Wynn treads water, IGT overachieves, Ohio and Missouri flatten

Pay no attention to the man behind the curtain (Xi Jinping). That was the message of Wynn Resorts‘ first-quarter earnings call. Some analysts weren’t having it, with Deutsche Bank‘s Carlo Santarelli opining that Macao was “the real story.” That being said, he lauded the company, which “again delivered strong domestic results, with both Las Vegas and Encore Boston Harbor eclipsing our forecasts, to varying extents.” The shortfall in China, although “well anticipated” managed to neutralize the domestic outperformance. While Santarelli didn’t feel there was much novelty in the earnings call, he passed along the news that Wynncore occupancy was running at an enviable 91%, cash flow both on the Las Vegas Strip and in Boston was better than ever, Wynn lost $31.5 million on its abortive interactive division and Macanese hotel occupancy was 75% during the Labor Day period, of which more in “Jottings.”

“Given continued ambiguity in Macau, we have revised our 2022 and 2023 forecasts lower, with these revisions more than offsetting our domestic [cash flow] upward revision,” Santarelli concluded. Wynncore was the revenue leader, with $441 million, followed by Encore Boston Harbor’s $191 million (awfully damn good for a regional casino), then Wynn Palace‘s $163 million and Wynn Macau‘s $135 million. The Macanese casinos were ever so slightly ROI-negative. Despite the Chinese underperformance, CEO Craig Billings more than hinted at additional investment in Macao that “might be from a non-gaming perspective. We’re not under any illusion that we’re talking about a Las Vegas-style non-gaming market. It’s just a very different dynamic there,” he said.

Wynn is sitting on 12.5 undeveloped acres in the enclave. “We have three opportunities to build very meaningful product offers for the future,” said the company’s Macanese emissary, Ian Coughlan, noting that all of this was contingent upon the concession-retender process. In the meantime, former junket-operated spaces will converted to mass-market gambling, in a major strategic shift.

Billings showed some ankle vis-a-vis the New York City market but said vaguely, “We’re interested in New York and we’re active there. We’re not in a position yet to talk about anything in particular.” Wynn would be a great fit for the market so we hope that Billings is being very active indeed. For the moment, he’s focused on the United Arab Emirates, where Wynn will go halvsies on a casino megaresort on Al Marjan Island. “We have moved quickly to our design on our project in the UAE, and I grow more excited about the opportunity with each iteration of that design,” Billings said, although his description leads on to expect another iteration of Wynn Las Vegas.

He’s certainly not daunted by the thought of Caesars Entertainment or anyone else crashing the casino party: “I would point out that we not only compete, but punch up well above our weight, in the most competitive market in the world in Las Vegas. Our underwriting of that opportunity presumed there would be competition, but I can’t tell you that we know of any now.” That’s the spirit.

International Game Technology outperformed Wall Street expectations for 1Q22 by 7%, bringing home $433 million. All segments of the business exceeded forecasts, even digital (which is definitely more of a supplier’s market these days than an operator’s). Net revenues were $1 billion and management expects as much or more next quarter. Despite an overall shrinkage in the installed base of slot machines, IGT shipped more new slots than in any first quarter of its history. I-gaming launches in Connecticut and West Virginia helped swell the digital sphere to a best-ever performance. Credit Suisse analyst Barry Chaiken was dead-on in his revenue projection but noted that the IGT upside was “asymmetrical … with particular strength in lottery.”

Santarelli was more positive still, saying IGT had overcome “considerable headwinds … stemming from omicron, supply chain issues, and, more recently, unfavorable FX fluctuations.” The company well overshot his projections and Santarelli echoed Chaiken’s praise of the lottery performance. While noting that the company’s performance was impervious to criticism, he wrote, “we felt the quarter, given the known headwinds coming into the print, was a positive surprise. We believe the result further lends to management credibility and the work, especially on the expense management side, the Company has put in to improve the efficiency of the operations.” What’s not to like?

Ohio casino revenue is trending down ever so slightly from last year, for a statewide gross of $215.5 million last month. Had there not been an extra weekend day we might have seen a genuine decline, albeit small. MGM Northfield Park continues to reign supreme ($25.5 million, +4%) but is seeing a viable challenge from Hard Rock Cincinnati (ab0ve), which surged 14.5% to $24.5 million—and Hard Rock has table games, which MGM doesn’t. Hollywood Columbus also put on a brave show, grossing $24 million despite being off 1%. Jack Cleveland, however, dipped 4% to $23 million, while Hollywood Toledo slipped 6.5% to $21 million. Jack Thistledown suffered a reversal of fortune, falling 12% to $17 million while Scioto Downs gained 3.5% to a robust $22.5 million. Miami Valley Gaming continues to prosper, up 4.5% to $20 million, Belterra Park grossed $8.5 million, a 6% slippage, Hollywood Dayton slid 7% to $14 million, a most unusual occurrence, and Hollywood Mahoning Valley dipped 3.5% to $14.5 million.

Gaming revenue is flattening in Missouri, where April 2022 was even with the year previous. Visitation was down 2.5% but spending was up 3%. In its last pre-Horseshoe month, Lumiere Place (above) went into a 23% tailspin, down to $13 million. Nor was usual market champ Ameristar St. Charles immune from the market correction, slipping 2.5% to $26 million (still easily tops in the Show-Me State). Customers flocked to Penn National Gaming‘s two St. Louis-area casinos, with River City leaping 22% to $23.5 million and Hollywood St. Louis gaining 25% to $22 million. Kansas City was far less volatile. Bally’s Kansas City was up 12% to $11 million but Argosy Riverside regained 4% to $16 million. Harrah’s North Kansas City (-9%, $16 million) and Ameristar Kansas City (-8%, $18 million) are still losing market share, though. In the sticks, Century Casinos had a rough month, ceding 18% ($4.5 million) in Caruthersville and 12.5% ($6.5 million) in Cape Girardeau. Luckily, management is making capex investments in both that should enable them to compete as mini-destination properties.

Those of us hoping for an NBA team in Las Vegas—and the odds look mighty good—will derive cold comfort from a new WalletHub study which deems Sin City the eighth-worst for roundball fans. Why? Mostly because UNLV basketball is deemed to suck, basically. It is ranked 157th in performance level, 120th in minimum season-ticket price, 236th in stadium capacity and—ouch!—231st in fan engagement. We think the arrival of a pro team would turn those metrics around. After all, who knew Las Vegas would be one of America’s hockey hotbeds? If Salt Lake City can be #3, why can’t Vegas give it a run for its money?

Jottings: No surprise, sports betting continues to mature in Illinois, where March Madness propelled $971 million in wagers. From that sports books harvested $79.5 million (before promotions) … Caesars Danville has been postponed a full year, into 2024. Supply chain issues are blamed, but Councilman Sherman Saunders took it in stride, saying, “The building itself is in excess of a hundred years old. It’s also a brownfield site. It’s expected that things can happen” … Marylanders continue to chafe at the indefinitely delayed launch of mobile sports betting. The blame falls on the many small fry applying for licenses, with regulators saying many “applicants do not fully understand the industry” … More bad news for Macao: Labor Day weekend drew fewer than 100,000 visitors. A sudden spike of Covid-19 in crucial Guangdong Province was the inciting incident … Extensive flooding forced the closure of Muscogee Creek Nation Casino. Happily, tribal leadership kept Oklahomans’ paychecks coming while the resort was dark.

Quote of the Day: “Bring on a recession. Maybe we can build this stuff a little cheaper. The only supply-chain issue we have is crab. Who knew? We’re a cheap trip, an easy trip. It’s not a lot of gas. If you go back to the Great Recession, regional casinos did just fine … We’re perfectly situated today for what’s going on in the world.”—Full House Resorts CEO Dan Lee during the 1Q22 earnings call, dominated by the subject of crabmeat.