Wynn Resorts, Limited — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024; comparative period is Q1 2023. Wynn Resorts operates integrated resorts in Macau, Las Vegas and Boston, and holds a 40% interest in the Wynn Al Marjan Island development in the UAE, currently expected to open in 2027. Results are unaudited; management cautions that the quarter is not necessarily indicative of full-year results.
Financial performance
- Revenue: $1.863 billion, up 30.9% from $1.424 billion. Casino revenue rose 46.2% to $1.121 billion; non-casino revenue rose 12.9% to $741.4 million.
- Operating income: $362.9 million versus $169.5 million. Operating margin was approximately 19.5%, compared with 11.9% a year earlier.
- Net income: $176.5 million versus $1.1 million. Net income attributable to Wynn Resorts was $144.2 million, or $1.30 per diluted share, versus $12.3 million and a diluted loss of $0.02 per share.
- Adjusted Property EBITDAR: $646.5 million versus $429.7 million. This is a non-GAAP supplemental measure and is not a substitute for operating income or cash flow.
- Cash flow: Operating cash flow was $315.1 million, up from $169.5 million. Capital expenditures were $97.7 million; the company also invested $69.9 million in its UAE affiliate. Cash used in investing activities was $167.4 million.
- Cash and liquidity: Cash and cash equivalents were $2.420 billion at quarter-end, down from $2.879 billion at December 31, 2023. Investments were $848.7 million. Available revolver capacity was $886.9 million, including $149.6 million for Macau and $737.2 million for WRF.
- Debt: Long-term debt, including current portion and net of issuance costs and discounts, was $11.212 billion, versus $11.738 billion at year-end. The filing reports $1.291 billion as current debt. Management said the company was in compliance with debt covenants.
- Other balance-sheet items: Total liabilities were $14.417 billion and total stockholders’ deficit was $946.4 million at March 31, 2024.
Changes from Q1 2023
- Macau Operations revenue increased 66.4% to $998.6 million, which management attributed primarily to stronger gaming volumes, hotel occupancy and restaurant covers as visitation improved following the removal of COVID-related measures in January 2023.
- Las Vegas revenue increased 8.5% to $636.5 million, supported by higher room and food-and-beverage revenue; casino revenue declined 12.5%. Encore Boston Harbor revenue was broadly flat at $217.8 million.
- Macau gains drove the increase in company-wide operating income and net income. Higher business volumes also increased operating expenses; gaming taxes totaled $488.8 million, compared with $310.4 million.
- Operating cash flow improved, while cash declined primarily in the context of debt repayments, dividends and investment spending. The company invested $97.7 million in capital expenditures, compared with $124.5 million in Q1 2023.
Outlook, financing and risks
- The filing provides no numerical full-year earnings or revenue guidance. Management describes continuing Macau recovery and ongoing property operations, but notes that quarterly results may not predict full-year performance.
- In February 2024, WRF issued $400 million of 7⅛% notes due 2031. Wynn Las Vegas repurchased $800 million principal amount of 5½% notes due 2025, using note proceeds and cash. Management expects fixed interest payments to decrease $12.5 million for the remainder of 2024, while increasing in later years as detailed in the filing.
- Approximately 76% of long-term debt was fixed-rate. A 100-basis-point change in variable rates would change annual interest expense by an estimated $21.4 million. A 1% change in the U.S. dollar/Hong Kong dollar exchange rate would result in an estimated $46.4 million foreign-currency transaction gain or loss.
- Key disclosed risks include regulatory and gaming-license compliance, geopolitical or tourism disruptions, competition, collection of gaming receivables, interest-rate and foreign-exchange exposure, substantial indebtedness, and construction and regulatory risks related to development projects.
- A securities class action remains in discovery; the company says it cannot currently estimate the probability or possible loss. A U.S. Attorney’s Office investigation into anti-money-laundering matters is ongoing; no charges or claims have been brought, and the company cannot predict the outcome or estimate potential loss.
- Unusual items included $16.9 million of property charges and other expenses, primarily asset abandonments at Wynn Palace and Wynn Interactive contract termination and other costs, and a $17.9 million loss from derivative fair-value changes. Wynn Interactive ceased to be a reportable segment; its results are included in Corporate and other.
- The board declared a $0.25-per-share dividend payable May 31, 2024. The filing reports no material change to the company’s previously disclosed risk factors during the quarter.
Important facts for investors to verify
- Whether Macau revenue and gaming volumes remain durable, and how casino win rates compare with the company’s stated expected ranges.
- Debt maturity and refinancing plans, available revolver capacity, interest-rate sensitivity and the effect of future debt service on liquidity.
- Collection trends in gaming receivables: 68.4% of markers were due from customers outside the U.S., primarily in Asia; the casino credit-loss allowance was 20.7% of gross casino receivables.
- Progress, remaining funding needs and regulatory or construction risks for Wynn Al Marjan Island, expected to open in 2027.
- Developments in the securities litigation and federal investigation, for which the filing does not provide a clear estimate of potential loss.