Wynn Resorts Ltd (WYNN) — Q4 2024 Earnings Call Transcript

Thank you, operator, and good afternoon, everyone. On the call with me today are Craig Billings and Brian Gullbrants in Las Vegas. Also on the line are Linda Chen and Frederic Lubosuto. Please note that we published a presentation to provide more color on the company and recent performance ahead of this call. You can find the presentation on our Investor Relations website. This will become a regular fixture along with our earnings release going forward. I want to remind you that we may make forward-looking statements under the safe harbor provisions of federal securities laws, and those statements may or may not come true. I will now turn the call over to Craig Billings.

Thanks, Julie, and good afternoon. As always, thank you for joining us today. We've been very active over the past three years, making numerous positive changes to and investments in our businesses in Las Vegas, Boston, and Macau. Changes in how we market, in our underlying technology, in how we deliver service to our best customers, in how we build and program food and beverage and retail, in how we program entertainment, in the production of our own unique events, and in how we control expenses. All of these changes were made in pursuit of further distancing ourselves from our competitors. You can see the results of these efforts in our 2024 results—yet another record year of adjusted property EBITDA, including another annual record in Las Vegas. Operationally, we are stronger, more nimble, and more results-focused than we have ever been. Meanwhile, we are expeditiously developing what I believe to be the most exciting development project in the industry in the UAE—a project that will ultimately produce meaningful EBITDA and further diversify our business. The opening of that project coupled with a concurrent reduction in the amount of CapEx we will be deploying in North America will also mark an important inflection point in our free cash flow profile. Our future is bright. And it is this bright future, coupled with the fact that our stock price does not appropriately reflect the value of our assets, that drove us to repurchase $200 million of stock in the fourth quarter and another $150 million thus far in Q1. While industry multiples remain suppressed, while growth capital remains focused on a narrow set of AI and tech companies, and until we believe Wynn El Marjan is appropriately reflected in our valuation, we will continue to repurchase our equity because we believe the return profile on those repurchases is meaningful. Now turning to the quarter and starting here in Las Vegas. Demand remained healthy in the fourth quarter, with table games drop essentially flat against a very tough comp, and slot handle up by 13%. Our gaming market share for the quarter grew meaningfully, highlighting the strength and quality of what we offer here in Vegas. Our non-gaming business in Q4 was also strong, though it was impacted by tough year-over-year comparisons during F1 week. EBITDA during the event in 2024 was about $20 million lower than in 2023. The lion's share of the difference was due to a decline in RevPAR stemming from lower overall Las Vegas room rates during that event. Though it is important to note that in both years, our ADRs were about 50% higher than those of the two closest competing properties here in Las Vegas. Our daily EBITDA during the 2024 event remained materially elevated relative to the years before F1 was a fixture in the market. The F1 team did a tremendous job with this year's event, and with the event having now settled in, we have a good baseline from which to grow in future years. More recently, demand in January looked good with both drop and handle up year over year and ADR and SMB covers both up year over year. Of course, this year we didn't have the benefit of hosting the Super Bowl here in Las Vegas, which impacts February. And that's about a $25 million EBITDA headwind for Q1 versus 2024. Excluding Super Bowl weekend, all of our key volume metrics are up year over year. Looking further out, we already have our budgeted group and convention room nights for 2025 on the books at healthy ADRs. Transient booking demand over the last two weeks has been extremely robust. When coupled with a calendar that is once again full of large demand drivers, the setup for 2025 feels good. The team at Wynn Las Vegas continues to set the standard and with new food and beverage openings later this year, including the much-anticipated opening of Zero Bond, a planned renovation of the Encore Tower, and other relatively modest targeted investments, we will exit 2025 even stronger with limited remaining CapEx on the horizon. Turning to Boston, Encore Boston: We were encouraged by particular strength in our slot business where handle was up 6%. This helps set a new all-time property record for slot revenue, offsetting some of the union-related payroll increases incurred in 2024. We continue to grow the database and stabilize some of the recently opened properties, with the best days ahead. More recently, demand in Boston has remained healthy through January, led by strong year-over-year growth in slot handle and stable non-gaming revenue against a tough comp. Turning to Macau, we generated $293 million of EBITDA during the fourth quarter, down about 1% year over year and up 11% sequentially. While the market in Macau continues to be competitive, we remain disciplined in our focus on maximizing EBITDA. We recently completed the rollout of digital tables throughout Wynn Palace and Wynn Macau, which will yield operational benefits and, when coupled with our data science and machine learning capabilities, should allow us to be more precise and efficient with reinvestment over the medium term. On the CapEx side, we made several improvements and optimizations in Macau in the fourth quarter, most notably an expansion of the Chairman's Club at Wynn Macau, a gaming area focused on our best customers. We will also soon be adding a variety of food and beverage offerings in Wynn Palace with the opening of our destination food hall, a development that we believe will drive incremental visitation and footfall to Wynn Palace. We also continue to advance design work and approvals on the remainder of our concession-related CapEx: the event center, the theater, and a production show at Wynn Palace. More recently, January was characterized by healthy mass table drop, strong direct VIP turnover, and full occupancy in the hotels, while Chinese New Year saw a more prolonged period of visitation and less concentration on specific days than we saw in 2024. In fact, for the fourteen days beginning January 29, and including the days after the holiday period, volumes were healthy, with drop and turnover in line with 2024 and slot handle up. During that period, the volume indicators look good. Turning to Wynn Al Marjan Island in the UAE. Construction is rapidly progressing on the project with work now reaching the thirty-fifth floor of the hotel and over 4.6 million square feet of concrete and steel in place. As we discussed at our Investor Day in October, we believe the UAE will be a $3 billion to $5 billion gaming market over time and certainly the most exciting new market for our industry in a decade. To support this project and the early work we are doing to build our database and brand awareness in the region, we were pleased to announce in early January that we entered into an agreement to purchase Aspenols in Mayfair, London. This small but strategic asset provides a presence in Central London, where many of our future Wynn Al Marjan customers spend a meaningful amount of time. Lastly, we are actively exploring and are well positioned to capitalize on additional new market opportunities in attractive gateway cities. We have strategic land banks in each of our new markets that provide an embedded long-term growth pipeline. Meanwhile, our leverage profile continues to improve as free cash flow grows, allowing us to increase the return of capital to shareholders through the recurring dividend and meaningful share repurchases. With that, I will now turn it over to Julie to run through some additional details on the quarter.

Thank you, Craig. At Wynn Las Vegas, we generated $267.4 million in adjusted property EBITDA on $699.5 million of operating revenue during the quarter, delivering an EBITDA margin of 38.2%. EBITDA was down 1% year on year, and revenues were up slightly on a difficult comp from 2023. Higher-than-normal table games hold positively impacted EBITDA by a little more than $30 million in the quarter. While volume metrics were positive, with drop essentially flat year on year and slot handle up 13%. Operating expenses excluding gaming tax per day were $4.4 million in the quarter, up about 1% compared to the prior year. The team in Las Vegas continues to exercise strong cost discipline and has largely mitigated the bulk of our union-related payroll and other benefits increases without impacting the guest experience. Turning to Boston, we generated adjusted property EBITDA of $58.8 million, down year over year on a tough comp, on revenue of $212.7 million with an EBITDA margin of 27.7%. We’ve stayed very disciplined on the cost side, with operating expenses per day of $1.17 million, up only 2% year on year despite labor cost pressures in that market. The Boston team has also done a great job mitigating union-related payroll increases through cost efficiencies in areas of the business that do not impact the guest experience. Our Macau operations delivered adjusted property EBITDA of $292.8 million in the quarter on $926.6 million of operating revenue, resulting in an EBITDA margin of 31.6% in the quarter.

by a little over $12 million in the quarter. Operating expenses excluding gaming tax were approximately $2.59 million per day in Q4, up 1.2% year on year. The team has done a great job staying disciplined on costs, and we remain well positioned to drive strong operating leverage as the market continues to grow over time. In terms of CapEx in Macau, we are currently advancing through the design, planning, and approval stages on several of our concession commitments. As we noted the past few quarters, these projects require numerous government approvals, creating a wide range of potential CapEx outcomes in the near term.

As such, we now expect total CapEx spend in 2025, including our concession-related commitments and other projects, to range between $250 million and $300 million. Moving on to the balance sheet, our liquidity position remains very strong, with global cash and revolver availability of $3.5 billion as of December 31. This was comprised of $1.8 billion of total cash and available liquidity in Macau, and $1.7 billion in the US. The combination of strong performance in each of our markets globally, with our properties generating nearly $2.4 billion in 2024 adjusted property EBITDA, together with our robust cash position, creates a very healthy consolidated net leverage ratio of just over four times. Our strong free cash flow and liquidity profile allows us to reduce leverage while returning capital to shareholders. To that end, the Wynn Resorts, Limited Board approved a cash dividend of $0.25 per share, payable on March 5, 2025, to stockholders of record as of February 24. As Craig mentioned, we also repurchased 2.14 million shares for approximately $200 million during the year, bringing our total share repurchases for the year to 4.35 million shares for an aggregate cost of $386 million. These share buybacks, together with our recurring dividend, highlight our focus on and continued commitment to prudently returning capital to shareholders. Finally, we spent approximately $127 million on CapEx in the quarter, primarily related to villa renovations and food and beverage enhancements in Las Vegas, concession-related CapEx in Macau, and normal cost maintenance across the business. Additionally, we contributed $99 million of equity to the Wynn Al Marjan project during the quarter, bringing our total equity contribution to date to $631.7 million. We estimate our remaining 40% pro-rata share of the required equity to be approximately $700 million to $775 million, fully loaded for capitalized interest.

We recently announced we finalized a $2.4 billion financing package for the project from a diverse group of globally recognized lenders. This landmark transaction is the largest hospitality finance in the history of the UAE and indicative of the broad support for this project from the financial community and beyond. We're very grateful for the support of our lenders, and with the financing now in place, we have achieved a significant milestone on the path to opening the project that's planned in early 2027. With that, we will now open up the call for questions.

Hey, Craig, Julie. If I could just start with a question that's more focused on Las Vegas. When you consider the headwind or, in this case, the tailwind from kind of favorable hold, what win rate are you putting that back to? Is that like a 22% embedded table hold?

Yeah. That's right.

Okay. So my question is for close to two years now, if you look at the entirety of 2023 and 2024, your hold percentage has been slightly north of 25%. Now I was just wondering if it feels as though perhaps the nature has changed a little bit. Clearly, there have been some mathematical changes, but it also seems as though it's used higher more often than not. So I'm kind of wondering if we're doing the right thing at this point by continuing to kind of knock down posted results by a number that you've achieved.

Well, that's a good question, Carlo. You're right. We tend to be pretty conservative. I think that's true, by the way, not just in Las Vegas, but also in Macau, based on side bets, tie bets, and cash that gets dropped at the VIP tables and not just rolling. So I think your point's a valid one, and we certainly will.

Great. Thank you. And then, obviously, one of your peers in Las Vegas last night had very positive comments on January. You guys made positive comments on January and kind of the February period to date, excluding the Super Bowl. Should we take from those comments that you are seeing growth in January and February from an EBITDA perspective, or is it still kind of just top line growth with cost pressures that you're trying to offset? Or is it flowing through to EBITDA at this stage?

Yeah. Well, first of all, you're right. January was good. And the Super Bowl is not comparable. I would say we were up year to year in all of the key volume indicators. If you took it from a week ago, right before Super Bowl weekend started, we were up across the board. To me, that's indicative of what's happening here in Las Vegas from a demand perspective. On the expense side, I think you've seen us be pretty good about managing the impact of cost pressures. You can see it in the 2024 results and driving pretty healthy margins.

Great. Thank you. And then, if I could, one quick one on Macau. I know market shares are not something you focus on, whether it pertains to GGR market share. In terms of the competitive environment, you noted in your remarks that it remains competitive. But is there anything you're seeing as you look out to 2025 that would move the needle in terms of the competitive nature of the market and how it impacts Wynn?

No. I think you're correct. We've said it as well—it is a highly competitive market. Competitive but stable. I don't think there's anything unusually crazy going on. We're focused on EBITDA and margin, and that's what we think about every day. We know what our reinvestment is down to the basis point and will modulate it as we feel we need to in order to drive the best EBITDA results we can.

Great. Thank you very much.

Hi. Good afternoon, everyone. Thanks for taking my question.

Craig or Julie, just maybe we could ask about kind of keeping with Macau for a minute. As we zoom out, there's been a lot of discussion around pretty good footfall into the market during Chinese New Year, but some questions about spend per visit. Can you give us the bottom outlook of how you're seeing behavior in the market and your general sense of health, especially as you look across segments, premium mass versus base mass? Sure. The higher-end premium segment is certainly outperforming the base mass during Chinese New Year. That’s definitely the case. It could be influenced by the economy. There are a lot of crosscurrents in the economy, and it's difficult to read. There's been modest stimulus. Obviously, the economy has seen stronger days in general, but I think it's fair to say that the premium customers have outperformed the base best, at least for us. That’s not commentary on the entire market, and that's fine for us because that's our customer base.

And, you mentioned in the prepared remarks the acquisition in London. Quite a unique opportunity there. Craig, are there more sort of either bolt-on opportunities like that, places you could look to opportunistically expand the brand short of full-scale IR development? Just how do you see that? I know it's probably very unique, given the global customer base, but could you broaden that for us?

Sure. Yeah. It is unique. I would characterize it well. This acquisition was really about establishing the presence in a key global gateway city. In a part of the world where, when taken together with Wynn El Marjan, we're building a meaningful business.

So the two—when you put the two properties together, is it going to serve an area home to 2.5 billion people and 40% of the world's millionaires?

Absolutely. So you should think about this as a part of Wynn El Marjan, and in fact, the business will report up to Wynn El Marjan.

Hi, everyone. Congratulations on the quarter and another successful year. I wanted to ask about the gaming customer and the gaming volumes in Las Vegas.

In Q4, I think, quite a bit stronger than we were expecting. Table drop was about flat, and slot handle was up nicely. I think MGM spoke to that as well. So curious if you could help us understand whether the F1 customer was stable, did the F1 customer play more slots, or was it strong slot volumes across the whole quarter. Can you give us a sense of whether it was a couple of events that drove that volume or are you just seeing healthy play in slots all quarter from your customer base?

Yeah. It was not F1 in particular. It was broad-based strength across the quarter. It's indicative again of healthy demand, not just in the market, but for what we offer.

Thanks, Craig. Maybe one on margin. Obviously, financing is now complete, and you're already in full speed ahead. But what are the major milestones we should think about between now and early 2027? I think topping off might be targeted for the end of the year. Just curious what we should keep our eye on in terms of major milestones from here.

You're right. Topping off is towards the end of this year. Subsequent to that, we will spend more time with the sell-side and interested buy-side folks on Wynnum Marjan. We'll likely be arranging a market trip. So that would probably be the next point at which you want to be on the lookout because it’s important that folks understand all the amazing things that are happening in the UAE and in Dubai in general—the prevalence of high-value food and beverage, luxury hotels there, and really the power of that market. So, stay tuned because we’ll be inviting folks out to the extent that they want to come.

Hi, everyone. Congratulations on the quarter and another successful year. I wanted to ask about the potential opportunities outside of Wynn Al Marjan, as New York seems somewhat uncertain in this moment.

Sure. We're a little unique in that we build very large, battleship-style assets. We generally don't do small developments. The US regional gaming market is a tough market. The opportunities left there are primarily infill, and there’s potential cannibalization from online gaming. So I think the US regional market has slowed. What do we have before us? We have Marjan, a substantial land bank there, and we've seen the power of land banks in new markets. Particularly, we are active in Thailand, though it's early days. We're active in New York, but we won't be subject to market slowdown in New York, and we are very disciplined in terms of how we think about New York. We also have substantial land banks in Las Vegas. We have years and years of growth ahead of us. I often get asked why we're not moving on the land in Las Vegas right now. The reality is that from a capital perspective, from a bandwidth perspective within our team, there are only so many things that can be done at once. And, of course, there are time-bound opportunities that arise, and if Thailand moves ahead, for example, we want to make sure that we're in a position to participate. We have a lot of opportunities. Right now, we're very focused on Wynn Al Marjan.

Great. Thanks. Some others in Vegas have talked about their ability to grow EBITDA despite the tough comp with the Super Bowl last year. I don’t know if you have any thoughts on that. I know you have some renovation disruption at Encore, but what’s your take on that?

Sure. What I would say is, excluding Super Bowl weekend—which again was an impossible comp— all of our key volume metrics are up year over year. We anticipate a strong group room base at healthy ADRs and have seen very strong transient booking demand of late. Over the past ten days, seven of those days have been higher than any booking rates over the past two years. Retail sales were up 3% in January on incredibly tough comps, and our restaurant and banquets business is flat to last year, despite the absence of the Super Bowl. We feel good about the setup for 2025.

Okay. Thank you. And then just on Thailand, have you specified which entity would be pursuing something in Thailand? We have not, but I can tell you it would happen out of a subsidiary of Wynn Resorts, Limited. The US listed it.

Hey. Good afternoon, Craig and Julie. Thanks for taking my question. Another one on Vegas. Table drop was basically flat year over year relative to F1, and slot handle seems like it's accelerating. Craig, I guess, relative to three or six months ago, what do you feel has fundamentally changed, if anything? Because it certainly feels like there's a much more constructive tone here. Is it customer base, or are people coming back and spending more? What do you see?

I don't think our tone has changed much. I think we’ve been saying the same thing for the past two years—that growth doesn't go to the sky, but things look really good. We've made a lot of changes over the past three years to strengthen our position in this market, and certainly, to a certain extent, we go as Vegas goes. We’ve been outperforming. You can see that on an EBITDA per room basis across all the different businesses that sit under this group. I think we have great demand across the board, and you can see that in our results. If I could add on the slot side, we've made material improvements. We've expanded our high-limit room, focused on the mix of games we offer our customers, and really leaned into service. We're building a much better box and continuing to improve on what we do.

Hi. Thanks. Maybe a couple of follow-ups here. Just one on the buyback. It sounds like you have capacity on whatever that hypothetical upper bound is, and maybe there is one. If you don't get the response that you want and the stock stays in place, are there other options you would consider to unlock underlying value?

We’re not buying back stock for an immediate market response. That’s not what we’re doing. We are buying back stock because we believe it's a good long-term value.

Makes sense. And then one other one—on the Vegas OpEx comments, what are some of the mitigation factors you put in place to offset some of the wage inflation we've been seeing? How would you generally characterize net operating expense growth in 2025?

Mitigation is, as they say, a river of nickels. It's not one or two or three things that I can outline for you; it’s a hundred different things. And we’re very careful to make sure that the customer doesn’t feel that. I can’t point to one or two specific things. We have a modest increase in union-related costs for 2025, and we will figure out how to save that. Depending upon what happens with inflation and tariffs, we might have an impact on some input costs, primarily on the food and beverage side that comes down to procurement and sourcing. Four or five years in now, we know how to manage operating expenses without damaging the brand.

Next, we'll go to the line of Steve Wiesinski from Stifel. Please go ahead.

Hey. Good afternoon. So, Craig, if I can stay on OpEx, but switch over to Macau. It came in a little better than what we were thinking. Can you help us understand how you're thinking about the cost structure for Macau this year? I'm not going to provide OpEx per day guidance, but I would say that, like Las Vegas, it comes down to day-to-day management. OpEx can be impacted by non-gaming programming and get a bit of lumpiness from quarter to quarter. But really, it comes down to extremely good management.

Thanks for that, Craig. And second question—if I can go back to the buyback real quick. I'm wondering how you think about balancing the buyback with investing capital in new projects. How do you go about that?

Fortunately, we're in a position now from a liquidity perspective and a leverage perspective where we can do both. Even if we took on new projects, you have to imagine that from a development perspective, that takes time, and the capital spend for those is several years out. As I said in my prepared remarks, while multiples remain suppressed, we will continue to support the stock with buybacks.

Afternoon, everybody. Thanks for taking my question. On Las Vegas, the refresh and renovations, can you flesh out the timing, rooms out of service, and whether you think you’ll have disruption over the next couple of quarters?

We do it in the depths of summer when we have the most flexibility and capacity. We're essentially taking out three floors at a time—the floor being renovated and one above and one below it—to minimize disruption. There may be a slight impact but we’re planning to launch this with WDD at the end of the summer, anticipating about a twelve-month process to reduce the impact as much as possible. However, we won't call out the disruption specifically.

That's super helpful. I also want to ask a question about room rates. Your room rates are tied to the rest of the market. I'm curious if, while the fall was a little squishier away from you, things have gotten better as we approach the new year.

I don't think we're in a position to comment on the market as a whole because we're only 4,700 keys out of a hundred fifty thousand. I will say in Q1, you're going to see in our reported Q1 a decline in ADR, but that's because of the Super Bowl. The Super Bowl room rates were exceptional. Our pricing power feels incredibly good and continues to feel strong as we move into 2025.

Hi. Good afternoon. Thanks for taking my question. I wanted to direct the attention to slide twenty where you lay out the CapEx projects in Macau. Can you help us think about some returns you’re planning on these investments? The 2026 one is much larger and farther out in terms of financial impact but how does that fit into your long-term growth strategy?

We've been talking for some time about the commitment we made with the concession and we've made a commitment of $2.6 billion over the next ten years. We’ve laid out on page twenty in the presentation the big three items we are focusing on. We’ve made a lot of progress on the destination food hall, which is internal to Wynn Palace. The larger projects that require approvals—we're still in that process. We've been deliberate in how we've identified what we want to build in Macau. We’re very focused on it staying within the Wynn brand. In terms of ROI, it's too early to get to specifics, but these projects will be consistent with our brand and with the non-gaming elements we've deployed successfully in Vegas. Our experience shows that non-gaming amenities drive visitation to our properties and ultimately strong long-term returns for us and our shareholders.

Do you think the effects of FX on your market will affect visitation or customer spending significantly?

Not at all. International business has historically shown resilience against fluctuations in FX. We have diversified and are less reliant on international business than in the past.

Hey. Thanks for taking my questions, Craig and Julie. A few months ago, there were headlines regarding the pace at which the UAE would allocate gaming licenses. Given your support, do you have any views on the pace of future competitors?

We don’t believe that every Emirate will avail themselves of potential licenses by any means. Based on what we've seen, we don’t see line of sight on a second license. It’s important to note that we're opening in March of 2027, and design and build time is significant. If you consider that we will have a lead, first to market generally leads to a sticky database, and we are well positioned to handle potential new entrants. We believe clustering would be positive for the industry. We’re comfortable with our position. Finally, we think about our most important customer cohorts. This acquisition in London is about catering to new customers who may wish to experience our luxury offerings and who may also be inclined to gamble.

Thank you all for participating in the Wynn Resorts, Limited fourth quarter 2024 earnings call. That concludes today's conference. Please disconnect at this time and have a wonderful rest of your day.