Q2 2021 Wynn Resorts Ltd Earnings Call
Welcome to the Wynn resorts.
Quarter 2021 earnings call.
Participants are on a listen only until the question and answer session of today's conference.
To ask the question Chris.
Chris Star 1 on your touch on saw record your name and I will introduce you.
Please limit your questions to 1 question and 1 follow up question.
This call is being recorded if you have any objections you may disconnect at this time.
I would now like to turn the meeting over to Craig Billings, Chief Financial Officer, Sir you may begin.
Thank you operator, and good afternoon, everyone on.
On the call with me today on mathematics, Marilyn Spiegel, and Brian Gulbrandsen Las Vegas also on the line are Ian Colin Linda Chen surround to others include a suite Joe on.
Ginny holiday.
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 Matt Maddox.
Thanks, Craig and thank.
Thank you everyone for joining us today.
I'd like to start off with our results in North America.
Which we were all very happy with.
Starting in Las Vegas, we made $133 million in EBITDA in Las Vegas.
And what was great about the second quarter with each month was stronger than the last in fact June EBITDA was double what we experienced in April.
We saw our occupancy continue to grow week over week and the strength across all segments was quite apparent from our nightclubs to our hotel, our restaurants and our gaming volumes.
We were able to achieve $133 million of EBITDA without international high end play, which in the past had been almost 20% of our results and without conventions.
And that trend continued into July.
In fact in July Wynn Las Vegas experienced its single largest EBITDA 4 months since we opened in 2005.
We were able to get occupancy up to the mid <unk> on the weekend and it was still on the ATM during the week, but we focused on rate.
We had we were getting over $500 ADR on the weekend and we're continuing to make sure we have the right customers in here.
And achieving the right results.
Moving on to Boston same thing can be said it was a record quarter in in Boston at $46 million.
We saw each month stronger than the last hour database is accelerating quite rapidly there in fact, our new sign ups for our Wynn rewards program were up 70% in the second quarter compared to the first quarter, 70% and again same story July record months.
Laura Best month on record for Encore Boston Harbor.
So when I look at our results in North America.
You know, it's interesting to say because the second quarter be a peak.
And I think that that's very short term thinking the second quarter is not a peak its a preview of what's to come.
We've all been able to streamline our expense structure understand how to yield our properties better and the ability to generate significant EBITDA out of these assets is quite clear.
Now clearly the delta variance, starting a little bit of a curve ball right now, but that that will be short term and it will subside.
And what is clear is people want to have funds. They want to go to Las Vegas, and as we see conventions come back which is going to happen and then more international play from around the world come back I am very confident that we will continue to see growth in our results in both Las Vegas and in Boston.
Looking at Macau, we made $67 million on the EBITDA for the quarter.
And Macau has been continuously sort of 2 steps forward 1 step back on our first quarter earnings call. We talked about the strength that we've just experienced during may and Golden week, or we'd achieved $3 million on EBITDA a day during that period.
However, after that call there was a small outbreak in Guangdong that was quickly stamped out within a couple of weeks, but that greatly suppressed the volumes in June.
We did start to see a slight come back in the middle of July to where the results. We're getting close to the April and May results, which really indicates that there is real pent up demand in the region to go to Macau.
Theres been another outbreak.
We've all been reading about in the region.
And.
The restrictions have stepped up quite significantly just over the last few days in terms of travel restrictions I think the good thing that we all have now experienced is that the Macau government Act decisively and quickly.
Usually it has been able to remedy these things and in the greater Bay area within a matter of weeks.
So while we don't know how long this is going to last they experienced thus far with the decisive action on the ability to test millions of millions of people just within a matter of days in the region and in Macau does give us great hope that this will continue to pass and what's really.
What we're really focused on is the accelerating vaccination rates in the region.
And so while it's impossible to predict right now we are quite hopeful that as the vaccinate as vaccination rate continues to accelerate and the stated goals.
Our our hopefully achieved by the end of the year that we will begin to see a more stabilized and normalized operating environment.
Looking at the interactive space Wynn Interactive we have an S..4 that's live right now out there we're working very closely with the Australasia team on our stack and that is moving forward quite well and we're really excited about it.
We've put together a full robust program of new product delivery and end up marketing program that we will be rolling out 4 NFL. This year that we're excited about this.
The space is competitive there's no doubt, but we are very confident with what we've put together with our product with our brand and what we're going to be able to offer that we are going to be a real player in this market and we're excited to share a lot more with you at an upcoming analyst day.
Craig will talk about a little more detail on this call.
So with that I'm Gonna go ahead, and turn it over to Craig to get into some more detail.
Thanks, Matt.
Matt noted our Macau operations delivered $67.6 million of EBITDA in the quarter on $454.4 million of operating revenue.
Our EBITDA was driven by encouraging gaming and non gaming performance combined with solid cost controls with particular strength in April and May gross gaming revenue per day in <unk> 'twenty..1 was approximately 31% of Q2.19 led by the premium mass segment.
Our <unk> results from Macau were positively impacted by higher than normal VIP table games hold that increased EBITDA by approximately $10 million from a normalized level.
With respect to cost controls our opex, excluding gaming tax was $2.3 million per day in the quarter. This is down 23% from $3 million per day in the fourth quarter of 2019, and only up slightly sequentially. Despite the increase in revenue.
We continue to be well positioned to drive strong operating leverage as the business recovers.
At Wynn Las Vegas, we generated $133.2 million of adjusted property EBITDA on $355.1 million of operating revenue with particular strength on the weekends.
And the casino, we saw broad based strength across key segments with slot handle 37% above <unk> 2019 levels and table drop only 3% below <unk> 19.
The team in Las Vegas has done a great job of controlling costs without negatively impacting the guest experience delivering a record adjusted property EBITDA margin of 37, 5% in the quarter.
Opex per day again, excluding gaming taxes decreased 24% to $2.3 million per day in the second quarter of 'twenty, 1 from 3 million per day in the fourth quarter of 19.
While opex increased approximately 45% sequentially from $1.6 million or <unk> 21 revenue nearly doubled driving strong operating leverage.
In Boston as Matt mentioned, we generated another record quarter with adjusted property EBITDA of $46.9 million on a record EBITDA margin of 28, 4%.
Similar to Las Vegas, we have remained very disciplined on the cost side with Opex per day, excluding gaming tax of 870000 in the quarter a decrease of over 30% compared to $1.3 million per day in Q4.19.
And a modest increase relative to the first quarter of 'twenty 1 on the back of improved improved business volumes and increased operating hours.
Turning to Wynn interactive we spent much of the quarter aggressively advancing our product features and building a robust marketing campaign ahead of the 2021 football season strategic highlights over the past few months include the recent launch of our web applications in Indiana, Colorado, Tennessee, New Jersey, and Virginia, which we expect to help drive user.
<unk> over time.
We've also strengthened our third party partnerships through agreements with the Detroit Lions, the Colorado Rockies and Cumulus media.
We've also announced several new high profile brand ambassadors, including Tim Howard and Chad, Chad Johnson with more to come.
Additionally, as sports and sports media continue to converge, we've partnered with several engaging content creators, including Chris long to develop unique sports theme programming from the new Blue wire podcast studio at Wynn Las Vegas, which is scheduled to open in a few weeks.
When interactive is now powered by just over 340 employees and is run rating a $110 million on annualized gross revenue as of July <unk>.
We modestly exceeded the Q2 results underpinning the projections published in connection with our announced east back with Austerlitz in may despite lower than expected user acquisition spend.
We anticipate our revenue to accelerate over the remainder of the year, particularly in the fourth quarter as we rollout our thoughtful and unique marketing campaign and our new product features.
Our total acquisition spending declined sequentially and we believe our ability to exceed our revenue projections on lower acquisition spend is a testament to the brand's ability to drive retention and higher average spend per customer.
We look forward to sharing more details on this business during our presentation to sell side analysts planned for September along with a slide deck that will be posted on our IR website at that time.
Turning to the balance sheet, our liquidity position remains very strong with global cash and revolver availability of over $3.9 billion as of June 30.
In Macau, we had approximately 2 billion of available liquidity as of June 30 in the U S. We had total liquidity of approximately $1.9 billion on June 30th with a substantially lower daily cash burn globally compared to the first quarter of 'twenty 1.
Earlier this week a subsidiary of Wynn Macau Ltd received commitments for a new $1.5 billion senior unsecured revolving credit facility that will mature in 2025.
The arrangement includes broad participation by our bank group of supportive existing lenders, including local and international banks borrowings under the new facility along with cash on hand will be used to refinance and retire our existing senior secured senior secured credit facility in Macau.
Finally, our capex in the quarter was $70 million and we remain prudent with respect to Capex, while we gained further confidence in the recovery.
With that we will now turn it over to Q&A.
Operator.
Thank you.
At this time, if you would like to ask a question. Please press star 1 on your phone on mute.
Phone and record your name clearly after the problems and I will introduce you for your questions. Please limit yourself to 1 question and 1 follow up question to withdraw your question. Please press star 2.
Our first question comes from.
Colo Centinela.
Thank you.
Your line is now open.
Matt Craig I guess, obviously a lot has happened in the last couple of weeks.
But in terms of how you guys are thinking about maybe the relevant benchmarks as to when things could start to get back to normal is there anything you folks on the ground are tracking or or maybe have been told as it pertains to kind of getting things.
Reopened in a way that we're all accustomed to.
Yes sure.
Comment and turn it over to Ann I think right now everyone is really focused on the accelerated vaccination rate and getting to those stated goals by the end of the year.
The Delta very that's very hard to predict and the actions that they take over there our quick and decisive because they stamp it out when they lock it down.
On.
We don't really have any other clarity as to when that will change, but I think the fact that the pace of vaccination is quite encouraging.
Just more thoughts on that.
Okay.
And are you on mute or did you drop.
Sorry can you hear me now on that yes.
So it's very it's very clearly linked to the pace of destinations as you've pointed out.
Within the PRC, but also within Hong Kong and Macau on us getting a tripartite agreement on a global going so that we can get back to a higher level of normally than we've experienced we have managed the listing business very well there is a desire on the part of the PRC government to allow travel into Macau whenever.
It's possible, we've obviously had a pullback in the last couple of days, but there's confidence that the current small cluster will be under control within a couple of weeks, we're going through mass testing of.
The entire population of Macau over a 3 day period, and we're confident that we will be open with the PRC in due course.
But it is very linked to vaccine Rollouts, 1 consequence of having a small cluster.
The outbreak in Macau is it'll be a huge encouragement for some other people that have held back on getting the vaccine because they deemed Macau very safe and this could be an alert from them to go on get vaccinated right now we're at 44% vaccination rates in the city are very similar to Hong Kong. So we hope to lift that considerably in the coming weeks.
Months.
Great. Thank you that's very helpful. And then Craig just just kind of revisiting.
Your commentary on Las Vegas.
Obviously, you guys have taken a lot of cost out of the other business I believe property level margin 37, 38% in the period, you know clearly well higher than kind of the aggregate of 2019 over 1000 basis points better and as the business does ramp and acknowledging that you guys are kind of bringing on or brought on you know a while ago, but happened.
Yet put in use the incremental <unk>.
Group.
The meeting space.
What is the margin profile potentially look.
Yes.
Sure Carlo So you may recall, we touched on this a little bit on the last call and really as the business has come back in North America. We've been we've been better able to understand where we will have permanent cost saves and where some costs might come back and you saw some of those costs come back in.
Over the course of Q2.
And we had more than corresponding revenue increases, but as we said on the last call. We're really not talking in terms of margins because that is ultimately.
Business mix and revenue revenue dependent but what we did say is that we expect expected about $150 million of ongoing annual cost saves in the U S comprised of somewhere between 75 and $95 million in Vegas, and $65 to $85 million.
In.
In Boston.
Thanks, Craig that's helpful. Thank you guys.
Next question.
Our next question comes from Thomas Allen with Stanley Morgan Your line is open.
Thank you.
Can you just give us a little bit more color on what youre seeing in terms of group bookings in Vegas.
Okay.
Sure you want to take that sure the.
August is our first month that we will almost be back to a normal run rate for group bookings, but when you think about second quarter each month with sequentially higher and this year, we are going to have more group bookings than we had ever.
In the second half of the year. So we're in good shape right now we've had just a handful of cancellation.
We have our largest group that comes in next week.
And the pickup is solid so we feel really good about that for 2022, we are above pace from what we were in 2019 and the same is true for 2023 and the <unk> are higher in 2022 and 2023. So we feel good about that group business. In addition.
The pace of leads has been also accelerated so you know COVID-19.
It's relatively new we don't know what the future is going to be like that in terms of just a week ago that that's the status of what we're seeing.
Okay. It's helpful. Thank you and then just as my follow up on Wynn Bad.
The line is taking on the closing on a transaction and when do you expect to start deploying that capital.
Sure.
So we would expect it's really SEC dependent because we have another instance of the S..4 that will need to make its way through the SEC They were pretty expeditious with the last review.
So we would hope that the shareholder vote would be in late September we would then get regulatory approvals.
Which is really just just protocol and we would hope to close in early to mid Q4 keep in mind, we have the.
The ability to advance.
Debt.
Business funds from Wynn resorts, and then essentially take that back as part of the proceeds so it's not going to stop us from deploying capital where appropriate and prudent but we would expect closure sometime in Q4.
Thanks Kurt.
Sure.
Next question.
Thank you.
As a reminder, if you would like to ask a question. Please press star 1 on your telephone keypad and record your name clearly and I'll introduce you.
Our next question comes from.
Stephen Grambling with Goldman Sachs. Your line is open.
Hi, Thanks.
There's always a bit of a tough question to answer it necessarily but what's what's been the latest conversations and our expectations related to the concession renewal in Macau and how are you trying to plan around that from a capital allocation standpoint.
Yeah sure. This is Matt and then I'll turn it over to Ian to comment as well, but theres really no new news on that front. So we we have a very good relationship in Macau with the local government. We're working closely with the local government to ensure that the goals of the greater Bay region as being a tourist destination.
And on Macau being a really central part of that are met and what we can do to help facilitate that growth and facilitate continued expansion in Macau. So.
Bob.
We feel really good about our position in Macau as a good corporate citizen and the future of Macau and or Linda do you have any other thoughts on that.
Yes.
The government is trying to refocus on clearly on the managing the unpredictability of pandemic. That's our primary focus but it doesn't mean that work has been taking place behind the scenes. The government have referenced on a number of occasions that the first step in the process is a public consultation process that will.
Place from the second half of the year and there was also a completion of local elections in September which is necessary before they start addressing any gaming law revision. So there is a lot of activity going on behind the scenes no official conversations yet but work is taking place primary consideration is managing it.
The Covid side.
Okay.
Thank you and maybe as a follow up.
Focusing on Macau I guess, if we were to think about the liquidity profile on that market is there any way to assess how that looks.
Its ability to support VIP or even parts of premium mass.
Support a full rebound should you get the green light in the back half of the year.
Yeah.
Stated I think on our last couple of calls that we are very optimistic about premium mass and the liquidity profile that will be there and and in core mass and VIP is certainly structurally changed.
Lot of VIP customers are converting to more direct customers, we're seeing that already.
The idea that VIP would revert back to its previous levels I think that's clearly a forgone at that time on happen.
But the overall market and high end customers.
I think will be quite robust as you pointed out the green light comes on.
Great. Thanks, so much.
Thank you. Our next question comes from David Katz with Jefferies. Your line is open.
Hi afternoon, Thanks for taking my question.
I wanted to ask about Macau Riyadh.
Honestly no.
Tell exactly when.
But presuming.
But there is sort of an all clear to reopen.
Our flow of customers.
No come with some state of normalcy.
Help us understand what a ramp like that.
Would look like on.
What's the trajectory on what would be on the puts and takes et cetera.
Yeah.
So as you pointed out David.
It's hard to predict but just when we witnessed what happened with Golden week in May how we went from you know not a lot of business in April to $3 million of EBITDA a day over that period. It just shows that the pent up demand is very real and I think everywhere around the world the demand for what we do.
<unk> is stronger than it's ever been so.
Clearly VIP won't come Roaring back to where it was but I fully anticipate that what youll see on the premium mass side and on the mass side will be stronger than it's ever been.
With very limited visitation, we've seen retail revenues up more than 50% to 70% are in.
In and Wynn Palace, and our retail partners are continuing to double down and invest building large scale stores in our facilities as we speak which really.
It goes to the idea that this is going to be quite.
Quite tourist destination when things come back.
And why don't you spend a little time, just talking about some of the new retail offerings that are going to be opening soon and how excited those brand partners are.
Well actually joining the quarter was the first and second quarter, we had benign stores at Wynn palace that have been shut down and being getting moved around and we have the arrival of knowing L. D. M H our brands into wind pilot flow.
They're opening a L V men's and women's to different stores at the end of this week and we've got 2 stores with Christian Dior opening Sandy and boldly opened recently, so there's a huge desire with the top line to be represented in both of these properties, we have acuity as long as my.
From a friend et cetera, trying to get space and can you give us a call.
For Ts.
Hi, David My point to that is clearly that.
Just a small portion of our EBITDA, but it is an indication of what people are seeing in that region that Macau is going to be I think a very successful on robust tourist destination for the premium mass customer as things start to clear.
And a quick thank you for that and if I can just follow up quickly on might be more for Ian.
1 other things, which we've seen here are our labor constraints.
What is the labor situation like in Macau.
While our workforces predominantly Macau based with Macau local residents and we do have 20% of our working population that is in port labor above we have no issues with finding work force and the majority of our important leg.
Comes from the PRC. So we haven't had any issues at this point on they don't believe in Macau will have any issues attracting workers.
Okay. Thank you very much.
And I'd like to point out in North America.
Clearly attracting workers has been a challenge.
For the hospitality industry, but for us.
It Hasnt been we set a record EBITDA in Las Vegas in July and we also had an additional 500 people that we brought on board.
To make sure that we keep our margins, where we have them, but that our service levels are maintained at the same things happened at Encore Boston Harbor. So.
The labor market is clearly tight but debt applicant flow that we've seen coming to our properties has been extraordinary we we've had a hard time interviewing people versus finding people and.
I think that's really going to be a big benefit for us going forward.
Operator, we have time for 1 last question.
Thank you our last question comes from Robin Farley.
With UBS your line is open.
Great. Thanks for taking the question.
I wanted to ask about in Vegas with those strong margins are there some amenities like the buffet or valet parking that you know some of these sort of lower margin amenities that debt.
May come back that Werent fully there in the quarter if you could just.
Manage our expectations a little bit about how.
Margins may look sequentially if.
If you had all of that baked in already in Q2, or if there's anything that might be layered in here from Q2 into Q3.
Well when you think about the buffet, we have opened the buffet. It opened at the beginning of July and so that has opened 5 days a week. We also have our valet parking at our tower suites that is complementary for guests for guests, who choose to park and Wynn resorts.
On the resorts side, there is a fee for parking, but they park for free in the parking garage. All other amenities are wide open we will be opening some additional restaurants in August we opened Delilah in July so that brought on additional labor and then our new Mexican restaurant concept Playa will be opening in August.
And so youll see additional.
Ftes coming on but also the appropriate revenues to support that and as Matt mentioned, Robyn we generated.
Tremendous amount of EBITDA on July despite the buffet being open and all the parking dynamics that Marilyn just mentioned I would just refer you back to what we talked about on our last call on I referenced a little bit earlier, which is the kind of $75 million to $95 million of cost saves in Vegas, we think are permanent and $65 to 85 in Boston and then you can vary a day.
Model and kind of back into the margin.
Okay, great. Thanks, and then just 1 other comment.
Comment I want to clarify I'm Marilyn when you were talking about group I just want to make sure I understood. You said something like the second half will have the most group ever or something and I just want to make sure I understand it was like.
Group events happening or new bookings coming in for Q3 to regroup Robin day groups on the books coming in the second half of 2021 are the highest number of group bookings we've experienced at Wynn and so typically most of the group bookings are happened in NIE.
First and second quarter and so there's a couple of reasons for that 1 groups that were scheduled in the in 2020 are were pushed into 2021 and some of those groups were pushed into the second second half of the year, but they have held and so it's a large number of group bookings for a.
Second half.
But I imagine that.
22, which would be ahead of that but not at this point is that correct. It is so the pace in 2022 is the most group bookings we've ever had on the books at this time for the.
For the year. So we are pacing very well in 'twenty, 2 and very well in 'twenty 3 we're quite optimistic about the group business, especially with our new asset, which we really didn't have a chance to use much because we opened it up and then COVID-19 hit us in 2020, so we feel very good.
About the group business coming back of course, all that depends upon the future of Covid in our lives.
Okay, great. Thank you very much.
Thank you everybody for joining us today, we'll see you next quarter.
That concludes today's conference call. Thank you for your participation.
At this time.
Yes.
[music].
Okay.
[music].
Okay.
Yes.