永利渡假村 (WYNN) 2021 Q1 法說會逐字稿

Welcome to the Wynn Resorts First Quarter 2021 Earnings Call. (Operator Instructions) This call is being recorded. (Operator Instructions)

I will now turn the conference over to Craig Billings, President and Chief Financial Officer. Sir, you may begin.

Thank you, operator, and good afternoon, everyone. On the call with me today are Matt Maddox and Marilyn Spiegel in Las Vegas. Also on the line are Ian Coughlan, Ciaran Carruthers, Frederic Luvisutto and Brian Gullbrants.

I want to remind you that we may make forward-looking statements under safe harbor federal securities laws, and those statements may or may not come true.

I will now turn the call over to Matt Maddox.

Thanks, Craig, and good afternoon, everyone. Before we dive right into the quarterly results, I'd like to first talk about how excited we are to announce the merger of Wynn Interactive into the Austerlitz Acquisition Corp. As we've been thinking about online sports betting and the iGaming space over the last few years, we knew that we had to stick to what we do, which is build great products and provide the best customer service. Wynn Interactive is now a company with over 300 people. We have some luminaries from European gaming, people -- co-founders of Bwin, that are responsible for a lot of the product that we're developing in this 300-person team.

And as we look out into the future, and we realize this is likely going to be as large as the commercial casino revenue opportunity of $40 billion over the next 5-plus years, which, by the way, that's typically about how long it takes to build one of our bricks-and-mortar properties, around 5 years, we knew that this was an opportunity that we had to capitalize on. And so as we explored various options, it became very clear that creating a pure-play public company in partnership with Bill Foley, one of the most renowned investors in the United States, was clearly the right thing to do to create those value for the Wynn Resort shareholders and for the Wynn Interactive shareholders.

Bill, just for those of you that don't know, has created over $100 billion in shareholder value during his investing career, $100 billion. He's the owner of a professional sports team. He owns luxury hospitality assets around the country. He recently completed the successful de-SPAC of Paysafe, a digital payments company that is now getting into the digital gaming space.

So partnering with Bill and our team of 300 people and thinking about the product road map and the marketing dollars and -- that we're going to invest to ensure that we're winners in this space felt like the exact right thing to do. And we're very excited to have $640 million of committed capital injected into this company to launch this venture.

We'll be posting a presentation online after this call that has a lot more details around this merger, and we'll be spending time after this call talking about it.

With that, I'm going to go ahead and turn over to our quarterly results. And what we've been seeing in our properties in Macau, Las Vegas and in Boston has been a very similar story, momentum each month continuing to accelerate. As an example, in Macau, we generated $43.9 million of EBITDA in the first quarter, but it's moving so fast over there. I feel like talking about what we're seeing now is more relevant than what we experienced in the first quarter as we saw strength continue into February and in March. So that momentum continued in April and in May.

And in fact, during the Golden Week, which is the first week of May in Macau, we experienced and generated $3 million of normalized EBITDA per day during Golden Week, by far the highest amount of normalized profit that we've been able to generate since the onset of the pandemic at the beginning of 2020. Even with the junket volumes continuing to fluctuate between 25% and 30% of Golden Week 2019, we were able to achieve these results because we focused our business on mass and premium mass. And as we talked about in previous calls, we've been converting space that was previously for VIP into premium mass space, and we feel very comfortable and confident with our position in the Macau market.

In fact, we generated 76% of our mass volumes during the Golden Week this year compared to the Golden Week in 2019. Our hotel occupancy during Golden Week was 93%. And retail, which is continuing to be a shining star across our portfolio in North America and Macau, was up 80% over the Golden Week numbers in 2019. Going forward, in May and into June, we do expect that May will continue to see acceleration over the April results. And we are very, very excited about the summer and what's going to come in Macau. Just seeing the earnings power over Golden Week and understanding where the Chinese consumer is headed and what our position in that market is makes us more confident in our position in Macau, in the Macau market and our future development opportunities in and around Wynn Palace to continue to build on what we do best and to grow our top line and our bottom line in Macau.

Moving to North America in Las Vegas. Again, we've seen very encouraging trends. We generated $28 million in EBITDA in the first quarter. And what we really saw was right around March Madness was when the volumes began to pick up in the first quarter, and that has accelerated. As an example, in the month of April, our RevPAR, which is where we're really focused, has increased 50%, 5-0, over the first quarter results. Retail revenues in the month of April were the second-best month on record. From 2005 until April of 2021, it's the second-best month on record. And what's even more encouraging and much more than a green shoot but a clear indication of the roaring consumer that's coming back, our slot revenues in April were $25 million which was a property record, more than any other month in the history of Wynn Las Vegas.

So you take those things that we're already seeing in Las Vegas and looking at quarter-to-date, our EBITDA has already exceeded the first quarter in Las Vegas. Our weekends going forward are in the 90s in terms of hotel occupancy. And we're really focused on pricing and pricing power. Our group business is holding on and looking actually quite strong for the back half of the year. In fact, just last week, we hosted our first large group of 600 people, and it went off without a hitch. People are so happy to be back. Conventions work. Customers are excited. And as more restrictions are lifted and we're able to really start to roll out our entertainment and our night clubs and do what we do best, we think that Las Vegas' opportunity is really unique, and the best times are ahead.

Moving to Boston at Encore Boston Harbor. We achieved record EBITDA of $30 million for the quarter. And that's even with restricted operating hours and quite significant COVID restrictions in the month of January. And that trend has continued. In fact, in the second quarter, thus far, our daily EBITDA is up 30-plus percent compared to the first quarter. Encore Boston Harbor is hitting on all cylinders right now. We've been able to really rationalize the cost, run the building much more efficiently and focus on our casino customers and being the top super regional casino in the Northeast. I believe that Encore Boston Harbor is going to continue to grow quarter-over-quarter throughout this year as that property and that management team are really doing an amazing job.

With that, I'm going to turn it over to Craig to provide more details on the quarter.

Thanks, Matt. As Matt noted, our Macau operations delivered $43.9 million of EBITDA in the quarter on $417 million of operating revenue. Our EBITDA was driven by encouraging gaming and nongaming performance combined with solid cost controls. Gross gaming revenue per day in 1Q '21 was approximately 34% of Q4 2019, led by the premium mass segment with particular strength in March. As Matt mentioned, this strength continued into April as mass drop reached $16.8 million per day or 59% of Q4 2019 or a 26% increase compared to 1Q 2021 levels. Our 1Q 2021 results in Macau were positively impacted by higher-than-normal table games hold that increased EBITDA by approximately $10 million to $15 million from a normalized level.

With respect to cost controls, our OpEx, excluding gaming tax, was $2.2 million per day in the quarter. This was down 25% from approximately $3 million per day in Q4 2019 and flattish sequentially. We are well positioned to drive strong operating leverage as the business continues to recover.

At Wynn Las Vegas, we generated $28.1 million of adjusted property EBITDA on $178.7 million of operating revenue from a business that was heavily weighted to weakened occupancy. In the casino, we saw broad-based strength across key segments with slot handle and table drop reaching 86% and 80% of Q4 2019 levels, respectively, during the quarter. The team in Las Vegas has done a great job of controlling costs without negatively impacting the guest experience.

OpEx per day, excluding gaming taxes, decreased 48% to $1.6 million per day in 1Q '21 from $3 million per day in Q4 2019. And similar to Macau, OpEx was largely flat compared to Q4 2020. As Matt noted, the business picked up beginning in March, and the strength continued in the second quarter to date. We believe the combination of meaningful permanent cost saves, along with increased group demand, position as well to accelerate our recovery as we move into the back half of 2021.

In Boston, we generated record EBITDA of $30.4 million despite curtailed operating hours for much of January and a continued significant limitation on gaming positions. Similar to Las Vegas, we've remained very disciplined on the cost side with OpEx per day, excluding gaming tax, of $760,000 in 1Q 2021, a 40% decrease compared to $1.3 million per day in Q4 '19 and a modest increase relative to the $680,000 per day in Q4 2020.

Turning to Wynn Interactive. Now with approximately 300 employees, as Matt mentioned, and over $100 million in run rate gross gaming revenue based on March results, we are aggressively scaling our efforts to close key product gaps, develop new and innovative features and create a world-class branding and brand ambassador program. You'll hear more about this exciting business during our video presentation and in our slide deck that will be posted to our Investor Relations website at approximately 2:30 p.m. Pacific today.

Turning to the balance sheet. Our liquidity position remains very strong with global cash and revolver availability of nearly $4 billion as of April 30. In Macau, we had approximately $2.09 billion of available liquidity as of the end of April. And in the U.S., we had total available liquidity of approximately $1.85 billion on April 30, with a substantially lower daily cash burn globally compared to the second half of 2020.

As a reminder, on February 11, we completed a successful public offering of 7.5 million shares of Wynn Resorts stock with net proceeds of $842 million. Our CapEx in the quarter was $40 million. With the North American business environment improving, we have made the decision to proceed with the Las Vegas room remodel this summer and have approximately $175 million remaining to spend. Beyond that, we are remaining extremely prudent with respect to CapEx while we gain further confidence in the recovery.

With that, we will now open the line to Q&A. (Operator Instructions) Thank you. Operator?

(Operator Instructions) Our first question is from Carlo Santarelli with Deutsche Bank.

Matt, you obviously gave a lot of color on kind of the trends you're seeing in Macau now. As it pertains and to the extent that you can address, what provides the confidence in the follow-through? Obviously, Golden Week is going to be an exogenous period, but the follow-through in what you've seen in March, April and then now with Golden Week, as we come out of the holiday period, is it something around kind of just the comfort level of travel, people getting more used to it? Or do you foresee some vaccination-type or, I should say, visa-type restrictions loosening that would kind of really allow the growth to be a little bit more unbridled?

No. I don't think I'd use the word unbridled right now. Well, nothing in Macau has been unbridled. The government has been very careful and cautious as to how they continually increase tourism into the market. And we do anticipate that to continue. So some of the things that I think are quite positive is we're actually seeing a lot of new customers, a lot of new premium mass customers. Premium mass was actually up during Golden Week more than mass for us, but they were both very strong. Just because Macau is an option for people to travel, and so we think that over the long term, Macau opening up to China is actually allowing us to acquire customers that we've never seen before.

So I think that each week that goes by, again, Golden Week excluded, it is getting stronger. And we -- looking at our forecast, even though the window is quite short, back half of May and into June, we're feeling pretty good about the continued strength.

Ian, do you want to add anything to that?

I think the success of Golden Week has given us a lot of confidence about the summer. You could say it's almost been a test bed for a raging Chinese economy where people have no way of traveling overseas. And to what you said earlier, we are seeing new customers coming to market who haven't traveled to Macau before, and they're getting positively overwhelmed with the quality of resorts in the city. And I believe that that's going to be very sticky for us through the summer. What we've seen post Golden Week is the normal post-holiday norm, but it's at a higher level than some of the weakened weekend business that we had in April. So as we head towards the summer, we're very positive.

Great. And then just one last one. Craig, you mentioned obviously going through with the LV room remodel this summer. $175 million of CapEx left this year, I imagine you're referring to. And if you guys could just comment like given what should, I think, by most accounts, be a very strong summer in Las Vegas as the market continues to kind of open up and obviously, group stuff comes back, was there thought on potentially kind of holding off on that to keep the maximum amount of rooms online for the summer and second half?

This is Matt. So no, we -- our rooms haven't been remodeled since 2010. We actually were going to launch the remodel at the end of '19, and COVID-19 put a little stop to that because of all the uncertainty. Look, clearly, in hindsight, I wish we would have spent the $200 million while we were closed, but we didn't. And the idea that we need to wait because we're worried about room compression, I think, is the wrong thing to do because if you look at our property and going into 2022, we have yet to utilize our new 400,000 square foot convention center.

And a lot of -- while the back half of '21 looks good, '22 is really strong. And so what we want to do is we want to come out of '21 and go into '22 with brand-new room product. And this is not just a soft refurb, a rag job. This is a full remodel of these rooms. And I think it's going to really be a competitive edge for us going into 2022.

Marilyn, do you have any thoughts on that?

No. As we think about how it starts, it's going to be a slow ramp-up, but we'll be finished -- we'll start mid-July. We'll finish by the end of the year. And I agree with Matt, we've got so much to look forward to in '22. We want to be totally prepared for that.

The next question is from Joe Greff with JPMorgan.

Just first question on Macau. Just based on what you're indicating for 2Q to date and the visitation numbers we've seen coming out of Macau for April and May, it would suggest that you and others are seeing a much stronger length of stay, which maybe makes sense given the increased pivot and focus to premium mass. Can you talk a little bit about that? And how much of that is intentional through how you're positioning your assets versus maybe what's just kind of going on with the different type of customer behavior in Macau?

Yes. Sure, Joe. Ian, why don't you take that one around length of stay?

Sure. We're not seeing a significant increase in length of stay. People are normally staying 2 to 3 nights. That's always been our market anyway. The lack of group tours and day-trippers to the city is what's missing from the previous marketplace. Length of stay stays pretty consistent, but it's a higher-quality customer, particularly the new customers that are coming to market and trying out Macau as an overseas technical travel base. We're seeing a higher quality of customer.

Great. And Matt, maybe you mentioned this and I missed it or I'm not sure if you talked about it, but you gave us some indication of sort of the strength in May over April, but I'm not sure you gave the April base in Macau in terms of either volumes or EBITDA per day or sort of other metrics to tie that May performance to?

Yes. No, Joe, I did not. I was just making the comment that we're continuing to see strength. I mean the month of April, for us, the first couple of weeks were a little soft with Qingming Festival and other things that were going on. And we really saw the back half of April strengthen. And then following Golden Week, we're experiencing those volumes and feel like it's going to continue to grow from that level.

The next question is from Thomas Allen with Morgan Stanley.

On Vegas, you gave some encouraging commentary around weekend occupancy being in the 90s and how you're really focused on rate. Can you just give us some more color on the rate and maybe some color around what's going on in weekdays?

Sure. So we've really focused on RevPAR. We're really focused on having the right guests come here who appreciate the room product, who want to dine in our restaurants, who want to play on the floor. And so you can come here and find it will be May, the first weekends that we'll see 90%. Midweek, we will be, in May, about 20 points less than that. That's obviously the lack of the group business. And yet, we just had our first group come, and they filled 90% of their block.

So we felt really good about that. At one time after we reopened, we dipped our rate. And I would say that our regular customer was not comfortable with having so many people here. And so we have really increased that rate, and the RevPAR is very important, but you can see that we will sell at the top of the market on a consistent basis.

Helpful color. And then just on Macau, a couple of quarters ago, maybe last quarter, you talked about feeling like you were taking some of the -- some of your competitors' customers as they came back to market and they wanted the best product. Do you still feel like that's happening?

I don't actually remember saying that we're taking other people's customers, but what we have been taking are -- and seeing are new customers. And I feel very comfortable that the way we positioned our product there that we will be market share takers on the premium mass and core mass side with our assets and VIP that we're converting into the premium segment. So I do expect us to continue to increase our share on that front as we roll out really our new programs and our new product.

Ian, do you have any more color on that?

I think it may be a reference to some of the second half of 2021 initiatives that we have described, which were reconditioning of former VIP spaces, which allow us to react to new premium mass customers coming to market and to capture more than our fair market share. We've got the full launch of the West Casino in Macau. We've expanded our Diamond and Chairman's villa on the Wynn Palace. We've been repurposing villas and large suites to provide many villa experiences for the premium mass market. And we're doing a long series of private events in culinary arts and concerts over the summer and into the end of the year, which will drive more premium mass business for us. And we've got a digital brand campaign that we're launching during the summer aimed at non-gaming, which will attract more customers to our properties.

So we're excited about that. And despite the arrival of new competition in the marketplace, particularly in our neighborhood, we actually welcome that. And it's a firming up of what we call South Cotai. We've had Morpheus open. MGM is ramping up. And we've got Grand Lisboa Palace opening at some point in the summer. So that's all great for the future to introduce new customers to Wynn.

(Operator Instructions) Our next question is from Stephen Grambling with Goldman Sachs.

This one will tie in WynnBET that a little bit, but it's really meant to be a Wynn Resorts question. Some of your peers have talked about the benefits of omnichannel as it relates to iGaming and online sports betting. How will Wynn Resorts continue to interact with WynnBET to ensure you capture that full benefit?

Craig, why don't you take that one?

Sure. Happy to. So I guess I would respond to that from 2 perspectives. The first is that we're in the midst now of integrating Wynn Rewards into our product. You'll see more of that in the presentation here in about 30 minutes. So we'll have Wynn Rewards fully integrated into the product, and we do believe that will generate benefit for the land-based business. We obviously have a pretty robust database in North America, about 13 million folks. And so that will, in return, benefit WynnBET.

Then the second component to that is really Massachusetts. So there's a few different retail and online sports betting bills floating around in Massachusetts right now. And while the timing is TBD, we would be hopeful that something gets done this year. And we're going to be ready to go day 1 in the event that legalization is passed, and we have a very strong home court advantage there. So I think the integration of the digital product there, where we have a $2-plus billion asset in the middle of Boston, will prove to be very fruitful for both businesses.

Look forward to seeing the video.

Thanks.

The next question is from David Katz with Jefferies.

Operator, let's move to the last question, please.

Our last question is from Robin Farley with UBS.

Great. Similarly, I wanted to ask a question that is really about the impact on Wynn Resorts, which is, will Wynn Resorts be receiving kind of a royalty stream for the use of the Wynn brand from the spun-out company? Just trying to think about the benefit to the Wynn Resorts piece.

Sure. Robin, it's Matt. I'll talk a little bit about it and then hand it over to Craig. So as you look at the press release and the presentation, you'll find that Wynn Resorts is still the majority owner of WynnBET post-transaction. So Wynn Resorts will own roughly 58% of the company post-transaction. There are intercompany arrangements just like with our other properties for royalty streams and all of the intercompany marketing agreements. So all of that is in place.

What's exciting for us is to have really a pure-play public company with $600-plus million of committed capital and our management team and Bill Foley ready to really go after the space over the next few years. So clearly, we're still the majority owner of that company, and we vote over 70% of it. So you should continue to think about it as a subsidiary of Wynn Resorts, fully controlled.

And Craig, do you want to add anything else to that?

No. I think you said it well. The benefit to Wynn Resorts comes through the equity ownership, but certainly, there are intercompany arrangements representing the brand and consumables on property that WynnBET may use.

And just as an example, as we've been -- as we've launched WynnBET now in 6 states, we've seen various customers getting really excited about the bricks-and-mortar experience and the ability to participate in both sides of that. We've had one customer in the Northeast transfer hundreds of thousands of dollars to one of our casinos, and we offer lots of rewards that would include being picked up on a plane and a villa and all the things that we do at Las Vegas.

Being able to offer that always sounded like the right idea, but we're already seeing how excited our WynnBET customers are to take advantage of that. So I fully anticipate that WynnBET will have a very large database and that the companies will be able to utilize those for both our bricks-and-mortar experience and the online experience.

Okay. Great. Can I ask one follow-up on Macau? Just kind of a bigger picture question. I think that you've said on previous calls that it might be sort of a multiyear. So just looking bigger picture, the VIP piece of the business has never gotten back to kind of that pre -- that 2014 level. Where do you think -- when things normalize, when borders are open, and it's not -- and that's not the issue, where do you think VIP kind of levels out versus pre-COVID levels?

It's really hard to predict. But on the past couple of calls, I've been out there saying that it feels like it probably gets back to around 50% of the pre-COVID levels. I hope I'm wrong. I hope it's more than that. But we're positioning our business for that outcome, and we're positioning our business on the continued growth in the premium mass and mass segment.

And I would just add to that, Robin. You're right. The junket business has been evolving, but we've been evolving, too. And so a lot of those players are actually playing directly with the operators, right? So we've been pivoting resources to better serve those customers, as we've talked about kind of ad nauseam, both physical resources and service personnel. And so we're well positioned to deal with the transition, whatever that transition ultimately looks like.

All right. Thank you, folks. Have a great day. We look forward to talking to you again.

Thank you. That does conclude today's conference. Thank you all for participating. You may disconnect at this time.