Wynn Resorts, Limited — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022; unaudited. Wynn operates resorts in Macau, Las Vegas and Boston, and online gaming through Wynn Interactive. Amounts below are in U.S. dollars.
Financial performance and liquidity
| Metric | Q1 2022 | Q1 2021 |
|---|---|---|
| Operating revenue | $953.3 million | $736.7 million |
| Operating loss | $94.9 million | $175.7 million |
| Net loss attributable to Wynn Resorts | $183.3 million | $281.0 million |
| Diluted loss per share | $1.59 | $2.53 |
| Adjusted Property EBITDA | $177.6 million | $58.9 million |
| Net cash used in operating activities | $117.4 million | $253.9 million |
Revenue rose 29.4%; the operating loss was about 10.0% of revenue, compared with 23.9% a year earlier. Adjusted Property EBITDA was about 18.6% of revenue, versus 8.0%. These EBITDA figures are non-GAAP supplemental measures and are not a substitute for operating income or cash flow.
Non-casino revenue increased 110.2% to $463.5 million, while casino revenue declined 5.1% to $489.9 million. Interest expense, net of capitalized amounts, was $152.2 million, and the weighted average interest rate was 5.05% versus 4.84% in Q1 2021.
At March 31, cash and cash equivalents were $2.317 billion, with $9.1 million of restricted cash. Available borrowing capacity was $1.048 billion across the WRF and WM Cayman II revolvers. Total debt carrying value was $11.923 billion, including $50.0 million current; total liabilities were $13.213 billion. Stockholders’ deficit was $1.033 billion.
Cash and cash equivalents decreased $205 million during the quarter. Investing cash outflow was $97.2 million, including $96.3 million of net capital expenditures. Financing provided $10.9 million, including a $50.0 million contribution from a retail joint-venture investor, partly offset by debt repayment, share withholding repurchases, lease payments and distributions.
Material changes versus Q1 2021
- Las Vegas revenue increased 146.9% to $441.2 million and Encore Boston Harbor revenue increased 46.7% to $190.8 million, reflecting higher gaming volumes and hotel occupancy, more restaurant covers, and fewer pandemic-related operating restrictions than in the prior-year quarter.
- Macau revenue fell 28.4% to $298.4 million amid travel restrictions and COVID-related testing and procedures. Macau Adjusted Property EBITDA turned negative: Wynn Palace $(0.9) million and Wynn Macau $(4.7) million, compared with $27.4 million and $16.6 million, respectively, a year earlier.
- Las Vegas Adjusted Property EBITDA rose to $159.4 million from $28.1 million; Encore Boston Harbor rose to $55.3 million from $30.4 million. Wynn Interactive remained loss-making, with Adjusted Property EBITDA of $(31.5) million, improving from $(43.5) million.
- Property charges and other increased to $45.7 million from $5.6 million, including a $30.3 million Wynn Interactive goodwill impairment and $9.6 million of Wynn Interactive contract termination expenses.
- Operating cash outflow improved year over year, but remained negative. The company attributed the improvement principally to higher operating revenue, partly offset by higher expenses.
Outlook, risks and unusual items
- Macau concession: The concession was scheduled to expire June 26, 2022. The company said it believed an extension and renewal would occur; its extension request was subject to Macau government approval. Without an extension or replacement concession, Macau gaming assets would transfer to the government without compensation. Certain debt documents also could allow noteholders to demand repayment or trigger revolver prepayment. Macau proposed extending concessions through December 31, 2022 while it revised gaming law and conducted a tender.
- COVID-19: Macau visitation and operations remained affected by travel restrictions and protective measures. Management said it could not reasonably estimate the future impact on results, cash flows or financial condition. The company suspended its dividend program for the foreseeable future but believed available liquidity could support continuing operations.
- Debt amendment after quarter-end: On May 5, 2022, WM Cayman II lenders waived certain financial covenants through the March 31, 2023 test date and set a 2.625% minimum interest margin through June 30, 2023. WML may face restrictions on dividends or distributions unless specified financial criteria are met. Management said the company was in compliance with debt covenants at March 31.
- Encore Boston Harbor sale-leaseback: The company expected to receive approximately $1.7 billion in the fourth quarter of 2022, subject to approvals and closing conditions, and enter a 30-year lease with initial annual rent of $100 million and rent escalations. Proceeds could be used for general corporate purposes, including debt repayment.
- Planned spending: Management expected $50–$60 million of remaining costs for the Wynn Las Vegas room remodel, planned for completion in Q2 2022, and $55–$65 million for a theater reconfiguration and production expected to open in Q3 2022.
- Contingencies: Dore-related Macau lawsuits remain pending; one final ruling held WRM jointly liable for approximately $1.2 million. A U.S. securities action has claims proceeding against the company and former executives; management could not estimate the probability or range of loss. A U.S. anti-money-laundering investigation remained ongoing, with no charges or claims reported and no estimable loss range.
- Market risks: Approximately 77% of long-term debt was fixed-rate. A 100-basis-point change in variable rates was estimated to change annual interest expense by $23.0 million. A 1% change in the U.S. dollar/Hong Kong dollar exchange rate was estimated to result in a $39.6 million foreign-currency transaction gain or loss.
The filing provides no formal full-year earnings or revenue guidance. Management’s forward-looking statements are subject to substantial operating, regulatory, travel, financing and other risks.
Important facts for investors to verify
- Whether Macau’s concession was extended, renewed or replaced, and the resulting impact on Macau operations and related debt provisions.
- Whether the Encore Boston Harbor sale-leaseback closed on expected terms, including the $1.7 billion proceeds and long-term rent obligations.
- Trends in Macau visitation, gaming volumes, cash generation and revolver covenant compliance after the quarter-end waiver.
- Progress in reducing Wynn Interactive losses and the effect of the recorded goodwill impairment and contract termination costs.
- Operating cash flow, debt service needs, and the status and potential resolution of the disclosed litigation and regulatory investigation.