Q1 2023 Wynn Resorts Ltd Earnings Call
Okay.
Sure.
Welcome to the Wynn resorts first quarter 2023 earnings call. All participants are in a listen only mode until the question and answer session of today's conference.
To 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 Cameron I'm, sorry 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, and Brian Gulbrandsen Las Vegas also on the line of Linda Chen Fredrik, maybe Sue Cheung and Jenny holidays, 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 Craig billings. Thanks.
Thanks Julien.
Good afternoon, everyone and thanks for joining us today.
Before we get into the specifics of the quarter I'm pleased to say that after three years of suspension today, we announced that we are resuming payment of a quarterly dividend.
Initially <unk> 25 per share.
We have a number of growth projects in flight that required capital and will ultimately add meaningful EBITDA to our business, but with Macau returning to profitability in North America, continuing to perform well above historical levels.
Have sufficient financial flexibility to also return capital to shareholders.
I also want to express appreciation to our 27000 plus team who were once again recently recognized by Forbes travel Guide with 24 five Star Awards. The most of any independent Hotel company in the World. Thank you for all that you do.
Turning to Las Vegas.
To tell you it's fascinating time in our business. Despite the confluence of high inflation high interest rates bank failures and increasingly difficult year over year comps Wynn Las Vegas delivered an all time record in Q1 with $232 million of adjusted property EBITDA.
Supported by our consumer that continues to feel flush.
We also subsequently delivered the best April in the history of the property.
We continue to invest heavily in people programming and the building to further distance ourselves as the clear leader in luxury and Vegas.
Looking ahead, we currently have a strong pipeline of forward group demand continued rooms pricing power healthy drop in handle and a robust programming calendar, particularly in the back half of the year.
Yet I continue to watch the macro factors that I mentioned earlier and I will note that with Q2 'twenty three we will begin comping against some very strong prior year quarters.
Lastly, just as I have in the past several quarters I will continue to tell you exactly what we're seeing and right now things feel good around here.
Turning to Boston like Vegas, Encore had a strong quarter generating $63 million of EBITDAR.
We saw strength across the casino in terms of table drop and slot handle and overall <unk> on.
On the non gaming side, we delivered strong hotel revenue driven by both ADR and occupancy.
The strength has continued into Q2 with EBITDA per day in April largely consistent with trends, we have experienced over the past few quarters.
We also launched retail sports betting at Encore Boston Harbor in Q1, which helped drive a 20% increase in sign ups to our wind rewards loyalty program year to date.
I expect the book will continue to be a significant driver for new customer acquisition over time.
On the development front in Boston, we finalize the interiors and begun to buyout structural materials for our upcoming projects across the street from the property that will add incremental parking food and beverage and entertainment amenities.
Turning to Macau.
We generated $156 million of EBITDA in the quarter with lower than normal VIP hold negatively impacting EBITDA by about $10 million.
In the casino mass table drop reached 82% of Q1 2019 levels and our VIP hold normalized market share was over 14% during the quarter. Despite unusually low hold in our mass business at Wynn Macau.
And the fact that significant portions of Wynn Macau East Casino were closed for renovation during the quarter.
Encouragingly that market share was consistent with full year 2019 levels.
On the non gaming side, our retail business was incredibly strong with tenant retail sales, increasing 60% compared to the first quarter of 2019, once again, highlighting the strength of our premium consumer.
Looking forward as you have seen market wide GTR momentum in Macau has been very impressive building through the first quarter and accelerating into April .
Who would have thought even six months ago that the market would be run rating north of $22 billion of annual GTR.
In April our mass drop per day increased versus Q1, our direct VIP turnover per day increased meaningfully versus Q1 and occupancy and retail sales were very healthy.
More recently the May Golden week holiday period was particularly strong outperforming Golden week 2019 in several key areas in.
In the casino or overall mass table drop during the holiday period was nearly 10% above 2019 Golden week levels and our direct VIP turnover was more than double 2019 levels.
Outside of gaming or tenant retail sales increased 36% compared to Golden week, 2019, and our hotel occupancy was 95%.
Performance during and after the quarter was skewed towards Wynn Palace, driven both by the mix of customers that have returned to Macau and the initial reopening waves and the renovation related closures at Wynn Macau that I mentioned earlier.
We are making a number of changes and improvements to Wynn Macau that I expect will drive longer term market share gains in the meantime, I expect that Wynn Palace will continue to pace ahead of Wynn Macau and the recovery.
On the development front in Macau, we are deep into design and planning for our concession related capex commitments, which we believe will help support <unk> long term diversification goals and be additive to our business over the coming years.
We look forward to telling you more in due course.
Lastly, I hope that you were all able to review the information we provided a couple of weeks ago on when our Marshwan Islands are planned integrated resort in the UAE.
If you haven't listened to the presentation of read through the slide deck, you can find both on our IR website.
I'm incredibly proud of the program and design elements, we have put together, thus far and as we noted in the presentation. We think the resorts will generate between 450 and $600 million of steady state EBITDA.
The combination of our 40% equity ownership in the project along with our management and license fees will drive a very healthy ROI for Wynn resorts shareholders.
With that I'll now turn it back to Julie to run through some additional details on the quarter.
Thank you Craig.
Wynn Las Vegas, we generated an all time record of $231 6 million and adjusted property EBITDA on $596 $8 million of operating revenue during the quarter higher than normal hold positively impacted EBITDA by around $4 million in Q1.
Our hotel occupancy was 88, 8% in the quarter of 1100 90 basis points year over year, and up 620 basis points versus Q1 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 $493. During Q1, 'twenty three up 14, 1% versus Q1, 'twenty, two and 46% above Q1 2019 levels or other non game.
<unk> businesses saw broad based strength across food and beverage entertainment and retail which were up nicely year over year, and also well above pre pandemic levels.
And the casino, our Q1 'twenty three slot handle increased 33, 5% year over year with 99% above Q1 2019 levels.
Finally, while table drop was up nine 6% year over year and was 49% of our Q1 2019 levels.
Attainment Vegas has done a great job of controlling costs without negatively impacting the guest experience delivering adjusted property EBITDA margin of 39, 5% in the quarter.
On a hold normalized basis, our EBITDA margin was up approximately 300 basis points year over year at approximately 1400 basis points compared to Q1 2019.
Opex, excluding gaming tax per day with $3 $7 million in Q1, 'twenty, three which was flat sequentially and up 20% compared to Q1 2019 levels, but well below the 46% increase in operating revenues.
Turning to Boston, we generated adjusted property EBITDA of $63 4 million with EBITDA margin of 29, 3%, we saw broad based strength across casino a non gaming during the quarter and the casinos, we generated $191 million of T. G. L. A property record with strength.
In both tables and slots.
Our non gaming revenue grew 21% year over year to $50 $9 million with particular strength in hotel and food and beverage. We've stayed very disciplined on the cost side with Opex, excluding gaming tax per day or approximately $1 7 million in Q1 'twenty. Three this is up relative to Q1 'twenty two.
On increased business volumes and flat sequentially as we've discussed on prior calls the year over year, EBITDA and Opex comps were impacted by contractual labor agreement, which added around $45000 per day to our Opex base beginning late in Q2 'twenty two.
We are well positioned to drive strong operating leverage as we continue to grow the top line over time.
On the calibrations delivered adjusted property EBITDA of $155 8 million in the quarter on $600 1 million of operating revenues.
Lower than normal VIP hold negatively impacted EBITDA by around $10 million in Q1 as Craig noted we were encouraged by the meaningful uptick in visitation in demand we experienced during the quarter with particular strength in mass casino and luxury retail sales our opex, excluding gaming tax was approximately $2 3 million.
Per day in Q1, a decrease compared to $3 $2 million in Q1, 2019 and up modestly from Q4 <unk>.
Quite a meaningful sequential increase in business volumes the.
The team has done a great job remaining disciplined on costs and we're well positioned to drive strong operating leverage as the business recovers over time.
In terms of Capex. We are currently advancing through the design and planning stages on a concession commitments and as we noted last quarter. These projects require a number of government approvals, creating a wide range of potential capex in the very near term as such for 2023, we continue to expect capex related to our concession commitments to range.
Between $50 million to $220 million.
Turning to win interactive.
<unk> decreased both sequentially and year over year to $21 1 million in Q1 'twenty three.
Our team continues to stay disciplined on costs.
Driving improved marketing efficiency.
Moving onto the balance sheet, our liquidity position remains very strong with global cash and revolver availability of approximately $4 $7 billion as of March 31.
This was comprised of $1 $6 billion of total cash and available liquidity in Macau at $3 $1 billion in the U S.
Importantly, the combination of very strong performance in Las Vegas, and Boston with the properties generating over $1 1 billion of adjusted property EBITDA in the 12 months through March 31, together with our robust liquidity creates a very healthy leverage profile in the U S.
As Craig noted without properties performing well in each of our markets and a robust liquidity. We're pleased to announce that the board approved the resumption of a quarterly dividend with a cash dividend of <unk> 25 per share payable on June six 2023 to stockholders of record as of May 23, 2023, highlighting our commitment to prudent.
Returning capital to shareholders.
Finally, our capex in the quarter with $124 million, primarily related to the <unk> renovations and F&B at Hoffman at Wynn Las Vegas are normal course maintenance across the business.
With that we will now open up the call to Q&A.
Thank you to ask a question press star one on your Touchtone phone on mute your phone record your name clearly after the prompt I will introduce you for your question. Please limit yourself to one question and one follow up question.
Draw your question Press Star two.
Our first question comes from Carlo Santarelli with Deutsche Bank, You May go ahead Sir.
Hey, everyone. Thanks for taking my question.
Craig.
You talked about kind of some of the work you guys are doing on the peninsula at that asset how much of the I guess trailing that asset relative to cotai as it related to the work versus how much of the overall recovery.
That you've experienced or the market has experienced good cotai how much is the peninsula, what kind of lag that.
What do you think or what do you think it takes to kind of narrow that gap.
The resumption of kind of attempting.
Attempting to attain 19 levels in both geographies.
Sure No problem Carlos Thanks for the question. So first it's important to note we don't normalize for mass hold.
And so when we talk about normalized numbers don't include any unusually low hold of that and we did hold low in mass at Wynn Macau in the quarter, but certainly and I called it out for a reason.
Wynn Palace is leading the charge amongst our two properties as the market comes back there's really a few factors at play I think.
Who follows Macau closely knows that.
G Jr, and visitation were somewhat disconnected in the initial waves in that.
You had a lot of dedicated players come back a lot of those players all most of those players are rated players.
And they weren't coming with tour groups they were coming is individual.
Visitors and they disproportionately at least within our business ended up at Wynn Palace on Cotai Wynn Macau historically.
Has been more exposed to group business general unrated business et cetera, et cetera, So I'm not surprised from that perspective that Wynn Palace led Wynn Macau.
That's the first point the second point is that there are a number of changes that we are we're making to Wynn Macau property.
It needs to be refreshed and we're making those changes now we did start those in Q1, including some pretty significant a pretty significant refreshment of the east <unk> casino, there, which disrupted significant numbers of pads concurrently they were effectively closed.
During the quarter. So that also had an impact so I think as as the market continues to recover as more unrated play comes back to the market as more tour groups come back to the market then we will get the natural benefit.
Downtown and then of course, we're trying to make the property divest that it can be.
To take as much market share as we possibly can but in the interim as I said I would expect palace too.
To lead Wynn Macau.
Thank you that's helpful and then as a follow up obviously, there's plenty of development activity Theres, obviously, some spend on Cotai and your contributions down the road.
For the UAE development.
What was the primary thought process and driving factors in the decision to reach to the dividend.
Well thanks Carlos.
The dividend is we always talk about with our investors. The dividend is the cornerstone of our capital return strategy.
And.
The U S business is generating plenty of cash flow Macau is coming back quickly and so now we are doing exactly what you just alluded to we're balancing.
These high ROI development projects in Boston, and the UAE, we're preserving a bit of capital.
Related to New York City to the extent that that advances and on the other side our desire to to re implement that dividend and return capital. So we felt like this initial dividend was a great place to start.
And.
From there stay tuned, we'll we'll see how we grow it over time.
Great. Thank you Craig.
Thanks.
Thank you our next caller is Joe Greff with J P. Morgan.
Good afternoon everybody.
Yes.
Craig It looks like.
EBITDA margins on net revenues in Macao in March for about 30% wanted want to make sure. If my math is right on that.
And then if I just look at overall opex growth versus net or gross gaming.
Our gross revenue growth.
It looks like Opex.
Opex growth as approximately half of revenue growth.
Do you think that can continue or do you think opex growth is lagging because of labor constraints and maybe other nuance things and the Macau marketplace.
Thanks, Joe the market is.
Structurally different than it was in 2019 and before for a few reasons I think.
The change in the junket environment and the shift to mass is well understood on the Opex side.
The Concessionaires were encouraged to and generally did.
Maintain labor throughout the course of.
Of the shutdowns there are there are components of the labor pool.
Where I think all of us were able to particularly with respect to some some foreign labor, where we were able to trim.
And so I think I've heard comments from some of our competitors that they were bringing labor back on particularly on the housekeeping side et cetera et cetera.
That's generally true for us we have been operating at full capacity since the day the market reopened we're probably light in.
A couple of labor categories, not high dollar labor categories.
So I don't think were in a situation, where certainly our fixed costs are going to meaningfully accelerate as the market accelerates and I would expect some pretty healthy operating leverage.
Coming out of the business over the course of the next couple of years. If you look at where we're palace printed.
This quarter you can look at that relative to 2019 and you can see that there was distinct margin improvement our service levels, certainly havent degraded versus 2019, so I'm pretty bullish.
Great and Oh.
I was hoping you can maybe put a little bit more meat on the bones with respect to your comments about April in Macao in terms of the <unk>.
And EBITDA run rate I know, if you want to look at it.
Percentage growth rates in relation to March or for the full quarter, but any additional details would be appreciated.
I would just say our average EBITDA per day in April was up over our average EBITDA per day in <unk>.
In Q1, you saw what the market did the market grew quite healthy.
From February to March and then in the March to April .
And we had 14% share in in the first quarter. So I think you can probably do the math from there.
Great. Thanks, so much guys sure.
Thank you. Our next caller is Shaun Kelley with Bank of America, you May go ahead.
Hi, Good afternoon, everyone. Thank you for taking my question.
Just was hoping we could get a little bit more color on the recovery you're seeing maybe in the VIP segment. So obviously you called out direct skiing.
<unk> double over the Golden week holiday, but maybe just in general how you're serving that higher end customer where you see them playing on the floor just kind of behaviorally how has the market kind of adapted and adjusted to that and how your direct program has evolved as well.
Sure.
I think it's Sean I think it's honestly a little bit too early to forecast the overall trajectory of VIP, both direct and junket, but certainly we were pleased with turnover in both the quarter and.
And subsequent to including including Golden with Golden Week, I think it's a testament to how much Macao in general and we in particular have to offer those customers, including those from from broader Asia. So we're watching the Sichuan situation closely.
Stay tuned I don't think theres been a lot of frankly changes in terms of how we execute an indirect we certainly have developed some incremental.
Some incremental relationships player referral relationships outside of the traditional markets and thats part of the broader mandate to improve international visitation to Macau, but the way that we underwrite credit in the way, we think about extending credit none of that has changed so we'll see we'll see how it develops over the course of the next couple of quarters, but.
Overall, I think we've been pleasantly surprised.
Thank you for that and then as my follow up could you just going back to the renovations for a second on the peninsula.
Your expectations for when those should conclude or if they don't conclude entirely sort of become materially less of a headwind from here how long that program is expected to last the material the material impact will subside. This quarter. So we had the portions of the main floor on the east side closed at various points throughout.
Q1, that's complete now we're doing some work in some of our <unk>.
Jason salons and that will complete this quarter, there's a number of other things that will have a longer tail, but it shouldnt impact.
Shouldn't impact revenue the same way.
Thank you very much.
Thank you once again, if he would like to ask a question. Please press star one.
Our next caller is Dan <unk> with Wells Fargo. You May go ahead Sir.
Hey, good good afternoon, everyone. Thanks for taking my questions.
I wanted to actually pivot to win all Martin can you maybe talk about how we should think about this this property evolving over time in terms of the timing of your capital commitments, maybe the financing breakdown, where you know the equity contributions versus debt.
Gaming versus non gaming just any additional the additional color and I appreciate that the presentation was pretty.
Pretty thorough but just as we think about this going forward and over the next few years that'd be helpful. Yeah, sure think about it as a.
$4 billion project for now think about it is 50% equity, 50% construction related financing with the exact percentage TBD.
Think about the equity going in.
Pro rata with the construction costs Thats always a debate you have with the financing sources. So we'll see we'll see how that goes but thats the way that I would model. It for now I've talked a bit about this on prior calls the market in.
In Dubai.
From a non gaming perspective is incredibly healthy if you look at ADR. So if you look at spend on food and beverage. If you look at spend on luxury retail it's tremendous.
So we think that this is the more time, we spend there we think that this business is much more akin to.
Our Las Vegas business.
Hi, Dan.
It is same Macau or Boston, which are primarily gaming centric markets. So we think that this will be a healthy balance of gaming non gaming.
And that that will allow us to provide.
A very full and high quality experience and generate.
Very healthy returns.
Got it and then just in terms of Macau I know there was a couple of moving pieces in the quarter is there any way to maybe quantify it.
They recognize that this is not something you would typically just for but that that mass hold in the quarter.
In terms of the impact to EBITDA as well as that construction disruption and just as we kind of think about a normalized scenario going forward that would be helpful.
Yeah, So, there's probably 500 basis points of low mass hold plus or minus.
You have the statistics in the in the press release, you have dropped so you can apply that to it.
And the construction disruption we have not quantified.
Got it thanks.
Thank you. Our next caller is David Katz with Jefferies. You May go ahead Sir.
Yeah.
David Your line is open.
Okay.
Possibly your mute Hassan.
We will go to the next.
Well go to the next caller Robin Farley you May go ahead and with UBS.
Great. Thanks, just wanted to circle back to your comments about VIP rolling.
The fact that it was it.
A few times the level of 2019.
Our direct business for for Golden week, If we think about your direct VIP business in 2019, being maybe kind of 16%.
Total GDP.
Is it reasonable to think you could.
I'll get back to 30% of previous VIP levels or even higher. So this is really just kind of out of the box here.
Hundreds of new regulations.
Well thanks.
Thanks, Robyn I think what's unknown at this point is the denominator in your equation.
So.
We don't know what total VIP, what total VIP will be yet right, we need to really see how that develops over the course of the next couple of quarters.
Really no.
Legal or structural impediments to us returning to our prior.
Two our prior direct VIP business for frankly exceeding it.
<unk> bye to generally unaffected by the.
By the legal changes that happen. So I think that we were we know that.
I mean, that's that's what I was suggesting in other words, if you were a few times the level already four.
Golden week that you could.
In other words is there a reason that wouldnt be a sustainable rate of sort of recovery of your of your previous what was direct that you'd be able to recapture.
Some of what had been junket business at that same level or even or even higher.
No. There is no reason that we couldn't do that other than credit underwriting.
What we won't do is.
These underwriting players that were not comfortable with from an asset perspective, so with that caveat no. There's nothing that can stop that.
Okay. Thank you.
Sure.
We will take one last question operator thank.
Thank you John decree with the C. B R. E. You May go ahead.
Hi, good afternoon, everyone and thank you for taking my question.
Maybe bring the conversation back home for one in Las Vegas, obviously, a fantastic quarter for you guys in the market as a whole and two kind of customer segments.
Paying attention to is the international customer in convention recover presumably we've seen.
Both of those kind of accelerate in <unk>. So curious to get your thoughts on whether recovery of those two segments are for win specifically and how much room you have.
C in front for those kind of two customer segments relative to 19.
Sure I'll cover International and then I'll ask Brian to talk about the.
The group and convention pacing on the international side Youre right.
The market has not gotten back to its its full pre COVID-19 levels.
Really been a geography by geography question.
Latam starting to return early Europe has started to come back.
And so there's certainly there are certainly opportunities in international I do want to.
I would specifically call out China and mainland Chinese guests, where we don't know yet because it's very very early there.
So we'll see we'll see how that plays out but international is starting to trickle back and I think that that'll be a tailwind as we move through 2023 with the caveat that I mentioned with respect to seeing how China plays out Brian do you want to comment on our group and convention pace sure. Thanks, Craig Hey.
John Yes, I would say that group is back.
<unk> 19 levels at this point when you look to Q1 and what we did.
The team did an amazing job, we had one of our best where we had the best Convention group revenue we've ever had we had.
All the stars line up CES Homebuilders Con Expo. It was just a phenomenal quarter, which then helped drive a record quarter. If you look forward I think the group business is solid our teams done a great job were pacing towards a record group room nights for this year with very strong ADR as we build a solid base that will allow.
To yield manage our rooms in the other segments as we move forward and right now 24 knock on what 'twenty four is actually pacing ahead of what we believe will be a record 23. So yes, we're back to to beyond 19 levels and we see this right now continuing we're looking for the signs don't see any signs of softening yet.
But we're going to be cautious in our react if we have to but right now it looks pretty good and we have again as Brian said, it's proven to be interesting I think everybody at least that we talked to on the sell side the buy side keeps waiting for a shoe to drop in Vegas.
And it hasnt.
Date now we have a 2023 playbook 2024 playbook for every possible scenario, because we learned how to operate our business.
Credibly efficiently as we as we went through all the various iterations of Covid. So we feel great about where we are we're ready for anything and.
And we will see how it got.
Thanks, that's really helpful.
As a follow up one more on the cow.
Can you kind of give us your insights on the competitive landscape I guess, particularly on.
The direct VIP and premium mass it seems like Theres been plenty to go around so far neuro recovery, but curious to get your updated thoughts on player reinvestment in and how competitive or promotional.
<unk> has been if at all.
Sure.
It's early right and.
A wise person once told me that half of great strategic thinking is ignoring noise and there was a tremendous amount of noise in the market in Q1.
We had competitors with rooms out of commission.
We had hold volatility because in the early portion of the quarter. When you have lower volume. So you inherently have hold volatility.
You have a lot of things you have the market compounding month over month and growing month over month and and.
And it creates a lot of noise.
But in general I would say that the market is coming back much more quickly than anybody would have thought of certainly six nine months ago.
Incredibly good to see.
The margin profile of the businesses across Macau, it looks pretty strong which would indicate to me that reinvestment rates are relatively disciplined which is good.
Thank you for participating on today's conference call you may now disconnect.
Yeah.