Wynn Whiffs on Q2 Earnings as Operating Revenue Declines Almost 95 Percent

Posted on: August 4, 2020, 03:29h. 

Last updated on: August 5, 2020, 01:05h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

Wynn Resorts (NASDAQ:WYNN) said its second-quarter operating revenue dropped 94 percent to $85.7 million, down from $1.66 billion a year earlier. The gaming operator joined a growing list of companies reporting dismal numbers for the April through June stretch because of the coronavirus pandemic.

Wynn Whiffs On Q2 Results
Wynn and Encore in Las Vegas’s Q2 results were bad, but executives offered encouraging comments on virus testing and cash conservation. (Image: Las Vegas Review-Journal)

The Encore operator said it lost $5.97 a share. Analysts expected the company to lose $4.70 a share on sales of $275.82 million. Wynn posted an adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) loss of $322.9 million, worse than the EBITDA loss of $313.7 million Wall Street forecast.

The net loss figure excludes compensation for employees from April 1 through May 15 — a time frame in which the operator’s two Las Vegas Strip properties and Encore Boston Harbor were shuttered. Unlike many gaming companies, Wynn opted to pay employees for the entire shutdown period. But it was revealed in late June that two-thirds of staffers at the Massachusetts property will be furloughed.

In Macau, the company’s most important market, Wynn Macau and Wynn Palace combined for second-quarter operating revenue of just $20.6 million, down from $1.17 billion a year earlier. The firm said its Macau operations, though “fully restored,” are being hampered by travel controls and other restrictions.

Wynn’s VIP table games win percentage at both Macau venues was below expectations.

Prioritizing Safety, Cash

On a conference call with analysts and investors, Wynn CEO Matt Maddox — viewed as one of the architects of the health and safety plan that served as a foundation to reopen Nevada casinos in early June — highlighted the company’s coronavirus testing protocols.

Maddox said Wynn developed an algorithm to surveil staff and randomly test 500 to 600 employees every two weeks. He adds that the company has 10 in-house contact tracers.

“To put that in perspective, we performed 16,750 tests, and 98 percent have come back negative,” said Maddox. “The roughly 300 of our staff that were positive, our contact tracers contacted them immediately, and through an extensive interview process, 99 percent of those 300 people were exposed outside of Wynn.”

On the business side, Maddox reiterated that Wynn will staff to demand, noting that in the 26 days in June Wynn and Encore on the Strip were operational, the company generated roughly $9 million in EBITDA on a normalized basis. The CEO said the financial focus is on conserving cash and breaking even or turning a profit. To start the current quarter, Wynn generated EBITDA of $5 million in Las Vegas.

Current occupancy rates in Wynn’s home market are about 50 percent on the weekends and 30 percent on weekdays.

Vegas Trends

Like rival Vegas venues, Wynn and Encore were closed for all of April and May, sending the operator’s June quarter revenue down 86 percent to $64.9 million, a steep decline from $464.1 million a year earlier.

Maddox said amid the June reopening, there were signs of pent-up demand in Sin City, particularly from California visitors, and that Wynn was fielding roughly 4,000 reservation requests per day.

However, that number declined amid a second wave of coronavirus cases, as would-be visits from Arizona and California — the two key drive-in markets for Las Vegas — slid 25 percent, according to the CEO.

In Massachusetts, Maddox said slot volumes are actually higher, but table games are suffering because craps and roulette still aren’t operational. He said the company is working with the Massachusetts Gaming Commission (MGC) to get those gaming offerings up and running.