Wynn Resorts, Limited — Q3 2021 Form 10-Q
Reporting period: Three and nine months ended September 30, 2021; unaudited. Wynn operates resorts in Macau, Las Vegas and Boston, and Wynn Interactive. Results improved as U.S. properties resumed fuller operations and Macau activity recovered from pandemic-related disruption.
Financial and operating results
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Operating revenue | $994.6 million | $370.5 million | $2,721.4 million | $1,409.9 million |
| Operating loss | $83.7 million | $283.0 million | $288.9 million | $1,053.4 million |
| Net loss attributable to Wynn Resorts | $166.2 million | $758.1 million | $578.6 million | $1,797.7 million |
| Diluted loss per share | $1.45 | $7.10 | $5.10 | $16.85 |
| Adjusted Property EBITDA | $154.6 million | $(65.9) million | $420.3 million | $(394.1) million |
- Q3 revenue increased 168.5%; casino revenue was $496.3 million and non-casino revenue was $498.4 million. The recovery spanned Macau, Las Vegas and Boston. Las Vegas operations generated $183.4 million of Q3 Adjusted Property EBITDA; Macau operations generated $10.2 million, and Boston generated $64.6 million. Corporate and other was $(103.6) million, primarily reflecting Wynn Interactive’s ramp-up.
- For the first nine months, revenue rose 93.0%. Casino revenue increased 106.5% and non-casino revenue increased 76.2%. The comparison reflects pandemic-related property closures in 2020 as well as improved operations in 2021.
- Operating expenses rose 65.0% in Q3, including higher gaming taxes and costs associated with increased business levels. Nine-month operating expenses rose 22.2%. Q3 Adjusted Property EBITDA included reversals of previously accrued expenses of $8.6 million at Wynn Palace and $8.1 million at Wynn Macau following a change in estimate.
- Net cash used in operating activities was $216.8 million for the first nine months, versus $781.1 million used in the prior-year period. Capital expenditures, net, were $213.1 million; net cash used in investing activities was $229.1 million.
- At September 30, cash and cash equivalents were $2.48 billion, and available revolver capacity was $1.25 billion. Long-term debt had a carrying value of $11.74 billion, including $50.0 million current; total liabilities were $13.20 billion. The company reported a stockholders’ deficit of $592.6 million.
Material changes and financing
- The company issued 7.475 million shares in February 2021, raising $841.9 million net. It used $716.0 million to repay the WRF revolver; the remaining proceeds were for general corporate purposes.
- In September, a new $1.50 billion-equivalent WM Cayman II revolving facility was entered into, with $1.09 billion borrowed. Together with $200 million of cash, borrowings facilitated repayment of $1.26 billion under the Wynn Macau Credit Facilities and related fees. The new facility matures in September 2025; available capacity was $413.1 million at quarter-end.
- Debt carrying value declined from $13.07 billion at December 31, 2020. Interest expense for the first nine months increased 11.4% to $453.6 million, primarily due to higher average debt and interest rates. Management reported compliance with debt covenants.
- The quarterly dividend remains suspended. No shares were repurchased under the publicly announced repurchase program during the first nine months; $800.1 million of authorization remained at September 30.
Outlook, risks and other notable items
- COVID-19 and Macau: Las Vegas and Boston incrementally resumed full operations, including seven-day hotel operations. Macau visitation remained substantially below 2019 levels: total visitation from the PRC increased versus 2020 but was 75.6% below the comparable 2019 period. Management said it could not reasonably estimate the pandemic’s future financial effects.
- Macau concession: The concession expires June 26, 2022. Management believes it will be renewed or extended, but failure to secure an extension or replacement could end Macau gaming operations and trigger noteholder put rights and mandatory repayment provisions under the WM Cayman II facility, with material adverse consequences.
- Capital plans: The remaining Wynn Las Vegas room-remodel cost was estimated at $110 million to $130 million, with completion expected in Q2 2022. The company did not expect significant 2021 construction spending on the second phase of Wynn Palace.
- Wynn Interactive: A proposed business combination was subject to stockholder, gaming-regulatory and other approvals. Assuming no public-share redemptions, Wynn Resorts expected to retain about 58% equity and 72% voting interest. The filing also lists November 9, 2021 transition and employment agreements for Matt Maddox and Craig Billings; their terms are not detailed in the supplied filing text.
- Contingencies: A securities class action had claims proceeding against the company and certain current and former executives; management could not estimate the probability or range of loss. A U.S. Attorney’s Office anti-money-laundering investigation remained ongoing, and the company said it could not estimate potential loss. The filing describes other litigation and notes that outcomes are uncertain.
- Market and operating risks: Approximately 78% of long-term debt was fixed-rate; a 100-basis-point change in variable rates was estimated to change annual interest expense by $20.4 million. A 1% change in the U.S. dollar/Hong Kong dollar rate was estimated to cause a $37.7 million foreign-currency transaction gain or loss. The company also cited credit collection, travel restrictions, regulation, leverage and refinancing risks.
- Unusual period comparisons include the large 2020 income tax expense, primarily from deferred-tax valuation allowances, and a $30.2 million derivative-litigation settlement credit to 2020 general and administrative expense. Q3 2021 also included an $11.8 million foreign-currency remeasurement loss.
Important facts for investors to verify
- Progress and terms of Macau concession renewal, and any related debt-holder rights or repayment triggers.
- Macau travel conditions and visitation recovery, alongside the sustainability of improved Las Vegas and Boston demand and property-level EBITDA.
- Cash burn, capital spending, debt maturities, revolver availability and the company’s ability to service debt while operating cash flow remains negative.
- Developments in the securities litigation and anti-money-laundering investigation, including any change in estimated exposure.
- Status and final ownership, funding and regulatory approvals for the Wynn Interactive transaction, and the implications of the November 9 leadership agreements.