Wynn Resorts, Limited

Welcome to the Wynn Resorts Third Quarter 2020 Earnings Call. All participants are on a listen only until the question and answer session of today's conference. To ask a question, press star 1 on your touchstone phone. Record your name and I will introduce you. Please limit yourself to one question and one follow-up question. This call is being recorded. If you have any objections, you may disconnect at this time. I would now turn the line over to Craig Billings, President and Chief Financial Officer. Sir, you may begin.

Thank you, Operator, and good afternoon, everyone. On the call with me today are Matt Maddox and Marilyn Spiegel in Las Vegas. Also on the line are Ian Collin, Linda Chen, Kieran Carruthers, Frederick Lupusuto, and Brian Goldbrand. I want to remind you that we may make forward-looking statements under safe harbor federal securities laws, and those statements may or may not come true. I will now turn the call over to Matt Maddox.

Thanks, Craig, and thank you for joining us today, everyone. Everybody's glued to the television watching these exciting election results right now. So we'll get right into it on our results here. I'd like to start in Macau. So the third quarter in Macau was really very similar to the second. There wasn't a lot to talk about. We're still seeing roughly 8% to 10% of our visitor volumes compared to pre-COVID levels. And it was really, there was just not a whole lot going on. But as everyone has been seeing, the government of Macau, with its deliberate approach and steadfastness, has been working very hard to continue to open Macau. Macau is probably one of the safest places on the planet, hasn't had a COVID case in months and months and months. And everyone there is really excited to see the progress that's going on. So as an example, in the month of August, in Macau, our EBITDA line was negative $40 million because there was very little revenue and we were carrying our cost. Our team's doing a great job saving money where we can, being more efficient while protecting the local employment and all of our employees. However, in October, we started to see those trends change. So we went from 10% of our normal visitor volumes up to almost 30%. And it wasn't just over Golden Week. It was actually throughout the month. And, in fact, I looked at our visitor data from November 2nd, 3rd, and 4th at Wind Palace before I walked in here, and we're seeing roughly 6,000 people a day come in the building. Pre-COVID, that number was 18,000. So those trends that we saw in early October are continuing into November. From a revenue standpoint in October, masks, drop on the table side was roughly 40% of our pre-COVID levels. And on the junket side, which everyone's been talking about the junket business, what's going to happen to it? Is it going to survive? Where is it going to go? Clearly, it's changing. Clearly, it will be smaller even as we come through this than it was before, but it's still very real. We saw 30%, roughly between 25% and 30% in turnover compared to our pre-COVID levels in the junket space. So that activity produced actual positive EBITDA for us in October. So if you think about it, we went from a negative 40 million in August, which was normal, similar in July, et cetera, to a positive six in October. Quite a big swing. And what we are optimistic about in Macau is, is the way that everything has been handled there, it doesn't appear to be one step forward, one step backward, one step forward. It's been a very deliberate approach, very thoughtful, and it just feels like we are, and the market is just going to continue to get better. I don't know at what speed. I don't know at what pace, but the overall mood, attitude, and trajectory is quite good. In fact, looking in October at our retail sales, They were roughly flat with last year, and our top five stores in Macau were up 25% compared to last year. So there's real consumer, pent-up consumer demand, and it's just going to take time for the market to continue to open, but we feel really good about the current trajectory that's going on there. Moving to North America, as we talked about on the last call, we are not going to sacrifice our brand or our culture to make an extra few dollars here or there. That means while we have significantly less staff, approximately 7,400 less staff globally now that we did pre-COVID, we are still operating at a five-star level in Macau and in North America. We are focused on making sure we have the highest room rates in the markets. But we've also been focusing on making sure that we continue to break even or make money. And in Las Vegas, we made $20 million in the third quarter, hold adjusted closer to 28. Some of the things that are encouraging that we're seeing in Las Vegas is we are taking share in the casino segment. We're seeing new domestic customers that we've never seen before that previously were lifers at some of our competitors. And I think for all of the reasons that we've been laying out, from our security protocols of checking everyone when they walk in, to our COVID protocols, to all of our restaurants being open, we're beginning to continue – not beginning, we are taking market share on the casino side. Slots in the market were down over 33% during the quarter, and we were down 60%. Table drop was down about 35% in the quarter, and we were down 25%. We're just seeing more business. We're seeing higher-end customers. Not a lot, but we're seeing that I believe we are gaining share on that front. In October in Las Vegas, we actually had our best month. We generated roughly $14 million of EBITDA in October. We had a little bit of hold luck in there, maybe $2 million. But overall, it was a very good month. Now, As everyone on the call knows, Las Vegas has seasonality, and we're coming into the slow time. So COVID cases are picking up in the U.S., obviously, and November, December are quite slow in Las Vegas and have been heavily reliant on group. So October will not be repeated in November and December. But it shows that when there is just a little bit of business with the way we've restructured our expense line, the amount of operating leverage that we have now, revenue quickly converts into EBITDA. And our focus, as things do get a little slower during the winter, is to make sure that we stay EBITDA positive. That's what we're going to do in Las Vegas. And I would think, it's hard to tell, but I think when Las Vegas probably was the most profitable integrated resort casino on this trip, or if not the most, it was definitely at the top of the list. So our strategy is working, we're maintaining our brand, we're maintaining our culture, and we're making a little bit of money. Moving to Boston. Encore Boston Harbor is really starting to hit its stride. So we generated roughly $26 million in EBITDA, significantly more than we ever have in the past, during the quarter. And our team has really learned how to be a super regional operator. We focused during the shutdown on how to run Encore Boston Harbor differently than we were because clearly what we were doing was not quite right. And so we've had a laser focus on the casino segment and what it is that those customers want and how we're going to deliver it. And if you look at our results, slot handle per day, just overall volume per day, was actually up over last year. It's pretty extraordinary when you think about we had 1,800 slot machines open during this third quarter compared to 3,000 last year, and volume was higher on a daily basis. Win per unit was over $400 on the 1800 unit, so I think $407 compared to $219 last year. So Encore Boston Harbor is really starting to understand how, and we are starting to understand what that market is, how to market to those customers, and how to monetize there. Massachusetts recently, just this week, announced that starting over the weekend, restaurants, bars, casinos, etc., We'll need to close COVID related starting at 930 at night. That's clearly a setback for us, but it's very temporary. And I'm sure it's the right thing to do from a health perspective. The government of Massachusetts has done a terrific job throughout all of this, managing this from Governor Baker to the Massachusetts Gaming Commission. So, you know, we view it as a temporary setback, but it's really nothing that we're worried about because our business model is sound, and I think that we're going to continue to see increases in revenue and increases in EBITDA out of Encore Boston Harbor. Moving on to one more topic. This is a new one for us. There's been a lot going on in the gaming world concerning sports betting. and in particular online sports betting. We've been very focused on this topic for the last couple of years, but we've been admittedly quiet about it. In 2019, working with Craig Billings, who is helping me run this effort, we decided that we wanted to focus on product first. So how could we have the best product, because that is who we are, when it comes to sports betting, online sports betting. We scoured the earth and we found a company in the UK called Betful. And the founders and the operators of that company, we had a great cultural fit. They were the founders of Bwin and Party and understand this intimately. And they built a product in the UK that was really very social. So the engagement that they had with their customers was quite extraordinary, and therefore their KPIs were really, really good. So when you see your friend making a bet, it will pop up on your phone. Do you want to follow your friend? It's very parlay heavy. It moves you into chat rooms quickly. It's fun. It's a lot of fun. And, you know, their user acquisition costs in the UK and their LTVs were quite attractive relative to industry standards. So we made an investment. in that company in 2019 and began working on a U.S. rollout with them. We then moved forward and we acquired that company. We own 70% of that company now, and they are fully integrated in. We have 150 people inside Wynn Interactive, and we've begun our U.S. rollout. So quietly, but we can now talk about it, we have – signed market access deals in the United States in nine states. That represents about 25% of the total addressable market. I think a lot of the analysts on this call say that that's roughly $20 to $30 billion. So we already have access to 25% of that, and we're in very active dialogue, definitive documentation in many cases, on seven additional states. which represents another third of that market. So the way that we're going, we think that we'll have more than half of the totable addressable market through market access deals underway and in winter active and in fairly short order. We have launched WinBet, our product, in New Jersey. We're learning a lot. We have product releases every two weeks. And so far, and Craig will talk a little bit more about this, our CPAs are quite good, and it's encouraging what we're seeing. So we will be rolling out this product in the various markets where we have access, and it's something that we have a lot of focus on. We've invested $80 million into that company to focus on user acquisition and continued development over the next few months, and we've had lots and lots of interest from various people wanting to co-invest, wanting to be a part of it. And what I've been focused on, along with Craig, is we're going to build an amazing product and have a real business opportunity and roll it out. And that's where we are. And feel very good that while currently, when Interactive does roughly $20 million in revenue, that that number is going to grow exponentially. at an exponential rate as we move forward. So with that, I think I'll go ahead and open it up to Craig to talk a little bit more about the quarter.