Wynn Resorts, Limited — Q2 2022 Form 10-Q
Reporting period: Three and six months ended June 30, 2022. Unaudited. Unless noted, amounts are U.S. dollars; figures are rounded.
Business context
Wynn operates integrated casino resorts in Macau, Las Vegas and Massachusetts, as well as Wynn Interactive. Results reflected a sharp contrast between continued COVID-related travel restrictions in Macau and stronger activity in Las Vegas and Boston.
Financial performance and liquidity
| Metric | Q2 2022 | Q2 2021 | Six months 2022 | Six months 2021 |
|---|---|---|---|---|
| Revenue | $908.8M | $990.1M | $1,862.2M | $1,726.8M |
| Operating loss | $52.0M | $29.5M | $146.9M | $205.3M |
| Net loss attributable to Wynn Resorts | $130.1M | $131.4M | $313.4M | $412.3M |
| Diluted loss per share | $1.14 | $1.15 | $2.73 | $3.66 |
| Adjusted Property EBITDA | $179.2M | $206.9M | $356.7M | $265.8M |
Q2 revenue fell 8.2%, while six-month revenue rose 7.8%. Q2 casino revenue declined 40.3% and non-casino revenue increased 41.8%. Macau Operations revenue was down 74.2% in Q2; Las Vegas Operations revenue rose 58.0% and Encore Boston Harbor revenue rose 27.2%. Macau segment Adjusted Property EBITDA was negative $90.3M in Q2, compared with positive $67.6M a year earlier. Las Vegas and Boston generated $226.7M and $63.7M, respectively.
Six-month operating cash flow was negative $157.5M, versus negative $226.8M a year earlier. Capital expenditures were $186.0M; cash used in investing activities was $195.4M and cash used in financing activities was $150.9M. Cash, cash equivalents and restricted cash declined $507.3M during the half.
At June 30, cash and cash equivalents were $2.015B, with $1.047B of available revolver capacity. Debt carrying value was approximately $11.912B, including current debt; weighted-average total debt was about $12.039B in Q2, at a 5.14% weighted-average interest rate. The company reported a stockholders’ deficit of $1.374B. Management stated it was in compliance with debt covenants.
Material changes and unusual items
- Las Vegas and Boston growth partly offset continued deterioration in Macau. Six-month Las Vegas revenue rose 87.8% and Boston revenue rose 35.8%; Macau Operations revenue fell 52.3%.
- Q2 property charges and other expenses were $26.9M, including $7.5M of goodwill impairment, $10.3M of intangible-asset impairment and $7.6M of restructuring costs related to BetBull. Six-month property charges totaled $72.6M, including $37.8M of goodwill impairment and other Wynn Interactive-related costs.
- Foreign-currency remeasurement losses were $10.1M in Q2 and $25.2M for the first half, primarily related to Macau entities’ U.S.-dollar debt and obligations.
- The company repurchased approximately 2.38 million shares for $137.4M during the first half. Its dividend program remained suspended for the foreseeable future.
Outlook, risks and contingencies
- Macau and COVID-19: Macau casino operations closed under government measures on July 11, 2022, resumed on a limited basis July 23, and limited non-gaming operations began resuming after most enhanced restrictions were lifted August 2. Visitation remained severely reduced; management could not estimate the effects of future restrictions or closures.
- Gaming concession: WRM’s concession was extended to December 31, 2022 for a $6.0M premium. The company said it believed the concession would be further extended, renewed or replaced, but no assurance was provided. Failure to obtain a continuing concession could trigger a put right on up to $4.7B of WML Senior Notes and accelerated repayment under the WM Cayman II Revolver, with potentially material effects.
- Liquidity actions: In July 2022, the company drew $211.5M on the WM Cayman II Revolver. Its Encore Boston Harbor real-estate sale-leaseback, subject to approvals and closing conditions and expected in Q4 2022, was projected to provide approximately $1.7B, with initial annual rent of $100M under a 30-year lease. Proceeds could be used for general corporate purposes, including debt repayment.
- Debt and market exposure: Certain WM Cayman II financial covenants were waived through the March 31, 2023 test date. About 77% of long-term debt was fixed-rate. Management estimated a 100-basis-point increase in variable rates would raise annual interest expense by $27.6M. Macau currency movements also create exposure.
- Legal and regulatory matters: The company disclosed Dore-related Macau litigation, a securities action and an ongoing U.S. anti-money-laundering investigation. It could not estimate the possible loss, if any, for the securities action or investigation. Management said ordinary-course litigation was not expected to have a material effect, while noting outcomes remain uncertain.
Management stated that available cash, operating cash flows and revolver capacity were expected to support obligations for the foreseeable future, but emphasized the continuing adverse effects and uncertainty of COVID-19. No specific financial guidance was provided in the filing text.
Important facts for investors to verify
- Whether Macau visitation and operating restrictions improve, and whether Wynn secures a concession beyond December 31, 2022.
- Closing, proceeds and final lease terms for the proposed Encore Boston Harbor sale-leaseback.
- Cash burn, revolver usage, debt maturities and interest-rate exposure, particularly if Macau operations remain constrained.
- Further developments or potential financial effects of the disclosed litigation and anti-money-laundering investigation.
- Adjusted Property EBITDA is a non-GAAP measure and excludes, among other items, interest, depreciation, capital spending and certain charges; it should not be treated as operating cash flow or a substitute for GAAP results.