# WYNN RESORTS LTD (WYNN) FY 2023 MD&A

Verbatim Item 7 Management's Discussion and Analysis from WYNN RESORTS LTD's 10-K for fiscal year 2023.

SEC filing source: https://www.sec.gov/Archives/edgar/data/1174922/000117492224000046/wynn-20231231.htm
Accession: 0001174922-24-000046
Filing date: 2024-02-23
Report date: 2023-12-31
Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary.
Confidence: high

Company profile: /company/WYNN/
All MD&A years: /company/WYNN/mda/
Previous year: /company/WYNN/mda/fy2022/ (FY 2022)
Next year: /company/WYNN/mda/fy2024/ (FY 2024)

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with, and is qualified in its entirety by, the consolidated financial statements and the notes thereto included elsewhere in this Annual Report on Form 10-K.

Discussion of 2021 items and year-to-year comparisons between 2022 and 2021 that are not included in this Form 10-K can be found in "Management’s Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2022.

Overview

We are a designer, developer, and operator of integrated resorts featuring luxury hotel rooms, high-end retail space, an array of dining and entertainment options, meeting and convention facilities, and gaming, all supported by an unparalleled focus on our guests, our people, and our community. Through our approximately 72% ownership of Wynn Macau, Limited ("WML"), our concessionaire Wynn Resorts (Macau) S.A. ("Wynn Macau SA") operates two integrated resorts in the Macau Special Administrative Region ("Macau") of the People's Republic of China ("PRC"), Wynn Palace and Wynn Macau (collectively, our "Macau Operations"). In Las Vegas, Nevada, we operate and, with the exception of certain retail space, own 100% of Wynn Las Vegas. Additionally, we are a 50.1% owner and managing member of a joint venture that owns and leases certain retail space at Wynn Las Vegas (the "Retail Joint Venture"). We refer to Wynn Las Vegas, Encore, an expansion at Wynn Las Vegas, and the Retail Joint Venture as our Las Vegas Operations. In Everett, Massachusetts, we operate Encore Boston Harbor, an integrated resort. We also hold an approximately 97% interest in, and consolidate, Wynn Interactive Ltd. ("Wynn Interactive"), through which we operate online sports betting, gaming, and social casino businesses. Additionally, the Company has a 40% equity interest in Island 3 AMI FZ-LLC, an unconsolidated affiliate, which is currently constructing an integrated resort property ("Wynn Al Marjan Island") in Ras Al Khaimah, United Arab Emirates.

Key Operating Measures

Certain key operating measures specific to the gaming industry are included in our discussion of our operational performance for the periods for which the Consolidated Statements of Operations are presented. These key operating measures are presented as supplemental disclosures because management and/or certain investors use these measures to better understand period-over-period fluctuations in our casino and hotel operating revenues. These key operating measures are defined below:

•Table drop in mass market for our Macau Operations is the amount of cash that is deposited in a gaming table's drop box plus cash chips purchased at the casino cage.

•Table drop for our Las Vegas Operations is the amount of cash and net markers issued that are deposited in a gaming table's drop box.

•Table drop for Encore Boston Harbor is the amount of cash and gross markers issued that are deposited in a gaming table's drop box.

•Rolling chips are non-negotiable identifiable chips that are used to track turnover for purposes of calculating incentives within our Macau Operations' VIP program.

•Turnover is the sum of all losing rolling chip wagers within our Macau Operations' VIP program.

•Table games win is the amount of table drop or turnover that is retained and recorded as casino revenues. Table games win is before discounts, commissions and the allocation of casino revenues to rooms, food and beverage and other revenues for services provided to casino customers on a complimentary basis. Table games win does not include poker rake.

•Slot machine win is the amount of handle (representing the total amount wagered) that is retained by us and is recorded as casino revenues. Slot machine win is after adjustment for progressive accruals and free play, but before discounts and the allocation of casino revenues to rooms, food and beverage and other revenues for services provided to casino customers on a complimentary basis.

•Poker rake is the portion of cash wagered by patrons in our poker rooms that is retained by the casino as a service fee, after adjustment for progressive accruals, but before the allocation of casino revenues to rooms, food and beverage and other revenues for services provided to casino customers on a complimentary basis. Poker tables are not included in our measure of average number of table games.

•Average daily rate ("ADR") is calculated by dividing total room revenues, including complimentaries (less service charges, if any), by total rooms occupied.

•Revenue per available room ("REVPAR") is calculated by dividing total room revenues, including complimentaries (less service charges, if any), by total rooms available.

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•Occupancy is calculated by dividing total occupied rooms, including complimentary rooms, by the total rooms available.

Below is a discussion of the methodologies used to calculate win percentages at our resorts.

In our mass market operations in Macau, customers may purchase cash chips at either the gaming tables or at the casino cage. The measurements from our VIP and mass market operations are not comparable as the measurement method used in our mass market operations tracks the initial purchase of chips at the table and at the casino cage, while the measurement method from our VIP operations tracks the sum of all losing wagers. Accordingly, the base measurement from the VIP operations is much larger than the base measurement from the mass market operations. As a result, the expected win percentage with the same amount of gaming win is lower in the VIP operations when compared to the mass market operations.

In our VIP operations in Macau, customers primarily purchase rolling chips from the casino cage and can only use them to make wagers. Winning wagers are paid in cash chips. The loss of the rolling chips in the VIP operations is recorded as turnover and provides a base for calculating VIP win percentage. It is customary in Macau to measure VIP play using this rolling chip method. We typically expect our win as a percentage of turnover from these operations to be within the range of 3.1% to 3.4%.

In Las Vegas, customers purchase chips at the gaming tables in exchange for cash and markers. Customers may then redeem markers at the gaming tables or at the casino cage. The cash and markers, net of redemptions, used to purchase chips are deposited in the gaming table's drop box. This is the base of measurement that we use for calculating win percentage. Each type of table game has its own theoretical win percentage. Our expected table games win percentage is 22% to 26%.

At Encore Boston Harbor, customers purchase chips at the gaming tables in exchange for cash and markers. Customers may then redeem markers only at the casino cage. The cash and gross markers used to purchase chips are deposited in the gaming table's drop box. This is the base of measurement that we use for calculating win percentage. Each type of table game has its own theoretical win percentage. Our expected table games win percentage is 18% to 22%.

Results of Operations

Summary annual results

The following table summarizes our financial results for the periods presented (dollars in thousands, except per share data):

[[GREPCENT_TABLE]]
[["","Year Ended December 31,"],["","2023","","2022","","Increase/ (Decrease)","","Percent Change"],["Operating revenues","$","6,531,897","","","$","3,756,825","","","$","2,775,072","","","73.9"],["Net income (loss) attributable to Wynn Resorts, Limited","729,994","","","(423,856)","","","1,153,850","","","NM"],["Diluted net income (loss) per share","6.32","","","(3.73)","","","10.05","","","NM"]]
[[/GREPCENT_TABLE]]

NM: Not meaningful.

The increase in operating revenues for the year ended December 31, 2023 was primarily driven by increases of $1.48 billion, $902.3 million, and $348.5 million from Wynn Palace, Wynn Macau, and our Las Vegas Operations, respectively, resulting from an increase in gaming volumes, hotel occupancy, and covers at restaurants. The results of our Macau Operations for the year ended December 31, 2022 were negatively impacted by certain travel-related restrictions and conditions, including COVID-19 testing, entry restrictions, and other mitigation procedures, related to the COVID-19 pandemic. Over the course of December 2022 and January 2023, Macau authorities eliminated these COVID-19 related protective measures, which resulted in increased business volumes at our Macau Operations for the year ended December 31, 2023.

The increase in net income attributable to Wynn Resorts, Limited for the year ended December 31, 2023 was primarily related to increased operating revenues at our Macau Operations and our Las Vegas Operations, as well as an income tax benefit related to the release of valuation allowance on certain deferred tax assets as a result of achieving sustained profitability in the U.S., partially offset by increased operating expenses, and impairment losses for goodwill and intangible assets related to the Wynn Interactive reportable segment.

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Financial results for the year ended December 31, 2023 compared to the year ended December 31, 2022.

Operating revenues

The following table presents our operating revenues (dollars in thousands):

[[GREPCENT_TABLE]]
[["","Year Ended December 31,"],["","2023","","2022","","Increase/ (Decrease)","","Percent Change"],["Operating revenues"],["Macau Operations:"],["Wynn Palace","$","1,886,844","","","$","410,289","","","$","1,476,555","","","359.9"],["Wynn Macau","1,213,534","","","311,249","","","902,285","","","289.9"],["Total Macau Operations","3,100,378","","","721,538","","","2,378,840","","","329.7"],["Las Vegas Operations","2,480,606","","","2,132,136","","","348,470","","","16.3"],["Encore Boston Harbor","865,786","","","831,073","","","34,713","","","4.2"],["Wynn Interactive","85,127","","","72,078","","","13,049","","","18.1"],["","$","6,531,897","","","$","3,756,825","","","$","2,775,072","","","73.9"]]
[[/GREPCENT_TABLE]]

The following table presents our casino and non-casino operating revenues (dollars in thousands):

[[GREPCENT_TABLE]]
[["","Year Ended December 31,"],["","2023","","2022","","Increase/ (Decrease)","","Percent Change"],["Operating revenues"],["Casino revenues","$","3,718,402","","","$","1,632,541","","","$","2,085,861","","","127.8"],["Non-casino revenues:"],["Rooms","1,185,671","","","802,138","","","383,533","","","47.8"],["Food and beverage","1,028,637","","","846,214","","","182,423","","","21.6"],["Entertainment, retail and other","599,187","","","475,932","","","123,255","","","25.9"],["Total non-casino revenues","2,813,495","","","2,124,284","","","689,211","","","32.4"],["","$","6,531,897","","","$","3,756,825","","","$","2,775,072","","","73.9"]]
[[/GREPCENT_TABLE]]

Casino revenues for the year ended December 31, 2023 were 56.9% of operating revenues, compared to 43.5% for the year ended December 31, 2022. Non-casino revenues for the year ended December 31, 2023 were 43.1% of operating revenues, compared to 56.5% for the year ended December 31, 2022.

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Casino revenues

Casino revenues increased primarily due to higher gaming volumes at our Macau Operations following the discontinuation of pandemic-related travel restrictions in Macau in late 2022 and early 2023. The table below sets forth our casino revenues and associated key operating measures (dollars in thousands, except for win per unit per day):  

[[GREPCENT_TABLE]]
[["","Year Ended December 31,"],["","2023","","2022","","Increase/ (Decrease)","","Percent Change"],["Macau Operations:"],["Wynn Palace:"],["Total casino revenues","$","1,471,280","","","$","255,886","","","$","1,215,394","","","475.0"],["VIP:"],["Average number of table games","56","","","53","","","3","","","5.7"],["VIP turnover","$","11,363,248","","","$","2,641,321","","","$","8,721,927","","","330.2"],["VIP table games win","$","383,384","","","$","23,471","","","$","359,913","","","NM"],["VIP win as a % of turnover","3.37","%","","0.89","%","","2.48"],["Table games win per unit per day","$","18,744","","","$","1,259","","","$","17,485","","","NM"],["Mass market:"],["Average number of table games","242","","","229","","","13","","","5.7"],["Table drop","$","6,126,841","","","$","1,312,786","","","$","4,814,055","","","366.7"],["Table games win","$","1,373,436","","","$","282,138","","","$","1,091,298","","","386.8"],["Table games win %","22.4","%","","21.5","%","","0.9"],["Table games win per unit per day","$","15,574","","","$","3,489","","","$","12,085","","","346.4"],["Average number of slot machines","580","","","623","","","(43)","","","(6.9)"],["Slot machine handle","$","2,385,033","","","$","732,197","","","$","1,652,836","","","225.7"],["Slot machine win","$","102,816","","","$","31,295","","","$","71,521","","","228.5"],["Slot machine win per unit per day","$","486","","","$","142","","","$","344","","","242.3"],["Wynn Macau:"],["Total casino revenues","$","970,269","","","$","216,639","","","$","753,630","","","347.9"],["VIP:"],["Average number of table games","41","","","41","","","\u2014","","","\u2014"],["VIP turnover","$","5,132,628","","","$","1,771,143","","","$","3,361,485","","","189.8"],["VIP table games win","$","191,936","","","$","55,999","","","$","135,937","","","242.7"],["VIP win as a % of turnover","3.74","%","","3.16","%","","0.58"],["Table games win per unit per day","$","12,699","","","$","3,828","","","$","8,871","","","231.7"],["Mass market:"],["Average number of table games","216","","","235","","","(19)","","","(8.1)"],["Table drop","$","5,155,929","","","$","1,170,633","","","$","3,985,296","","","340.4"],["Table games win","$","910,825","","","$","189,769","","","$","721,056","","","380.0"],["Table games win %","17.7","%","","16.2","%","","1.5"],["Table games win per unit per day","$","11,560","","","$","2,284","","","$","9,276","","","406.1"],["Average number of slot machines","530","","","646","","","(116)","","","(18.0)"],["Slot machine handle","$","2,212,196","","","$","895,466","","","$","1,316,730","","","147.0"],["Slot machine win","$","68,667","","","$","31,768","","","$","36,899","","","116.2"],["Slot machine win per unit per day","$","355","","","$","139","","","$","216","","","155.4"],["Poker rake","$","18,266","","","$","357","","","$","17,909","","","NM"]]
[[/GREPCENT_TABLE]]

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[[GREPCENT_TABLE]]
[["","Year Ended December 31,"],["","2023","","2022","","Increase/ (Decrease)","","Percent Change"],["Las Vegas Operations:"],["Total casino revenues","$","628,185","","","$","535,279","","","$","92,906","","","17.4"],["Average number of table games","233","","","234","","","(1)","","","(0.4)"],["Table drop","$","2,425,621","","","$","2,274,010","","","$","151,611","","","6.7"],["Table games win","$","599,001","","","$","511,746","","","$","87,255","","","17.1"],["Table games win %","24.7","%","","22.5","%","","2.2"],["Table games win per unit per day","$","7,038","","","$","5,990","","","$","1,048","","","17.5"],["Average number of slot machines","1,645","","","1,703","","","(58)","","","(3.4)"],["Slot machine handle","$","6,423,374","","","$","5,617,775","","","$","805,599","","","14.3"],["Slot machine win","$","451,833","","","$","394,052","","","$","57,781","","","14.7"],["Slot machine win per unit per day","$","752","","","$","634","","","$","118","","","18.6"],["Poker rake","$","25,720","","","$","19,680","","","$","6,040","","","30.7"],["Encore Boston Harbor:"],["Total casino revenues","$","648,668","","","$","624,738","","","$","23,930","","","3.8"],["Average number of table games","191","","","187","","","4","","","2.1"],["Table drop","$","1,422,416","","","$","1,447,851","","","$","(25,435)","","","(1.8)"],["Table games win","$","308,890","","","$","315,057","","","$","(6,167)","","","(2.0)"],["Table games win %","21.7","%","","21.8","%","","(0.1)"],["Table games win per unit per day","$","4,429","","","$","4,604","","","$","(175)","","","(3.8)"],["Average number of slot machines","2,550","","","2,716","","","(166)","","","(6.1)"],["Slot machine handle","$","5,256,696","","","$","5,007,772","","","$","248,924","","","5.0"],["Slot machine win","$","421,190","","","$","402,688","","","$","18,502","","","4.6"],["Slot machine win per unit per day","$","452","","","$","406","","","$","46","","","11.3"],["Poker rake","$","21,505","","","$","9,476","","","$","12,029","","","126.9"]]
[[/GREPCENT_TABLE]]

NM - Not meaningful.

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Non-casino revenues

The table below sets forth our room revenues and associated key operating measures:

[[GREPCENT_TABLE]]
[["","Year Ended December 31,"],["","2023","","2022","","Increase/ (Decrease)","","Percent Change"],["Macau Operations:"],["Wynn Palace:"],["Total room revenues (dollars in thousands)","$","201,783","","","$","40,079","","","$","161,704","","","403.5"],["Occupancy","94.9","%","","38.4","%","","56.5"],["ADR","$","323","","","$","156","","","$","167","","","107.1"],["REVPAR","$","306","","","$","60","","","$","246","","","410.0"],["Wynn Macau:"],["Total room revenues (dollars in thousands)","$","109,308","","","$","25,691","","","$","83,617","","","325.5"],["Occupancy","96.5","%","","41.1","%","","55.4"],["ADR","$","281","","","$","154","","","$","127","","","82.5"],["REVPAR","$","271","","","$","63","","","$","208","","","330.2"],["Las Vegas Operations:"],["Total room revenues (dollars in thousands)","$","784,385","","","$","651,291","","","$","133,094","","","20.4"],["Occupancy","89.6","%","","86.7","%","","2.9"],["ADR","$","513","","","$","454","","","$","59","","","13.0"],["REVPAR","$","459","","","$","393","","","$","66","","","16.8"],["Encore Boston Harbor:"],["Total room revenues (dollars in thousands)","$","90,195","","","$","85,078","","","$","5,117","","","6.0"],["Occupancy","93.0","%","","91.4","%","","1.6"],["ADR","$","398","","","$","382","","","$","16","","","4.2"],["REVPAR","$","370","","","$","349","","","$","21","","","6.0"]]
[[/GREPCENT_TABLE]]

Room revenues increased $383.5 million, primarily due to higher occupancy and ADR at our Macau Operations and our Las Vegas Operations.

Food and beverage revenues increased $182.4 million, primarily due to increased restaurant covers at our Las Vegas Operations and our Macau Operations.

Entertainment, retail and other revenues increased $123.3 million, primarily due to higher business volumes across our properties, including an increase in revenues of $34.8 million from entertainment, convention, and special event-related sales and $9.6 million from other outlets such as the spa, salon, and golf course at our Las Vegas Operations, and an increase in revenues of $29.7 million and $9.8 million from our leased retail outlets at our Macau Operations and our Las Vegas Operations, respectively.

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Operating expenses

The table below presents operating expenses (dollars in thousands):

[[GREPCENT_TABLE]]
[["","Year Ended December 31,"],["","2023","","2022","","Increase/ (Decrease)","","Percent Change"],["Operating expenses:"],["Casino","$","2,238,671","","","$","1,099,801","","","$","1,138,870","","","103.6"],["Rooms","307,132","","","261,343","","","45,789","","","17.5"],["Food and beverage","822,323","","","700,549","","","121,774","","","17.4"],["Entertainment, retail and other","340,437","","","328,529","","","11,908","","","3.6"],["General and administrative","1,065,022","","","830,450","","","234,572","","","28.2"],["Provision for credit losses","(3,964)","","","(7,295)","","","3,331","","","(45.7)"],["Pre-opening","9,468","","","20,643","","","(11,175)","","","(54.1)"],["Depreciation and amortization","687,270","","","692,318","","","(5,048)","","","(0.7)"],["Gain on EBH Transaction, net","\u2014","","","(181,989)","","","181,989","","","NM"],["Impairment of goodwill and intangible assets","94,490","","","48,036","","","46,454","","","96.7"],["Property charges and other","130,877","","","65,116","","","65,761","","","101.0"],["Total operating expenses","$","5,691,726","","","$","3,857,501","","","$","1,834,225","","","47.5"]]
[[/GREPCENT_TABLE]]

NM - Not meaningful.

The increase in total operating expenses was primarily due to increased operating costs associated with higher business volumes at each of our properties, an increase in impairment of goodwill and intangible assets and property charges at Wynn Interactive, as a result of our decision to close its online sports betting and iGaming platform, WynnBET, in certain jurisdictions, and the gain recorded in 2022 in connection with the closing on a sale-leaseback arrangement with respect to certain real estate assets related to Encore Boston Harbor (the "EBH Transaction").

Casino expenses increased $686.7 million and $396.5 million at Wynn Palace and Wynn Macau, respectively. These increases resulted from higher operating costs, including increases of $642.3 million and $381.4 million in incremental gaming tax expense at Wynn Palace and Wynn Macau, respectively, driven by the increase in casino revenues.

Room expenses increased $28.8 million and $9.7 million at our Las Vegas Operations and Wynn Palace, respectively. These increases resulted from higher operating costs related to an increase in room revenues at our Las Vegas Operations and Wynn Palace.

Food and beverage expenses increased $69.4 million, $31.5 million, and $17.2 million at our Las Vegas Operations, Wynn Palace, and Wynn Macau, respectively. These increases resulted from higher operating costs related to an increase in food and beverage revenues at our Las Vegas Operations, Wynn Palace, and Wynn Macau, respectively.

Entertainment, retail and other expenses increased $35.5 million at our Las Vegas Operations as a result of higher operating costs associated with live and theatrical entertainment. Entertainment, retail and other expenses also increased $19.2 million at our Macau Operations as a result of higher operating costs associated with increased business volumes. These increases were partially offset by a decrease in marketing and other operational costs of $45.4 million at Wynn Interactive.

General and administrative expenses increased primarily due to triple-net operating lease expense of $139.8 million at Encore Boston Harbor following the sale-leaseback transaction in December 2022, an increase of $29.4 million at our Las Vegas Operations attributable to payroll and other general and administrative expenses required to support higher business volumes, and increased corporate and other general and administrative expenses of $52.3 million, primarily due to development costs.

For the year ended December 31, 2023, pre-opening expenses totaled $9.5 million, which primarily related to the launch of sports betting operations in Massachusetts. For the year ended December 31, 2022, pre-opening expenses totaled $20.6 million, which primarily related to reconfiguring the theater space at Wynn Las Vegas.

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We recorded a gain of $182.0 million related to the closing of the EBH Transaction in December 2022.

During the year ended December 31, 2023, the Company recognized impairment of goodwill and other finite-lived intangible assets of $72.1 million and $22.4 million, respectively, as a result of our decision to close Wynn Interactive's online sports betting and iGaming platform, WynnBET, in certain jurisdictions. During the year ended December 31, 2022, the Company recognized impairment of goodwill and other intangible assets of $37.8 million and $10.3 million, respectively, as a result of changes in forecasts and other industry-specific factors and our decision to cease Wynn Interactive's BetBull operations.

Property charges and other expenses for the year ended December 31, 2023 consisted primarily of contract termination and other expenses of $94.6 million, as a result of our decision to close Wynn Interactive's online sports betting and iGaming platform, WynnBET, in certain jurisdictions. Property charges and other expenses for the year ended December 31, 2023 also included other contract terminations of $8.7 million at Wynn Macau, and asset abandonments of $12.7 million and $8.0 million at Wynn Palace and our Las Vegas Operations, respectively. Property charges and other expenses for the year ended December 31, 2022 consisted primarily of restructuring costs incurred by Wynn Interactive, including contract termination costs of $32.8 million and asset abandonments of $3.3 million, $22.6 million, and $1.3 million at our Las Vegas Operations, Wynn Palace, and Wynn Macau, respectively.

Other non-operating income and expenses

Interest expense, net of capitalized interest, increased $100.6 million primarily due to an increase in the weighted average interest rate to 6.07% for the year ended December 31, 2023, from 5.36% for the year ended December 31, 2022.

We recorded interest income of $175.8 million for the year ended December 31, 2023, primarily related to interest earned on cash and cash equivalents held at financial institutions.

We incurred a foreign currency remeasurement loss of $11.5 million and a gain of $5.8 million for the years ended December 31, 2023 and 2022, respectively. The impact of the exchange rate fluctuation of the Macau pataca, in relation to the U.S. dollar, on the remeasurements of U.S. dollar denominated debt and other obligations from our Macau-related entities drove the variability between periods.

We recorded a gain of $45.1 million and $16.0 million for the years ended December 31, 2023 and 2022, respectively, from change in derivatives fair value. The change in derivatives fair value for the year ended December 31, 2023 included a gain of $49.7 million recorded in relation to the conversion feature of the WML Convertible Bonds.

We recorded a $12.7 million loss on debt financing transactions for the year ended December 31, 2023, primarily related to the issuance of the 2031 WRF Senior Notes and the repurchase of the tendered 2025 WRF Senior Notes.

Income Taxes

For the years ended December 31, 2023 and 2022, we recorded an income tax benefit of $496.8 million and an expense of $9.3 million, respectively. The 2023 income tax benefit primarily relates to the release of valuation allowance on certain deferred tax assets. The 2022 income tax expense primarily relates to U.S. profitability and changes in U.S. deferred taxes.

In 2024, Wynn Macau SA received an exemption from Macau’s 12% Complementary Tax on casino gaming profits from January 1, 2023 through December 31, 2027. Our non-gaming profits remain subject to the Macau Complementary Tax and casino winnings remain subject to the Macau special gaming tax and other levies in accordance with our concession agreement.

Net income (loss) attributable to noncontrolling interests

Net income attributable to noncontrolling interests was $52.2 million for the year ended December 31, 2023, compared to net loss of $285.5 million for the year ended December 31, 2022. These amounts are primarily related to the noncontrolling interests' share of net income (loss) from WML.

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Segment Information

As further described in Item 8—"Financial Statements and Supplementary Data," Note 20, "Segment Information," we use Adjusted Property EBITDAR to manage the operating results of our segments. Adjusted Property EBITDAR is net income (loss) before interest, income taxes, depreciation and amortization, pre-opening expenses, impairment of goodwill and intangible assets, property charges and other, triple-net operating lease rent expense related to Encore Boston Harbor, management and license fees, corporate expenses and other (including intercompany golf course, meeting and convention, and water rights leases), stock-based compensation, change in derivatives fair value, loss on debt financing transactions, and other non-operating income and expenses. Adjusted Property EBITDAR is presented exclusively as a supplemental disclosure because management believes that it is widely used to measure the performance, and as a basis for valuation, of gaming companies. Management uses Adjusted Property EBITDAR as a measure of the operating performance of its segments and to compare the operating performance of its properties with those of its competitors, as well as a basis for determining certain incentive compensation. We also present Adjusted Property EBITDAR because it is used by some investors to measure a company's ability to incur and service debt, make capital expenditures and meet working capital requirements. Gaming companies have historically reported EBITDAR as a supplement to GAAP. In order to view the operations of their casinos on a more stand-alone basis, gaming companies, including us, have historically excluded from their EBITDAR calculations pre-opening expenses, property charges, corporate expenses and stock-based compensation, that do not relate to the management of specific casino properties. However, Adjusted Property EBITDAR should not be considered as an alternative to operating income (loss) as an indicator of our performance, as an alternative to cash flows from operating activities as a measure of liquidity, or as an alternative to any other measure determined in accordance with GAAP. Unlike net income (loss), Adjusted Property EBITDAR does not include depreciation or interest expense and therefore does not reflect current or future capital expenditures or the cost of capital. We have significant uses of cash flows, including capital expenditures, triple-net operating lease rent expense related to Encore Boston Harbor, interest payments, debt principal repayments, income taxes and other non-recurring charges, which are not reflected in Adjusted Property EBITDAR. Also, our calculation of Adjusted Property EBITDAR may be different from the calculation methods used by other companies and, therefore, comparability may be limited.

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The following table summarizes Adjusted Property EBITDAR (in thousands) for Wynn Palace, Wynn Macau, Las Vegas Operations, Encore Boston Harbor, and Wynn Interactive as reviewed by management and summarized in Item 8—"Financial Statements and Supplementary Data," Note 20, "Segment Information." That footnote also presents a reconciliation of Adjusted Property EBITDAR to net income (loss) attributable to Wynn Resorts, Limited.

[[GREPCENT_TABLE]]
[["","Year Ended December 31,"],["","2023","","2022","","Increase/ (Decrease)"],["Wynn Palace","$","615,846","","","$","(96,557)","","","$","712,403"],["Wynn Macau","338,091","","","(124,047)","","","462,138"],["Las Vegas Operations","946,243","","","801,095","","","145,148"],["Encore Boston Harbor","257,409","","","243,386","","","14,023"],["Wynn Interactive","(42,646)","","","(98,490)","","","55,844"]]
[[/GREPCENT_TABLE]]

Adjusted Property EBITDAR at Wynn Palace and Wynn Macau increased $712.4 million and $462.1 million for the year ended December 31, 2023, respectively, primarily due to an increase in operating revenues of $1.48 billion and $902.3 million for the year ended December 31, 2023, respectively, partially offset by an increase in operating expenses. Our Macau Operations for the year ended December 31, 2022 were negatively impacted by certain travel-related restrictions and conditions related to the COVID-19 pandemic. Over the course of December 2022 and January 2023, the Macau authorities relaxed or eliminated COVID-19 related protective measures, which resulted in increased business volumes at our Macau Operations for the year ended December 31, 2023.

Adjusted Property EBITDAR at our Las Vegas Operations increased $145.1 million for the year ended December 31, 2023, primarily due to an increase in revenues from room and casino operations of $133.1 million and $92.9 million, respectively, partially offset by an increase in operating expenses.

Adjusted Property EBITDAR at Encore Boston Harbor increased $14.0 million for the year ended December 31, 2023, primarily due to an increase in revenues from casino operations of $23.9 million, partially offset by increased operating expenses.

Adjusted Property EBITDAR at Wynn Interactive increased $55.8 million for the year ended December 31, 2023, primarily due to a decrease in marketing and promotional expense of $45.4 million and an increase in operating revenues of $13.0 million.

Refer to the discussions above regarding the specific details of our results of operations.

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Liquidity and Capital Resources

Our cash flows were as follows (in thousands):

[[GREPCENT_TABLE]]
[["","Year Ended December 31,"],["Cash Flows - Summary","2023","","2022"],["Net cash provided by (used in) operating activities","$","1,247,879","","","$","(71,272)"],["Net cash (used in) provided by investing activities:"],["Capital expenditures, net of construction payables and retention","(442,793)","","","(300,127)"],["Purchase of investments","(836,519)","","","\u2014"],["Purchase of intangible and other assets","(64,383)","","","(52,377)"],["Proceeds from EBH Transaction","\u2014","","","1,700,000"],["Proceeds from sale of assets and other","1,162","","","1,471"],["Net cash (used in) provided by investing activities","(1,342,533)","","","1,348,967"],["Net cash used in financing activities:"],["Proceeds from issuance of long-term debt","1,200,000","","","211,435"],["Repayments of long-term debt","(1,533,124)","","","(50,000)"],["Repurchase of common stock","(212,455)","","","(187,499)"],["Proceeds from exercise of stock options","1,965","","","\u2014"],["Proceeds from issuance of subsidiary common stock","\u2014","","","2,895"],["Proceeds from sale of noncontrolling interest in subsidiary","\u2014","","","50,033"],["Distribution to noncontrolling interest","(22,579)","","","(27,744)"],["Dividends paid","(84,733)","","","(1,445)"],["Finance lease payments","(19,267)","","","(18,188)"],["Payments for financing costs","(41,240)","","","(3,165)"],["Other","(7,773)","","","\u2014"],["Net cash used in financing activities","(719,206)","","","(23,678)"],["Effect of exchange rate on cash, cash equivalents and restricted cash","282","","","(2,094)"],["(Decrease) increase in cash, cash equivalents and restricted cash","$","(813,578)","","","$","1,251,923"]]
[[/GREPCENT_TABLE]]

Operating Activities

Our operating cash flows primarily consist of operating income (excluding depreciation and amortization and other non-cash charges), interest paid and earned, and changes in working capital accounts such as receivables, inventories, prepaid expenses, and payables. Our table games play is a mix of cash play and credit play, while our slot machine play is conducted primarily on a cash basis. A significant portion of our table games revenue is attributable to the play of a limited number of premium customers who gamble on credit. The ability to collect these gaming receivables may impact our operating cash flow for the period. Our rooms, food and beverage, and entertainment, retail and other revenue is conducted on a cash and credit basis. Accordingly, operating cash flows will be impacted by changes in operating income and accounts receivable, net.

During the year ended December 31, 2023, the increase in cash flows from operating activities was primarily due to increased revenues from our Macau Operations and our Las Vegas Operations, which was partially offset by an increase in operating expenses associated with higher business volumes.

During the year ended December 31, 2022, the decrease in net cash used in operating activities was primarily due to a decrease in marketing expenses related to Wynn Interactive and an increase in customer deposits.

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Investing Activities

Our investing activities primarily consist of project capital expenditures and maintenance capital expenditures associated with maintaining and continually refining our world-class integrated resort properties.

During the year ended December 31, 2023, we incurred capital expenditures of $187.2 million at our Las Vegas Operations, $70.6 million at Encore Boston Harbor, and $25.6 million at Wynn Macau primarily related to various renovations and maintenance capital expenditures; $66.3 million at Wynn Palace primarily due to non-gaming related capital projects; and $93.2 million at Corporate and other primarily related to future development projects, including $34.6 million related to an expansion project adjacent to Encore Boston Harbor. In addition, during the year ended December 31, 2023, we purchased $836.5 million in investments, comprised of United States treasury bills and fixed deposits maturing in less than one year.

During the year ended December 31, 2022, we incurred capital expenditures of $226.4 million at our Las Vegas Operations primarily related to the Wynn Las Vegas room remodel and theater reconfiguration, and $20.2 million at Encore Boston Harbor, $31.9 million at Wynn Palace, and $13.0 million at Wynn Macau primarily related to maintenance capital expenditures. We also received $1.70 billion in cash proceeds upon closing of the EBH Transaction. In addition, we made a $40.2 million investment in an unconsolidated affiliate.

Financing Activities

The below table presents proceeds from the issuance, repayments, and repurchases of the specified debt instruments during the year ended December 31, 2023 (in thousands):

[[GREPCENT_TABLE]]
[["","Proceeds from issuance","","Repayments and repurchases"],["WRF 7 1/8% Senior Notes, due 2031","$","600,000","","","$","\u2014"],["WML 4 1/2% Convertible Bonds, due 2029","600,000","","","\u2014"],["WRF 7 3/4% Senior Notes, due 2025","\u2014","","","600,000"],["WLV 4 1/4% Senior Notes, due 2023","\u2014","","","500,000"],["WLV 5 1/2% Senior Notes, due 2025","\u2014","","","399,999"],["WRF Term Loan, due 2024","\u2014","","","33,125"],["Total","$","1,200,000","","","$","1,533,124"]]
[[/GREPCENT_TABLE]]

In addition, during the year ended December 31, 2023, we repurchased 2,206,573 shares of our common stock for $195.5 million. We also made dividend payments of $84.7 million, paid $41.2 million for financing costs related to the financing activities above and used cash of $22.6 million for distributions to noncontrolling interest holders of the Retail Joint Venture.

During the year ended December 31, 2022, we repurchased 2,956,331 shares of our common stock for $171.3 million under our equity repurchase program. We also borrowed $211.4 million under the WM Cayman II Revolver and made quarterly amortization payments under the WRF Term Loan totaling $50.0 million. In addition, we received a $50.0 million contribution from a noncontrolling interest holder in exchange for a 49.9% interest in certain retail space contributed by the Company to the Retail Joint Venture and used cash of $27.7 million for distributions to noncontrolling interest holders of the Retail Joint Venture.

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Capital Resources

The following table summarizes our unrestricted cash and cash equivalents, investments, and available revolver borrowing capacity, excluding capacity under intercompany loan agreements, presented by significant financing entity as of December 31, 2023 (in thousands):

[[GREPCENT_TABLE]]
[["","Total Cash and Cash Equivalents","","Investments(1)","","Revolver Borrowing Capacity"],["Wynn Macau, Limited and subsidiaries","$","1,317,744","","","$","697,908","","","$","\u2014"],["Wynn Resorts Finance, LLC(2)","361,529","","","\u2014","","","736,451"],["Wynn Resorts, Limited and other","1,199,913","","","147,284","","","\u2014"],["Total","$","2,879,186","","","$","845,192","","","$","736,451"]]
[[/GREPCENT_TABLE]]

(1)Investments consist of investments in United States treasury bills and fixed deposits maturing in less than one year.

(2)Excluding Wynn Macau, Limited and subsidiaries.

Wynn Macau, Limited and subsidiaries. WML generates cash from our Macau Operations to fund working capital requirements as needed. We expect to use this cash to fund working capital and capital expenditure requirements at WML and our Macau Operations, and to service our WML Senior Notes, WM Cayman II Revolver, and WML Convertible Bonds. WML paid no dividends during 2023 or 2022.

In 2024, Wynn Macau SA renewed its agreement with the Macau government that provides for a payment in lieu of complementary tax on dividend distributions which would otherwise be borne by stockholders of Wynn Macau SA from January 1, 2023 through December 31, 2025. The payment is $5.5 million for the year ended December 31, 2023.

Pursuant to the amended and restated facility agreement dated June 27, 2023, the base rate applicable to loans denominated in U.S. dollars made pursuant to the WM Cayman II Revolver transitioned to the term secured overnight financing rate ("Term SOFR"), plus a credit adjustment spread of 0.10%, plus (b) a margin of 1.875% to 2.875% per annum based on WM Cayman II’s leverage ratio on a consolidated basis. The new Term SOFR base rate became effective July 4, 2023. The loans denominated in Hong Kong dollars under the WM Cayman II Revolver bear interest at HIBOR plus a margin of 1.875% to 2.875% per annum based on WM Cayman II's leverage ratio on consolidated basis. The final maturity of all outstanding loans under the Revolving Facility remains unchanged at September 16, 2025. WML, as guarantor, may be subject to certain restrictions on payments of dividends or distributions to its shareholders, unless certain financial criteria have been satisfied.

On March 7, 2023, WML completed an offering (the "Offering") of $600.0 million 4.50% convertible bonds due 2029 (the "WML Convertible Bonds"). The WML Convertible Bonds are governed by a trust deed dated March 7, 2023 (the "Trust Deed"). The net proceeds from the Offering, after deduction of commission and other related expenses, were $585.9 million. WML intends to use the proceeds for general corporate purposes. The WML Convertible Bonds bear interest on their outstanding principal amount from and including March 7, 2023 at the rate of 4.50% per annum.

The WML Convertible Bonds are convertible at the option of the holder thereof into fully paid ordinary shares of WML, at the initial conversion price of approximately HK$10.24 (equivalent to approximately $1.31) per share, subject to and upon compliance with the terms and conditions of the WML Convertible Bonds (the "Terms and Conditions," and such right, the "Conversion Right"). The conversion price is at the fixed rate of HK$7.8497 (equivalent to US$1.00), subject to standard adjustments for certain dilutive events as described in the Terms and Conditions. WML has the option, in its sole discretion, to pay to the relevant bondholder an amount of cash equivalent in order to satisfy the Conversion Right in whole or in part.

The holders of the WML Convertible Bonds have the option to require WML to redeem all or some only of such holder’s Bonds (i) on March 7, 2027 at their principal amount together with interest accrued but unpaid to (but excluding) the date fixed for redemption; or (ii) on the Relevant Event Redemption Date (as defined in the Terms and Conditions) at their principal amount together with interest accrued but unpaid to, but excluding such date, following the occurrence of (a) when the Ordinary Shares cease to be listed or admitted to trading or are suspended from trading for a period equal to or exceeding 10 consecutive trading days on the Stock Exchange of Hong Kong Limited, or if applicable, the alternative stock exchange, (b) when there is a Change of Control (as defined in the Terms and Conditions), or (c) when less than 25% of WML’s total number of issued Ordinary Shares are held by the public (as interpreted under Rule 8.24 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited). The WML Convertible Bonds may also be redeemed at the option of WML in whole, but not in part, at any time after March 7, 2027, but prior to March 7, 2029, upon giving notice to the bondholders in accordance with the Terms and Conditions, under certain circumstances specified in the Trust Deed.

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If our portion of our cash and cash equivalents were repatriated to the U.S. on December 31, 2023, it would be subject to minimal U.S. taxes in the year of repatriation.

Wynn Resorts Finance, LLC and subsidiaries. Wynn Resorts Finance, LLC ("WRF" or "Wynn Resorts Finance") generates cash from distributions from its subsidiaries, which include our Macau Operations, Wynn Las Vegas, and Encore Boston Harbor, and capital contributions from Wynn Resorts, as required. In addition, WRF may utilize its available revolving borrowing capacity as needed. We expect to use this cash to service our WRF Credit Facilities, the WRF Senior Notes and the Wynn Las Vegas Senior Notes, and to fund working capital and capital expenditure requirements as needed.

WRF is a holding company and, as a result, its ability to pay dividends to Wynn Resorts is dependent on WRF receiving distributions from its subsidiaries, which include WML, Wynn Las Vegas, LLC, and Wynn MA. The WRF Credit Agreement contains customary negative and financial covenants, including, but not limited to, covenants that restrict WRF's ability to pay dividends or distributions and incur additional indebtedness.

On February 16, 2023, WRF issued $600.0 million aggregate principal amount of 7 1/8% Senior Notes due 2031 (the "2031 WRF Senior Notes") in a private offering. The 2031 WRF Senior Notes were issued at par, for proceeds of $596.2 million, net of $3.8 million of related fees and expenses. Also on February 16, 2023, WRF completed a cash tender offer for any and all of the outstanding principal amount of the 2025 WRF Senior Notes, and accepted for purchase valid tenders with respect to $506.4 million and paid a tender premium of $12.4 million. We used a portion of the net proceeds from the offering of the 2031 WRF Senior Notes to purchase such tendered 2025 WRF Senior Notes and to pay related fees and expenses.

In March 2023, we repurchased all of the outstanding Wynn Las Vegas 4.25% Senior Notes due 2023 of $500.0 million using cash held by WRF, at a price equal to 100% of the principal amount plus accrued interest under the terms of their indenture.

In April 2023, we repurchased the remaining outstanding 2025 WRF Senior Notes using the remaining net proceeds from the issuance of the 2031 WRF Senior Notes and cash held by WRF, at a price equal to 101.938% of the principal amount plus accrued interest under the terms of its indenture.

In May 2023, WRF and certain of its subsidiaries entered into an amendment (the "WRF Credit Agreement Amendment") to its existing credit agreement (the "WRF Credit Agreement").

The WRF Credit Agreement Amendment amends the WRF Credit Agreement to: (i) transition the benchmark rate from LIBOR to Term SOFR and to make conforming changes, (ii) reduce the aggregate principal amount of revolving commitments under the revolving credit facility by $100.0 million, from $850.0 million to $750.0 million, (iii) extend the stated maturity date for lenders electing to extend their revolving commitments in an amount equal to approximately $681.3 million from September 20, 2024 to September 20, 2027, and (iv) extend the stated maturity date for lenders electing to extend their term loan commitments in an amount equal to approximately $749.4 million from September 20, 2024 to September 20, 2027. Lenders who elected not to extend their revolving commitments in an amount equal to approximately $68.7 million will remain subject to a stated maturity date of September 20, 2024, and lenders who elected not to extend their term loan commitments in an amount equal to approximately $75.6 million will remain subject to a stated maturity date of September 20, 2024.

In August 2023, Wynn Las Vegas repurchased $400.0 million aggregate principal amount of its 5 1/2% Senior Notes due 2025 ("2025 WLV Senior Notes"), at a price equal to 94% of the principal amount, plus accrued interest and an early tender premium of $20.0 million and the related fees and expenses, using cash held by Wynn Resorts.

In February 2024, WRF issued an additional $400.0 million aggregate principal amount of 7 1/8% Senior Notes due 2031 (the "2031 WRF Add-On Senior Notes") in a private offering. The 2031 WRF Add-On Senior Notes were issued at a price equal to 103.0% of the principal amount, for net proceeds of approximately $409 million. Also, in February 2024, Wynn Las Vegas repurchased $678.0 million aggregate principal amount of its 2025 WLV Senior Notes, at a price equal to 97.2% of the principal amount, plus accrued interest and an early tender premium of $20.3 million to the holders of validly tendered 2025 WLV Senior Notes. The Company used the net proceeds from the 2031 WRF Add-On Senior Notes and cash held by Wynn Resorts to purchase such validly tendered 2025 WLV Senior Notes and to pay the tender premium and related fees and expenses.

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Wynn Resorts, Limited and other subsidiaries. Wynn Resorts, Limited is a holding company and, as a result, our ability to pay dividends is dependent on our ability to obtain funds and our subsidiaries' ability to provide funds to us. Wynn Resorts, Limited and other primarily generates cash from royalty (including intellectual property license) and management agreements with our resorts, dividends and distributions from our subsidiaries, and the operations of the Retail Joint Venture of which we own 50.1%. Fees payable by Wynn Macau SA to Wynn Resorts, Limited under its intellectual property license agreement are capped at $140.0 million for the year ended December 31, 2024. We expect to use cash held by Wynn Resorts, Limited and other to service our Retail Term Loan, to fund working capital needs of our subsidiaries, pay dividends, make required capital contributions to the entity which owns the Wynn Al Marjan Island development, and for general corporate purposes.

The Company is currently constructing a phased development adjacent to Encore Boston Harbor, which will include a theater, entertainment venues, gaming facilities, food and beverage facilities, and a parking garage. We expect to incur between $375.0 million and $400.0 million of remaining project costs related to this development, which we expect to complete during the first quarter of 2026.

On June 2, 2023, the Company entered into a second amendment to the existing term loan agreement (the "Retail Term Loan Amendment") which transitions the benchmark interest rate of the Retail Term Loan from LIBOR to the adjusted daily simple secured overnight financing rate ("SOFR") and to make related conforming changes, effective July 3, 2023.

The Company paid a cash dividend of $0.25 per share in each of the quarters ended June 30, 2023, September 30, 2023, and December 31, 2023 and recorded $28.5 million, $28.2 million and $28.4 million respectively, against accumulated deficit.

On February 7, 2024, the Company declared a cash dividend of $0.25 per share, payable on February 29, 2024 to stockholders of record as of February 20, 2024.

Other Factors Affecting Liquidity

We may refinance all or a portion of our indebtedness on or before maturity. We cannot assure you that we will be able to refinance any of the indebtedness on acceptable terms or at all.

Legal proceedings in which we are involved also may impact our liquidity. No assurance can be provided as to the outcome of such proceedings. In addition, litigation inherently involves significant costs. For information regarding legal proceedings, see Item 8—"Financial Statements and Supplementary Data," Note 18, "Commitments and Contingencies."

In April 2016, our Board of Directors has authorized an equity repurchase program of up to $1.00 billion. Under the equity repurchase program, we may repurchase the Company's outstanding shares from time to time through open market purchases, in privately negotiated transactions, and under plans complying with Rules 10b5-1 and 10b-18 under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). We repurchased 2,206,573 shares of our common stock at an average price of $88.61 per share, for an aggregate cost of $195.5 million under this equity repurchase program during the year ended December 31, 2023. As of December 31, 2023, we had $433.4 million in repurchase authority remaining under the program.

We have in the past repurchased, and in the future, we may periodically consider repurchasing our outstanding notes for cash. The amount of any shares and/or notes to be repurchased, as well as the timing of any repurchases, will be based on business, market and other conditions and factors, including price, contractual requirements or consents, and capital availability.

New business developments or other unforeseen events may occur, resulting in the need to raise additional funds. We continue to explore opportunities to develop additional gaming or related businesses in domestic and international markets. There can be no assurances regarding the business prospects with respect to any other opportunity. Any new development may require us to obtain additional financing. We may decide to conduct any such development through Wynn Resorts, Limited or through subsidiaries separate from the Las Vegas, Boston or Macau-related entities.

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Contractual Commitments

The following table summarizes our scheduled contractual commitments as of December 31, 2023 (in thousands):

[[GREPCENT_TABLE]]
[["","Payments Due By Period"],["","Less Than 1 Year","","1 to 3 Years","","4 to 5 Years","","After 5 Years","","Total"],["Long-term debt obligations","$","711,155","","","$","4,567,554","","","$","3,598,277","","","$","2,950,000","","","$","11,826,986"],["Fixed interest payments","475,663","","","715,592","","","492,645","","","173,736","","","1,857,636"],["Estimated variable interest payments(1)","195,673","","","188,815","","","32,561","","","\u2014","","","417,049"],["Macau gaming premium(2)","14,484","","","28,968","","","28,968","","","57,937","","","130,357"],["Macau Property Transfer Agreement payments(3)","6,596","","","28,585","","","43,976","","","87,952","","","167,109"],["Construction contracts and commitments","126,110","","","14,079","","","924","","","\u2014","","","141,113"],["Operating leases","142,219","","","285,628","","","292,005","","","3,836,365","","","4,556,217"],["Finance leases","15,064","","","8,364","","","3,540","","","61,796","","","88,764"],["Employment agreements(4)","97,018","","","91,177","","","8,992","","","2,677","","","199,864"],["Massachusetts surrounding community payments(5)","14,966","","","30,880","","","32,218","","","77,047","","","155,111"],["Other(6)","179,398","","","102,955","","","27,336","","","33,294","","","342,983"],["Total contractual commitments","$","1,978,346","","","$","6,062,597","","","$","4,561,442","","","$","7,280,804","","","$","19,883,189"]]
[[/GREPCENT_TABLE]]

(1)Amounts for all periods represent our estimated future interest payments on our debt facilities based upon amounts outstanding and SOFR or HIBOR rates as of December 31, 2023. Actual rates will vary.

(2)Represents the fixed and minimum variable gaming premium amounts payable under the Gaming Concession Contract, based on the number and type of gaming tables and machines we operate.

(3)Represents amounts payable under the Property Transfer Agreements (as defined in Item 8—"Financial Statements and Supplementary Data," Note 5, "Property and Equipment, net").

(4)Represents payments to executive officers, other members of management and certain key employees. Employment agreements generally have three to five year terms and typically indicate a base salary and often contain provisions for discretionary bonuses. Certain of the executives are also entitled to a separation payment if terminated without "cause" or upon voluntary termination of employment for "good reason" following a "change of control" (as these terms are defined in the employment contracts).

(5)Represents payments to certain communities surrounding Encore Boston Harbor, required as a condition of the gaming license awarded to Wynn MA, LLC.

(6)Other includes open purchase orders, future charitable contributions, performance contracts and other contracts. As further discussed in Item 8—"Financial Statements and Supplementary Data," Note 14, "Income Taxes," we had $135.7 million of unrecognized tax benefits as of December 31, 2023. Due to the inherent uncertainty of the underlying tax positions, it is not practicable to assign this liability to any particular year and therefore it is not included in the table above as of December 31, 2023.     

Gaming Concession Contract

On December 16, 2022, Wynn Macau SA entered into a definitive gaming concession contract (the "Gaming Concession Contract") with the government of Macau, pursuant to which Wynn Macau SA was granted a 10-year gaming concession commencing on January 1, 2023 and expiring on December 31, 2032, to operate games of chance at Wynn Palace and Wynn Macau.

In addition to the Macau gaming premium and Property Transfer Agreements payment commitments included in the table above, Wynn Macau SA committed to make certain non-gaming and gaming investments in the amount of MOP17.73 billion (approximately $2.20 billion) over the course of the ten-year term of the Gaming Concession Contract. MOP16.50 billion (approximately $2.05 billion) of the committed investment will be used for non-gaming capital projects and event programming in connection with, among others, attraction of foreign tourists, conventions and exhibitions, entertainment performances, sports events, culture and art, health and wellness, themed amusement, gastronomy, community tourism and maritime tourism.

Wynn Macau SA agreed, as part of its commitment for its Gaming Concession Contract, to increase its investment in non-gaming projects (original commitment of MOP16.50 billion (approximately $2.05 billion) by 20% once market-wide gross gaming revenues reached MOP180.00 billion (approximately $22.36 billion) in any one year (the "Trigger Event"). As market-wide gross gaming revenue exceeded MOP180.00 billion (approximately $22.36 billion) in 2023, the Trigger Event occurred at the end of 2023 and each gaming concessionaire is now required to increase its original committed investment amount in non-gaming projects by 20%. Wynn Macau SA will comply with its further investment commitment by investing MOP3.30 billion

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(approximately $409.9 million) over the course of the remaining 9 years of the Gaming Concession Contract in non-gaming capital projects. The scope, nature and timing of the additional investment in non-gaming capital projects will be mutually agreed between Wynn Macau SA and the Macau SAR Government in due course and according to the terms of the Gaming Concession Contract.

See Item 8—"Financial Statements and Supplementary Data," Note 18, "Commitments and Contingencies," for additional information regarding the amounts owed under the Gaming Concession Contract and Macau gaming law.

Wynn Al Marjan Island Funding Commitment

Pursuant to the shareholders' agreement governing Island 3 AMI FZ-LLC, the unconsolidated entity in which the Company has a 40% ownership interest and which owns the Wynn Al Marjan Island integrated resort development project in Ras Al Khaimah, United Arab Emirates, the Company, and the entity's other shareholders, have committed to fund the development of the project through capital contributions in an amount up to its pro rata share of at least 20% of the project budget. The amount and timing of such contributions are subject to approval by the entity's shareholders.

Critical Accounting Policies and Estimates

The preparation of our consolidated financial statements in conformity with GAAP involves the use of estimates and assumptions that affect the amounts reported in the consolidated financial statements. Certain of our accounting policies require management to apply significant judgment in defining the appropriate assumptions integral to financial estimates and on an ongoing basis, management evaluates those estimates. Judgments are based on historical experience, terms of existing contracts, industry trends and information available from outside sources, as appropriate. However, by their nature, judgments are subject to an inherent degree of uncertainty, and therefore actual results could differ from our estimates.

WML Convertible Bond Conversion Option Derivative

On March 7, 2023, WML completed the Offering of the WML Convertible Bonds. The Company determined that the conversion feature contained within the WML Convertible Bonds is not indexed to WML's equity and, as such, is required to be bifurcated from the debt host contract and accounted for as a free-standing derivative (the "WML Convertible Bonds Conversion Option Derivative"). In accordance with applicable accounting standards, the WML Convertible Bond Conversion Option Derivative will be reported at fair value as of the end of each reporting period, with changes recognized in the statements of operations.

The Company used a binomial lattice model in order to estimate the fair value of the embedded derivative in the WML Convertible Bonds. Inherent in a binomial options pricing model are unobservable (Level 3) inputs and assumptions related to expected share-price volatility, risk-free interest rate, expected term, and dividend yield. The Company estimates the volatility of shares of WML common stock based on historical volatility that matches the expected remaining term to maturity of the WML Convertible Bonds. The risk-free interest rate is based on the Hong Kong and United States benchmark yield curves on the valuation date for a maturity similar to the expected remaining term of the WML Convertible Bonds. The expected life of the WML Convertible Bonds is assumed to be equivalent to their remaining term to maturity. The dividend yield is based on the historical WML dividend rate over the last several years. The output of the lattice model can be highly sensitive to fluctuations in its inputs.

Sale-leaseback Transaction

On December 1, 2022, the Company closed on a sale-leaseback arrangement with respect to certain real estate assets related to Encore Boston Harbor (the "EBH Transaction"). Upon closing of the EBH Transaction, the Company received cash proceeds of approximately $1.70 billion in exchange for the sale of such real estate assets, recognizing a gain on sale of $182.0 million, and concurrently entered into a lease agreement with respect to the sold assets for the purpose of continuing to operate the Encore Boston Harbor integrated resort. Upon entering into the lease agreement, the Company recognized an operating lease asset and a corresponding operating lease liability of $1.51 billion.

Accounting for sale-leaseback transactions requires significant management judgement and estimates, including with respect to the determination of whether the transaction qualifies as a sale as defined within GAAP, operating versus finance lease classification, and inputs into the measurement of lease assets and liabilities.

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In determining whether the transaction qualifies as a sale, we are required to assess whether a contract exists and if so, whether control has passed to the counterparty in the contract. Control indicators include, but are not limited to, whether the entity has a present right to payment for the asset, whether the customer has legal title to the asset, whether the entity has transferred physical possession of the asset, whether the customer has significant risks and rewards of ownership of the asset, and whether the customer has accepted the asset. Concluding whether a sale has occurred requires significant judgement in determining whether the rights and obligations created by the sale agreement convey control to the counterparty in the transaction.

In a sale-leaseback arrangement, we are required to determine whether the lease is classified as an operating lease or a finance lease. A finance lease would preclude sale accounting. A lessee is required to classify a lease as a finance lease if, among other factors, 1) the term is for the major part of the remaining economic life of the underlying asset or 2) the present value of the sum of the lease payments equals or exceeds substantially all of the fair value of the underlying asset. Lease terms include options to extend the lease when it is reasonably certain that such option will be exercised. The Company’s operating lease related to Encore Boston Harbor contains an initial term of 30 years from December 2022 to November 2052 with one thirty-year renewal period at the Company’s option, which, in management judgement, is not considered to be reasonably certain of being exercised. The determination of whether the present value of the sum of the lease payments equals or exceeds substantially all of the fair value of the underlying asset requires the use of estimates, in both determining the discount rate to measure the present value of the sum of the lease payments and in determining the fair value of the underlying assets. As the interest rate implicit in our leases is not readily determinable, we use our incremental borrowing rate, which is defined by GAAP as the "rate of interest that a lessee would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment," to determine the present value of lease payments. Inputs into our selected incremental borrowing rate which require management's judgement include quantifying our entity-specific credit risk and risks associated with the economic environment specific to the leased assets. In determining the fair value of the underlying assets, we use a combination of the income, market, and cost approaches, which include inputs such as estimated future cash flows, the selection of recently sold comparable properties, and estimated cost to construct a comparable asset.

Allowance for Credit Losses

A substantial portion of our outstanding receivables relates to casino credit play. Credit play, through the issuance of markers, represents a significant portion of the table games volume. Our goal is to maintain strict controls over the issuance of credit and aggressively pursue collection from those customers who fail to pay their balances in a timely fashion. These collection efforts may include the mailing of statements and delinquency notices, personal contacts, the use of outside collection agencies, and litigation. Markers issued at our Las Vegas Operations and Encore Boston Harbor are generally legally enforceable instruments in the United States, and United States assets of foreign customers may be used to satisfy judgments entered in the United States.

The enforceability of markers and other forms of credit related to gaming debt outside of the United States varies from country to country. Some foreign countries do not recognize the enforceability of gaming related debt, or make enforcement burdensome. We closely consider the likelihood and difficulty of enforceability, among other factors, when issuing credit to customers who are not residents of the United States. In addition to our internal credit and collection departments, we have a network of legal, accounting and collection professionals to assist us in our determinations regarding enforceability and our overall collection efforts.

We regularly evaluate our reserve for credit losses based on a specific review of customer accounts and outstanding gaming promoter accounts, taking into consideration the amount owed, the age of the account, the customer's financial condition, management's experience with historical and current collection trends, current economic and business conditions, and management's expectations of future economic and business conditions and forecasts. Accounts are written off when management deems them to be uncollectible. Recoveries of accounts previously written off are recorded when received.

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The following table presents key statistics related to our casino accounts receivable (dollars in thousands):

[[GREPCENT_TABLE]]
[["","December 31,"],["","2023","","2022"],["Casino accounts receivable","$","218,694","","","$","171,893"],["Allowance for casino credit losses","$","34,739","","","$","74,207"],["Allowance as a percentage of casino accounts receivable","15.9","%","","43.2","%"]]
[[/GREPCENT_TABLE]]

The decrease in allowance for casino credit losses as shown in the table above is primarily due to the impact of historical collection patterns and expectations of current and future collection trends, as well as the specific review of customer accounts. Although the Company believes that its allowance is adequate, it is possible the estimated amounts of cash collections with respect to receivables could change. Our allowance for credit losses is based on our estimates of amounts collectible and depends on the risk assessments and judgments by management regarding realizability, the current and expected future state of the economy and our credit policy. Our reserve methodology is applied similarly to credit extended at each of our resorts. As of December 31, 2023 and 2022, 41.8% and 34.3%, respectively, of our outstanding casino accounts receivable balance originated at our Macau Operations.

As of December 31, 2023, a 100 basis point change in the allowance for credit losses as a percentage of casino accounts receivable would change the provision for credit losses by approximately $2.2 million.

As our customer payment experience evolves, we will continue to refine our estimated allowance for credit losses. Accordingly, the associated provision for credit losses may fluctuate. Because individual customer account balances can be significant, the reserve and the provision can change significantly between periods as we become aware of additional information about a customer or changes occur in a region's economy or legal system.

Impairment of Long-lived Assets, Intangible assets, and Goodwill

We evaluate our property and equipment and other long-lived assets for impairment in accordance with applicable accounting standards. For assets to be disposed of we recognize the asset at the lower of carrying value or fair market value less costs of disposal, as estimated based on comparable asset sales, solicited offers, or a discounted cash flow model. For assets to be held and used, we review for impairment whenever indicators of impairment exist. In reviewing for impairment, we compare the estimated future cash flows of the asset, on an undiscounted basis, to the carrying value of the asset. If the undiscounted cash flows exceed the carrying value, no impairment is indicated. If the undiscounted cash flows do not exceed the carrying value, an impairment is recorded based on the fair value of the asset, typically measured using a discounted cash flow model. If an asset is still under development, future cash flows include remaining construction costs. All recognized impairment losses, whether for assets to be disposed of or assets to be held and used, are recorded as operating expenses.

The Company tests goodwill for impairment annually, or more frequently if events or changes in circumstances indicate that this asset may be impaired. The Company’s test of goodwill impairment starts with a qualitative assessment to determine whether it is necessary to perform a quantitative goodwill impairment test. If qualitative factors indicate that the fair value of the reporting unit is more likely than not less than its carrying amount, then a quantitative goodwill impairment test is performed. For the quantitative analysis, the Company compares the fair value of its reporting unit to its carrying value. If the estimated fair value exceeds its carrying value, goodwill is considered not to be impaired and no additional steps are necessary. However, if the fair value of the reporting unit is less than its carrying amount, goodwill impairment is recorded equal to the difference between the carrying amount of the reporting unit and its fair value, not to exceed the carrying amount of goodwill.

During the year ended December 31, 2023, as a result of the Company's decision to cease operating Wynn Interactive's online sports betting and iGaming platform in certain jurisdictions, the Company identified interim indicators of impairment related to the goodwill assigned to the WynnBET reporting unit within the Wynn Interactive reportable segment. As a result, the Company performed an impairment test as of December 31, 2023, and determined that the carrying value of its goodwill exceeded the estimated fair value of that reporting unit based on a combination of the income and cost approaches, causing the Company to recognize a goodwill impairment loss of $72.1 million. As of December 31, 2023, the Company had no remaining goodwill recorded related to the acquisition of BetBull Limited ("BetBull"), a subsidiary of Wynn Interactive. The Company also recognized impairment of other finite-lived intangible assets related to Wynn Interactive's closed operations totaling $22.4 million during the year ended December 31, 2023.

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During the year ended December 31, 2022, as a result of changes in forecasts and other industry-specific factors and management's decision to cease the operations of Betbull Limited ("BetBull"), a subsidiary of Wynn Interactive, the Company recognized impairment of goodwill and other finite-lived intangible assets of $37.8 million and $10.3 million, respectively.

Litigation and Contingency Estimates

We are subject to various claims, legal actions and other contingencies, and we accrue for these matters when they are both probable and estimable. For matters that arose on or prior to the balance sheet date, we estimate any accruals based on the relevant facts and circumstances available through the date of issuance of the financial statements. We include the accruals associated with any contingent matters in other accrued liabilities on the Consolidated Balance Sheets.

Income Taxes

We are subject to income taxes in the United States and other foreign jurisdictions where we operate. Accounting standards require the recognition of deferred tax assets, net of applicable reserves, and liabilities for the estimated future tax consequences attributable to differences between financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. The effect of a change in tax rates on the income tax provision and deferred tax assets and liabilities generally is recognized in the results of operations in the period that includes the enactment date. Accounting standards require recognition of a future tax benefit to the extent that realization of such benefit is more likely than not. Otherwise, a valuation allowance is applied.

As of December 31, 2023, we had deferred tax assets of $2.20 billion, including a foreign tax credit ("FTC") carryforward of $1.20 billion and deferred tax assets related to interest expense carryforwards of $156.2 million and net operating loss carryforwards of $239.6 million. In assessing the need for a valuation allowance, the Company considers whether it is more likely than not that the deferred tax assets will be realized. In this assessment, appropriate consideration was given to all positive and negative evidence including recent operating profitability, forecasts of future earnings, ability to carryback, the reversal of net taxable temporary differences, the duration of statutory carryforward periods, and tax planning strategies.

In 2023, we considered both the achievement of sustained profitability and cumulative income as well as forecasted income and tax planning strategies to be significant forms of positive evidence. We determined that the positive evidence outweighed the negative evidence and supported a release of a portion of the valuation allowance. Therefore, we recorded a $1.10 billion net decrease to valuation allowances, including a $971.7 million decrease to the valuation allowance on FTC carryforwards. Of the $971.7 million decrease, $97.5 million relates to current year utilization and $572.6 million relates to expirations of FTCs in 2023. The remaining $301.6 million represents FTCs more likely than not to be realized based on future taxable income and tax planning strategies. We also recorded a $158.0 million decrease in valuation allowance on disallowed interest expense carryforward. The need for valuation allowances against deferred tax assets will be reassessed on a continuous basis in future periods and, as a result, the allowance may increase or decrease based on changes in facts and circumstances.

As of December 31, 2022, we relied solely on the reversal of net taxable temporary differences in assessing the need for a valuation allowance.

Our income tax returns are subject to examination by the IRS and other tax authorities in the locations where we operate. We assess potentially unfavorable outcomes of such examinations based on accounting standards for uncertain income taxes. The accounting standards prescribe a minimum recognition threshold that a tax position is required to meet before being recognized in the financial statements.

Uncertain tax position accounting standards apply to all tax positions related to income taxes. These accounting standards utilize a two-step approach for evaluating tax positions. The tax benefit is measured as the largest amount of benefit that is more likely than not to be realized upon settlement.

As applicable, we recognize accrued penalties and interest related to unrecognized tax benefits in the provision for income taxes.

Recommendations made by the Organization for Economic Cooperation and Development’s Base Erosion and Profit Shifting 2.0 ("BEPS 2.0") project have the potential to lead to changes in the tax laws in numerous countries, including the implementation of a global minimum tax. Several countries around the world have enacted or proposed changes to their

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existing tax laws based on these recommendations. We are monitoring the potential changes in tax laws resulting from the Organization for Economic Cooperation and Development’s multi-jurisdictional plan of action to address base erosion and profit shifting, which could impact our effective tax rate.