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Home / Articles

Wynn Resorts: Analytical Overview & Q2FY23 Performance Review

20 Jun, 2024
Written by
Elizaveta Latinskaya
Elizaveta Latinskaya
Wynn Resorts: Analytical Overview & Q2FY23 Performance Review

Wynn Resorts has been making significant strides in the global gaming and hospitality industry, underscoring its commitment to expansion and innovation. Recently, the company revealed exciting new developments and strategic financial moves, including the construction of its latest luxury resort, Wynn Al Marjan Island, in Ras Al Khaimah, United Arab Emirates (UAE).

Wynn Al Marjan Island Project  

Wynn Resorts has released new images of Wynn Al Marjan Island, its first beachfront resort in the Middle East North Africa (MENA) region. This development, a $3.9 billion project with a 40% stake owned by Wynn, is expected to open in early 2027. Located on a nearly 62-hectare island, the resort will feature 1,542 rooms and suites, 22 dining and lounge experiences, a theater, a luxury shopping esplanade, and extensive recreational facilities. This project is seen as a major milestone for Wynn, positioning it as a key player in the rapidly growing UAE gaming market, which CBRE Credit Research Director Colin Mansfield describes as the “next gaming frontier.”

Financial Strategy and Market Positioning  

Wynn Resorts is strategically positioning itself as a leader in free cash flow margin within the global gaming sector. CBRE estimates that the Wynn Al Marjan Island project will be de-leveraging for Wynn on a pro forma basis by 2026, with gross lease-adjusted leverage expected to decline to about 4.2x. The company’s robust internal liquidity and strong cash flow generation are critical factors enabling it to self-fund its equity investment into the UAE project, ensuring minimal impact on consolidated leverage.

Q2FY23 Financial Performance

Wynn Resorts’ Q2FY23 financial results highlight the company’s strong recovery and growth trajectory. Key metrics indicate significant improvements across various financial parameters compared to Q2FY22.

Revenue and Income  

For Q2FY23, Wynn Resorts reported operating revenues of $1,595.822 million, a substantial increase of $686.990 million from the $908.832 million reported in Q2FY22. This growth underscores the company’s successful operational strategies and its ability to attract and retain high-value customers across its properties.

The adjusted net income attributable to Wynn Resorts was $103.3 million, or $0.91 per diluted share, compared to an adjusted net loss of $93.7 million, or $0.82 per diluted share, in Q2FY22. This turnaround from a net loss to a net income demonstrates Wynn’s effective cost management and revenue generation capabilities.

Adjusted Property EBITDAR  

Adjusted Property EBITDAR for Q2FY23 was $524.5 million, marking an impressive increase of $345.3 million from the $179.2 million reported in Q2FY22. This improvement reflects enhanced operational efficiencies and higher customer engagement at Wynn’s properties.

Strategic Financial Moves

Wynn Resorts has also made strategic financial decisions to strengthen its balance sheet and optimize its capital structure:

1. Convertible Bonds Offering: On March 7, 2023, Wynn Macau, Limited (WML) concluded an offering of $600 million 4.50% convertible bonds due 2029, generating net proceeds of $585.9 million. This move provides additional liquidity and flexibility for the company’s growth initiatives.

2. Debt Repurchase: In March 2023, the company repurchased all its outstanding Wynn Las Vegas 4 1/4% Senior Notes, totaling $500.0 million in principal amount, using cash held by Wynn Resorts Finance. This repurchase incurred a $1.0 million loss due to early debt extinguishment but significantly reduces future interest obligations.

3. Term Loan Amendment: On June 2, 2023, Wynn Plaza Property Owner, LLC and Wynn Property Owner, LLC executed a second amendment to the existing term loan agreement. Effective July 3, 2023, the amendment adjusted the benchmark interest rate for the $615.0 million secured loan and incorporated related conforming changes, further optimizing the company’s debt profile.

Business Outlook

Looking ahead, Wynn Resorts anticipates continued growth and stability across its global operations:

– Macau Operations: The company expects the win percentage for VIP operations to range from 3.1% to 3.4%, with table games win percentages in Las Vegas and Encore Boston Harbor projected between 22%-26% and 18%-22%, respectively.

– Debt Management: Wynn anticipates a net increase in fixed interest rate long-term debt obligations by $100.0 million during H1FY23, with fixed interest payments projected to rise significantly in the coming years due to new debt issuances and repurchases.

– Currency Risks: Given that a substantial portion of WML’s debt is in U.S. dollars while most revenues and expenses for Macau-operated casinos are in Hong Kong dollars or Macau patacas, exchange rate fluctuations could impact financial results. A 1% shift in the U.S. dollar/Hong Kong dollar exchange rate could result in a foreign currency transaction gain/loss of $44.1 million based on Q2FY23 balances.

Conclusion

Wynn Resorts continues to demonstrate resilience and strategic foresight in the dynamic global gaming industry. With its robust financial performance in Q2FY23, strategic financial maneuvers, and ambitious projects like Wynn Al Marjan Island, the company is well-positioned for sustained growth and expansion. As Wynn leverages its strong cash flow and market positioning, it remains a formidable player in the luxury gaming and hospitality sector, poised to capitalize on new opportunities and navigate future challenges.

For a comprehensive look at Wynn Resorts’ performance, access our complimentary Wynn Resorts Q2FY23 Report Overview today!

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