Q4 2022 Wynn Resorts Ltd Earnings Call
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Welcome to the Wynn resorts fourth quarter 2022 earnings call. All participants are in a listen only mode until the question and answer session of today's conference.
Ask a question press star one on your Touchtone phone record your name and I will introduce you. Please limit yourself to one question and one follow up question.
This call is being recorded if you have any objections you may disconnect. At this time I will now turn the line over to Julie Cameron Doe Chief Financial Officer. Please go ahead.
Thank you operator, and good afternoon, everyone on the call with me today are Craig Billings Bryan Goldberg.
The Boardman in Las Vegas also on the line Ian Coughlan Linda Chen.
Charles and Jenny holiday 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.
Now I'll turn the call over to Craig Billings.
Yes Julien.
Afternoon, everyone and thanks for joining us.
As we prepared for this call I looked.
At an old Analyst's note that was published after our Q4 2019 earnings.
The expectation for 2022 EBITDA at Wynn Las Vegas in that note was $482 million.
Here, we are three years in a global pandemic later in Wynn Las Vegas, just printed $816 million of normalized adjusted property EBITDA eight.
$816 million.
I'm confident that this is an all time record sort of Standalone Las Vegas strip properties.
And mind you we did not deliver this result by nickel and Diming on service standards, and reducing staff to drive operating leverage.
The team did it by focusing on what we do best great.
Great products, Great service, great programming and it showed in our market share and pricing power.
The Wynn Las Vegas team absolutely crushed it in 2022.
Our business in Vegas is stronger and more relevant than it has ever been.
I'll talk more about the fourth quarter in Vegas in our outlook in a moment.
Turning to several other significant events I'd like to touch on our concession renewal and the reopening of Macau.
I was in Macau for nearly three weeks in December and after going through the den required quarantine I was fortunate to attend the signing ceremony for our new concessions.
I'm proud of the plan that we put forward as part of the concession renewal and believes that the Capex and programming, we proposed will be additive to our business there over the coming years.
I would like to thank the government of Macau for their faith in us and importantly, I would like to thank the Wynn Macau team for their dedication to our business over the past three very difficult years.
Fortunately recent actions by both Macau and mainland authorities to reopen the market give us great confidence that the difficulties are behind us in the near term future there much brighter.
Over the past several weeks, we've welcomed back an increasing number of guess as the region has reopened to travel and tourism in a meaningful way.
With our premium products and service levels, we are well positioned to lead the post COVID-19 recovery in Macau and our strengths were evident during the recent Chinese new year holiday period.
And the casino mass table drop reached 95% of 2019, Chinese new year levels with strong play across the spectrum from premium mass to core Max.
Indirect VIP turnover was 40% above pre COVID-19 Chinese new year levels.
And importantly, we estimate that our hold normalized GTR market share during the month of January was consistent with 2019 levels. Despite all the changes in the junket environment define the expectations of those who continue to incorrectly believe that we are solely up VIP focused organization.
On the non gaming side hotel occupancy was 96% and our tenant retail sales increased 34% compared to Chinese new year 2019.
Overall during the Chinese new year period, we delivered our strongest EBITDA performance since the onset of the pandemic approximately $4 million of normalized EBITDA per day.
Turning back to Las Vegas, the team at Wynn Las Vegas turned in a fourth quarter record with $219 million of EBITDA, we saw broad based strength across casino hotel F&B entertainment and retail all well above Q4 2021 levels, despite the difficult year over year comps.
Our investment in people facilities and programming and our teams deep sense of personal ownership of our business continue to drive growth.
We continue to monitor economic trends and forward bookings at Wynn Las Vegas.
We're encouraged that the strength, we have experienced over the past several quarters has continued into Q1.
Similarly, our forward looking indicators also remained quite strong despite well known macro concerns as room bookings are pacing at or above pre COVID-19 levels on substantially higher ADR.
Turning to Boston like Vegas, Encore had a strong quarter generating $63 million of EBITDAR.
We saw strength across the casino with record gross gaming revenue and on the non gaming side with strong hotel revenue driven by both ADR and occupancy.
The strength has continued into the first quarter was EBITDA per day in January largely consistent with trends, we have experienced over the past few quarters.
We were also pleased to launch retail sports betting at Encore, Boston Harbor last week, averaging a little over a half a million a day and handle over the first six days, which is about 80% of the average daily handle at Wynn Las Vegas.
During those six days, we also signed up about 30% more wind rewards members than normal we continued.
To expect the book to be a significant driver for new customer acquisition over time.
We also continue to advance our plans for our upcoming development projects across the street from the property that will include incremental parking food and beverage and entertainment amenities.
That went interactive our overall EBITDA burn rate in the quarter ticked up sequentially to $28 million due to a well publicized world series bet that went against us.
Adjusted for that single bet burn was roughly flat.
Our team continues to stay disciplined on cost, while driving improved marketing efficiency.
We're looking forward to the potential for a significant catalyst for win back in Massachusetts with the combination of our recently launched retail book and the expected upcoming launch of online sports betting.
Lastly, we are quickly advancing our planning for when our Marcia on island are integrated resort in the UAE.
We're in the late stages of programming for the resort and I expect we will be driving piles for the foundation of the property by the middle of the year.
I also expect we will share renderings programming and plans publicly over the next few months.
More time, we spend in that market. The more confident we are on the project.
With that I will now turn it over to Julie to run through some additional details on the quarter Julian Thank you Craig.
A loss Vegas, we generated a fourth quarter record of $219 3 million and adjusted property EBITDA on $595 $5 million of operating revenue during the quarter lower than normal hold negatively impacted EBITDA by around $10 $5 million in Q4.
Hotel occupancy was 89, 9% in the quarter up 350 basis points year over year, and up 50 basis points versus Q4 2019.
Importantly, we stay true to our luxury brand and continue to compete on quality of product and service experience with our overall ADR, reaching a record $492 during Q4 2022.
Seven 8% versus Q4, 2021, and 53% above Q4 2019 levels.
The non gaming businesses saw broad based strength across F&B entertainment, and retail which were up nicely year over year, and also well above 300 level and the casinos. All Q4 2022 slot handle increased 29% year over year and was 69% of Q4 2019 levels. Similarly.
Our table drop was up one 1% year over year and was 43% above Q4 2019 levels. Despite still suppressed international play during the quarter due to COVID-19 related travel challenges. The team in Vegas has done a great job of controlling costs without negatively impacting the guest experience delivering adjusted property EBITDA amount.
<unk> of 37, 4% in the quarter on a hold normalized basis EBITA margin was up approximately 1300 basis points compared to Q4 2019.
Opex, excluding gaming tax per day was $3 8 million in Q4, 2020% to 25% compared to Q4 2019 levels, but well below the 59% increase in operating revenues.
Boston before getting into the details I'd like to point out that following the closing of the sale leaseback transaction.
December one we're now reporting adjusted property EBITDA for this business in Q4 2022, we generated adjusted property EBITDA of $63 3 million with EBITDA margin of 29%, we saw broad based strength across casino and non gaming during the quarter and the casino we generated 109.
$2 million of GTR, a property record with strength in both tables and slots on non gaming revenues grew 13% year over year to a record $66 $8 million.
With particular strength in our hotel driven by 93, 9% occupancy and a $404 ADR.
We stay very disciplined on the cost side with Opex, excluding gaming tests per day or approximately $1 $107 million. In Q4 2022. This was a decrease of 8% compared to $1 3 million per day in Q4 2019.
Relative to Q3 2022.
As we've discussed on prior calls the year over year, EBITDA and Opex costs were impacted by a combination of contractual labor agreements, which added around $45000 per day to our Opex base beginning late in Q2 2022, along with a nonrecurring benefit of $2 million in Q4 last year, where.
We are well positioned to drive strong operating leverage as we continue to grow the top line over time.
Our Macau operations delivered an EBITDA loss of $59 $1 million in the quarter on $193 million of operating revenues.
Lower than normal hold negatively impacted EBITDA by around $25 million in Q4, while the COVID-19 situation in the region was challenging during Q4 as pregnant did we were encouraged by the meaningful uptick in visitation in demand we experienced during the recent Chinese holiday period.
Our opex, excluding gaming tax was approximately 2 million per day in Q4, a decrease compared to $2 4 million in Q4 2021.
Team has done a great job, preventing disciplined on costs and it's difficult operating environment.
We are well positioned to drive strong operating leverage as the business recovers overtime.
In terms of the new concessions, we approached the tender process very prudently carefully balancing our commitments to the governments with our responsibilities to our shareholders and of course, our liquidity position.
We're currently advancing through the design and planning stages for 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 expect capex related to our concession commitments to range between $50 million to $220 million.
Our future non gaming investments include a new theater that to be higher with a unique spectacle.
And innovative food halls, and in events and Entertainment Center.
<unk> noted we believe these investments play into our strengths as we have a demonstrated track record of introducing innovative non gaming investments to drive increased tourism and ultimately strong shareholder returns.
Turning to win interactive our EBITDA burn rate increased sequentially to $28 3 million in Q4, 2022, however, adjusting for the well publicized World series that Craig mentioned was roughly flat with our Q3 2022 burn rate of $17 7 million.
The team continues to control costs, while driving improved marketing efficiency.
Moving onto the balance sheet, our liquidity position remains very strong with global cash and revolver availability of approximately $4 $5 billion as of December 31.
This was comprised of $952 million of total cash and available liquidity in Macau on $3 5 billion in the U S. These numbers exclude the undrawn $500 million intercompany revolving credit facility. When result entered into with Wynn Macau.
We were pleased to close the sale leaseback transaction for the real estate Encore Boston Harbor on December one with gross proceeds of $12 7 billion further bolstering our already strong liquidity position and importantly, the combination of <unk> strong performance in Las Vegas, and Boston with the properties generating $1 4 billion.
<unk> property EBITDA during 2022, together with a robust liquidity create the very healthy leverage profile in the U S.
Without properties performing well in each of our markets and a robust liquidity I'd like to note our intention to repay our upcoming May 2023, Wynn Las Vegas bond maturity with cash from the balance sheet, reducing our domestic gross leverage by $500 million.
Finally, our capex in the quarter with $27 million.
Primarily related to normal course maintenance.
With that we'll now open up the call to Q&A.
Thank you to ask a question press star one on your Touchtone phone.
Mute your phone record your name clearly after the prompt and I will introduce you for your question.
Please limit yourself to one question and one follow up question to withdraw your question Press Star two and our first question comes from Carlo Santarelli with Deutsche Bank. You May go ahead.
Hey, Thanks, Thank you very much Craig and jewelry for the comments.
Craig joined whoever wants to kind of take this one Oh, Craig I know you spoke a little bit about kind of what you guys saw in Macau during Chinese new year to the extent you're willing to kind of comment on what you've seen in the aftermath and kind of the weeks following the holiday.
That'd be great.
Sure. Thanks, Carlo it's been pretty good actually Fredrick do you want to take.
You want to provide a little more color on that.
Sure Craig Thank you Carlo.
You have to post Chinese new year in the past the period does see a slowdown, but we have been very encouraged to see the business.
Very very strong.
With mass gaming direct VIP and weekends have spared about previously similar periods in the past. So we have seen the resilience of the business post Chinese new year, I'm very encouraged with that.
Great. Thank you that's helpful and then.
Craig you talked a little bit about obviously, what you saw on the VIP side.
I believe you said direct VIP was was 40% above or so that was 2019 Chinese new year levels correct can you comment at all as to what the experience has been with whatever junket VIP that they raised in the market today.
Yes, there was there was some junket activity over the over the course of Chinese new year obviously.
The situation has changed a lot from.
From the pre Covid period, I think it's actually a little bit too early to call out too.
To call out what role.
The gaming promoters in the junkets will play in the market, but there certainly was some activity.
Yes.
Great. Thanks, everybody.
Thank you our next caller is Joe Greff with J P. Morgan.
Hello, everybody.
Just sort of following up on Carlos question.
On what you saw in Chinese new years in the period since then.
Can you talk about the migration of the junket VIP business into the direct.
And into the premium mass component of your mass business.
How do you what do you think what would what otherwise would've been the junket what percentage of that do you think is migrating versus maybe not coming back quite yet I think it's.
Joe I think it's way too early to be talking about percentages given the market really just fully reopened on January .
January eight so really a months amongst now we certainly are seeing former junket customers migrate into both premium mass and into into direct remember direct is tricky because there you are talking about credit extension and so you have to be.
Quite prudent.
And how you manage the direct business, but unfortunately, it's just a little too early what I would say is volumes.
Volumes came back volumes came back strong.
The narrative that we're VIP focused I think proved to be pretty fast. We competed very strongly during the Chinese new year period, and we're incredibly proud of the results that we have.
And when you look back in 2019.
We always thought that the direct VIP component.
With something around 10% to 20% of the total VIP turnover.
Are we fair in and taking that can you remind us of that you are you are.
Okay. That's all for me. Thank you thanks, Joe.
Thank you our next caller is Shaun Kelley with Bank of America.
Hi, good afternoon, everyone. Thanks for taking my question.
Was hoping to get a little bit more color on maybe the cost and margin picture as things start to rebound in Macau Julia I think in the prepared remarks, you mentioned you were down around 2 million a day in the fourth quarter in Macau, if I caught it correctly down from $2 4 million back in 2019.
As youre sort of re ramping I mean, yeah, I think we all really underappreciated the amount of operating leverage that was going to happen in certain markets in the United States and kind of trying to put some of the tea leaves together around how this may play out from a couch. So just any kind of thoughts on expenses and margins as the recovery begins here.
So, yes youre correct.
We did talk to our Opex per day in Q4, with 2 million, which was down from two portfolio India. Prior we worked really hard last year to preserve cash and to manage opex down. While we were closed. So obviously that that's not representative of how things will be necessarily moving forward as you know.
Fully open now and stuffing.
Full time and F&B outlets in silos.
Where where that shakes out in terms of margin, it's really going to depend on mix of business that comes back in that market is pretty much. The same answer we give when we're asked about margin in in Vegas is it's very much mix dependent and we don't we don't manage our business on margin that is really the outcome.
We managed to a brand and we and we staff accordingly.
Were very tight in terms of in terms of staffing with our focus on doing that appropriately.
We're very focused on that but we're very very focused on service delivery centers as well and I would just add.
It's primarily a mass mass mix now so you're going to have that's inherently higher margin and a portion of the cost savings that we implemented during the.
The COVID-19 period, which.
Thank god as long behind us.
We will maintain.
So the margin profile should be healthy again, it's we're really talking about a couple of weeks here. So it's a little bit early to start forecasting specific margins.
Great understood and then maybe it's just the follow up another thing that kind of came up in the prepared remarks was the capex outlook in Macau and I think you gave a pretty wide range could you just kind of talk about what would sort of dictate maybe the high versus the low what are some of the different either projects that could get underway or things that could.
Could impact the outcome of the range that you discussed.
Sure.
So I think it's taking a step back as you think about our total commitment when we pulled through Aquino our concession of proposals we've committed to $2 2 billion over 10 years and that's a you know obviously that the mix of our Capex and Opex, but.
We are very focused on getting the capex down as quickly as possible. So that we can you know I said it we can sell to drive strong returns from it.
Limiting factor is really the approvals that we need locally to break ground and <unk>.
Build anything so it's really not in our hands, that's why we've given such a wide range because.
Yes.
From our perspective, we're pacing towards.
Getting throughout the N D and designing everything but we are.
Order, excluding the want to reset itself resolved.
Uhm can you discuss the upcoming launches and whether we should expect the business you're influx to profit this year.
Sure the upcoming the the most significant upcoming launches, Massachusetts, where obviously, we have we have on court, Boston Harbor, and I wouldn't I wouldn't.
Hope and expect that we will have.
A reasonable market share because of that the presence of that property as our competitors have in other markets. We are driving the business is.
Hard as we can while being prudent.
I would expect some point of inflection in in late 2000 twenty-three dependent upon how much use erect money good user acquisition, we do.
In in Massachusetts, but we have the burn at this point really really well under control and again as we talked about before the longterm strategy is really focused on Massachusetts.
And positioning ourselves for Igaming.
Which would make the business accretive to our our land basically resorts.
Okay. Thank you if I may pull up can you talk about your upcoming maturity and any thoughts about tapping <unk> kept on market now since we have seen some activity in the last few weeks.
But ain't Julie just mentioned in the prepared remarks that we're gonna pay down our upcoming maturity with cash on the balance sheet.
Great. Thank you very much.
[noise]. Thank you are next color is Robin Farley with you B S.
Great. Thanks.
I Wonder just surfing back to you how things are trending her attorneys and you're obviously really phone number three the holiday.
You know there's been chatter that the dropoff in the market over all that with a little bit more than season also I Wonder if you could give me your take on that is it.
Reasonable to think that they'll just be kind of increased volatility maybe around kind of shoulder periods or I guess, how would you kind of frame that you know more than normal for the seasonal drop off post the holiday.
Hi, Robyn I, Yeah, I'm, not sure who you've been talking to Frederick just mentioned that actually we've been performing above what we would normally see during that drop off periods.
But when you say performing above I I didn't know if that was a combination of you talked about <unk> expenses being down and so it could be Oprah all EBITDA, but just wondering.
Talking he was talking business volumes.
Okay. So would you then assume that that's crows and marketer in that in other words, what's your take on through to the overall market volatility that maybe you're dating Sharon it sounds like in that period, but just so you can know.
It's a week [laughter].
[laughter] right in the Grand scheme of things, it's a week.
So it's hard to hard to read any tea leaves in a week, what I would say is that the market roared back.
The cow was was a ranger on the mass side on the the direct VIP side on the retail side and on the occupancy side during Chinese new year, and it's it outperformed our expectations for the long period. Shortly thereafter anything beyond that it's just it's just too early to read.
Okay, and just to clarify when you say it outperformed your expectations.
You meant specifically that it was a.
Better sequential drop off and what you'd seen in 19 or just better than what your expectations word for a former here.
Okay. Thank you alright, thank you.
Thank you. Our next question is Danielle polity. He May go ahead from Wells Fargo.
Good afternoon, everyone and thanks for taking my questions I wanted us to go back on the 4 million EBITDA per day for Chinese New year that you mentioned is there any way you could put that into historical context, you know I don't know what it what it wasn't 2019 or during other golden week or Chinese new year periods.
Yeah. It would it would it be I I don't remember a sweet quoted it previously so I want to be careful in terms of in terms of prior disclosure.
But it's it's substantial relative to prior periods. It's not it's certainly not where are we Pete put it that way because the junket contribution.
Wasn't there this year and and that was you know call at 700 million and EBITDA in.
In a normal Chinese new year.
I think the point is it's a it's a substantial number given that the market really opened at the at the beginning of January and it gives us confidence in the remainder of 2023 and and beyond.
Understood and then just pivoting to Las Vegas I mean.
And China's effectively reopened have you seen that that high and Ah Asia business Kinda Resurface, you know like Vegas property too early to say I mean, our Bach our backdrop in the court in fourth quarter was pretty strong. So we've been doing pretty well on the back of of domestic bark business and in fact those folks from the.
Region that chose to sit it out <unk> COVID-19 out over here, so again, a little bit a little bit early to say you have to go through the process of getting a visa you have to arrange travel et cetera, et cetera, but certainly international travel is a a tailwind did that we hope to see in Vegas in 2023, given that really in 2022 it was only.
The only real inbound visitation was some from Europe and from Latin America.
Got it thanks.
Upgrade to the next question would be the last one.
Thank you and our last question comes from Stephen Grambling with Morgan Stanley You May go ahead Sir.
Hey, Thanks, I may have missed this but in Las Vegas could you just provide any additional color you on what you're seeing in terms of forward bookings.
You know not only in the first quarter should be particularly strong, but even as you look out over the course of the year, what you're seeing in any expectations.
As it relates to kind of convention next thanks.
Sure I'll start and then I'll ask I'll ask Brian to comment so first and foremost we have been really intentional over the past year and how we've approached our business in Las Vegas, our business here is more relevant with the best customers than ever before.
And so even with the Tailwinds, we've outperformed yet we're keenly aware of the broader economic environment from interest rates gas prices to lay offs and we have a 2000 twenty-three playbook for any number of of economic scenarios, but do you Wanna talk about your view on 2023, and then perhaps dig a little bit more into convention absolutely.
As we look to twenty-three not only were we pacing strong coming out of 22 going into twenty-three is just accelerated Ah I'm. So excited about what we've got coming in twenty-three when you look at it we got the best teams in the business, we got the best assets in the business.
In Vegas, we've got strong pace, a group, particularly as we look forward into twenty-three and then even beyond.
Q1 may be a record for us it's just a really done well we have strong pricing power in every channel. We got a new show, we just launched with awakening, we've got several projects coming in twenty-three, they're really exciting and then we kind of kick things at the end up a notch with F. One in November so R. I.
Outlook for the year pending no other macro economic impacts it looks pretty good we're feeling pretty good about what we can see right now so on the group side very strong we're doing really well on what we can control we don't control the macro economy. That's a fact so.
You know, how how that flows dano, but ER, but we're feeling good about our business here.
Fair enough, but then if I can just sneak in a quick follow up on Macau as you would think about how to grow the direct V. I P. Business are you thinking about that as an opportunity is one way to to think through maybe some of the customers who used to bet well D. I P and in the mass market segment.
Target customer and is there any way to frame, yeah, how big that business to grow.
Every customer is unique and so it's it's really difficult if I had if I had a.
A broad strokes playbook, I, probably wouldn't share it on a public call, but every customer is is unique and so the ecosystem now which is comprised of junkets, but different.
Promoters and us it gives us the ability to address a sub segment of those junk at customers some of them, they're they're they're gonna, it's gonna take years to figure out.
But certainly a portion of those will migrate into our direct business you saw over over Chinese new year.
And some of them will migrate into into premium mess, but I don't think there's a broad swath playbook that we can we can talk about.
Sure enough. Thanks, so much sure.
Okay, well with that will now close the call. Thank you will get tons a day.
We look forward to that.
I see.
Thanks, everybody.
Thank you for participating on today's conference call.
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