Q1 2021 Wynn Resorts Ltd Earnings Call
Thanks.
[music].
Welcome to the Wynn resorts first quarter 2021 earnings call. All participants are on a listen only mode until the question and answer session of today's conference.
And ask a question. Please press star one on your Touchtone 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 conference over to Craig Billings, President and Chief Financial Officer, Sir you may begin.
Good.
Thank you operator, and good afternoon, everyone on.
And on the call with me today on mathematics, and Marilyn Spiegel and Las Vegas, and also on the line and Colin you're on two brothers tried to build to suit Joe and Brian.
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'll now turn the call over to Matt Maddox.
Thanks, Craig and good afternoon, everyone.
Before we dive right into the quarterly results I'd like to first talk about how excited we are.
<unk> announced the merger of Wynn interactive and to the ASO, It's acquisition Corp.
As we've been thinking about online sports betting and the I gaming space over the last few years.
We knew that we had to stick to what we do which is build great products.
And provide the best customer service Wynn Interactive is now a company with over 300 people.
We have some of the luminaries from European and gaming people co founders of the Wynn.
They are responsible for a lot of the product that we're developing and this 300 person team.
And as we looked out into the future and we realize this is likely going to be as large as the commercial casino revenue opportunity.
Of $40 billion over the next five plus years.
Which by the way that's typically about how long it takes to build one of our bricks and mortar properties around five years.
We knew that this was an opportunity that we had to capitalize on.
And so as we explored various options and that.
Very clear debt, creating.
Pure play.
<unk> company.
And partnership with Bill Foley.
One of the most are now investors and the United States was clearly the right thing to do to create the most value for the Wynn resorts shareholders and for the Wynn interactive shareholders.
Bill just for those of you that don't know has created over $100 billion and shareholder value.
During his invest and clear 100 billion.
He is the owner of a professional sports team and luxury hospitality.
Assets around the country.
He recently completed the successful these back on pace as a digital payments company that is now getting into the digital gaming space.
So partnering with bill and our team of 300 people and.
And thinking about the product roadmap and the marketing dollars and that we're going to invest to ensure that were winners in this space and.
Felt like the exact right thing to do and we're very excited to have $640 million of committed capital injected into this company.
Watch this debenture.
We will be posting a presentation.
Online after this call there's a lot more details around this merger and we will be spending time. After this call talking about it.
With that I'm going to go ahead and turn it over to our quarterly results.
And.
What we've been saying and our properties in Macau, and Las Vegas, and and Boston has been a very similar story.
Momentum each month and continuing to accelerate.
Example, and Macau, we generated $43 $9 million of EBITDA and the first quarter.
But it is moving so fast over there I feel like talking about what we're seeing now is more relevant than what we experienced in the first quarter. As we saw strength continue into February and March So that momentum continued in April and in May and in fact dearth.
The Golden week, which is the first week of May and Macau.
And we experienced and generated $3 million of normalized EBITDA per day during golden week by far the highest amount of normalized profit that we've been able to generate since the onset of the pandemic at the beginning of 2020.
Yeah.
Even with the junket volumes continuing to fluctuate between 25 and 30%.
Golden Week 2019, we were able to achieve these results because we focused our business on mass and premium mass and as we've talked about and previous calls we've been converting space that was previously for VIP and premium mass space, and we feel very comfortable and confident with our position and the Macau market and food.
Correct.
We generated 76%.
Of our mass volumes during the Golden week, this year compared to the Golden week and 2019.
Our hotel occupancy during Golden week was 93% and retail which is continuing to be a shining star across our portfolio and North America, and Macau was up 80% over the Golden week numbers and 2019.
Going forward and May and into June we do expect debt may we'll continue to see acceleration over the April results and we are very.
Very excited about the summer and what's going to come and Macau.
Just seeing the earnings power.
Over a golden week, and understanding where the Chinese consumer is headed and what our position and that market is it makes us more confident and our position in Macau and the Macau market and our future development opportunities and and around Wynn Palace to continue to build on what we do best and to grow.
ROE, our topline and our bottom line and Macau.
Moving to North America, and Las Vegas, again, we've seen very encouraging trends, we generated $28 million and EBITDA and the first quarter and what we really saw was right around March madness was when the volumes began to pick up.
And the first quarter and that has accelerated as an example, and the month of April our Revpar, which is why we're really focused and increased 50% five hour over the first quarter results.
Retail revenues and the month of April were the second best months on record.
From 2005 till April of 2021, there is the second best month on record.
And what's even more and more encouraging and much more than a green shoot, but a clear indication of the roaring consumer that's coming back our slot revenues and April were $25 million.
Which was a property record.
More than any other months and the history of Wynn Las Vegas.
So you take.
Those things that we're already seeing and Las Vegas, and looking at quarter to date, our EBITDA has already exceeded the first quarter and Las Vegas.
Our weekends going forward or in the Ninety's in terms of hotel occupancy.
And we're really focused on pricing and pricing power.
Our group business is holding on and looking actually quite strong for the back half of the year and fact, just last week, we hosted our first large group of 600 people and.
Went off without a hitch people are so happy to be back conventions work customers are excited and as more restrictions are lifted and we're able to really start to rollout our entertainment and our nightclubs and do what we do best we think that Las Vegas is opportunity is really unique.
And the best times are ahead.
Moving to Boston at Encore, Boston Harbor, where we achieved record EBITDA of $30 million for the quarter and that's even with restricted operating hours and quite significant COVID-19 restrictions and the month of January.
And that trend has continued in fact and the second quarter, thus far our daily EBIT is up 30 plus percent compared to the first quarter.
Encore Boston Harbor is hitting on all cylinders right now.
We've been able to really rationalize the cost run the building much more efficiently and focus on our casino customers and being the top superregional casino and the northeast I believe that Encore Boston Harbor is going to continue to grow quarter over quarter throughout this year is that property and that.
Management team are really doing an amazing job.
With that I'm going to turn it over to Craig to provide more details on the quarter.
Thanks, Matt.
Matt noted, our Macau operations delivered $43 9 million of EBITDA and the quarter on $417 million of operating revenue. Our EBITDA was driven by encouraging gaming and non gaming performance combined with solid cost controls gross gaming revenue per day, and <unk> 21 was approximately 34% Q for 2019 led by.
And the premium mass segment with particular strength in March.
As Matt mentioned this strength continued into April as mass drop reached $16 8 million per day or 59% of Q4 2019.
And 26% increase compared to <unk> 2021 levels.
On <unk> 2021 results and Macau were positively impacted by higher than normal table games hold that increased EBITDA by approximately $10 million to $15 million from a normalized level.
With respect to cost controls our opex, excluding gaming tax was $2 2 million per day and the quarter. This was down 25% from approximately $3 million per day in Q4, 2019, and flattish sequentially. We are well positioned to drive strong operating leverage as the business continues to recover.
At Wynn Las Vegas, we generated $28 1 million of adjusted property EBITDA on $178 7 million of operating revenue from a business that was heavily weighted to weekend occupancy.
And then the casino saw broad based strength across key segments with slot handle and table drop reaching 86% and 80% of Q4 2019 less levels, respectively. During the quarter.
Team and Las Vegas has done a great job of controlling cost and without negatively impacting the guest experience.
Opex per day, excluding gaming taxes decreased 48% to $1 6 million per day, and <unk> 21 from $3 million per day, and Q4, 2019, and similar to Macau Opex was largely flat compared to Q4 and 2020.
As Matt noted the business picked up beginning in March and this strength continued in the second quarter to date, we believe the combination of meaningful permanent cost saves along with increased group demand position us well to accelerate our recovery as we move into the back half of 2021.
And Boston, we generated record EBITDA of $30 4 million. Despite curtailed operating hours for much of January and kind of continued significant limitation on gaming positions.
Similar to Las Vegas, we have remained very disciplined on the cost side with Opex per day, excluding gaming tax of 760000, and <unk> 2021, a 40% decrease compared to $1 3 million per day, and Q4, 19, and a modest increase relative to the 680 K per day, and Q4 and 2020.
Turning to Wynn interactive.
Now with approximately 300 employees as Matt mentioned and.
And over $100 million and run rate gross gaming revenue based on March results. We are aggressively scaling our efforts to close key product gaps develop new and innovative features and create a world class branding and brand Ambassador program.
You'll hear more about this exciting business during our video presentation and in our slide deck that will be posted to our investor Relations website at approximately 230 P M Pacific today.
Turning to the balance sheet, our liquidity position remains very strong with global cash and revolver availability of nearly $4 billion as of April 30 and me.
<unk>, we had approximately 2.09 billion of available liquidity as of the end of April and on the U S. We had total available liquidity of approximately $185 billion on April 30, and with a substantially lower daily cash burn globally compared to the second half of 2020.
As a reminder, on February 11th we completed a successful public offering of seven 5 million shares of Wynn resorts stock with net proceeds of $842 million.
Our capex and the quarter was $40 million with the North American business environment, improving we have made the decision to proceed with the Las Vegas room remodel this summer and have approximately $175 million remaining to spend beyond that we're remaining extremely prudent with respect to capex, while we gained further confidence and the recovery.
With that we will now open the lines for Q&A. Please limit your questions to Wynn resorts related topics as we will discuss the Wynn interactive transaction in more detail and a separate presentation. Later today as I mentioned, thank you operator.
Thank you to ask a question. Please press star one on your Touchtone phone on mute your phone record your name clearly after the prompt and I will introduce you for your question to withdraw your question Press Star two.
Our first question is from Carlo Santarelli with Deutsche Bank You May go ahead.
Hey, guys. Thanks.
And there's a lot of color on on kind of the trends youre seeing and Macau now and as it pertains to the extent that you can address what what provides the confidence and the follow through obviously golden week is going to be and exogenous scary, but the the follow through and what you've seen in March April.
And now with Golden week has as we come out of the holiday periods and is it something around kind of just the comfort level of travel people getting more used to it or do you foresee vaccination type or I should say visa tight restrictions loosening that that would kind of really allow the growth to be a little bit more on bridal.
No.
I don't think I'd use the word unbridled right now.
Nothing and Macau has been.
Unbridled the government has been very careful and cautious as to how they continually increased tourism into the market and we do anticipate that to continue.
So yes, some of the things that I think are quite positive is we're actually seeing a lot of new customers a lot of new premium mass customers premium mass was actually up during golden week more than mass for us, but they were both very strong.
Just because Macau is an option for people to travel and so we think that over the long term Macao opening up to China is actually allowing us to acquire customers that we've never seen before so you know I think that each week that goes by.
And Golden week excluded it is getting stronger and we looking at our forecast, even though the windows quite short.
On back half of May and into June we're feeling pretty good about the continued strength and do you want to add anything to that.
Sure I think the success of Golden week has given us a lot of confidence about the summer and.
You could say, it's almost be at a tax rate for arranging Chinese economy, where people.
And no way of traveling overseas and.
And to walk you said earlier, we are seeing new customers coming to market, who haven't traveled for Macau before and they're getting and positively overwhelmed with the quality of the resorts and the city and I believe that that's going to be very sticky for us through the summer and.
And what we've seen post Golden week, and the normal post holiday lull blood and so on a higher level.
And I look the week and weekend and business that we had in April so.
We had towards the summer were very positive.
Great. Thank you guys and then just one last one Greg you mentioned, obviously going through with the L. B room remodel this summer.
$175 million of Capex.
Youre right and that you're referring to it and you guys can just comment like yoga.
Given what should I think by most accounts.
And as strong summer and Las Vegas.
As the market continues to kind of open up and others.
Groups got comes back was there was this thought and potentially kind of holding off on on that.
And the maximum amount of rooms online for the summer and second half.
This is Matt so no.
We are rooms.
<unk> been remodeled since 2010.
We actually we're going to launch the remodel at the end of 19 and.
COVID-19 and put a little stop to that because of all the uncertainty.
And in hindsight I wish we would've spent the $200 million, while we were close but we didn't.
And the idea that we need to wait because we're worried about room compression and I think is the wrong thing to do because if you look at our property and going into 2022, we have yet to utilize our new 400000 square foot Convention Center.
And a lot of it while the back half of 'twenty, one looks good for 'twenty two is really strong.
And so what we wanted to do is we want to come out of 'twenty, one and go into 'twenty, two with brand new room product and this is not just a soft refurb.
And <unk>.
AG job. This is a full remodel of these rooms, and I think it's going to really be a competitive edge for us going into 2022, Maryland and any thoughts on that now and as we think about how it starts is going to be a slow ramp up that will be finished will start mid July we will finish by the end of the year and I agree with.
And that we've got so much to look forward to and 'twenty two we want to be totally prepared for that.
Alright, Thank you all very much.
Thank you. The next question is from Joe Greff with J P. Morgan you May go ahead.
And.
Hey, guys.
Just first question on Macau, just based on what you're indicating for <unk> to date and the visitation numbers, we've seen coming out of Macau for April and May.
It would suggest that that you and others.
We're seeing a much stronger length of stay.
And maybe make sense given the increased pivot and focus to premium mass can you talk a little bit about that and and how much of that is is intentional through how you're positioning your assets.
And maybe what's just kind of going on with a different type of customer behavior and Macau.
Yes, sure Joe and why don't you why.
Why don't you take that one on length of stay.
Sure, we're not seeing here for Ya.
And for Kim to increase and length of stay and.
People are normally extreme two to three nine and that's always been on our market anyway and the.
Electric group tours and day trippers to the city and it's what's missing from the previous marketplace.
Length of stays stays pretty consistent but it is a higher quality customer, particularly for new customers with recovery per market and flying off and Kulzer and ER.
Overseas correctly food travel.
Travel Bruce.
And we're seeing higher quality and club store.
Yeah.
Great. Thank you for that and maybe you mentioned, this and and I missed it or or I'm not sure. If you talked about it but you could give us some indication of sort of the.
The strength and May over April, but I'm not sure sure you gave the April based on the Cal in terms of either volumes or EBITDA per day or sort of other metrics to tie that may performance too.
No Joe I did and I was just making the comment that we're continuing to see strength I mean, the month of April the for US. The first couple of weeks were a little soft with Qingming Festival and other things that were going on and we really saw.
On the back half of April strengthen and then following Golden week, we're experiencing.
Those volumes and feel like it's going to continue to grow from that level.
Thank you very much.
Thank you. The next question is from Thomas Allen with Morgan Stanley You May go ahead.
Thank you unveil guess you gave some encouraging commentary around weekend occupancy being over and the nineties.
And how you were really focused on rate can you just give us some more color on the rate and maybe some some color on what's going on and weekdays. Thank you.
Sure.
So we've we really focus on Revpar, we're really focused on having the right guests come here, who will appreciate the room product and still want to dine and our restaurants, who will want to play on the floor and so.
You can come here and find it'll be made the first weekend that will see 90% midweek, we will be in may about 20 points less and that that's obviously the for lack of the group.
Business and yet we just had our first group come and they filled 90% of their blocks that we felt really good about that at one time. After we reopened we dipped our rate and I would say that our regular customer was.
Not comfortable with having so many people here and so we have really increased that rate and revpar is very important that you can see that we will sell at the top of the market on a consistent basis.
Oh for color and then just on Macau on a couple of quarters ago. Maybe it was last quarter you talked about feeling like you were taking some of the some of your competitors customers as they came back to the market and they want the best product.
And do you still feel like that's happening.
I don't actually remember, saying that we are taking other people's customers, but what we have been taking and seeing our new customers and.
And I feel very comfortable that the way we positioned our product there that we will be market share takers on the premium mass and core mass side with our assets and VIP that we're converting into the premium segment. So I do expect us to continue.
New to increase our share on that front as we rollout our really our new programs and our new product and do you have any.
And more color on that.
I think you referenced through some of the second half of 2021 initiatives described which for.
And.
Reconditioning.
Former VIP spaces for two megawatts to react.
Reacts to new premium non customers coming to market and to capture more than our fair market share. We've got the full launch of the rate casino at Wynn Macau, we've expanded our diamond and chairman and that law.
On the food palace and we'd be.
And Repurposing village and large suites to provide and then you've got like experiences for the premium and mass market and.
And we are doing.
A long series of private events, and culinary arts and concerns over the summer and into the end of the year, which will drive more premium mass business for us and we've got a beautiful brand campaign that we're launching during the summer and into non gaming, which will attract more customers to our properties. So we're excited about that and despite the arrival of new.
Competition, and the market, particularly in our neighborhood and we actually welcome that and it's a.
Affirmative on with what we call. So called side, we've had morpheus open and G. M is ramping up and.
We've got roundish for powerful thing at some point and this summer so that the upgrade for the future.
<unk> new customers to Wynn.
Helpful. Thank you.
Thank you and just as a reminder, if you'd like to ask a question. Please press star followed by one.
Our next question is from Stephen Grambling with Goldman Sachs. You May go ahead.
Hey, there this one well.
And we'll try and win that a little bit, but it's really meant to be a wynn resorts question. Some of your peers have talked about the benefits of omni channel as it relates to other gaming and online sports betting how old Wynn resorts continue to interact with Wynn bed to ensure you capture that full benefit.
Greg why don't you take that one sure happy to so I guess I would respond to that from two perspectives. The first is that we're in the midst now of integrating Wynn rewards into our products youll see more of that and the presentation here and about about 30 minutes and we will have will have wynn rewards fully integrated into the product and we do believe that.
Will that will generate benefits for the land based business. We obviously have a pretty robust database and North America of about 13 million folks and so that will that will.
And return benefit when debt and the second component to that is really Massachusetts. So there is a.
A few different retail and online sports betting bills floating around and Massachusetts, right now and while the timing is TBD, we would be hopeful that's something gets done this year.
And we're going to be ready to go on day, one and the event and the utilization has passed and we have very strong home court advantage. There. So I think the.
And the integration of the digital product, there, where we have two plus billion asset and the middle of Boston.
We will prove to be very fruitful for both businesses.
Thanks look forward to seeing the video.
Thanks.
Thank you. The next question is from David Katz with Jefferies. You May go ahead.
David Your line is open can you. Please check your mute feature.
And we are not getting a response David if your line is open you May go ahead with your question.
Operator, let's move to the last question. Please.
Yes. Thank you. Our last question is from Robin Farley with UBS you May go ahead.
Great. Thanks.
And we really wanted to ask a question that is really about the impact on on Wynn resorts, which is wynn resorts be receiving kind of a royalty stream for the use of the Wynn brand from the company just trying to think about the benefit to the Wynn resorts piece. Thanks.
Sure Robyn and I, it's Matt.
Talk a little bit about it and then handed over to Craig.
And you look at the press release and the presentation Youll find.
Wynn resorts is still the majority owner of wind debt post transaction so wynn.
And there is oracle on roughly 58% of the company post transaction.
And there are intercompany arrangements, just like with our other properties for royalty streams.
And all of the intercompany marketing agreement. So all of that is in place what's exciting for US is to have it really a pure play public company with 600 plus million dollars on committed capital.
And our management team and Bill Foley ready to really go after this space over the next few years.
So clearly we are still the majority owner of that company and we vote over 70% of it. So you should continue to think about it as a subsidiary of Wynn resorts fully controlled.
And Greg you want to add anything else to that and I think you said on.
And the benefits of Wynn resorts comes through the equity ownership, but certainly there are intercompany arrangements, representing the brand and consumables on property debt that Wynn debt.
And just as that.
For example, as we have been.
No.
As we've launched win back now and six states we've seen various customers.
And getting really excited about the bricks and mortar experience and the ability to participate and both sides of that we've had one customer and the northeast transfer hundreds of thousands of dollars to one of our casinos and we offer lots of rewards that would include being picked up on a plane and.
And the Villa and all the things that we do at Las Vegas, being able to offer that always sounded like the rate idea, but we're already seeing how excited our win back customers or to take advantage of that so I fully anticipate that when that will have a very large database and that the companies.
And we'll be able to utilize those for both our bricks and mortar experience and the online experience.
Okay, great. Thanks for the color can I ask one follow up on Macau.
Just kind of a bigger picture question I think that you've said on previous calls that you thought it might be sort of on a multiyear.
Just looking bigger picture.
The VIP and piece of the business has never gotten back to kind of that debt pre two.
2014 level, where do you think when things normalize when borders.
Borders are open and it's not and that.
That's not the issue where do you think VIP kind of levels out versus pre COVID-19 levels.
It's really hard to predict but and on the past couple of calls you know I've been out there, saying that it feels like it probably get back to around 50% of the pre COVID-19 levels I hope Im wrong, I hope, it's more than that but we're positioning our business for that outcome and.
And we're positioning our business on the continued growth and the premium mass and mass segment.
And I would just add to that Rob and yet youre right. The junket business has been evolving, but we've been evolving too and.
So a lot of those players are actually playing directly with the operators right. So.
And we've been pivoting resources to better serve those customers as we've talked about kind of AD nauseum, both physical resources and.
And service personnel and.
So we're well positioned to deal with the transition whatever that transition ultimately looks like.
Great. Thank you very much.
Alright. Thank you folks have a great day and day, we look forward to talking to you again.
Thank you that does conclude today's conference. Thank you all for participating you may disconnect at this time.
Yeah.