Wynn Resorts, Limited — FY2020 Form 10-K
Reporting period: Fiscal year ended December 31, 2020. The filing also reports fourth-quarter results. Wynn operates integrated resorts in Macau, Las Vegas and Boston, and holds approximately 72% of Wynn Macau, Limited and Wynn Interactive.
Financial performance and position
| Metric | FY2020 | FY2019 |
|---|---|---|
| Operating revenue | $2.096 billion | $6.611 billion |
| Operating income (loss) | $(1.232) billion | $878.3 million |
| Net income (loss) attributable to Wynn Resorts | $(2.067) billion; $(19.37) per diluted share | $123.0 million; $1.15 per diluted share |
| Adjusted Property EBITDA | $(324.3) million | $1.815 billion |
| Net cash from operating activities | $(1.072) billion | $901.1 million |
| Capital expenditures | $290.1 million | $1.063 billion |
| Cash and cash equivalents at year-end | $3.482 billion | $2.352 billion |
| Total debt principal at year-end | $13.154 billion | $10.515 billion |
| Stockholders’ equity (deficit) | $(737.3) million | $1.541 billion |
FY2020 operating margin was approximately negative 58.8%, based on reported operating loss and revenue. Interest expense, net of capitalized interest, rose to $556.5 million from $414.0 million. Income tax expense was $564.7 million, primarily reflecting increased valuation allowances on deferred tax assets. At year-end, available borrowing capacity was $461.4 million across the WRF and Wynn Macau revolvers. The company reported a $1.072 billion operating cash outflow; cash increased by $1.128 billion overall, largely reflecting financing activity.
Fourth quarter: Revenue was $686.0 million, versus $1.653 billion in Q4 2019. Operating loss was $178.6 million and net loss attributable to Wynn Resorts was $269.5 million, versus a $72.9 million attributable net loss in Q4 2019.
Material changes versus the prior comparable period
- Revenue fell 68.3% year over year. Macau revenue declined 78.8%, Las Vegas revenue 54.2%, and Encore Boston Harbor revenue was nearly flat, down 0.6%.
- Casino revenue decreased 73.0%; non-casino revenue decreased 57.9%. COVID-19 closures, travel restrictions, reduced capacity and subdued demand affected all markets.
- Adjusted Property EBITDA turned negative at each reported resort: Wynn Palace $(149.6) million, Wynn Macau $(87.2) million, Las Vegas $(56.4) million and Encore Boston Harbor $(23.8) million.
- Debt principal increased by approximately $2.639 billion. During 2020, WML issued $2.35 billion of senior notes and WRF issued $600 million of 7.75% notes, alongside revolver borrowing and debt repayments.
- The allowance for credit losses rose to $100.3 million from $39.3 million; casino receivables allowance was 47.2% of gross casino receivables, versus 12.4% a year earlier.
Outlook, commentary and risks
- Management said it could not reasonably estimate the pandemic’s future effects on results, cash flows or financial condition. Travel restrictions and protective measures could persist or return, and management could not predict when demand would recover to pre-pandemic levels.
- The company suspended its quarterly dividend in May 2020 and postponed major project capital expenditures. It did not expect significant 2021 spending on the Wynn Palace expansion or Wynn Tower room remodel. In February 2021, it raised $842.4 million net through a common-stock offering and used $716 million to repay WRF revolver borrowings.
- Year-end liquidity was $3.482 billion in unrestricted cash plus $461.4 million of stated revolver capacity. Management believed liquidity and financing actions supported continuing operations. WRF’s amended facility required at least $325 million of liquidity through April 1, 2022; management reported compliance with debt covenants at year-end.
- Wynn Macau’s gaming concession was scheduled to expire June 26, 2022. Renewal, extension or a new concession was uncertain; loss of the concession could materially affect operations and revenue.
- Other significant risks include high leverage and debt service, reliance on a limited number of resorts and premium customers, gaming-credit collectability, regulatory and licensing requirements, competition, and exposure to travel restrictions and regional economic conditions.
- The company reported an ongoing U.S. anti-money-laundering investigation involving subpoenas related to transactions at Wynn Las Vegas; it could not estimate any potential loss. An amended securities class action remained pending. The filing also describes unresolved litigation concerning the Massachusetts gaming-license award. A separate derivative settlement produced $30.2 million of net proceeds recognized as a reduction of general and administrative expense in 2020.
- COVID-19 triggered long-lived-asset recoverability tests at each resort; the company reported no impairment as of December 31, 2020, but warned that prolonged disruption or adverse assumptions could require a future charge.
Important facts for investors to verify
- Current Macau concession-renewal developments and any impact on the concession’s June 2022 expiration.
- Post-filing liquidity, debt balances, revolver availability, covenant requirements and maturity/refinancing plans.
- Operating recovery by market, including Macau visitation and Las Vegas and Boston capacity, hotel and entertainment levels.
- Updates on the AML investigation, securities action and Massachusetts license-related litigation, including any estimable financial exposure.
- Credit-loss trends and recoveries, and whether deferred tax assets and resort asset carrying values remain supportable.