Wynn Resorts, Limited (WYNN) Q1 2011 Earnings Report, Transcript and Summary

Good afternoon, and welcome to the Wynn Resorts First Quarter 2011 Earnings Call. Joining the call on behalf of the company today are Steve Wynn, Marc Schorr, Matt Maddox, Marilyn Spiegel, Scott Peterson; and on the phone, Ian Coughlan, President of Wynn Macau; and Robert Gansmo, CFO of Wynn Macau. [Operator Instructions] Now, I would like to turn the call over to Mr. Maddox. Please go ahead, sir.

Thank you, and good afternoon, everyone. Before we get started, I need to remind everybody we will be making forward-looking statements under the Safe Harbor of federal securities laws, and those statements may or may not come true. So with that, I'm going to turn it over to Steve for the introduction.

Well, I think everybody has seen the numbers. They were very nice. As is the case from time to time, the casino gets a little lucky, and that was the case this year and during Chinese New Year in Las Vegas. But it was gratifying, and so it resulted in 120% increase in earnings. But stripped of that sort of thing and normalizing the percentage that the casino produces, we still had very nice increases in our REVPAR, our Average Daily Rate and our revenues in non-casino area and activity in the casino. Business in Las Vegas has improved, which is a trend that we saw last year at the end of the year, and we raised our rates and had no problem. We also are enjoying the benefits of having invested a couple hundred million dollars in Las Vegas, half of which went to remodel all of the rooms in our hotel, which opened in April of -- exactly six years ago. We started it at the end of five years because that's what we do here. We take care of the property, and we upgraded it while we remodeled it. And that was another reason why we get higher rates, and we'll be able to get higher rates going forward. We continue to press ahead with increases, which will continue in the next quarter. We also spent a great deal of money. We built the Beach Club, the Encore Beach Club. We built Surrender, another nightclub. We remodeled Baccarat. Altogether, we put a new motor entrance in our villas. A lot of things to make the place even more user-friendly and more fun for people. We benefited from having a strong capital structure, which allowed us to do these things. And contrary to some of the things you see on television, we brought money from China and invested it here in this particular case, and it worked out very well for us. It was also terrific for us to notice yesterday was the 108th day of the calendar year 2011. And it was on the 108th day that we passed the $0.5 billion mark in EBITDA. We're at $503 million at 108 days, which is a really wonderful clip. It would put us, if that were to continue, it would put us enormously ahead of last year. The increase in Macau was 50%, the increase in Las Vegas was 120%. As usual, during these conference calls, I tend to see if that was entirely anomalous or whether the trend sort of continues. And it appears to be doing it because in April, and of course, it's only 18 days, we're about 160% ahead in Las Vegas and about 100-odd percent -- over 100% in Macau. We want to point out that up until now and continue until the 21st of April, the Macau numbers are comparing Encore and Wynn Macau for a total of 1,000 rooms to just Wynn. Encore at Wynn -- Encore in Macau opened up on April 21. So we get our first year-to-year comparisons where the facilities are equal, starting in the last week of April and of course, all of May and thereafter. So we are benefiting from the fact that our hotel is larger compared to its size last year, and that's going to last for another three or four days and then we're up against an equal facility. I think if anybody is looking at our numbers, they should keep that in mind. And I think that sort of summarizes, unless Matt thinks we ought to add anything to our opening comments. But business for us is terrific. We're at the top end of the market, and that's a good place to be under the circumstances. Everybody is here with me today. I think the operator mentioned that Marilyn is here and Ian is in Macau. Matt and I and Marc are here, everybody, Scott. We're all available to discuss the implications of our numbers with whomever is now ready to ask.

[Operator Instructions] Your first question is from the line of Joe Greff of JPMorgan. Joseph Greff - JP Morgan Chase & Co: Steve, looking backwards at the first quarter and so far in April in Las Vegas, normalizing that the Baccarat hold, what do you think is driving your increases in REVPAR, the non-gaming spend? How much of it do you think is property-specific? And maybe, Marilyn, you can chime in on some of the things that you might be doing differently. How much of it is the market itself just getting better? And then I have a follow-up on Macau.

It's a question for Marilyn Spiegel. I think -- Marilyn, I think you could address that.

Well, actually, I don't see the market getting much better from the January-February numbers that LVCVA announced. But we certainly have a different trend in terms of finding customers who not only want to stay here and they want to eat here and they want to visit our retail stores and our showroom. And so we have been very focused on all of our hotel channels, how we think about our revenue management system, how we're thinking about our website. And we're trying to bring in a guest who is willing to pay for the amenities that we offer, and part of our strategy has been to have confidence in this market. So rather than moving to where many of the competitors have, we've really tried to stay above the fray, and our customer base is finding us and enjoying our service and our products. Joseph Greff - JP Morgan Chase & Co: And on Macau, I know you've added some new junkets there recently. How much of that contributed to the first quarter? I think most of that hit the very tail-end of the first quarter. And further to that topic, I mean, is there much in a way of taking relatively underutilized tables, whether premium mass or maybe improving the Junket business where you think you can get a better yield with additional Junket business in Macau? Is there much less to improve the yield on the table side in Macau, I guess, is my general question.

It's Marc Schorr. In VIP in Macau, we're 243 VIP games this quarter, first quarter '11, versus 196 in first quarter of '10. And so we increased our VIP market share by increasing our table games. Obviously, we took the games from the general casino and moved them into the more profitable market for us.

But sales in Macau, retail sales, and other indicia of non-casino play are also sharply up...

30-something percent.

Yes, 37%, 40% sharply up. Food and beverage was 43%. I mean, our facilities in Macau are very well received as are some of our competitors as well, but we're enjoying that. And of course, the most important number to remember in gaming, I've said this before, I’m going to -- for those of you who really follow this, don't look at market share per se, look at fair share. We use that term, you can call it what you want. But you basically take how many units of slot machines or tables does a given operator have compared to the total in the marketplace, and then take a look at the share of the money that the person -- that the company has. If that ratio is better than 1:1, then you're a net receiver of the customers and you've sort of made a dorm out of your neighbor. If it's less than 1:1, then you're a donor to your neighbor, and that's a negative fair share. We have been able to increase our fair share market penetration in the face of increased competition. It happened to us in Atlantic City years ago. We were the smallest place. But the more places came on, the more our premium over the average increased, and we're enjoying that again in Macau. It's a very important number, and it sort of tells you how good a job you are in delivering a good guest experience, a good customer experience that makes those people want to come back again and again and keep you as their favorite place. That's the number that I watch very carefully and then Matt and Marc. We're on that all the time, and that's what's happened to us in China.

And also, a tremendous increase in our slot operation in China. Our product mix has been very well accepted by the patron in China. It's our slot per win is more than up 78%.

So is our general casino win per unit. We just get a different kind of customer, really. That's what happens.

This is Ian in Macau. We continue to tweak in the size or table and slot layout on the main floor. We're watching VIP productivity very carefully. We're making changes constantly to get a better yield and higher productivity. And just some very quick numbers, we've got 10% of the table games in the marketplace. We have 14% of the market share. And on slots, we've got 8% of the slots in the marketplace in the first quarter, and we've got 22% of the market captured.

Ian has just highlighted our agility, or what we hope is our agility, and that fair share ratio. That's what he watches with Linda [Chen], and that's what Marilyn watches here with Scott Peterson and Marc. And that's really -- that's our whole focus. And it comes down to one thing, all the rest is baloney, guest experience. If the guest experience is good, everything is sweet and lovely. If it's not, problems. Which is, again, why your capital structure is so incredibly important in our business so that you can protect your employee base and your facilities and the way we present it. I think we'll take another question now.

Your next question is from the line of Shaun Kelley with Bank of America.

My question’s probably mostly for Matt. But just glancing on the balance sheet side of things, it looks like you ended the quarter at about $1.8 billion of net debt. Kind of looking on a run rate basis, that's going to put you guys probably below a turn and a half of kind of net leverage. So could you just help us think a little bit more strategically about how you guys are thinking about the balance sheet opportunity? Maybe first off, what's the right optimal capital structure for the business? Is there some opportunity to maybe tap into the debt markets at some point here just given -- I mean, how much cash you guys are generating at this point?

So we will always make a very conservative balance sheet, as you know, Shaun. We did change our capital structure around a little bit this time. We increased our dividend from $0.25 a quarter to $0.50 a quarter.

We did that, yesterday.

That's right. It came out today, so that was announced today. And so we're returning more capital to shareholders. So we're still a growth company where we have Cotai on the horizon, we have other projects that we're looking into. So we're going to keep our powder dry and make sure that we're not building out this company with a lot of leverage. We're doing it with a lot of cash flow, which is the best way to grow the business.

And Matt, just on that. With the cash flow sitting over kind of in Macau, but you guys obviously -- or the bulk of it coming from over there right now. I mean, would there be any strategic interest at all about considering maybe looking at starting to buy back shares in the subsidiary over there?

Shaun, I really don't want to get into the strategic interest of how we're going to deploy our capital. But we're going to continue to be very conservative and make sure that our growth is fully funded and we're not highly dependent on the fragile capital markets.

Everything is opportunistic, and I think Matt's point is that you can take full advantage of opportunities as they present themselves if you have a strong capital position. We do. We are watching. We pay attention. We know when to buy our stock. We know when to sell our stock from the company's point of view. I don't think we've ever really gotten titillated by an acquisition. Our experience has been that if we don't build them ourselves, they're not as good as they need to be in today's marketplace. And I don't mean in any way to be deprecating my former practice hotels, but we try and get better with each one and be more user-friendly with each one. And more importantly, make each hotel more convenient for the staff because at the end of the day, it's our employees that touch the customers. It's our employees that make the guest experience, not the people on this call. We create an environment where the employees can do it. And that's one of the reasons why we're politically concerned because if the living standard of our employees are dropping because of the fiscal policy of the government, we can't keep up with salary increases to protect the people on fixed income from the damage that they're suffering at the hands of this deficit. And so this and gas prices, they worry us going into the summer. The cost -- the living standard in America is being rapidly and critically eroded, and we recognize that as a factor in our future as we look at our growth and our opportunity. Next question.

Your next question is from the line of Rachael Rothman with SIG.

Can you talk a little bit about maybe, Marilyn, some of the cost-cutting programs that you've been implementing at Wynn or what you've done to drive the margin expansion that we've seen even excluding the hold benefit in the quarter?

Actually, I wouldn't describe it so much as a cost-cutting program as one that's driven by revenue growth, and that's why the margins came in so strong. We look at every expense obviously. We look at payroll, we looked at our fixed expenses. They're very stable. More critically, though, we have increases in variable expenses because our gaming revenues were higher. There’s a few things that we have done to enhance the guest experience. Steve talked about it on our last call where we're going to have a Discover Wynn call center such that anyone who calls us for reservation will also able to book their restaurant reservations, their show reservations, their spa, everything, one-stop shopping. Because we really think that when a guest comes here, we could serve them for all their needs. And so that's been important to us, and we're going to move into that new call center in mid-May. But besides that, we've looked at how our labor was deployed before, making sure that it's smart before we add a position. We determine if there's someone who could be -- their responsibilities changed a bit. But I don't think that we'd really have cost-cutting as the focus here.

So as we think about the sequential progression in the margin or the opportunity for continued margin gains x the hold benefit throughout the year, how should we frame that?

Well, once you get a business operating, in terms of its staffing and other controls, at a proper level, then you’ve leaned out that company, that enterprise, to the point where you are not wasting money. The next dollar that you cut after that, you are compromising the enterprise, delivery of its service and its long-term performance. Growth comes from money, from revenue. It doesn't come from cost-cutting. Cost-cutting is only good for avoiding waste. But once we get to that number, the kind of businesses we run, we don't go any further with that. That's why capital structure is important. Again, I keep seem to be going back to those two words. But we don't worry about seeing how much we could cut. That's for people who run a different kind of business than us. This is not Wal-Mart here. This is a place where people expect more, they pay more and they get it. So our focus is on revenue. I'm done with what I had to say. Next question.

Your next question is from the line of Mark Strawn with Morgan Stanley.

One question on the land concession in Macau. Are there any updates there in terms of when that could be signed? And is there any -- is this tied up in terms of a coordinated plan by the government to issue the concessions with others in the market who may be looking to Cotai? Or is it just something that will happen when it happens?

I think both of your comments are appropriate. Things move in Macau at a speed that is comfortable for that government. What we do is we comply with the procedures that are involved, and then the government issues its permissions or publishes in the Gazette or does whatever it does in due course, and there's an awful lot going on in Macau. And so a lot of this is not -- a lot of the -- the administration of the government is not something that we're familiar with. These departments have multiple functions attached to them. And so things move a little bit more slowly than they do when you really want them to speed up. But the government has published the fact that we are to build on our property. They have let us fence it in, they even let us build a warehouse on it. And the actual commencement of construction, which we are ready to do, will take place when the government issues that permission to us and I'm told that it's any day now. And those were in conversations as recently as a week or two ago. And you know you're left with that simple statement and you just wait until they tell you, and that's how it works over there. And it may seem -- you get a little anxious, you wish it would go faster. But it is, in the long run, a very steady process actually and we're used to it over there. We spend more time talking about on this conference calls than we do among ourselves. And considering what's going on with the products that we operate, it's not like we're under any terrible pressure here. We're very busy with the drawings, and there's an enormous amount of preparation to have complete construction documentation. Having finished design development and we know what the hotel looks like, we're now in the process of actually doing the reflected ceiling plans, finishing structural drawings for the foundation, which is very complicated in a landfill. So we make very good use of this time that while we're waiting to begin the remediation of the actual earth that's – Cotai, remember, is a landfill. So we go down 180 feet before we get to the bottom of the footings with pilings and caissons and such. So I hope that answers your questions.

Yes. Thank you very much.

Your next question is from the line of Steve Kent with Goldman Sachs.

A couple questions. First, on the Cotai project, could you give us any sense as to how much capital that will take? Second, I did notice -- I thought it was a very good job that you were able to have your occupancy come down a little bit in Vegas, but your ADR went up quite a bit. And I'm just wondering if there is -- if you are taking, in fact, even more of your fair share in Vegas as you described in Macau. It sounds like you are, and maybe you could help us understand that a little bit. And then third question is, Mass Market in Macau showed a very nice hold for the second quarter in a row, and I'm wondering if there's anything to that beyond just the normal luck.

Let's see...

Cotai.

Cotai.

Las Vegas room mix.

And the hold in Macau.

The hold in Macau is a function we tend to do better when the length of play is extended and people linger in our place. The longer they play, the better it is for us, and they linger in our facilities. It's a subtle point. It's one that totally occupies my attention in the design development process. It's something we've always understood, and it's one of the reasons why every place we've ever operated, starting with the Golden Nugget here in Atlantic City, through Mirage, Bellagio, Treasure Island, always held better than our competitors. We -- so that's the story in the Mass Market. The room mix in Las Vegas and Macau [indiscernible] yes, and our research, we continually sift down and identify the customer we want. We just don't go and scoop people up at the border. We're a little bit more selective than that.

And I think Marilyn's point was right, is we're more confident now in holding our rates. So in the first quarter of this year, 20% of our business is through the Leisure segment, the lowest end of the segment. Last year, in the first quarter, it was 32%. So we were able to shift a lot of the low-end segment to our casino, to our convention area and to our promotional area, which really helped us drive more cash revenue and a higher ADR. It's a better customer.

So that supports your view that you said about Macau, is that you're gaining market share of these higher -- higher quality customers in this market.

Yes, we're like Louis Vuitton, for lack of a better metaphor. We're the -- I hope we're the Louis Vuitton of our business and Aramis and Chanel, those kinds of people. And you really have to know your customer and cater to that customer and build facilities and light the light for that customer and pick the texture for that customer. It's a very meticulous process, which is why it takes us so long in design development, because every little thing really does matter. And at the end of the day, it's 90% human resource engineering. It's our employees that do it, which is why we get so concerned with anything that effects them negatively, like, gas prices that zoom up. Even Wal-Mart’s more expensive, clothing’s more expensive, school’s more expensive, shoes are more expensive. It's all because the dollar is less expensive. You know our currency against troubled euro, a troubled pound, has gone backwards in the last nine months between 10% and 18%, depending whether you're looking at the pound or the euro. It’s hitting us now, and my employees are complaining about it. Marilyn gave the rank-and-file cost-of-living increase. How many weeks ago? When did you do it, Marilyn?

Just last week.

Last week. We're trying to keep up even though we seem to have crosshairs on our back from the administration. We gave one in Macau, a big cost-of-living increase in Macau because we wanted to combat -- try and combat inflation, which is probably a losing game.

Just to finish up. Steve, did you mention the cost of the Cotai project? I was wondering if...

I'm sorry. Steve, one of the things that happens because we're getting this time to perfect and work on our budgeting is that the better the drawing’s condition is, the tighter we get in our budgeting. I started off by thinking, listen, it's okay to spend $2.5 billion or even $3 billion in Cotai. We'll make $100 million a month, what difference does it make? You can talk that way around the office, but when it comes to publishing the budget, we are now at a stage where we're working on interiors. And this hotel is filled, this one in Macau, with entertainment attractions, non-gaming, public entertainment and showroom entertainment and things like that. It is really by orders of magnitude the best thing we've ever done. Physically and operationally, it's the culmination of 40 years of experience -- 44 years of experience. And so the final number is something -- a really dependable budget is something I hope to have in the next six months. But it will be in that range, between $2 billion and $3 billion. It's a 1,580 rooms, of which 900 are suites.

Your next question is from the line of Tom Marsico with Marsico Capital.

I was going to ask a question, you just touched upon it with your entertainment attractions. It looks like there can be some segmentation that would go on in Cotai in Macau. And I was just wondering what you've learned from the new offerings that have come to the market over the last 12 months, how you perceive those offerings versus what you're looking at, at your own hotel there and then also with Cotai as far as new offerings?

Great question, and probably the most subtle inquiry that's available in the business from the point of view of management. I've been doing this for 40-odd years, and by far, the toughest thing is to nail the entertainment issue on the button. Very, very difficult. Just to think about Macau, think about Atlantic City for a moment. A lot of repetitive frequent visitation. The average customer comes several times a month. So when -- as opposed to Las Vegas, where they come two or three times a year. In Las Vegas, the size of the turn of customers is such that sustaining shows, we brought Cirque du Soleil to town with Mystère at Treasure Island. Then, you remember, we did the water show "O" at Bellagio, since that time. And then Franco Dragone did Le Rêve for us, and we make $25 million a year with Le Rêve. It's a very wonderful thing for us. We've had to invest $130 million in it over a period of years to keep it, because we're always changing it, making it better. But in Macau, a sustaining show is a bit dicier as a proposition because people can't see the same show 15, 20, 30 times. So what we prefer to do is to focus on venues that have special event featured entertainment, number one. And number two, to heavily get involved in creative, fanciful public entertainment. Public entertainment are Fountains of Bellagio, Volcano at Mirage, pirate ships that sink at Treasure Island, the Lake of Dreams at Wynn, the Tree of Prosperity and the Dragon and the whole changing lobby at Encore and Wynn in Macau. These kinds of things don't involve a ticket per se, but they involve a very strong entertainment experience, many of them costing $40-odd million. I mean, the volcano, the fountains, the pirate ships, they're all $40 million tickets even back in the '80s and '90s. In Cotai, we are taking the notion of public entertainment, things that you don't have to buy a ticket for, to augment and increase the fantasy quotient of the facility to a whole other level. The entire hotel is filled with such things. Restaurants have such things. The lobby have such things. This is in addition to showrooms. The government is very anxious to have Macau have a terrific entertainment profile. We respond to anything that the government likes there because that's the way to live and be successful in Macau. So we have taken the notion of in-room box entertainment, you know, like a theater, and we’ve combined it with public entertainment on a level that we have never, ever done before. And it has been such fun, Tom. It's taken up the better part of the last year to dream up some of the stuff, because we're doing things we've never done before. And that means we can't go to the Yellow Pages to find out how to do them. And Steve Kent want to know about the budget, and this makes it a little tougher to put your finger right on it until you get all the bugs worked out. But this place is going to be an entertainment experience from one end of it to another. And as I say, Tom, I am a little concerned about -- I'm not confident, I should say, about launching a $200 million sustaining production as much as I'm confident that having Coco Lee on one weekend and Jet Li on another, having featured entertainment. That's -- Coco's going to be married this year to one of our board members, Bruce Rockowitz, in Macau. But she is a lady who is the singer and is one of the greatest live performers in Asia, and Coco was the voice you heard singing on Crouching Tiger, the movie. And she's a big concert act. Those kinds of things I believe in because you can change them month-to-month. And that's the direction we're going in, Tom, and you and I talked about this before. But we haven't seen anything that's changed our opinion on that.

When you talk about the public entertainment side and the attraction – to the attraction, so the show that you have at SW is fanciful, is out there, but you don't pay for it, you watch it. You pay for it in a different way by having another drink or so. Is that the sort of public entertainment that you're also talking about at Cotai? So it's a meeting place for people to be? Because I'm seeing the sophistication of the customer improving in the market, and you can see it by the type of goods that they're buying. Maybe they're just buying them because they're expensive. But it seems to me like their taste in a lot of things that are Western, the massive sells that are occurring now at the art galleries and at the auction houses, there's definitely a new sophistication, a new level of wealth that has been created in China. And so I think that the market has changed dramatically over the last four or five years. Or am I -- are you seeing any of that? Am I...

Yes, yes and...

Because we're seeing an inflection point is what I'm thinking here.

And so when we design restaurants, when we think about making a Japanese restaurant -- I'll give you an example. We're talking about a Japanese -- it rains there. It's moist there. The weather is changeable. So when we talk about creating a Japanese restaurant, we create a Japanese restaurant that's on a Japanese garden, and that garden and that restaurant -- the restaurant has no walls. It's an indoor-outdoor restaurant in a beautiful garden. But. way up high is a space frame roof that's coated on the inside with a black, a matte-finish fabric, so that it looks like the night sky because it's an evening restaurant in this particular case. And so the roof and the sky disappear, and you're in an outdoor environment but you don't have to worry about the rain or the wind or the temperature. And then the garden begins to morph while you're sitting in it, and flowers bloom and fountains come up and go down and the entire environment changes while you're having dinner -- several times. That kind of thing is a mixture of public entertainment augmenting, in this case, a Japanese restaurant. And in each of our cases, we have done this sort of thing. In the bus station, we have a tremendous bus arrival with a dancing fountain outside. And the bus arrival, the bus lobby, has been taken to another level, and in it are public entertainment surprises. There's also an opera house, a proscenium theater that has performance in it. So almost everywhere you go in this hotel, and I've just touched -- scratched the surface, this hotel is a bit of a wonderment as far as your experience. Because I want people to say, when they go to South China and they go to Macau, that they have to stay in our place because it's such fun. Another point I would make about this facility -- I'm assuming for a minute, Tom, that people on the call care about this. A lot of the business there is related to high-end Junket business. Right now in downtown Macau, we are smack-dab in the middle of everybody: Lisboa on one side, the MGM on the other, the Arc on the other and StarWorld. We're in the center. And we get a certain percentage of our business as the second play. When someone is unlucky at one place, they'll walk across the street and gamble at our place. That geographic positioning is a factor in our volume. In Cotai, you don't have pedestrian migration because things are too far apart. These facilities have huge footprints, lots of parking, driveways and the weather is, as I say, changeable and in some cases, challenging. So they don't walk. They go around by buses, and everybody supplies free bus transportation. So I have to make sure that this place for the junket and high-end customer is so irresistible that it is the first choice, that every junket operator must be in this hotel, that the customers go there first. I don't really care where they go second. I prefer they go to one of our places. But I -- DeRuyter Butler, my design partner, and I, we have built a product, designed a product, that is so perfectly suited to that marketplace and to do exactly what I just described: force, virtually; compel, a softer word; the high-end players to come here first. And the room product, the public area, the access, the arrivals, the multilevel spaces that are animated. It's a different -- this product would never be built in Las Vegas, ever. It's strictly a product of Macau. And finally, in this long-winded dissertation, I would conclude by saying we did well with Wynn Macau. We took the sensibility of The Peninsula in Hong Kong to heart when we designed it. We had no actual hands-on experience in Macau. We had, after the opening of Wynn, hands-on experience and we designed and built Encore, a very specific kind of facility with amenities that were based upon our insights into our customers to improve the guest experience a la Macau. Forget about Las Vegas, this was about Macau. The Cotai project is, because of the landmass, because of the room we had and the experience we've gained, the Cotai project takes that evolutionary arc way up high. And I hope that -- I'm maybe talking too much.

I just think it drives greater stability to your client base in return visits, so I think it is important to talk about. Just one final question, if you wouldn't mind. What sort of activities are you looking at beyond Cotai? Any opportunities? I remember during the election time frame, I think Harrah's was going around with Gary Loveman talking about Internet gambling and there's been some recent developments there. I was just wondering if you might be interested in commenting on that if there's any interest at Wynn that [indiscernible].

Sure. We've been approached over the past several years by most of the Internet players who wanted to combine with us and take advantage of our brand. And we finally became convinced, sort of hesitantly, about PokerStars, because it didn't seem to be any interest in the government to enforce restrictions on the game of poker. They were enforcing restrictions on people who dealt to sports, but not to poker. So based upon that, we made a very tentative, conditional deal that said if the United States government makes poker legal and provides that anybody who's been dealing poker recently is acceptable, and then if that legislation passes in Washington and then if you can get approved by Nevada or New Jersey or whoever is the licensing authority, then we'll go in business and split it with you 50-50 and we'll call it -- put our name on it. As you know, PokerStars, finally, the Justice Department decided that if you've been dealing even just poker since they passed the law about credit cards and all that sort of thing, that they've indicted PokerStars and other players. And so the Justice Department’s taken a very strong position that the -- you call it UIDA?

UIGEA [Unlawful Internet Gambling Enforcement Act of 2006].

UIGEA, that law that was passed in '06, that law included poker even though in California they say it's a game of skill and all that sort of thing. Now there are a number of companies that approach us that have not violated UIGEA and would like to go forward with Wynn as a partner. I think that there's a very complicated agenda in Washington at the moment concerning the deficit, global economy and taxation and all kinds of things that are critical. Everybody knows about that. Whether the Congress, the House and the Senate, whether John Boehner and Senator Reid will consider this enough of a priority to take it up and deal with it, the subject of Internet poker seems to be screaming for regulation. There's a huge business, and we've seen from these publicity that these companies offshore don't care about dealing. They do it anyway. This reminds me of the Volstead Act during prohibition that said you can't drink beer. Well, people drank beer anyway. And poker is about as American as apple pie, and you can go on an Internet site called pokerscout.com and see the millions of people playing poker. They actually count it up. Half of them or a third of them are in the United States of America. It seems to me that almost every congressman and senator has, in his constituency, people who are breaking the law, technically. That's not a very healthy thing. So the situation cries for regulation so that states can get money at a time when they need money and the federal government can get some money at a time when they could use the money. It seems like an intelligent thing to sit down and regulate it. But it isn't for me to decide that. It's for the senators and the representatives to do it. I've expressed my opinion, such as I just have now, to Senator Reid who, I think, agrees with it. I've talked to various members of Congress trying to find out what they thought of it, so that we could then have a program in our company that conformed to public policy. But public policy up to now, which is no surprise to anybody, has been murky and arcane. Arcane is a good word from the SATs that means mysterious and unfathomable. Most everything in Washington is mysterious and unfathomable. But we're trying to figure out what the hell the public policy is, and then we can have a corporate policy.

Your next question is from the line of Harry Curtis with Nomura Securities.

Steve, I had a quick question about the global Baccarat market and your views on how Vegas fits into that global market now that we've seen an increase in Baccarat capacity globally. And so if we think ahead over the next 12-to-24 months, I was wondering what you thought about how the expanding base of Baccarat customers globally. Does it continue to lift Baccarat revenues in Las Vegas?

Well, I think it's very important to remember that if a person who is in the resort and casino business, wants to have a Baccarat game, the price of admission is very high. Forget -- and I'm not talking about the [indiscernible] concession in Macau or a major Strip hotel in Las Vegas that cost billions of dollars. What I am saying is that you need an organization, a very complex organization. In our case, it's run by Linda Chen, who’s on my board. You need a complex organization that has representation in all of the Asian markets and the Latin markets and European markets. You need to be constantly working that market, contacting and maintaining relationships with those customers. You have to have a sophisticated organization that can make the credit decisions and execute collection appropriately. This is not a game for children. Once you create that organizational structure, and I say it's daunting, then the first dollar of Baccarat probably costs you $30 million a year. But then you can open the door to $200 million of it. So I think the most important thing to remember is that the taking advantage of the Baccarat market, for lack of a better term, worldwide is a function of an extremely sophisticated organizations. There are several here in Las Vegas. Certainly, the Sands, certainly the folks at MGM with my old hotels, The Bellagio and Caesars, I think, with Caesars Palace, and of course, the operators in Macau. There are eight of us that do this. They do okay in London with it. It's a much tinier, baby-sized piece of business. But it's a big leap to get into this business. You can't just spread a Baccarat table. I mean, these people -- you got to be prepared to give millions and millions of dollars of credit. Scott, what are our -- what's our market bucket like in Las Vegas at the moment? Scott Peterson, Chief Financial Officer. This is an interesting little point.

I mean, our gross receivables are $175 million.

$175 million in receivables. What's our reserve for doubtful accounts?

$70 million.

$70 million. Almost half of it is reserved for doubtful accounts. Now we put a small percentage of the money away every time we grant a marker. That's the reserve for doubtful accounts. In my 40-odd years, we've never missed or under-reserved, which is to say that in my career with my colleagues, we've been able to issue credit responsibly over decades. That is a very difficult thing to do, and Marc Schorr, Linda Chen, Scott Peterson, Robert Gansmo...

60% or 61% reserve in account.

And we're 61% reserve. What's the size of receivables in Macau?

$81 million.

$81 million and $50 million reserved, because the junket operators take care of that. But what -- the point I'm making is, is this is a whole big deal to work on this and you've got to be totally committed. You got to have the building, the facility and the staff, the people. There's the cool things that get the people that know how to do this. And I hope that's -- that tells you where it's going to go if there are -- if the market’s to grow, it will be because people have the facilities and the staff to go find the customers, make it easy for the customers to come to them. Next question.

Your next question is from the line of Robin Farley with UBS.

Just kind of two short-term questions. In Macau, in the quarter, you added about 20 tables since the end of the year. Did most of those come on early in the quarter, late in the quarter? And just can you remind us, at this point, are you maxed-out in terms of your table allocation?

Came on late, Robin. They're really a big factor in Macau.

I'm sorry?

We're up to currently around 499 games, which include 11 poker games. So we're getting close to the table allocation, but there's a little room.

And then in Vegas, you talked a lot about, obviously, the increases in REVPAR and food and beverage revenue. There's been a lot of talk about, in the Vegas market in general, about a slowing since Q1. Have you seen a slowing? I mean, still an increase, but just a kind of as you look out to the next two or three quarters and the comps do get tougher in the second half. Can you give us some color on that?

Matt, you answer that?

So what we've seen at our end of the market, the luxury end, is the second quarter still feels pretty good. July is soft, which I think you'll hear from all of the other operators. But the fourth quarter, just based on our convention bookings and October, in particular, also feels pretty good. So outside of large macro events like gas going to $4.50, we feel pretty good about our position in the market the rest of the year.

The summer will be tough when we go to the automobile people, but that's July and August. But the convention business, Robin, starts around the 10th or 15th with some of the fashion and jewelry stuff middle of August. And then -- so we get help – little relief from the heat and the reliance upon the automobiles. But we deal around that here, and we can do that in our play.

Your next question is from the line of Janet Brashear with Sanford C. Bernstein. Janet Brashear - Sanford C. Bernstein & Co., Inc.: Shifting back to Macau again, the VIP revenue keeps growing faster than the Mass revenues. I wonder if you could address what your expectations are about that ratio going forward?

Well, we did add capacity, so that sort of explains part of it. I don't know that we've thought about it anymore than that. As long as we -- it takes – there’s several hurdles to become a junket operator at Wynn. First of all, you've got to pass a pretty severe internal investigation process that we installed the day we opened in '06 and share with the Nevada gaming authorities every quarter. So that's one hurdle. Then the next hurdle is Linda. Linda puts a big minimum requirement on a junket operator to get tables in our place, big hurdle. So when we see that there's an opportunity -- and then Linda uses a geographic distribution system. She tries to have people in different places to represent us, so that the customers -- so that the operators don't overlap too much. So those are the factors that determine whether we allow someone else to join us in our marketing and it's hard... Janet Brashear - Sanford C. Bernstein & Co., Inc.: I'm thinking a little more broadly about the whole market, not just Wynn. But as you look at the whole market, how much mass can grow versus how much VIP can grow in terms of the customer volume and flow to Macau?

Well, I don't want you think that I'm insensitive, but the fact is, I don't care. Can't make any money in the other places, they're on their own. I -- we keep a very myopic look on our own place. And we -- from time to time, we compare it to the marketplace. But we're watching our own performance, and we make all our decisions on our own tables and our own performance. So you're asking me a question for which we don't do much homework. Janet Brashear - Sanford C. Bernstein & Co., Inc.: One final question. Ian gave us the market share numbers in Macau based on your fair share calculation. Does Marilyn have those handy for Las Vegas?

Sure. The table numbers were between – we’re about 2.5x our fair share on tables and we’re at fair share on slots.

We're about 250% above our fair share. Thank you very much.

Thank you, everybody. I hope we didn't cut anybody off. Samantha [Stewart] is always available to answer any other questions, so am I for that matter and Matt and the rest of us. Nice talking to you, especially when we have a cool quarter, it makes it fun. Goodbye.

Thank you all for participating in today's Wynn Resorts First Quarter 2011 Earnings Call. You may now disconnect.