Q4 2019 Earnings Call
Welcome to the Wynn resorts fourth quarter 2019 earnings call.
Vince on listen only until the question answer session of today's conference to ask a question Press Star one on your Touchtone phone.
Phone record your name and I will introduce you. This call is being recorded if you have any objections you may disconnect. At this time I will now turn the call over the credit Billings, President and Chief Financial Officer, Sir you may begin.
Thank you operator, good afternoon, everyone with me today in Las Vegas, or mathematics in Maryland, Spiegel also on the liner.
Ian Coughlan, Toronto Brothers, Frederick sure, Joe and Bryan Goldberg.
To remind you that we may make forward looking statements under safe harder Harbor Federal Securities laws in those statements may or may not come true I will now turn the call over the mathematics.
Thanks, Greg and welcome everyone to our fourth quarter conference call today.
To kick it off I'd like to start in Macau.
So we are currently focused.
Almost solely on the health and safety of our employees our customers in the Macau community at large right now in Macau.
I'd like to commend the government of Macau.
Now and in China in fact for the quick and decisive action that they take and continue to take.
To contain the crowd of Iris wherein daily conversations with the government.
It's been extremely transparent and we they have been terrific partners with us as we focus on the safety.
We have every one in Macau.
In fact on February 5th at Midnight, we worked closely with the government in Macau and all of the operators in Macau.
To see our casino operations.
On a it midnight on February 5th.
It was a controlled and organized closure.
The casino, we do still have our hotel and a couple of restaurants open for the few remaining guess that are in the cow.
But during this time, while the casino is closed our operating expense burn rate is roughly 2.4 million to 2.6 million a day.
And that's largely comprised of payroll tar 12200 employees.
Looking back at the fourth quarter, we generated $347.7 million <unk>.
And like the past quarters, we experienced.
Quit growth in core mask, coupled with compression in the V.I.P. segment.
As we reported on the third quarter October was actually quite strong generating even a little over $4 million a day, but.
But we began to see deceleration leading up to the 20th year celebration handover of mckell back to China.
<unk> on December 20th.
Just like the entire market. However, while it's a short period of time, we did notice that beginning on December 23rd through January 10th in a somewhat normal operating environment, our business jumped right back to $4 million, a day and even between the two properties and normalize basis.
Moving to Las Vegas, we made $80 million an even.
With a 20 million dollar negative hold impact during the quarter.
On a full year just to put in perspective in 2019 hour baccarat volumes were down roughly 30% in 2019 compared to all of 2018.
And that contributed to more than a 50 million dollar decline and he did a year over year.
Our domestic business continues to be up in the casino and and non gaming.
Par was up over three per cent in the fourth quarter and our retail revenues were up double digits.
We're excited about 2020 in Las Vegas, we have a 430000 square foot Convention center, that's opening in weeks to great fanfare. We have three new restaurants that are would be more social dining focused in high energy there'll be opening throughout 2020.
Begin to remodel of when Las Vegas, the 2700 rooms here in the summer of this year and completing before the end of 2020.
So we have a lot going on in Las Vegas, and we feel really good about all of the segments of our business as we continue <unk> as we continue to monitor the far east segment as it relates to Las Vegas.
Looking at Encore, Boston Harbor, we doubled our even die from the third quarter to the fourth quarter to $15 million. Our table games business remains healthy we opened and table games was healthy and it continues to grow and to be quite strong actually.
And all the programs that we're putting in place for our slot for our slot when we launched the wind rewards program, which is at first it for US in North America, which is a tiered card program. We're starting to see those things work in at Encore Boston Harbor in fact, our when per unit on the slot floor was up a little over.
13% compared to the third quarter, and we're continuing to see incremental and incremental growth on the slot floor.
In 2020, we're focused on continuing to match, our food and beverage concepts with with our customers. So destination dining for the overnight visitors as we are ramping our hotel business, there and providing more quick serve options for the daily visitors. So we feel good about the progress that we're making it encore Boston Harbor as we continue to ran.
That property throughout 2020.
<unk> I'll turn it over to correct.
Thank you ma'am.
Noted in our release are mckell operations deliberate adjusted EBITDA 347.7 million on 1.1 billion of operating revenues quarter was characterized by strengthened mass with combined property when in the mass segment up 6% year over year.
<unk> positively impacted by higher than normal direct T.I.P. old percentage, which increase deep adopt by approximately 17.5 million from normalized level with the hold impact weighted more heavily to win mckell at approximately 12.5 million.
The team in Macau has done a great job of controlling costs at both properties at when palace are operating expenses, excluding taxes were down both year over year in sequentially, which drove a 40 basis point increase in normalized done margin compared to Q3.
Despite the top line pressure experience market.
<unk> was flat year over year and sequentially, despite incremental payroll expense incurred to staff up the Lakeside casino.
We are well prepared to drive strong operating leverage when the market returns to normal.
Or Las Vegas operations produced adjusted EBITDA at 80.1 million and the third quarter on operating revenue of 368.8 million. Our results were negatively impacted by low table games sold in both <unk> and domestic tables.
Costing us about 20 million if it dies met mentions.
While baccarat was soft year over year on a tough cop, we sell 4% growth in non baccarat table drop and slot handle.
On the hotel side wrapped par increased approximately 3% year over year to $288 driving 120.3 million of hotel revenue.
Bad debt expense in Las Vegas was 4.1 million compared to 1 million in the prior your quarter costing US 3 million incomparably button.
The team in Las Vegas also did an excellent job controlling costs from the face upward pressure on payroll with operating expenses, excluding tax and bad debt down slightly year over year.
We spent approximately 49 million and project costs in the group space at when Las Vegas, and Q. for 19, taking or spend to date to roughly 351 million construction is now complete and the expansion is slated to open it a few weeks.
Encore Boston Harbor produced 15.3 million any but <unk> on 169.3 million and operating revenue.
Well games hold was in the normal range.
As mentioned, we have a number of initiatives in play in Boston designed to drive revenue growth and we expect those initiatives will bear fruit over the course of 2020.
We have also carefully managed our expense space, there and operating expenses, excluding gaming tax in Boston with down approximately 11% quarter of a quarter.
We anticipate making additional investments and the properties throughout the year, particularly food and beverage, but we're not yet ready to quantify the budget for those initiatives, we expect that will be relatively modest.
Turning to the balance sheet during the quarter. We successfully completed a 1 billion dollar 10 years senior notes offering into cow was strong support from Asia base longterm investors.
We intend to use the proceeds from the notes offering to repay a portion of our turbulence and be count.
As a result, this will reduce our senior secured debt and related leverage ratio, while extending our maturity profile and an attractive rates.
We ended the quarter with total debt of 10.4 billion inclusive of the 1 billion if recently issued mcalpine.
We also had total cashing investments of 2.36 billion, including approximately 1.8 billion. It when the cow and total company wide revolver capacity of 1.25 billion are liquidity position, particularly M. account is very strong.
Finally during the quarter, we returned over 100 million to shareholders through our quarterly dividend payment.
With that we will now open up the call to CUNY operator.
Thank you to ask a question press star one on your Touchtone phone I meet your phone record your name clearly after the <unk>.
D.C. for your question to try your question press start to.
First question comes from <unk> do I think.
Hey, guys and thanks to the comments I kind of hate to be generic and more general, but but if you can just big picture. How do you guys think about things here in the near term and certainly appreciate the color Mad on kind of the the cost per day here during the closure how does things look over there at present what are you.
Hearing in terms of you know the potential to reopen after the two week window and most importantly, what do you foresee kind of on the back end of this.
So I think it's it's a little early to try to say when exactly we will reopen we are again the team on the ground is working with the government on a daily basis and watching very carefully if there'll be any continued outbreaks of the virus and so far.
You know, we we feel like things are fairly well contained and we're just watching it very carefully.
In terms of Macallan General I think you know the way we look at it is there's been so much investment in the region and all the new infrastructure. If there was just coming to fruition with the high speed rail coming into into Mccann and the light rail launching and it was really set up for quite extraordinary 2020.
We were we were quite excited about it. So I'm not you know I don't want to predict when operations will be back to normal they will be eventually we're not exactly sure when mcalenney set up for a really great rebound tourism was one of the first things that rebound in events like this because people want.
To get out and move around and get back to normal. So we do feel good about the the long term aspect of of mccalla as soon as the the viruses completely contained.
Great. Thank you very much.
Hi next question consume Joe Graffam J.P. Morgan.
I'm good afternoon, everybody, Yeah, I mean, there's a lot of uncertainty Macallan I appreciate your comments on it.
Can you spend a little bit of time, what you're seeing from that that far east player going into the Las Vegas.
Can you share with us maybe your experiences path Chinese new year.
And the the that that segments and challenge for a while you lose a couple of different times on this call.
You know, we don't really combat did corner on what really happened during the corner, but so far so good we had our far East command, we had a party we've taken appropriate precautions the far east who are in town they can't get back to China and so they are travelling from one location to another location and.
They were here first they may have gone to another casino and we expect them to come back as they continue to play that clearly based upon the results you can see on the fourth quarter.
Very choppy marking.
And then.
Sticking to Las Vegas, your expectations for room pricing this year with Convention center and some of the other immunity build that in Las Vegas, I guess, maybe some of which might be impacted by the the room refresh. This summer how are you looking at at room pricing for the two boxes in Las Vegas, and and you know how much of a multi year.
Is that well with on occupancy end on on price. When you think about a longer term and that's all for me. Thank you.
I mean, the room pricing add occupancy in Las Vegas is a three fight every day right and so our convention business is very solid we feel great reception to our product we have leveraged our hotel rooms for the domestic casino growth that we are experiencing or that.
You're saying the round that'll be out of order from Jim through the beginning of November are going to depressed hotel revenue we will.
Or to.
Eliminate the low end leisure business that often comes to market in the third quarter and how it was really planned for that particular time in terms of probably end up with occupancy or with right. That's that's a story to be written.
And Joe we're still focused as we've been saying for about a year now that when the as the convention center stabilized and we're seeing lots of interest in it as people are touring it is booking quite fast that the four to six points of incremental occupancy is still the target as we get into late 20 and into 20.
One I think we ended the year at roughly 87% occupancy and we want to be in the low nineties six months from now.
Great. Thank you very much.
Hi next question comes from Felicia Hendrix and Barclays airline is now open.
Hi, there. Thank you so much so even for you I was just.
<unk>.
They should open up at the end of year.
Yeah and opened up in mid November 44 tables and did exceptionally well.
Lifted premium mass was incremental business for when the code the marketing and operations team did a great job launching and we were looking forward to a great Chinese new year. It had done very well up to that point and so we're encouraged them for the future. We still have elements of the facility to open.
In the first quarter. So we have two restaurants coming on board six retail outlets and support there is so it's an exciting developments in MCO plus we have all our own code rooms back.
Oh, so they're renovation.
Hi, One question comes from Sean Kelly from Bank of America airline is now open.
Hi, Good afternoon, you know maybe for for Matt or even just wanted to get your sense on you know I think obviously the market was a little disrupt they didn't Macallan December given you know the the the President's visit but was kind of curious on maybe you are bigger picture view on on maybe somebody implications that you know of that visit.
There were some some yeah I think some really positive reads about what that might have met for kind of the near medium term and then you know any kind of just initial reads on the new chief Executive and how those you know kind of how some of those really start going.
Oh sure so I'll kick it off in in in you can try men, but as I said before we thought mckowen was really set up for a great 2020.
Very optimistic about the new chief executive and the direction that he's taking the cow.
We we feel good about all the infrastructure that's coming in place clearly to visit in December by President. She was wildly lot at around you really all throughout China as a mechanic has done a great job with the one country and two systems. So we feel we feel really good about macaos position.
Going forward in do you have any thoughts on that.
We.
Two years ago, when the greater Bay area was being just goes to the government level because it was described as having a seed in one of the V.I.P. coverages as a greater Bay area move forward. After presidencies visit it's now position mokoena, leading role which is wonderful for everybody in the code business and commute.
Dizzy and secondly on the new Chief Executive.
He barely sat and sees any has this huge virus maelstrom, he's being quite amazing in his clear concise.
Pragmatic communication with the community and also with business, we've been in daily dialog with government and it's been quite remarkable the decision making that he's done in his first few weeks.
Mm.
Hi next question comes from Thomas Alan from Morgan Stanley Line is now okay.
Thanks, So so a couple of questions I'm, a cow how his business interruption insurance going to work and then also with with covenants I know you've been well under them an obvious hero ton of cash, but but are well the well that'd be they're concessions given and then finally.
The cost containment was really impressive can just talked a little bit more about about how how you were able to that thank you.
Sure Thomas It's Craig I'll I'll take the first two and then and then we could talk about.
The latter so generally speaking business interruption sure it's business interruption insurance.
Relate must relate to a physical event that caused the business interruption, so a storm or some type of some type of damage that obviously isn't the case here. So we don't expect material business interruption coverage proceeds from the crown of virus event to your question on covenants. The vast majority of our debt stack is comprised of.
Long dated unsecured bonds with no maintenance governance. The two bank facility do have maintenance covenants. The U.S. facility has more than ample covenant headroom to sustain a very for a long period of suppressed business volumes and <unk>.
<unk> facility does have a maintenance covenant that is sensitive to <unk>.
And as I suspect several concessionaires do we've already have a game plan in place to to manage that to the extent of the shut down is extended but it would have to be quite extended and as you rightly pointed out we have a ton of liquidity. We have a couple of billion dollars of availability between cash in revolver and mckell and that's more than sufficient to.
To last for <unk> really any period of closure.
And did you would you kindly comments on the the objects controls.
Sure. It's just a team efforts to collectively looking variable expenses, we were able to bring had come down we had a hiring freeze in place.
And the team did a good job and parsing expenses were not hurting the quality of service and the quality of product and facility.
Hi, My question comes from Harry Curtis from Infinite.
Then.
Yeah. Good afternoon. My question goes back to the comments that you made about the light rail system was it.
Operation long enough to get any sense of whether or not it would would be effective transporting more visitors to your.
To your properties.
So hardly this is in and it had only been an operation for three weeks and still going to testing mode. It's a great vehicle transfer situation for us with two stations right outside our property, but it's too early to tell them in terms of traffic movement et cetera.
I don't know question comes from D., the cats from Jeffries here line is now open.
Hi afternoon.
If I can just ask you to go back on one detail you did makes a mention show some evidence of no. Good cost containment can you talk a bit more about you.
You know what lovers and a bit more specificity around what you can do with costs are you you know encouraging vacation or any of those sorts of things that may.
Mitigate some you know cost impact and then secondly, you know I I wanted to change the subject and and talk a bit about encore, Boston and just sort of get your updated view about you know what a ramp to you know payback period might be you know overtime and how you're envisioning not.
Thank you.
Sure. So this is Matt for you know on the cost containment side in the in a normal operating environment I think in all of our properties. We've been doing a very good job focusing on costs and being smart inefficient right now in Macau V. roughly 1.8 to 1.9.
In a day of payroll. We are you know not looking at cutting that at all now as a time when you invest in your people you you don't do something short term that little how hurt culture or cause any distractions. So we're investing in the community right now because we know this will be temporary and we think that it's.
The right long term investment.
For Encore Boston Harbor, when we laid out the program and we open to analysts day, we talked about a two year ramp period admittedly it as launched softer than we thought in particular on the slot side and so we're doing a lot of work what we realized was we didn't have quite the right food and.
Beverage program in particular around quick serve.
For the daytime slot customer it's actually the same thing that we went through it when palace and when we opened we realized we needed more quick surf restaurants, and went Dallas, where you immediately closed a third of the casino we built ready.
Five new restaurants in the meantime, and so we're going through that process in a very fast way at Encore Boston Harbor, because when we see a problem we fix it.
So I think we're still in that two year ramp up mode.
Mm.
Thank you for your participation in today's comprehension me disconnect. It this time.
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Yeah that.
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