Wynn Resorts, Limited — Q2 2021 Form 10-Q
Reporting period: Three and six months ended June 30, 2021; unaudited. Wynn Resorts operates integrated casino resorts in Macau, Las Vegas and Boston, and consolidates Wynn Interactive. Unless noted, amounts below are U.S. dollars.
Financial performance and liquidity
- Q2 revenue: $990.1 million, versus $85.7 million in Q2 2020. Casino revenue was $602.7 million; non-casino revenue was $387.4 million. The comparison reflects extensive property closures in Q2 2020.
- Q2 earnings: Operating loss was $29.5 million (operating margin approximately negative 3.0%); net loss attributable to Wynn Resorts was $131.4 million, or $1.15 per diluted share, versus a $637.6 million loss, or $5.97 per share, a year earlier. Adjusted Property EBITDA, a non-GAAP measure, was $206.9 million versus negative $322.9 million.
- First-half revenue and earnings: Revenue was $1.727 billion, up 66.1% year over year. Operating loss was $205.3 million (margin approximately negative 11.9%); net loss attributable to Wynn Resorts was $412.3 million, or $3.66 per diluted share. Adjusted Property EBITDA was $265.8 million versus negative $328.2 million.
- Operating trends: Q2 Adjusted Property EBITDA was $133.2 million in Las Vegas, $67.6 million in Macau, and $46.9 million at Encore Boston Harbor; Corporate and other was negative $40.9 million. Recovery lifted results across properties, while Macau visitation remained constrained.
- Cash flow: First-half operating cash flow was negative $226.8 million; investing cash flow was negative $122.3 million and financing cash flow was negative $329.8 million. Cash, cash equivalents and restricted cash declined $677.3 million to $2.809 billion, including $2.803 billion of unrestricted cash and cash equivalents.
- Debt and liquidity: Debt carrying value, net of issuance costs and discounts, was $11.921 billion at June 30, including $1.308 billion current and $10.613 billion long-term. Available revolving borrowing capacity was $1.127 billion: $834.2 million under the WRF facility and $293.2 million under the Wynn Macau facility. Management reported covenant compliance. Approximately 77% of debt was fixed-rate; a 100-basis-point change in variable rates would change annual interest expense by an estimated $22.3 million.
- Capital and distributions: A February share offering generated $841.9 million net; $716.0 million repaid the WRF revolver. The company suspended its dividend program. First-half capital expenditures, net of construction payables and retention, were $110.0 million.
Material changes versus the prior comparable period
Revenue and property EBITDA rebounded sharply from the COVID-affected 2020 periods as Las Vegas and Boston reopened and Macau activity improved. For the first half, Macau revenue rose 71.0%, Las Vegas 37.3%, and Encore Boston Harbor 109.3%. Q2 casino revenue increased to $602.7 million from $9.4 million, partly reflecting the prior-year closures. The comparisons are not like-for-like: U.S. properties were closed for substantial portions of 2020, and Macau operations also faced restrictions. First-half interest expense increased 15.7% to $303.3 million, attributed primarily to higher average debt and interest rates. Debt carrying value declined from $13.066 billion at year-end 2020, while cash also declined.
Outlook, risks and unusual items
- COVID-19: Management said the pandemic would continue to adversely affect results and that it could not reasonably estimate its future effects. Travel restrictions, testing and quarantine measures remained relevant in Macau; on August 3, 2021, Macau announced tighter border controls and testing requirements following outbreak concerns. Nevada indoor mask requirements were also reinstated effective July 30, 2021.
- Macau concession: The concession was due to expire June 26, 2022. The company believed it would be renewed or extended, but failure to do so could transfer Macau gaming operations and equipment to the government without compensation and could trigger a put option on up to $4.7 billion of WML Senior Notes. This would materially affect the company.
- Financing and investment plans: In August 2021, a WML subsidiary received commitments for a new unsecured revolving facility of up to $1.5 billion, expected to be entered into in Q3 to help repay approximately $1.26 billion outstanding under existing Wynn Macau facilities. The company expected $150–$170 million of remaining Wynn Las Vegas room-remodel costs, with completion targeted for Q1 2022; it did not expect significant Wynn Palace phase-two construction spending in 2021.
- Wynn Interactive transaction: A proposed business combination with Austerlitz I was expected to close by year-end 2021, subject to approvals and other conditions. Assuming no public-shareholder redemptions, Wynn Resorts expected to retain approximately 58% equity and 72% voting interest.
- Contingencies: A securities class action remained pending after a July 28, 2021 ruling dismissed some claims but allowed others against the company and certain current and former executives to proceed. A federal investigation concerning anti-money-laundering policies and transactions at Wynn Las Vegas remained ongoing; the company could not estimate a possible loss. Management said it could not determine the probability or range of loss for the securities action.
- Other items: Q2 2020 comparisons were affected by $75.7 million of U.S. employee pay, tips and benefits expense accrued in Q1 2020, and by a $27.7 million net derivative-litigation settlement credit recorded in Q2 2020. These items affect period comparisons.
No quantified company-wide revenue or earnings guidance was provided in the filing. Management said it believed available liquidity could support continuing operations and pandemic-related challenges, while cautioning that COVID-19 effects and access to capital remained uncertain.
Key facts for investors to verify
- Macau concession-renewal developments, related regulatory conditions, and the potential WML Senior Note put option.
- Macau visitation, operating restrictions and recovery, including the impact of the August 2021 border and testing measures.
- Cash burn, cash availability across subsidiaries, debt maturities and completion of the proposed Wynn Macau refinancing.
- Progress and final cost of the Wynn Las Vegas room remodel, and the closing terms and retained ownership of the Wynn Interactive transaction.
- Developments in the securities litigation and federal anti-money-laundering investigation, for which potential losses were not estimable.
- Whether the rebound in revenue and Adjusted Property EBITDA persists; the filing cautions that this non-GAAP measure is not a substitute for operating income or cash flow.