Wynn Resorts (WYNN) delivered a much better-than-expected first quarter Wednesday, with the casino operator’s properties in Las Vegas and Boston continuing to post impressive results. But what helped push the company to an unexpected profit was the recovery in Chinese gaming hub Macao, allowing management to reinstate a 25 cent-per-share quarterly dividend. Operating revenue increased 49% year-over-year, to $1.42 billion, beating analysts’ expectations of $1.37 million, according to estimates compiled by Refinitiv. Adjusted property earnings before interest, taxes, depreciation, amortization, and restructuring or rent costs (EBITDAR) — Wynn’s key metric for profitability — climbed 141% year over year, to $429.7 million, topping analysts’ predictions for EBITDAR of $373 million. Adjusted earnings-per-share (EPS) came in at 29 cents per share, ahead of a consensus forecast of 2 cents a share. Bottom line Wynn’s days of losing money are officially in the past. The company on Wednesday delivered its first profitable quarter since 2019, following roughly three years of draconian Covid-19 restrictions in China that heavily weighed on the casino operator. China’s special administrative region of Macao had accounted for roughly 75% of Wynn’s total profits before the pandemic. But Macao is now firmly on the road to recovery, while there has been been no let-up whatsoever at Wynn’s Las Vegas and Boston properties. Still, gaming remains highly sensitive to economic developments. We will continue to monitor how the constantly evolving macroenvironment impacts Wynn’s business — but, for now, it remains clear that the trend of robust consumer spending on travel and experiences is playing right into the company’s hands. The stock’s reaction to the quarter is muted after hours, with shares up by less than 1%. So far, the market is underreacting to what clearly was a strong quarter, with a surprise capital return for shareholders to boot. Quarterly commentary Macao The region finally flipped to EBITDAR-positive after many quarters in a row of losses caused by Beijing’s Covid restrictions. The quarter looks to be uneven on a property-by-property basis, with the $20 million EBITDAR beat at Wynn Palace partially offset by an $18 million miss at Wynn Macao. It appears the miss could be attributed to individual wealthy gamblers frequenting Wynn Palace at the expense of Wynn Macao, which historically is more exposed to groups and tours. One of Wynn Macao’s casinos was also closed during part of the quarter for renovations. But the bigger story here is how fast the recovery is taking shape. In the casino, the so-called table drop, or total wage amount, from so-called mass customers reached 82% of first quarter 2019 levels, with market-share levels consistent with that of 2019. Wynn management also noted Tuesday that the recovery has accelerated into April, amid ongoing signs there is an extraordinary amount of pent-up demand waiting to be unleashed by China’s ongoing economic reopening. Wynn just wrapped up a terrific May Golden Week holiday period that outperformed 2019 in several key areas. Las Vegas Wynn Las Vegas continues to post big results, generating an all-time record adjusted EBITDAR of $231.6 million. Higher than normal ‘hold’ — how much revenue a casino generates from bets — positively impacted EBITDAR by around $4 million. There may be a lot of talk out there about a pullback in consumer spending, but it isn’t showing up at Wynn Las Vegas. Hotel occupancy was 88.8% in the quarter, up 1,190 basis points year-over-year and 620 basis points from the first quarter of 2019. And the property is much more profitable today than it was before the pandemic. On a hold normalized basis, Wynn Las Vegas’ EBITDAR margins expanded 300 basis points year-over-year and 1,400 basis points from the first quarter of 2019. The good times at Vegas rolled into April, too. Management Wednesday said it just had the best April in the history of the property. While macroeconomic headwinds remain a concern, CEO Craig Billings said during the company’s post-earnings conference call that “things feel good around here,” thanks in part to the strong pipeline of forward group demand and room-pricing power. Encore Boston Harbor The Boston property isn’t seeing any signs of a slowdown either, with strength on both the gaming and non-gaming side of the business. The casino’s gross gaming revenue of $191 million was a property record, and non-gaming revenues increased 21% year-over-year, boosted by the hotel and food-and-beverage segments. April is off to a good start, too, with management noting that EBITDAR per day is tracking consistent with trends it experienced over the past few quarters. Wynn Interactive Wynn continues to take a disciplined cost approach to its digital gaming platform. Its EBITDAR burn rate (the amount of money it lost) decreased sequentially and year-over-year. Capital allocation It’s been about three years since Wynn Resorts suspended its dividend to preserve cash during the pandemic, but now it’s finally back. The company announced Wednesday it will resume payment of a quarterly dividend, starting it off at 25 cents per share. That’s a far cry from the $1 per share quarterly payment Wynn offering pre-pandemic, but it’s still an important sign of confidence in the future of the business. Additionally, Wynn has several growth projects in the works that will require capital, including the Wynn Al Marjan Island resort in the United Arab Emirates. The project is estimated to cost $3.9 billion, but management believes the resort will generate between $450 million and $600 million of steady-state EBITDAR. Wynn Resorts will have a 40% equity ownership in the joint venture. Another project Wynn is holding out capital for is a possible New York City project in the Hudson Yards area of Manhattan. This would be huge get for Wynn, but it would also be a highly competitive bidding process. (Jim Cramer’s Charitable Trust is long WYNN. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. 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People use their smartphones to take photographs outside The Wynn Macau casino resort, operated by Wynn Resorts Ltd., in Macao, China, on Tuesday, Jan. 30, 2018.
Billy H.C. Kwok | Bloomberg | Getty Images
Wynn Resorts (WYNN) delivered a much better-than-expected first quarter Wednesday, with the casino operator’s properties in Las Vegas and Boston continuing to post impressive results. But what helped push the company to an unexpected profit was the recovery in Chinese gaming hub Macao, allowing management to reinstate a 25 cent-per-share quarterly dividend.
