Wynn Resorts: Strong Financial Performance and Growth Opportunities in Macau
2023-08-10
Wynn Resorts held its second quarter 2023 earnings call, led by the CFO and CEO, where they discussed the company's strong financial performance. The call highlighted record EBITDAR in Las Vegas and Boston, solid results in Macau, and growth opportunities in the UAE. One of the key topics of discussion was the company's focus on managing the sports betting business and their long-term shareholder-friendly view on it.
During the meeting, a deep-dive analysis was conducted on the company's performance in Macau and its dependence on the region's recovery. The current state of Macau's recovery and the factors influencing it were examined, including economic indicators such as GDP growth, tourism numbers, and government policies related to the gaming industry. The company's exposure to Macau and its contribution to overall revenue and profitability were also assessed, with comparisons to pre-pandemic levels providing a benchmark for evaluating progress.
The meeting also explored the company's strategies and initiatives aimed at capitalizing on the recovery of Macau. This included analyzing marketing campaigns, customer acquisition efforts, and investments in new facilities or amenities. The effectiveness of these strategies in driving revenue growth was crucial in evaluating the company's prospects in Macau. Additionally, the competitive landscape in Macau and the company's positioning within it were analyzed to understand market share and potential threats or opportunities.
The company's outlook for the market was positive, with a strong year so far and expectations for a record-breaking 2023. Lead volume was high, and successful lead conversion was reported. The company expressed confidence in obtaining the gaming license for the Al Marjan property and expected no concerns regarding the broader legalization process. They aimed to reach a run rate EBITDA of around $26-27 billion for GGR, with stable margins at Wynn Macau and no anticipated major changes.
Key performance indicators discussed in the meeting included operating expenses (Opex), commissions and discounts, and cost discipline. The company emphasized the need to modulate operating expenses based on business volumes and tasks. They mentioned no significant changes in handling commissions and discounts, with the specific approach depending on individual parameters. The company received praise for its strong performance in cost discipline, particularly in Las Vegas. The potential impact of a labor contract settlement and new terms on future costs was also discussed.
The company's specific outlook for the quarter or year was not explicitly stated, but the focus was on reducing costs and improving profitability. They had a long-term shareholder-friendly view on their sports betting business and believed in the recovery of Macau and its contribution to the overall market. The company expressed excitement about upcoming events like F1 and the Super Bowl, which they believed would benefit their brand. Overall, the company appeared focused on managing their business, reducing costs, and capitalizing on upcoming events.
In terms of capital spending plans, the company allocated between $300 million to $400 million in capital expenditures over the period of '23 to '24. More than half of the company's $2 billion commitment was dedicated to capex-related expenses. The company expected to front-load the capex spending, with $300 million to $400 million in the first two years and a similar amount in the following years. They also had discretionary free cash flow and were focused on deleveraging, returning capital to shareholders, and investing in exciting projects. Refinancing and adding to the dividend were also being considered.
The participants of the call included representatives from Barclays, Wells Fargo Securities, and Macquarie Group, along with the company's CEO, Craig Billings. The CEO mentioned being on track for a record year in terms of lead volume and expectations for continued strong performance in the following year. They also expressed confidence in obtaining the casino license for the Al Marjan property and addressed concerns about the legalization process. The company aimed for a run rate EBITDA of around $27 billion and did not anticipate a decline in margins. However, no further information was provided regarding the company's Interactive cash.