WYNN RESORTS, LIMITED — Q1 2021 Form 10-Q
Reporting period: Three months ended March 31, 2021; comparison is with Q1 2020. Wynn operates integrated resorts in Macau, Las Vegas and Boston, and consolidates Wynn Interactive. The quarter remained affected by COVID-19 travel restrictions, operating limits and reduced resort offerings.
Financial performance
| Metric | Q1 2021 | Q1 2020 | Change |
|---|---|---|---|
| Operating revenue | $725.8 million | $953.7 million | Down 23.9% |
| Operating loss | $175.7 million | $247.4 million | Loss narrowed |
| Net loss attributable to Wynn Resorts | $281.0 million | $402.0 million | Loss narrowed by $121.1 million |
| Diluted loss per share | $2.53 | $3.77 | Improved by $1.24 |
| Adjusted Property EBITDA | $58.9 million | $(5.3) million | Improved by $64.2 million |
| Net cash used in operating activities | $253.9 million | $176.5 million | Use increased |
| Capital expenditures, net | $40.3 million | $139.3 million | Lower |
Revenue fell across the portfolio: Macau Operations were down 14.7% to $417.0 million; Las Vegas was down 44.8% to $178.7 million; and Encore Boston Harbor was down 7.7% to $130.1 million. Casino revenue declined 9.6%, while non-casino revenue fell 45.3%, led by lower rooms and food and beverage sales. Las Vegas and Boston casino revenue increased year over year, but hotel, dining and entertainment activity remained constrained.
Adjusted Property EBITDA by segment was $43.9 million for Macau Operations, $28.1 million for Las Vegas, $30.4 million for Encore Boston Harbor, and negative $43.5 million for Corporate and other. Management attributed the overall EBITDA improvement largely to lower operating costs. Q1 2020 included $75.7 million of accrued U.S. employee salary, tips and benefits continuation costs, affecting comparability.
Liquidity, debt and capital
- At March 31, 2021, cash and cash equivalents were $2.89 billion, down from $3.48 billion at year-end; cash, cash equivalents and restricted cash totaled $2.90 billion.
- Available revolver capacity was approximately $1.13 billion: $833.9 million under the WRF facility and $293.0 million under the Wynn Macau facility.
- Long-term debt, net of issuance costs and current maturities, was $11.95 billion, versus $13.07 billion at December 31, 2020. Gross debt before those deductions was $12.04 billion. Management said the company was in compliance with debt covenants.
- Q1 financing included $841.9 million net proceeds from issuing 7.475 million shares. The company used $716.0 million to repay its WRF revolver and prepaid approximately $438.6 million of Wynn Macau term-loan principal. The issuance increased outstanding shares.
- Dividends remain suspended. The board had $800.1 million of remaining share-repurchase authorization, but Q1 repurchases reported were for restricted-stock tax withholding, not under that program.
- Approximately 77% of long-term debt was fixed-rate. The company estimated a 100-basis-point change in variable rates would change annual interest expense by $22.8 million.
Outlook, risks and notable items
- Management said COVID-19 would continue to adversely affect results and that it could not reasonably estimate the pandemic’s future impact on results, cash flows or financial condition. No quantified earnings or revenue guidance was provided.
- Subsequent to quarter-end, Encore at Wynn Las Vegas resumed full operations on April 8. On May 3, Nevada gaming regulators permitted the company’s Las Vegas gaming areas to operate at 100% capacity without spacing restrictions. Boston and Macau remained subject to changing public-health, travel and capacity conditions.
- The company expected to spend $170–$180 million on the remaining Wynn Las Vegas room remodel, planned for completion before year-end 2021; it did not expect significant 2021 construction spending on phase two of Wynn Palace.
- On May 10, 2021, Wynn Interactive agreed to combine with Austerlitz Acquisition Corporation I. Assuming no public-share redemptions, Wynn Resorts expected to retain about 58% equity and 72% voting interest. Closing was expected by year-end, subject to shareholder, regulatory and other conditions.
- Key risks include prolonged travel restrictions or renewed COVID measures, Macau visitation and gaming conditions, high leverage and refinancing needs, interest-rate and currency exposure, collection of gaming receivables, and reliance on subsidiaries for distributions. The filing also describes an ongoing federal anti-money-laundering investigation; the company could not estimate its outcome or any possible loss.
- Other legal matters include a pending securities class-action motion to dismiss and an appeal in a derivative action. Management stated it could not determine the probability or reasonably possible loss for the securities and derivative actions. The filing reported no material changes to previously disclosed risk factors.
Most important facts for investors to verify
- Whether Macau visitation and resort demand recover, and how quickly travel and operating restrictions ease.
- Cash burn, available borrowing capacity by subsidiary, debt maturities and covenant headroom; liquidity is not necessarily freely transferable among entities.
- Whether improved property EBITDA is sustainable, given lower revenue and the substantial Q1 2020 employee-cost comparison item.
- Completion cost and timing of the Las Vegas room remodel, and Wynn Interactive transaction approvals, terms and resulting ownership.
- Developments in the anti-money-laundering investigation and outstanding litigation, for which potential outcomes or losses were not quantifiable in the filing.