Wynn Resorts, Limited — Q3 2023 Form 10-Q
Business context and reporting period
Quarter ended September 30, 2023. Wynn operates integrated resorts in Macau, Las Vegas, and Boston, as well as Wynn Interactive. Macau’s removal of pandemic-related travel restrictions drove much of the year-over-year recovery; the prior-year comparison was affected by restrictions and testing requirements. The filing cautions that interim results are not necessarily indicative of full-year results.
Key financial metrics
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Revenue | $1.672 billion | $889.7 million | $4.691 billion | $2.752 billion |
| Operating income (loss) | $62.6 million | $(53.0) million | $482.4 million | $(199.9) million |
| Net income (loss) attributable to Wynn Resorts | $(116.7) million | $(142.9) million | $0.8 million | $(456.3) million |
| Diluted EPS | $(1.03) | $(1.27) | $0.01 | $(4.00) |
| Adjusted Property EBITDAR, non-GAAP | $530.4 million | $173.5 million | $1.485 billion | $530.3 million |
Q3 revenue increased 87.9%; nine-month revenue increased 70.5%. Macau Operations generated Q3 revenue of $819.8 million versus $115.6 million and nine-month revenue of $2.190 billion versus $531.3 million. Las Vegas revenue rose 13.7% in Q3 to $619.0 million; Encore Boston Harbor revenue was nearly flat at $210.4 million. Derived operating margins were approximately 3.7% for Q3 and 10.3% for the first nine months.
Casino revenue was $972.5 million in Q3, up 170.2%; non-casino revenue was $699.5 million, up 32.0%. Macau occupancy reached 96.9% at Wynn Palace and 98.7% at Wynn Macau in Q3. Las Vegas Adjusted Property EBITDAR was $219.7 million in Q3, up 12.2%; Encore Boston Harbor’s was $60.5 million, down 1.0%. Wynn Interactive reported an Adjusted Property EBITDAR loss of $4.9 million.
Cash flow, debt, and liquidity
- Nine-month operating cash flow was $806.6 million, compared with cash used of $153.0 million in 2022. Investing used $1.178 billion, including $786.5 million for short-term investments and $329.4 million of net capital expenditures. Financing used $527.9 million. Cash, cash equivalents, and restricted cash decreased $903.4 million to $2.880 billion.
- At September 30, cash and cash equivalents were $2.788 billion and investments were $791.7 million. The company also reported $737.0 million of available WRF revolver capacity, net of letters of credit. Some cash is held at subsidiaries and is intended to fund their own requirements.
- Debt carrying value was approximately $11.79 billion, including $112.1 million current and $11.68 billion long term. Total stockholders’ deficit was $1.709 billion. Management said the company was in compliance with all debt covenants.
- Approximately 25% of long-term debt carried variable rates. A 100-basis-point rate move would change annual interest expense by an estimated $23.1 million. Weighted-average debt rates were 6.18% in Q3 and 6.08% for the nine months, versus 5.41% and 5.20%, respectively, in 2022.
Material changes, outlook, and risks
- The revenue and operating-income improvement was led by Macau’s reopening and increased gaming, hotel, and restaurant activity. The year-over-year comparison is substantially affected by the depressed 2022 Macau base.
- Wynn Interactive’s planned closures in certain jurisdictions led to $94.0 million of Q3 impairment charges ($72.1 million goodwill and $21.9 million other intangible assets) and $97.7 million of contract termination and related charges. These items contributed to the Q3 net loss.
- Interest expense rose year over year, reflecting higher average debt and borrowing rates. Q3 also included a $50.6 million derivatives fair-value loss, including $48.8 million related to the WML convertible-bond conversion feature.
- Debt actions included $600 million of WML 4.50% convertible bonds due 2029 and $600 million of WRF 7.125% notes due 2031, alongside repayments and note repurchases. The WRF credit facility was amended, with most elected extensions moving maturities to 2027; portions totaling $68.7 million of revolver commitments and $75.6 million of term loans remained due in 2024. The Macau revolver was fully drawn and had a stated 7.35% weighted-average rate.
- The company declared a $0.25-per-share dividend payable November 30, 2023. It repurchased $56.2 million of shares under its program during the first nine months; $572.7 million of authority remained at September 30.
- No formal earnings guidance is provided in the supplied filing text. Management said it may have sufficient evidence within the next 12 months to release some U.S. deferred-tax valuation allowance, but timing and amount are uncertain.
- Key risks include Macau concession and regulatory requirements, gaming volumes and win rates, customer-credit collection, competition, travel and macroeconomic conditions, high leverage and interest-rate exposure, and foreign-exchange movements. The filing reports ongoing Dore-related Macau litigation, a securities class action proceeding through discovery, and an ongoing U.S. anti-money-laundering investigation; outcomes and potential losses could not be estimated clearly for the latter matters.
Important facts for investors to verify
- Whether Macau’s post-reopening revenue and EBITDAR levels persist, and how gaming volumes and win percentages compare with expected ranges.
- The effects of Wynn Interactive closures and related impairment, termination, and restructuring costs, including any further charges.
- Debt maturities, refinancing capacity, covenant headroom, floating-rate exposure, and whether subsidiary cash is available to the parent.
- Cash conversion after capital spending, interest, lease payments, dividends, and debt repayments; Adjusted Property EBITDAR excludes several of these cash uses.
- Developments in the Dore lawsuits, securities class action, anti-money-laundering investigation, and Macau tax-exemption application.
- Any valuation-allowance release and the fair-value assumptions for the Level 3 convertible-bond derivative.