of forward group demand, continued rooms pricing power, healthy drop in handle and a robust programming calendar, particularly in the back half of the year.

Yet I continue to watch the macro factors that I mentioned earlier, and I will note that, with Q2 2023, we will begin comping against some very strong prior year quarters. Lastly, just as I have the past several quarters, I will continue to tell you exactly what we’re seeing. And right now, things feel good around here. Turning to Boston. Like Vegas, Encore had a strong quarter, generating $63 million of EBITDAR. We saw strength across the casino in terms of table drop, slot handle and overall GGR. On the non-gaming side, we delivered strong hotel revenue driven by both ADR and occupancy. The strength has continued into Q2 with EBITDA per day in April largely consistent with trends we have experienced over the past few quarters. We also launched retail sports betting at Encore Boston Harbor in Q1, which helped drive a 20% increase in sign-ups to our Wynn Rewards loyalty program year-to-date.

I expect the book will continue to be a significant driver for new customer acquisition over time. On the development front in Boston, we finalized the interiors and began to buy out structural materials for our upcoming projects across the street from the property that will add incremental parking, food and beverage and entertainment amenities. Turning to Macau. We generated $156 million of EBITDA in the quarter with lower-than-normal VIP hold negatively impacting EBITDA by about $10 million. In the casino, mass table drop reached 82% of Q1 2019 levels, and our VIP hold normalized market share was over 14% during the quarter despite unusually low hold in our mass business at Wynn Macau and the fact that significant portions of Wynn Macau’s East casino were closed for renovation during the quarter.

Encouragingly, that market share was consistent with full year 2019 levels. On the non-gaming side, our retail business was incredibly strong with tenant retail sales increasing 60% compared to the first quarter of 2019, once again highlighting the strength of our premium consumer. Looking forward, as you have seen, market-wide GGR momentum in Macau has been very impressive, building through the first quarter and accelerating into April. Who would have thought even six months ago that the market would be run rating north of $22 billion of annual GGR. In April, our mass drop per day increased versus Q1, our direct VIP turnover per day increased meaningfully versus Q1, and occupancy and retail sales were very healthy. More recently, the May Golden Week holiday period was particularly strong, outperforming Golden Week 2019 in several key areas.

In the casino, our overall mass table drop during the holiday period was nearly 10% above 2019 Golden Week levels, and our direct VIP turnover was more than double 2019 levels. Outside of gaming, our tenant retail sales increased 36% compared to Golden Week 2019, and our hotel occupancy was 95%. Performance during and after the quarter was skewed towards Wynn Palace, driven both by the mix of customers that have returned to Macau in the initial reopening wave and the renovation-related closures at Wynn Macau that I mentioned earlier. We are making a number of changes and improvements to Wynn Macau that I expect will drive longer-term market share gain. In the meantime, I expect that Wynn Palace will continue to pace ahead of Wynn Macau in the recovery.

On the development front in Macau, we are deep into design and planning for our concession related CapEx commitments, which we believe will help support Macau’s long-term diversification goals and be additive to our business over the coming years. We look forward to telling you more in due course. Lastly, I hope that you were all able to review the information we provided a couple of weeks ago on Wynn Al Marjan Island, our planned integrated resort in the UAE. If you haven’t listened to the presentation or read through the slide deck, you can find both on our IR website. I’m incredibly proud of the program and design elements we have put together thus far. And as we noted in the presentation, we think the resort will generate between $450 million and $600 million of steady-state EBITDA.

The combination of our 40% equity ownership in the project along with our management and license fees will drive a very healthy ROI for Wynn Resorts shareholders. With that, I’ll now turn it back to Julie to run through some additional details on the quarter.

Julie Cameron-Doe: Thank you, Craig. At Wynn Las Vegas, we generated an all-time record of $231.6 million in adjusted property EBITDA on $586.8 million of operating revenue during the quarter. Higher-than-normal hold positively impacted EBITDA by around $4 million in Q1. Our hotel occupancy was 88.8% in the quarter, up 1,190 basis points year-over-year and up 620 basis points versus Q1 2019. Importantly, we’ve stayed true to our luxury brand and continue to compete on quality of product and service experience with our overall ADR reaching a record $493 during Q1 2023, up 14.1% versus Q1 2022 and 46% above Q1 2019 levels. Our other non-gaming businesses saw broad-based strength across food and beverage, entertainment and retail, which were up nicely year-over-year and also well above pre-pandemic levels.

In the casino, our Q1 2023 slot handle increased 33.5% year-over-year and with 99% of our Q1 2019 level. Similarly, our table drop was up 9.6% year-over-year and was 49% of our Q1 2019 levels. The team in Vegas has done a great job of controlling costs without negatively impacting the guest experience, delivering adjusted property EBITDA margin of 39.5% in the quarter. On a hold-normalized basis, our EBITDA margin was up approximately 300 basis points year-over-year at approximately 1,400 basis points compared to Q1 2019. OpEx excluding gaming tax per day was $3.7 million in Q1 2023, which was flat sequentially and up 20% compared to Q1 2019 levels, but well below the 46% increase in operating revenues. Turning to Boston. We generated adjusted property EBITDA of $63.4 million with EBITDA margin of 29.3%.

We saw broad-based strength across casino and non-gaming during the quarter. In the casino, we generated $191 million of GGR, a property record with strength in both tables and slots. Our non-gaming revenue grew 21% year-over-year to $50.9 million with particular strength in hotel and food and beverage. We’ve stayed very disciplined on the cost side with OpEx excluding gaming tax per day of approximately $1.17 million in Q1 2023. This is up relative to Q1 2022 on increased business volumes and flat sequentially. As we’ve discussed on prior calls, the year-over-year EBITDA and OpEx comps were impacted by contractual labor agreements, which added around $45,000 per day to our OpEx base beginning late in Q2 2022. We’re well positioned to drive strong operating leverage as we continue to grow the top line over time.

Our Macau operations delivered adjusted property EBITDA of $155.8 million in the quarter on $600.1 million of operating revenues. Lower-than-normal VIP hold negatively impacted EBITDA by around $10 million in Q1. As Craig noted, we were encouraged by the meaningful uptick in visitation and demand we experienced during the quarter with particular strength in mass casino and luxury retail sales. Our OpEx excluding gaming tax was approximately $2.3 million per day in Q1, a decrease compared to $3.2 million in Q1 2019 and up modestly from Q4 despite meaningful sequential increase in business volumes. The team has done a great job remaining disciplined on costs, and we’re well positioned to drive strong operating leverage as the business recovers over time.

In terms of CapEx, we’re currently advancing through the design and planning stages on our concession commitments. And as we noted last quarter, these projects require a number of government approvals, creating a wide range of potential CapEx in the very near term. As such, for 2023, we continue to expect CapEx related to our concession commitments to range between $50 million to $220 million. Turning to Wynn Interactive. Our EBITDA burn rate decreased both sequentially and year-over-year to $21.1 million in Q1 2023. Our team continues to stay disciplined on cost, while driving improved marketing efficiencies. Moving on to the balance sheet. Our liquidity position remains very strong with global cash and revolver availability of approximately $4.7 billion as of March 31.

This was comprised of $1.6 billion of total cash and available liquidity in Macau and $3.1 billion in the US. Importantly, the combination of very strong performance in Las Vegas and Boston with the properties generating over $1.1 billion of adjusted property EBITDA in the 12 months through March 31, together with our robust liquidity, creates a very healthy leverage profile in the US. As Craig noted, with our properties performing well in each of our markets and our robust liquidity, we’re pleased to announce that the Board approved the resumption of our quarterly dividend with a cash dividend of $0.25 per share payable on June 6, 2023, to stockholders of record as of May 23, 2023, highlighting our commitment to prudently returning capital to shareholders.

Finally, our CapEx in the quarter was $124 million primarily related to the spa and villa renovations and F&B enhancements at Wynn Las Vegas and normal course maintenance across the business. With that, we will now open up the call to Q&A.

Q&A Session

Operator: Thank you. [Operator Instructions] Our first question comes from Carlo Santarelli with Deutsche Bank. You may go ahead sir.

Operator: Thank you. Our next caller is Joe Greff with JPMorgan.

Operator: Thank you. Our next caller is Shaun Kelley with Bank of America. You may go ahead.

Operator: Thank you. [Operator Instructions] Our next caller is Dan Politzer with Wells Fargo. You may go ahead, sir.

Operator: Thank you. Our next caller is David Katz with Jefferies. You may go ahead sir. David, your line is open. Possibly your mute is on. We’ll go to the next caller. Robin Farley, you may go ahead with UBS.

Operator: Thank you. John DeCree with CBRE. You may go ahead.

Julie Cameron-Doe: Thank you. Well, with that, we’ll close the call. Thank you for your interest in Wynn Resorts and we look forward to sharing more information with you next quarter.

Operator: Thank you for participating on today’s conference call. You may now disconnect.