Wynn Resorts Q2 2024 Earnings Call Transcript

Sure, Carlo. I'll start, and then I'll ask Brian to talk a bit about group in Q3, Q4. Yeah, I noticed subsequent to one of our peers reporting the other day that there was -- that there were some thoughts around Q4, some concerns around Q4. As you said actually, the booking window is relatively short, other than for group and then certain special events, F1 in particular, and so we don't -- we're not seeing anything of concern per se with respect to Q4. F1, specifically, which I know was mentioned extensively again on a peer's call, F1, they're really top-notch operators. And unlike last year, when they heavily marketed throughout the year, they just started their big marketing push for the race this month, August. So I'm sure the race will be well executed. Our experience during last year's F1 and more recently during the Super Bowl tells us that we will be the place to see and be seen during the race. And so we're confident that we'll do just fine and get more than our fair share. Brian, group in Q3 and Q4 and any other thoughts on the back half of the year?

Sure. Thanks, Craig. Carlo, Q3 continues to pace very well. It's solid. August and September look even better than July. And when we look to Q4, pacing well for the year will be the best year we've ever had in group and convention. And '25 seems to be pacing actually ahead of that, all with strong ADR growth. So the sales team has done a phenomenal job, and our yield management team and revenue management continues to yield because of that strong base. So it helps all segments. So I think we're in solid shape and we're encouraged by what we're seeing.

Thanks, Carlo. Well, as you know, you've followed the company for a long time, we're not programmatic buyers of the stock and we tend to buy back more when it is particularly cheap. So you're right to that end, we did purchase in the quarter and we continued to purchase into July and actually the first few days of August. Actually, we still have some $365 million in capacity under the Board authorization. We're really balancing all of our liquidity needs between capital deployment for growth, the UAE, potentially other greenfield markets, delevering slightly and returning capital to shareholders through dividends and share repurchases. Fortunately, we're in a position to do all of that. And so as you rightly note, it's really a question of quantum, and we'll continue to be opportunistic about it.

Thanks, Joe. Well, to your second question first, there's always a relationship, given the way that GAAP requires you to book rooms revenue associated with the casino. There's always a relationship between casino volumes, quality of customers and room rates. With respect to retail -- the retail component of non-gaming, I think the situation with respect to luxury retail in China is hopefully well understood. I think you've seen a lot of the large luxury retailers come out and make commentary on the topic. And of course, Macau and Hong Kong are not immune. I think what we've experienced is pretty consistent with our peers who have comparable retail footprints.

To the first question that you raised, we're not going to provide specific numbers, but we were pleased with the bounce back in July. And as you know, market share can bounce around here and there over the course of any given year or any given quarter. And as I said in my prepared remarks, you can't take market share to the bank. So what we don't want to do is completely blow out our reinvestment levels in pursuit of market share that doesn't drive meaningful flow through. So we are being this with respect to reinvestment and being aggressive in terms of going out and getting business.

Sure. Thanks, Joe. Well, first of all, we are delighted with the public announcement of the GCGRA, the federal regulatory body for gaming if you -- for I guess you and everybody else on the call, if you haven't taken a look at their website, we encourage you to do that. The members of that body are some of the luminaries of the industry and very, very experienced regulators. The establishment of the GCGRA creates -- I think, hopefully creates incremental clarity for investors and financing sources. It certainly has on the financing -- on the bank financing side. And then you'll also note that they recently awarded a lottery license for the UAE. And I think that that hopefully, again, gives folks comfort. I assume that they will be moving forward next to the next step in our licensure. I don't have a specific timeline for you, but you can see all the momentum that's happening there.

Thanks, Shaun. Yeah, I'm sure you saw the news flow with respect to -- it was nearly a single day, but with respect to a recent visitation record. You're right, we don't really swim in that pond. It's not about the number of bodies. It's about the quality of the bodies. You're also correct that if we had to pick up one of the two properties that was more exposed to that, it would be downtown. And I can't say that that was a meaningful impact -- that had a meaningful impact rather. During the second quarter, it was really about share. We have to fight for share every day. That's what we need to do. So I don't -- we don't really watch visitation numbers and think about the broader impact on our business because, again, for us, it's about who's there, not how many are there.

No. There's a lot of cross currents happening in the economy there. So we watch that very closely. And as we've seen in this cycle and in previous cycles, the gaming business has been pretty resilient. You'll note the comment that I made to the previous caller with respect to retail, and I think you see that in the retail revenue and the retail revenue trends. But with respect to gaming, we don't see that. What we see is a pretty competitive market -- pretty competitive environment from market share. And so we have to be competitive and get our fair share.

Sure. Well, with the caveat that Macau has always been and always will be an extremely competitive market, I'm not going to comment on specific promotional activity by others in the market. But I can tell you that our reinvestment in any given quarter could move up or down 50 basis points, 75 basis points, something like that, based on what we're trying to achieve. But the core of our competitive strength will always be product and service.

Well, I would say anecdotally, it is impactful. I say anecdotally because we have so much going on, both in terms of internally generated events and programming that we're doing here and city-wide events that are happening or events that are happening at other properties. So I mentioned in my prepared remarks, we've done some $970 million in EBITDAR out of Wynn Las Vegas over the trailing 12 months. That's a real credit to the team here. So every little bit counts. I can't isolate any particular event short of, of course, the major events like F1, Super Bowl, things like that. And as I said on a previous call, we're delighted to have the sphere and their team as neighbors. We love innovators. We love people that do things at the cutting edge and drive high quality visitation.

Sure.

Yeah. Good question. Thank you. What do you look for? High-end wine sales, club sales? I mean, we can go all day. I mean, we can look at the -- we can get into the weeds and talk about individual unit metrics that you would be looking at if you were on the inside of our business. We haven't seen that yet. As we've been saying now for -- I think we've been answering questions around the impending performance of the business for over two years. So we haven't seen that yet. But we're watching very, very closely to see how the consumer is behaving both in the moment and as they book to stay with us.

What can we do to the extent that the consumer was to soften a little bit? And we've talked about this on calls previously as well. I mean, we lived through a zero revenue environment for several months in a seriously compressed revenue environment for many months after that as we went through COVID and the aftermath of COVID. That team is still here. Still doing a tremendous job. And we have every playbook under the sun. We've learned how to run this business far differently than we were able to pre-COVID, which is part of the reason that we have been running such incredibly healthy margins, and we're able to fade things like the union increases the way that we have. So we have a playbook for every possible situation, but we haven't seen any of those situations emerge yet.

Yeah. We would pursue it out of Wynn Resorts out of the U.S. enlisted entity. It's still early days. You're right. There has been progress, and it's encouraging to see. And it seems as though the legislators in Thailand really want to get this moving, which is great. We need to see more details on the regulatory and licensing structures. But the market is an attractive market. And it's probably conducive to meaningful investment pending, again, a deeper understanding of the regulatory and licensing structure. You have amazing tourism infrastructure. You have a really strong service culture and a favorable operating expense structure available in that market. So we're continuing to monitor the process very, very closely, and we're active on the ground there.

Sure.

Sure. The second portion of your question first, we don't target -- we don't have target leverage levels because we will lever in place EBITDAR to develop new projects. But we feel very good with where we are now. There's a WACC minimization question that needs to be answered, and we're probably in that zone at the leverage level that we're at today. With respect to buybacks, it's a little bit like capital deployment. We think about these things in five- and 10-year increments. And over five or 10 years, there's going to be times when the stock is expensive, there's going to be times when the stock is fairly priced, and there's going to be times when the stock is cheap. And so what we need to do is continuously decapitalize in an appropriate manner. And of course, we will consider whatever the implied valuation is in the equity at any given point in time, and we will act accordingly. But if we're growing the company by putting capital on the ground, we're returning to capital to shareholders through the dividend, and we are decapitalizing the business and we're doing the right thing for those who have a long-term view on our business, and those are the people that we care about.

Sure.

Sure, sure. Robin. Yes, smart tables have a few -- they've been around for a long time, but they've really just now reached the point from a technical soundness perspective and capability perspective where they could be really impactful. So, of course, they have implications on -- positive implications on game security. They have some implications on opex. But the important aspect of them is, in fact, the data and the ability to ingest and act on the data, which can drive better reinvestment decisions, which I think is at the core of what you mentioned when you say that it impacts market share. We've had a test bank of smart tables for a while now, and we're now moving to full roll out. We've made a ton of investments in the areas of analytics and data science over the course of the past several years, and I think we'll be in a position relatively quickly to both ingest and interpret and act on that data subsequent to roll out.

Sure. We lapped the union increases a couple days ago. So July was the last month that we were still dealing with difficult year-over-year comparables on those. And with respect to Q1, I don't have a view for you yet, to be perfectly honest. I mean, we agree -- how we operate. We aggressively manage revenue and we aggressively manage expenses, and we'll do that throughout Q1. But what the impact of not having the Super Bowl this year will be and what that'll mean to the numbers, I don't have any guidance for you yet.

Sure.

Sure. Try to figure out how to condense an hour's worth of content into a response. But -- so the way I think about it is like this. There is not a proper integrated resort on really that half of the planet, okay? So the closest is going to be in Asia, right? Singapore or Macau. So we have this unique asset. We have a very, very robust population that is within an eight-hour flight of that asset. This is a part of the world where people are accustomed to flying longer distances in order to holiday and to visit. You have 86 million airlifts coming into the Dubai airport. We're about 55 minutes via one of three six lane highways from the Dubai airport. In fact, because of traffic, it's shorter to get to us than it is to get to the major areas within Dubai. And then you have 10 million people locally, 9 million of whom are not Emirati and, therefore, are able to play. So -- and if you compare that to Boston, if you compare that to New York City, you can see that that's a pretty favorable number.

So we have a very robust go-to-market plan. We're not going to talk about it publicly, but we will be ready when the doors open. And I would say to your comment on Europe, yes, Europe is an important market for the UAE in general. But don't forget India. India is a huge market for this part of the world. There's a lot of folks there. There's a lot of wealth in India and that's going to be an important market. And there are other parts of Asia that are big markets for the UAE as well. So it's an exciting project. I think the catchment area is probably larger than any other project that we have done, maybe akin to Vegas, if you take into account the fact that Europe's population is pretty substantial and the international airlift is incredibly strong.

No. Well, first of all, market share can bounce in. Three people can come in and change your market share on any given day. That's the nature of the business, right, particularly when you're operating at the high end. So market share can bounce around. I think we are in a constant process of evaluating and reevaluating not just the quantum of reinvestment that we will provide, but the form of that reinvestment. And we are targeting that reinvestment at very specific segments and sub-segments of the market. And so we recognized what we needed to tweak from Q2 and from June in particular, and we corrected it and we went to market with it and we -- like I said, we bounced back in July, which was good to see.

Thank you, Brandt. And operator, the next question will be our last. Thank you.

Sure. We will grow in Vegas. It's really a question of when, not if. And we will take advantage of the land bank that we have in Las Vegas. In terms of relative returns, I think the highest relative return that we can quantify now is absolutely in the UAE on Al Marjan Island. And as I mentioned, we just took down a land bank there as well. You can look at the history of gaming markets, Macau in particular, and you can see the power of a land bank and the power of using that land bank and going to market relatively quickly. So that's top of mind for us. The other development opportunities that we have, most notably the potential in New York and the potential in Thailand, it's too early to say what the returns will be because we don't know what the tax rate will be. And obviously, that heavily, inversely correlates to what the return on the project. And we won't do project -- vanity projects, if those vanity projects don't deliver appropriate returns relative to everything else that we have on our plate.

Sure. Not really. So I talked about this a little bit on the last call. There's a bright side to the fact that purchasing power of $1 today is the same as about $0.80 in June of 2019. We reprice our rooms every day. Our gaming customers' bankrolls are in current dollars. Of course, our invested capital and our debt is in yesterday's dollars, which is a great setup. If you look at that $970 million of EBITDAR on our invested capital here, it's a very, very healthy return. That being said, we don't see it. And I wouldn't say that there's wide differentiation across the customer database. So again -- and you referenced this, we focus on a very specific customer. Brian, anything you would add there?

Yeah. I would say that the highest end of the market continues to grow for us on the non-gaming side, and the team's done a phenomenal job in capturing that business, and it's perfect for our brand, and that's where we sit and operate and do a great job. It continues to grow.

Sure.

Well, thank you, Chad. And thank you, everyone. We'll now close the call. Thank you for your interest in Wynn Resorts, and we look forward to updating you again next quarter.

Thanks, everybody.