Wynn Resorts Ltd. (NASDAQ: WYNN) has typically had one of the more eventful conference calls each earnings season, but often, that was because of things like Steve Wynn's comments on the state of politics, or his dog barking in the background.
The company's first quarter call this week was far less colorful -- but equally eventful, because it was the first time Steve Wynn hasn't been involved in the company since it was founded. Not only has he been pushed out as CEO, but he sold his entire stake in a deal orchestrated by new CEO Matt Maddox, who took this conference call as an opportunity to show that he's in charge now, and to detail how very different his vision for Wynn Resorts' future looks from that of his former boss.
Image source: Getty Images.
Wynn Resorts has been busy cleaning house
One of the first things Maddox and team had to do was clear out the operational and legal challenges left behind by Steve Wynn. They did so with remarkable speed. Maddox opened the call with the three biggest highlights:
Just to remind you of a few things that we've done over the last 60 days. Steve Wynn is no longer a shareholder in his business. In fact, two-thirds of his stock, or 8 million shares, the company personally placed with two long-term institutional thoughtful shareholders, and we are proud to have their support. Galaxy Entertainment, a company that we greatly admire purchased $920-plus million of Wynn stock, right under 5% of Wynn Resorts Limited, and we look forward to working with them in the future.
In another positive move, it ended years of litigation with former major shareholder Kazuo Okada, and his company Universal Entertainment Corp.:
[W]e're no longer mired in litigation, six years of litigation with Universal Entertainment, billions of dollars at risk, and we were able to solve that by repurchasing the redeemed shares. Effectively, there were 24.5 million shares, at $78 a share.
Litigation with former board member Elaine Wynn was also resolved:
We also resolved all outstanding litigation with Elaine Wynn, six years' worth. With no payment by the company.
Clearing these legal headaches made big headway in terms of putting Steve Wynn's legacy of legal troubles in the rear view mirror.
Rethinking Las Vegas development
Maddox has some different ideas from Steve Wynn about what the company's next steps should be in Las Vegas. Its lagoon and convention project is under construction now, but Maddox seems to be backing away from building another hotel tower:
In Las Vegas, our previous project ... the budget was over $3 billion. That was not sustainable, and so we are taking a hard look at what is sustainable here and what's going to keep attracting our customer. So we're moving forward with the lagoon ... and I'm a big believer in the future of Las Vegas. And so what we're going to be coming back to the investment community with later this year is where our next development opportunity will be. Will it be on the lagoon? Will it be on the Las Vegas Strip with the property we purchased in January? Those are things that we are studying now and will spend a lot of time on.
By shrinking the scope of the next phase of Wynn Las Vegas development, I think he's showing more financial prudence and a less grandiose vision than his predecessor.
Growth in Macau
One interesting takeaway from the conference call regarded the opening of MGM Resorts' MGM Cotai across the street from Wynn Palace in Macau. Instead of being a hindrance, it's helped the resort's performance. Said Maddox:
[W]e're seeing premium mass customers that are staying at MGM, walking over to Wynn Palace to enjoy our facilities, and that's obviously has an outsized benefit on the revenue line.
On the Macau Peninsula, management is seeing an opportunity grow as well. One of Maddox's first concrete moves as CEO has been a plan for a big upgrade to Wynn Macau.
In 2018, we will begin a $100 million investment program at the Peninsula in Downtown Wynn Macau. This will include reinvigorating our regional casino.
It appears the theme over the next few years will be less investment in Las Vegas, and a greater focus on Asian opportunities.
Wynn Resorts isn't the company it was a few months ago
The change in direction should be welcome news for shareholders, especially as pertains to new management's quick resolution of those lingering legal risks. I also think focusing on investments in Macau and Japan rather than the U.S. will be wise financially, and could drive better revenue and cash flow growth long term. Steve Wynn was an icon in gaming, but Wynn Resorts' new leadership may be better stewards of shareholder capital.
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