Encore Boston Harbor opening could be delayed "a week or two"

Wynn Resorts revenue drops nearly by 4%, hit by VIP operations' decline

In Macau, table games turnover in Wynn Palace’s VIP operations declined by 18%, but total revenue rose 9%, helped by mass-market gambling and hotel revenues.
2019-05-10
Reading time 3:25 min
The firm swung to a first-quarter profit of USD 104.9 million after prior-year results included a charge related to a legal settlement, and Las Vegas operations decreased by 7% mainly due to a baccarat drop. CEO Matt Maddox said in a conference call with analysts that it is only a matter of time before the lucrative segment rebounds. Wynn Resorts said it is reviewing the Massachusetts regulator's USD 35 million fine and considering whether to appeal some of the conditions imposed.

High rollers shied away from Wynn Resorts Ltd. in the latest period, causing the casino operator to miss Wall Street revenue targets. But CEO Matt Maddox said in a conference call with analysts that it is only a matter of time before the lucrative segment rebounds.

“I don’t know how long that area is going to be compressed, but what I do know is the demand is still there,” Maddox said Thursday, as reported by The Wall Street Journal. “And so, we feel very comfortable that when that business begins to come back, we’re going to be perfectly situated to capture it.”

Operating revenue fell 3.7% to $1.65 billion in the first quarter of 2019, driven by a decline in casino revenue. Shares, down 32% over the past 12 months through Thursday’s close, fell 4.4% to $130.34 in extended trading. The casino operator swung to a first-quarter profit of $104.9 million, or 98 cents a share, as the prior-year period included charges tied to a legal settlement paving the way for Wynn Resorts co-founder and former CEO Steve Wynn to sell his stake in the company. But excluding one-time items, quarterly profit fell to $1.61 a share from $2.30 a share. Analysts surveyed by FactSet expected an adjusted profit of $1.59 a share on $1.67 billion in revenue.

Wynn runs casinos in Las Vegas and Macau, a Chinese territory and the world’s largest gambling hub, and it is looking to grow its footprint. Massachusetts gambling regulators last week allowed the company to retain its license and open a casino near Boston but fined it $35 million after an investigation found that executives had run a sophisticated coverup to protect Wynn from allegations by employees that he had engaged in sexual misconduct. The state also fined Maddox $500,000. Former CEO, who declined to be interviewed by Massachusetts investigators, issued a statement to them included in the report saying he had never had a nonconsensual relationship.

Wynn Resorts said it is reviewing the Massachusetts decision and considering whether to appeal some of the conditions imposed by the regulators in the state. Maddox said even if the company were to appeal, the casino is expected to open on schedule by the end of June, though June 23 opening could be delayed “a week or two later” as the Las Vegas casino operator considers whether to accept the fines and conditions set by Massachusetts gambling regulators. A company spokesman later clarified to the Boston Herald that the primary condition is the whopping $35 million fine and the rest are the provisions set forth by the commission, including that Maddox hire an executive coach.

“I don’t know if the opening date will be June 23, or a week or two later, because we’re going to make sure that it’s flawless, and clearly the regulatory complexity we’ve been through has been a challenge,” said Maddox. “We’re now doubling back. We may give (ourselves) another week, we may not, but the property looks great.”

Nevada regulators separately fined Wynn Resorts $20 million, which the company has since paid. “We’ve been through a significant transition, and there’s been some turmoil over the last 15 months,” Maddox said in the earnings call Thursday. “But that is now behind us.”

The company, which last month called off a potential deal with Australian gambling company Crown Resorts Ltd., remains open to acquisitions, the CEO said on the call. However, he said the company isn’t currently pursuing any deals. The Crown Resorts deal would have given Wynn a foothold in a second international market, underscoring how casinos are looking beyond Macau to attract lucrative high rollers.

The results for the March quarter showed a 7% revenue decline from its Las Vegas operations along with a nearly one-quarter drop in a key profitability metric. Company officials blamed most of the drop on baccarat. They expect a slight recovery in the current quarter and said that Las Vegas should remain a global destination for high-spending customers from Asia.

In Macau, table games turnover in Wynn Palace’s VIP operations declined 18%. However, total revenue rose 9%, helped by mass-market gambling and hotel revenues. Wynn Macau saw a steeper 40% decrease in VIP operations’ table games turnover, driving a 15% overall revenue decline.

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