Wynn Resorts Management Discusses Q2 2012 Results - Earnings Call Transcript

Wynn Resorts (WYNN)

Q2 2012 Earnings Call

July 17, 2012 4:30 pm ET

Executives

Matt Maddox - Chief Financial Officer, Principal Accounting Officer and Treasurer

Stephen A. Wynn - Founder, Chairman, Chief Executive Officer, Chairman of Wynn Macau Limited and Chief Executive Officer of Wynn Macau Limited

Marc D. Schorr - Chief Operating Officer, Director, Member of Gaming Compliance Committee and Director of Wynn Macau Ltd

Linda Chen - Director, President of Wynn International Marketing Ltd and Chief Operating Officer of Wynn Resorts Macau

Maurice Wooden - Executive Vice President of Food & Beverage Operations

Robert Gansmo - Vice President and Chief Financial Officer

Analysts

Joseph Greff - JP Morgan Chase & Co, Research Division

Shaun C. Kelley - BofA Merrill Lynch, Research Division

Carlo Santarelli - Deutsche Bank AG, Research Division

Steven E. Kent - Goldman Sachs Group Inc., Research Division

Felicia R. Hendrix - Barclays Capital, Research Division

Robin M. Farley - UBS Investment Bank, Research Division

Jon T. Oh - Credit Agricole Securities (USA) Inc., Research Division

Presentation

Operator

Good afternoon, and welcome to the Wynn Resorts Second Quarter 2012 Earnings Call. Joining the call on behalf of the company today are Steve Wynn; Marc Schorr; John Strzemp; Matt Maddox; Maurice Wooden, COO of Wynn Las Vegas; Scott Peterson, CFO of Wynn Las Vegas; and on the phone, Linda Chen, COO of Wynn Macau; and Robert Gansmo, CFO of Wynn Macau. [Operator Instructions] I would now like to turn the call over to Mr. Maddox. Please go ahead, sir.

Matt Maddox

Thank you, everyone, for joining us today. Before we get started, just to remind everybody that we will be making forward-looking statements under the Safe Harbor Federal Securities law, and those statements may or may not come true. So with that, I'm going to turn over to Stephen for an introduction.

Stephen A. Wynn

Hello, and good afternoon, everybody. I appreciate Linda staying up so late in Macau. I think we have everybody here to answer questions. I'll make a couple of summary remarks. First, Las Vegas.

Last year, we -- I've mentioned before, we enjoy a great deal of very high limit Baccarat business. And that high play tends to be volatile. In the long run, not so much. But in the short run, it can be. For example, last year, during the 6 months, the first 6 months of the year, winners. That is to say, people who won money from the casino were outnumbered by the losers. The losers were outnumbered by the winners. And that is to say, the amount of money we paid to people who beat us, compared to the amount of money of folks who lost money to us was a positive for the company of $150-odd million.

This year, the people who won money in the casino were much more, and the people who lost money to the casino were less, and the delta was $38 million. That is to say, there was $112 million difference in 6 months in the win of the casino associated with high limit Baccarat.

Last year, we held 37% or something like that. And this year, it's 17%. Normalized, it's about 26% for that gain. So when you normalize everything, the trend in Baccarat, Marc will remind me, in 2010, high limit Baccarat won how much, Marc?

Marc D. Schorr

$111 million.

Stephen A. Wynn

$111 million, and then if you normalize a whole percentage...

Marc D. Schorr

$125 million.

Stephen A. Wynn

Pardon me?

Marc D. Schorr

In 2010, if you normalize it...

Stephen A. Wynn

2010 was $125 million...

Marc D. Schorr

Normalized.

Stephen A. Wynn

Normalized.

Marc D. Schorr

Actual was $111 million.

Stephen A. Wynn

And what was normalized last year?

Marc D. Schorr

$145 million.

Stephen A. Wynn

And this year, if you normalize it?

Marc D. Schorr

$174 million.

Stephen A. Wynn

$174 million. We actually have more business. So all of that is academic in a matter of speaking but, it does shed some light in understanding to the kind of shifts that can take place short-term in businesses that have this kind of high-end gambling. In terms of the rest of the business, it's about flat or slightly up in Las Vegas in terms of noncasino revenue.

And so, if you normalize everything, we would have had a better result than we did. Last year, we had a premium result because we had abnormally high hold percentages. But our business levels this year in Las Vegas are slightly better than last year, except for hold percentage.

In Macau, for the first 6 months, business was flat. We were slightly ahead. The market has gotten more competitive. Two new hotels opened up in the second quarter, operated by the Sands. And those 2 hotels added more games to the marketplace. And generally speaking, business was flat for the market, the high limit business and the VIP junket business and the total casino win. But we suffered on the top line, an adjustment of a couple of points on revenue, but we didn't seem to have the problem on the bottom line.

As a matter of fact, the basic challenge in Macau, we have our share of the business, is to preserve margin, the bottom line. And that is of course, difficult when we have been able to hold the percentage we pay to junket operators, to 40% plus 3% or so for complementaries and our competitors are about 5 points ahead of us in terms of what they give the junket operators. Now ordinarily, that's not an unusual thing. That happens all the time in competitive markets. A hotel like Wynn or before Wynn, the Bellagio was always facing the challenges of hotel -- of other properties who to tried to buy the business away from us by increasing promotional allowances and other customer discounts of one form or another, or player benefits.

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