Business context and reporting period
Wynn Resorts, Limited (Nasdaq: WYNN) filed this unaudited Form 10-Q for the three months ended March 31, 2023. The company operates integrated resorts in Macau, Las Vegas, and Boston, and an online gaming business. Results are not necessarily indicative of the full year.
Financial and operating performance
- Revenue: $1.424 billion, up 49.3% from $953.3 million. Casino revenue rose 56.6% to $767.0 million; non-casino revenue increased 41.7% to $656.7 million.
- Profitability: Operating income was $169.5 million, compared with an operating loss of $94.9 million a year earlier. Net income attributable to Wynn Resorts was $12.3 million versus a loss of $183.3 million. Basic EPS was $0.11; diluted EPS was a loss of $0.02, reflecting the assumed conversion of WML’s new convertible bonds in the diluted EPS calculation.
- Adjusted Property EBITDAR: $429.7 million versus $177.6 million. Macau Operations contributed $155.8 million, Las Vegas $231.6 million, Encore Boston Harbor $63.4 million, and Wynn Interactive recorded a $21.1 million loss. This non-GAAP measure excludes items including interest, depreciation, corporate expenses, and lease rent; it is not a substitute for GAAP earnings or cash flow.
- Cash flow: Operating cash flow was $169.5 million, compared with cash used of $117.4 million in Q1 2022. Investing used $132.0 million, including $124.5 million of capital expenditures. Financing provided $121.0 million. Cash, cash equivalents, and restricted cash totaled $3.939 billion at quarter-end.
- Debt and liquidity: Long-term debt, including current maturities, had a net carrying amount of $12.250 billion. Cash and cash equivalents were $3.844 billion, and WRF had $837.0 million of available revolver capacity. Approximately 24% of long-term debt was variable-rate; management said the company was in compliance with debt covenants.
- Balance sheet: Total assets were $13.724 billion and total liabilities were $15.340 billion; stockholders’ deficit was $1.616 billion.
Material changes versus the prior comparable period
- Macau Operations revenue more than doubled to $600.1 million as COVID-related travel restrictions were largely relaxed or eliminated. Wynn Palace revenue rose 126.2% and Wynn Macau revenue rose 70.8%.
- Las Vegas Operations revenue grew 33.0% to $586.8 million; Encore Boston Harbor revenue increased 13.4% to $216.3 million. Wynn Interactive revenue declined 10.5% to $20.5 million.
- Higher property volumes increased operating expenses by 19.6% to $1.254 billion. General and administrative expense rose 32.0%, including higher business-support costs, development costs, and Encore Boston Harbor triple-net lease expense.
- Interest expense increased $35.6 million to $187.7 million; the weighted-average interest rate rose to 5.95% from 5.05%. A $30.6 million foreign-currency remeasurement loss and $12.2 million debt-financing loss weighed on results, partly offset by $40.2 million of interest income and a $23.0 million gain from derivative fair-value changes.
- Financing included $600 million of 7.125% notes due 2031 and $600 million of WML 4.50% convertible bonds due 2029. The company repaid $500 million of Wynn Las Vegas notes due 2023 and tendered $506.4 million of WRF notes due 2025; it repurchased the remaining 2025 WRF notes in April.
Outlook, commentary, risks, contingencies, and unusual items
- Management attributed the improvement primarily to stronger Macau business volumes after easing of pandemic-related travel measures, as well as growth in Las Vegas and Boston. The filing provides no specific financial guidance or quantified forecast.
- Macau’s gaming concession runs through December 31, 2032. A $208.3 million concession-related intangible asset and corresponding liability were recognized in January 2023; the asset is amortized over the concession term.
- Interest-rate exposure remains material: management estimated that a 100-basis-point increase in variable rates would raise annual interest expense by $23.2 million. A 1% change in the U.S. dollar/Hong Kong dollar exchange rate was estimated to cause a $44.8 million foreign-currency transaction gain or loss.
- Key disclosed legal matters include Dore-related lawsuits in Macau, a securities class action certified in March 2023 and proceeding to discovery, and an ongoing U.S. federal investigation concerning anti-money-laundering policies and certain transactions. The company said it could not estimate the possible loss, if any, for the class action or investigation.
- Other risks include high indebtedness and refinancing needs, gaming license and regulatory requirements, customer credit collection, economic and geopolitical conditions, competition, and cyber and operational risks. The filing reported no material changes to previously disclosed risk factors.
- On May 9, 2023, the company declared a $0.25-per-share dividend payable June 6, 2023. The company also reported a $628.8 million remaining authorization under its share repurchase program; no program repurchases were made during the quarter.
Important facts for investors to verify
- Whether Macau’s post-reopening revenue and profitability levels persist, including the effects of gaming volumes and win rates.
- Debt maturities, refinancing terms, interest-rate exposure, and the availability of cash and revolver capacity across subsidiaries.
- The diluted EPS treatment and accounting valuation of the WML convertible-bond derivative, which uses Level 3 assumptions.
- Developments and potential financial exposure from the Dore litigation, securities class action, and federal investigation.
- Capital spending, Macau concession payments, subsidiary restrictions on distributions, and the sustainability of the resumed dividend.