The decisions Wynn Resorts made in mid-March to deal with the oncoming coronavirus pandemic, including spending $75.7 million to pay its U.S. employees during the nationwide casino shutdown, sent the company to a first-quarter cash flow decline of 109.2% and a companywide net loss of $402 million.
CEO Matt Maddox doesn’t regret any of the choices, which began long before Wynn chose to voluntarily close its casinos in Las Vegas and Boston.
“We have invested heavily in our culture and we chose to pay our employees through the end of May,” Maddox said Wednesday during the company’s first-quarter conference call.
“I wanted our team members to have smiles on their faces underneath their masks when they came back to work,” Maddox added. “You can quickly disrupt a culture that takes years and years to build.”
Shortly after the call concluded, Wynn announced that it had extended full pay and benefits to 15,000 employees in Las Vegas and Boston through May 31. The company said it will have spent $250 million in payroll for 75 days without an operating property.
Maddox said on the conference call that he was hopeful the company could reopen portions of its two Strip resorts by the end of May, if the medical data concerning the containment of the COVID-19 coronavirus meets state guidelines.
“We anticipate as we get closer that there will be pent-up demand in the leisure segment (for traveling to Las Vegas), Maddox said, “We’re going to have an environment (and) I think a lot of people will want to participate in (a place) that is safe and fun.”
Maddox said the company is still determining an opening plan for Las Vegas, which would include both Wynn Las Vegas and Encore but with occupancy restrictions in the hotels, while large gathering areas and nightclubs remaining closed.
He doesn’t expect a lot of hotel rooms coming online in the early days of the Strip’s reopening. Group business, Maddox said, will be “non-existent” for the first few months.
“It will be a slow ramp,” he said. “Our pricing power will dictate how full we want our properties to be.”
After dealing with this winter’s coronavirus outbreak in Macau, which saw the lucrative Chinese New Year celebrations sidelined in January and casinos closed for 15 days in February, Maddox said he engaged with medical experts at Georgetown University in March about the pandemic, which led to the company voluntarily closing Encore Boston Harbor on March 15 and its Las Vegas properties two days later.
Last month, Wynn released a detailed reopening plan that was developed in consultation with medical teams from Georgetown and Johns Hopkins Universities.
“We believe it will be the gold standard for sanitization and customer safety,” Maddox said, adding that several professional sports teams and other businesses had asked to review the plan.
At the same time, the company focused on preserving its balance sheet to weather the casino closures.
Wynn CFO Craig Billings said the company had $3.4 billion in cash on its balance sheet and had raised another $600 million in unsecured notes. Including its still well-below-normal Macau operations, Billings said the company had a daily cash-burn rate of $7.8 million, which included roughly $3.6 million in the U.S.
The company postponed a planned $170 million remodeling of its hotel rooms at Wynn Las Vegas until next year and has suspended its $1 per share quarterly dividend, which will save another $100 million every three months.
In the quarter that ended March 31, Wynn saw revenues fall 42.3% to $953.7 million. Net revenue in Las Vegas fell 19.2% to $323.8 million, while the net revenue declines in Macau were 56.2% at Wynn Macau and 64.3% at Wynn Palace.
Maddox said the company had an 8% increase in revenue per available room in Las Vegas in January and February before the pandemic wiped out much of March. The Macau market will remain impacted until the government eases travel restrictions from Mainland China and Hong Kong.
“The company expects visa/border restrictions, specifically in Guangdong, to ease over the next couple months, which is consistent with market expectations,” Jefferies gaming analyst David Katz told investors. “Management also expects pent-up demand in the summer, as May holiday booking in China appears robust.”
Wynn recorded a net cash flow loss of $38.9 million in the first quarter, or a 109.2% decline. Wynn lost $402 million in the quarter, a loss per share of $3.77.
Shares of Wynn, traded on the Nasdaq, were down 42 cents or 0.53% to close at $79.25 on Wednesday. The company’s shares were down another 1% in after-hours trading.
Howard Stutz is the executive editor of CDC Gaming Reports. He can be reached at hstutz@cdcgaming.com. Follow @howardstutz on Twitter.
