Wynn 1Q17 Earnings Call Notes

Stephen Wynn – Chairman of the Board and Chief Executive Officer

Business is good for us

“Okay. You can see the numbers. Business is good for us. We’ve been joining a research and sub activity at the top-end in China. Our hotels there – we’re enjoying the continuing prosperity of Wynn Macau and the steady growth of Wynn Palace pursuant to plans and the expectations we’ve had since the inception of that project.”

Chinese are settling back into old routines

“I have a picture – I have an opinion on that. And of course, it’s just my opinion. But I’ve said in these calls in the past that it would be a mistake to misunderstand the primary underlying driver of the Chinese economy. It is a massive thing and when you say that as I have in the past that we have a very positive and bullish look forward into our long-term position in Macau, at some point the long-term vision and the short-term begin to meld as they are now.

The suppression of the VIP market was something that was the result organically of a process that the administration of President Xi Jinping thought was appropriate for the country, the elimination of corruption. And it had secondary effects on high-end products like shopping, and automobiles, and gaming was part of that. But having made a corrective move in China there comes a point when the corrective move, it sort of finishes.

And although corruption is still a major item in the PRC, the initial impact has softened, because so much of the work that they thought had to be done, was done. And so people begin to return to normal spending habits, and they are not so strongly influenced by public policy issues that involve public officials. So the people are settling back into routines that they’re comfortable with, and that includes going to Macau and buying a new car or shopping at Louis Vuitton.”

Wynn 3Q16 Earnings Call Notes

Wynn Resorts, Limited’s (WYNN) CEO Steve Wynn on Q3 2016 Results

The Beijing government will support employment in Macau

“Well, the central government always supports the financial health, the employment security, and the welfare of the citizens in the special administrative region, and they repeat that, whether it is the Premier or Xi Jinping himself. My visits to Beijing only reinforce that with the people that I have had the privilege of discussing China with. I go there on occasion to broaden my perspective on China because, after all, Macau is part of it.”

Government will always act to protect the job security of the people

“In my conversations with the top level of the Macau government, they definitely want to protect the job security of the people that are engaged, the Macau citizens and everybody else, that are engaged in working at these places. There is a strong preference for protecting the employee base of the industry. When issues that affect them, meaning the employees and the local employees in particular, come up, the government is particularly responsive and on point. When we get to more subtle things that have to do, for example, with smoking, then the matter — the speed of decision slows down.”

Wynn 2Q16 Earnings Call Notes

Wynn Resorts, Limited’s (WYNN) CEO Stephen Wynn on Q2 2016 Results

The hotel itself is the show

“In a hotel casino, in these integrated resorts, the hotel itself is the show. A lot of conversation has been promulgated about the diversification of gaming away from just gambling to non-gambling things, and that conversation has widely and largely been misunderstood. So let me make a point about that now.

When you say diversify to non-casino things, you have to understand that isn’t a simplistic thing – ‘well, we’ll have more restaurants; we’ll have more shows; we’ll have more this or that other than a slot machine or a baccarat table.’ Diversification means how well do you make the entire place an attraction from a hospitality and touristic point of view, so that you don’t just rely on a baccarat player or a slot machine player.

Now, that diversification involves the entire building. We spent, without exception and without any possibility of contradiction, more money on non-casino attractions in Wynn Palace than has ever been spent on any facility of that sort on the planet Earth. And it has been done in the things that really matter to people – the width of the hallways, the height of ceilings, the attractiveness, the decor, the size of the rooms, the elegance and luxury of the retail offerings and, most importantly, the entertainment quotient of each and every food and beverage outlet.”

Steven Wynn has a political rant

“The election in the United States, I think we’re all in the same position. It’s almost impossible to predict exactly what effect that will have. Without getting into an economics discussion, we have – sooner or later, our political establishment is going to be forced, regardless of party affiliation, to deal with $19 trillion in debt that’s climbing by around $1.6 billion a day. That means that, in the Treasury auction each month in downtown Washington, we’re printing money at the rate of $40 billion or $50 billion a month, which is, of course, increasing the money supply and directly impacting the living standard or the buying power of the US dollar or people who are being paid like everybody on this call today.

Now, part of the frustration in America is the fact that the deficit is having an enormous impact on the living style and the living standard of Americans, but not all of this is well understood by the folks, to use Bill O’Reilly’s term. The folks are being – their living standard being clipped by the deficit and by the printing of money and the increase in the money supply.

How long can this go on? In the history of the Western world, inflating your way out of this kind of a problem, taken to its extreme, to use the Weimar Republic as an example, people went grocery shopping with wheelbarrows full of currency. Now, before the recession, the euro was $0.87, $0.85 on the dollar. During Quantitative Easing 1, 2 and 3, it went up to $1.48. That was a devaluation of the American currency by 20%. Now, it’s $1.10. And to use that as a benchmark for a moment, it isn’t that the dollar got stronger, it’s that the euro got weaker because they started quantitative easing and printing money in the euro community.

So this deficit issue impacts the mental health, the frustration, the positive sense of tomorrow that working people feel in America. It hasn’t got to do with rich folks. It’s got to do with government, fiscal and monetary policy. We have $14 trillion in public debt and $5 trillion in intergovernmental debt. The coupon on that $19-trillion-and-climbing is around 2.3%, and that’s with short-term interest rates at zero virtually. Now, the current Fed, the lady is going to keep interest rates where they are. That, of course, protects all of the credit card debt of $1 trillion that’s out there. And so, we don’t have mass panic on the credit card interest. But I know that the government is in a quandary as to what to do about this.

Now, the issue about what’s going to happen with the election isn’t so much an issue of Trump versus Clinton at the moment. It’s a question of whether the House and the Senate and the Executive branch can get together and make Americans feel safer and have a fiscal and monetary policy that isn’t self-destructive, which currently it is. Now, I know that, in this time of year, everybody is making all kinds of promises and declarations that they can do things or they will do things that, of course, they cannot without exacerbating the problems that are currently plaguing the country.”

Wynn 1Q16 Earnings Call Notes

Wynn Resorts’ (WYNN) CEO Steve Wynn on Q1 2016 Results

The activity in the stock market is poorly regulated and irresponsibly policed casino

“But when shorts – the exchanges really don’t enforce the rules of make it shorts. So it is an unconscionable manipulation of the stock that occurs. They open up every morning and the high-frequency traders and the shorts have a ball selling shares and then value buyers step in in the afternoon and they cover the shorts. It is regular casino activity. The activity on the stock markets is in my view poorly regulated and irresponsibly policed, especially with regard to short sales. And when it gets out of hand we see a lot of shorts because of China. Because we are such a clear China play we probably had a bigger percentage”

The stock market is more stupid as a gambling game than ever

“So the stock market has got more volatile, more stupid as a gambling game than ever before. And I look at it that way to be honest with you. I have very little respect for the integrity of the trading on the exchange in most stocks. And I have particular disdain for the fact that the SEC has failed to deal with high-frequency traders who are doing nothing more than taking advantage of inside information, a buy or a sell order, because of technology advantages.”

Maurice Wooden

Confident seeing a nice stability in Las Vegas

“So looking forward we continue to see the same type of growth that we had in the first quarter. We anticipate our revenues on the hotel side to be up around 5%. As far as what is on the books, we feel very confident that we have a nice stability in all segments.”

Wynn 4Q15 Earnings Call Notes

Steve Wynn

January in Macau was our best month in a long time

“what is interesting is to say that January in Macau, if I can anticipate some of the questions, was our best month in a long time. Happy to say so. And Chinese New Year is in progress, but early in the week, a little too soon to say, the mass component clearly looks a little stronger than in the past.”

Business is pretty good in the US

“With regard to Las Vegas, January was terrific and Super Bowl and February are off to a roaring start. And between that and President’s weekend, Las Vegas is an apple pie shape up through the 15th which will be Monday. The question in Las Vegas will be how is the last 14 days. But as of now business is pretty good in the United States and holding its own in Macau.”

You can judge the impact of a devaluation by what it did in our economy after QE 1, 2, 3

“Yes. Like any devaluation, if you are buying domestic products, you don’t feel it. If you are buying and you are trading internationally, you do feel it. If you are an exporter and a businessman in China and you are one of our customers, and they are, then devaluing the currency increases your ability to sell your products outside China. So a devaluation, which is of course a methodology of supporting the economy, tends to make our customers have more liquidity. And when we talk about devaluation, QE 1, 2 and 3 took the US dollar down by 18% or 20%. So you can judge what a devalued currency impact has on people by taking a look at what happened right here in the United States where we did precisely that with our federal reserve interventions in QE 1, 2 and 3.”

We have a high end customer in Vegas

” we are holding high and we have got this very privileged kind of patronage. It is one of the advantages — there are advantages and disadvantages of having a high end super quality resort. For example, your average customer tends to be a little wealthier, a little better able to afford more expensive food and wine and hotel rates.”

We focus on the bottom line more than the top line

“We tend to be very fastidious about having all of our games be profitable. We don’t pay so much attention to the top line as we do to the bottom line. So when we evaluate the casino, we don’t evaluate the handle or the Wynn, we evaluate the contribution to EBITDA of our games. And we try to maximize every foot of the casino with one metric in mind, contribution of EBITDA per foot.”

If there’s a recession then we’ll be affected like everyone else

“if there is a recession in America, and it is hard to see why there won’t be if we keep going the way we are, then Las Vegas will ultimately reflect whatever is going on in the rest of the United States. It always has. There’s sometimes been a delay if conventions are booked and things like that, but at the end we always seem to be just like anybody else, part of America and a big reflection of it. So I don’t want you to construe my remarks about a healthy January and a promising February to mean that we’re running counter to anything else you’re seeing. We’re just lucky, that’s all. Just luck, we’re holding high. I don’t want to make too much of it.”

The customers aren’t going to change

“We’re going to do what we have always done. We are going to keep trying to make it better in every way. And that, look, the customers aren’t going to change. There are people who come to Las Vegas and Macau to live big and have fun. And whoever gives them that product consistently and fully wins the race to the top, I guess is the way to put it, or ends up in first position.’

We know who our customers are and we know what they want

“We know who our customers are, we know what they want. And we’re going to try and figure out a better way to give it to them. That’s my ace in the hole. That is my secret.”

Matt Maddox

Chinese macro data is confusing, but it feels like our Macau business has been stabilizing

“Well, we’ve focused on our retail volumes and we are noticing that some of our retailers are starting to stabilize a little bit more compared to last year and the previous quarters. Our hotel occupancies are remaining about the same as they have been and we are seeing some pick up there. And then, Steve, you track all the visitation just like we do from each region. And the visitation also feels like it is stabilizing. So, all the China macro data is confusing for the moment, but what we see in our building and visitation to Macau feels like it has been stabilizing since November. And I think you’d hear that from all the operators.”

Wynn Resorts 3Q15 Earnings Call Notes

Wynn Resorts’ (WYNN) CEO Steve Wynn on Q3 2015 Results

Government policy is making it difficult to plan in Macau

“I mentioned this early in the conversation because it’s become a major issue in Macau as to the impact of government policy on and planning for employment, promotions, hiring and compensation. None of us are really clear on what our environment is going to be like going forward. And it makes planning and adjusting almost a mystical process. And this is the I think probably the major topic of conversation in executive conference rooms as people try and resolve their planning on human resources in the Macau market…I have no idea how many tables we’re going to have. The notion that a person who spent $2.5 billion, I’m talking about Melco now, would not know how many tables are going to have three weeks before they open is preposterous. It’s worthy of comment. ”

Away from Asian effected segments, Las Vegas doing pretty well

“Any change in our earnings in Las Vegas is strictly a reflection of a drop in Asian baccarat business. The rest of the segments in our Las Vegas business are pretty good. Room revenue and stuff like that is healthy. Our convention business is healthy; our food and beverage business is healthy. And we’re very satisfied with Las Vegas. And if anything, the problems in China are causing us to refocus our energies here in America even more intensely.”

Our perception of the present is a function of our expectations of the future

“Everybody in the world including all of a sudden it’s call today, it has been established that our present state of mind, our happiness, our sense of security is fundamentally a function of how we view tomorrow or the future. You tell someone this feeling poorly, suffering from ailment or some discomfort that they are going to be better in three days and they feel better today. You’ll tell someone who is feeling great today that they are going to be awfully sick next week and they get depressed today.”

The Chinese government has gone on a campaign against corruption

“from what we understand, reading the South China Morning Post and other source of information available to us, President Xi discovered that the people of China felt that government officials were corrupt and feathering their own nest. And he thought that that was very malignant for the health of his party and the future of his country and made a decision to correct that and have a campaign against corruption.”

Everyone in China does business with the government because they control everything

“And because of the way China, mainland China works, every businessman in that country dealt in one way or another with a government official because the government controls so many aspects of public policy and business interface.”

So businessmen basically went into hiding in reaction

So businessmen who had nothing to hide as well as those who might have had something to hide all went into the fox holes or into a defensive posture because they didn’t know if the next shoe was going to drop or what the next thing was going to happen. And it is caused across the board, a contraction of all VIP consumer spending at the higher level, which includes Macau.”

My job is really not that different from Xi Jinping’s

“At the end of the day, I am in the same position as this Head of the Macau government and for that matter President Xi Jinping. My job is to create a stable environment in terms of human resources, job security and a better future for people..And the job leaders are to do everything and anything in their power to create a happy and positive outlook to the future for their constituencies.”

Whether your a CEO or head of government you have to have vision

“whether you’re a CEO of a company or you’re the head of a government, you have to have a little bit of ability to look around the corner and see what’s coming ahead of you. And if that’s not good, turn away from it, amend your policies, learn from experience and come to a more sound conclusion.”

Well it wasn’t fun but at least we were honest

“Well, I don’t know that this has been the most satisfying quarterly phone call we’ve ever had but at least it’s the most candid and the most honest one that we could possibly give everybody that is interested in our company. And hopefully, it sheds light; it shares real intelligence and insight on the inevitability of anything that interferes with the long-term health of Macau or Las Vegas for that matter. And I’ve done my best to shine a light on that subject. “

Wynn 2Q15 Earnings Call Notes

Competitors in Macau are very good

“Our fellow operators in Macau are intelligent, they’re extremely well-financed and they’re quick to learn and to accommodate the things that they see in other hotels and to accommodate changes necessitated by their own experience in that market. It’s a very, very sharp place.”

Las Vegas is comfortable

In Las Vegas, we’re enjoying a comfortable business, I think is the right word for it. It’s not an aggressive growth by any means, but we are enjoying non-casino revenue that is acceptable.”

Interesting discussion about the difference between where people buy chips in China vs. the US and how that changes calculation of hold percentage

“In China, and virtually no one buys chips at the cage in America, at least in our experience over the last 40-odd years, and then walks to a table and gambles. In China, they do, in fact, do exactly that. I don’t know whether it’s because they’re using their credit card or they’re cashing in whatever RMBs they have or whatever, but people go to the cage, buy chips, and then circulate around the casino and bring the gaming tokens to the table with them. That means that when we count the boxes, it’s not a measurement truly of the drop or activity in the casino. The handle, it’s referred to in the alternative.”

Vegas is a grind, particularly because of international business

“Las Vegas is, one month is good, and then you see June numbers come out, not so good here on the gaming side. So, Las Vegas is a grind right now, and we think we’re in a good spot in our position in the business. But there’s no accelerated growth going on here, in particular because of the international business.”

Rearranging the floor has meant that we win more money with less games

“I also rearranged the floor in the casino to put our specialty games that are very popular with the public that have a higher margin and I put them in the 100% location and I moved my games with less of a margin to secondary locations. Those changes have worked out favorably to us in the past three weeks, and that kind of re-examination – our slot floor has been redone. We win more money with less games now. These are some of the reasons why we make more money than anybody else in Las Vegas.”

We don’t pay very much attention to our stock price

“our stock can trade at level A or level B. We don’t pay very much attention to our stock price per se, we pay attention to the underlying performance of the company, and those factors associated with performance that are within our control, which is why every week we grind on everything in this building from the use of every square foot of our real estate and our structures, to our plans for the future.”

You’re hearing that the China stock market selloff is going to affect junket collections, but I think it’s just noise

“you’re hearing in the market that all these margin calls that are taking place are going to affect the junkets and their ability to collect the junkets themselves. Some of them were involved in the market. But all of this is in my opinion just short-term noise. And I don’t think it’s going to have any long-term effect.”

Big for the sake of big does not appeal

“As we sit here today, we’ve never had such a opportunity presented to us that we thought was acceptable. That doesn’t mean that at some point in the future such a thing couldn’t happen, or that such an M&A, to use your term, a merger and acquisition, would make sense. But big for the sake of big is not a thing that I subscribe to, as you know, and I’ve said so before. We have a certain kind of a brand. It is flexible and adjustable for sure.”

I’m more interested in tomorrow’s newspaper than yesterday’s

“I’m more interested about tomorrow’s newspaper than yesterday’s newspaper.”

For a price, you can buy anything, but it has to be 2+2=5 or it’s a lot of trouble for nothing

“M&A is the kind of option that of course always exists. I mean for a price you can buy anything, I suppose, and some people find it in their mutual best interests to join up from time to time, because the net result is that two and two equals five. But really it has to be two and two equals five. If two and two equals four, it seems to me a lot of trouble for nothing. I’d rather build our own stuff.”

We’re in the resort business with casinos included

“We build resorts that are much more extravagant and attractive than they would be were it not for the fact that somewhere down the hall there’s a gaming room. But we’re basically in the resort business that has casinos included”

Wynn 1Q15 Earnings Call Notes

Our hopes for improvement in Macau have proven incorrect

“I think the trends in Macau were beginning to be very visible in the fourth quarter, but our hopes for an improvement in the Chinese New Year turned out to be incorrect. And the repositioning of the market and the degradation of the volumes in VIP, have continued even into April. Most of my remarks now are going to include what we’ve seen in the first four months, not just the first three months, because the trends that were clear in January, February and March have continued into April and as we look at the whole year in Las Vegas and Macau, certain simple truths emerge.”

It’s no secret that there’s been a change in attitude in mainland China

“It is no secret that there’s been a change in mainland China in attitudes towards a number of things that have impacted Macau. ”

Guest experience is everything

“Guest experience is what creates a better tomorrow and allows us to continue in business, eventually raise our prices to offset the rising cost of business. People that have a good experience tell their friends and they come back again and again. Guest experience is the beginning, the middle and the end of the story.”

Guest experience is determined by our employees

“guest experience is determined by our employees, the people that actually touch our guests and create that experience. So our attention goes from our balance sheet and our financial condition to maintain flexibility, but also it goes immediately to keeping our workforce stabilized, happy, and proud to be here.”

I’m hurt more than anybody by a lack of dividend

Now I’m speaking on this call as the largest single recipient of such distributions. There is a few institutions that, if you take T. Rowe Price, own more shares collectively, at least for the moment, but they’re in individual pockets. When there’s a dividend check in this company, the largest one goes to me. And so I say again, unapologetically as a shareholder and as a Chairman of the Board, we believe that you distribute the money that is free and clear cash flow after you’ve met all other obligations, and the Board of Directors should consider that principle every time they meet each quarter, as we did this time.”

We don’t plan on dividending borrowed money

“Steve put it perfectly that we don’t plan on dividending out borrowed money.”

Summer business in Vegas does not look like it’s picking up like it has in past years

” for April and May, we have a strong base and stable base of convention as well as leisure mix. Summer’s going to be interesting. We’re starting to see summer trends not pick up the same way they did in previous year. So we’re paying very close attention to the market. And what we’re getting as indicators as far as the summer business but it does not seem as strong at this point as it was last year.”

What’s the second quarter going to look like in Vegas? Weak.

“If you were to ask me, since we’re making forward-looking statements, what will the second quarter look like in Las Vegas? Weak. Do you hear me? Weak. So I’m trying to lower expectations here. This notion of a big recovery is a complete dream. I don’t think Las Vegas is experiencing a great recovery. I think it’s still very patchy and I think that that’s probably our non-casino revenue in the first quarter was flat. I’d be thrilled if it was flat in the second quarter.”

We would be thrilled if non-casino revenue was flat

” can you hear that? Here’s two of us saying we’d be thrilled if non-casino revenue was flat in the second quarter as it was in the first. My guess is that that’s going be a struggle.”

The general economic recover in the US has been grossly overstated

“secondly or thirdly, the recovery in America is a jobless recovery in real terms. And inflation in America in real terms is an enormous number. So I think that the general economic recovery in the United States has been grossly overstated. ”

I have never seen anything like we’re going to see with this Pacquiao fight

“we’re having this call today on the eve of the upcoming Pacquiao fight and Mayweather fight. And this, in my 40-odd years in this town, this is a one-off. I have never seen madness and demand of this sort. This fight is probably going to break all records for pay-per-view. It certainly is breaking all records in what they’re getting for tickets. We have never charged more than $1,500 for a ringside seat in a fight and they’re going for $10,000, and then $7,500 for the medium range, and then $5,000 for the ones in the upper tier, an outrageous amount of money. Mayweather and Pacquiao are going to not only have to have a fight, but they’re probably going to have to do a chorus line or something to justify the cost of this.

But our room rates are at $1,300, $1,400, $1,500 for typical rooms, and you can’t get a room in this town. I’ve never seen anything like it even with Hagler fought Leonard, Ali, nothing like this.”

The tentativeness in China is a reflection of the uncertainty with respect to Xi

“The tentativeness of the government is a reflection of their own uncertainty, I believe, in many respects, as far as predicting where to go tomorrow or in the near future. There’s a new boss in China, Xi Jinping, and his agenda is something that everybody is adjusting to. He’s a very dynamic man. He enjoys enormous popularity among the people of China. And in China, the people matter. And so, everybody’s waiting and watching.”