Grade: F — Major Red Flags
Framework: Schilit *Financial Shenanigans* + Beneish M-Score + forensic accounting principles
Data: SEC EDGAR 10-K (Filed 2026-03-02, FY ended December 31, 2025) + Yahoo Finance
Auditor: Ernst & Young LLP — Unqualified opinion
One-line verdict: Wynn Resorts carries $12.2B in total debt against only $2.1B in cash, and Debt/EBITDA of 6.9x with interest coverage at just 1.9x — both below critical thresholds. These are not lease-accounting artifacts; this is a genuine capital structure concern for a casino operator whose net income dropped 34% to $331M while revenue was flat. Through its 72% ownership of Wynn Macau Limited, the company is heavily exposed to Chinese regulatory and economic risk. The M-Score of -2.53 is clean and CFFO/NI of 4.13 shows cash flow exceeds reported earnings, but the leverage profile creates real vulnerability to any revenue downturn.
| Metric | Result |
|---|---|
| ❌ Red Flags | **2** (cash covers 17% of debt; Debt/EBITDA 6.9x, interest coverage 1.9x) |
| ⚠️ Watch Items | **2** (AR growth 24% vs revenue 0.1%; CapEx surge +56%) |
| Checks Completed | **17/18** (1 N/A: impairment data) |
| Beneish M-Score | **-2.53** (clean; threshold is -2.22) |
| Altman Z-Score | **0.72** (distress zone) |
| Auditor | Ernst & Young LLP — Unqualified opinion |
A Luxury Casino Operator Across Three Jurisdictions
Per the filing, Wynn Resorts is "a preeminent 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." The company operates through three main properties:
Additionally, the company holds a 40% equity interest in Wynn Al Marjan Island, an integrated resort under construction in the United Arab Emirates expected to open in 2027.
| Metric | FY2022 | FY2023 | FY2024 | FY2025 | Trend |
|---|---|---|---|---|---|
| Revenue | $3.8B | $6.5B | $7.1B | $7.1B | Flat YoY after recovery |
| Net Income | -$0.42B | $0.73B | $0.50B | $0.33B | Declining |
| Gross Margin | 36.4% | 43.2% | 43.5% | 41.4% | Contracting |
| CFFO | -$0.1B | $1.2B | $1.4B | $1.4B | Stable |
| FCF | -$0.4B | $0.8B | $1.0B | $0.7B | Declining |
Revenue flatlined at $7.1B in FY2025 while net income declined 34% from $500M to $331M. Gross margin contracted from 43.5% to 41.4%. The profit decline on flat revenue signals cost pressures — likely from Macau concession renewal costs, higher interest expense, and depreciation from the aging Macau properties.
Cash Flow: Strong Relative to Earnings, But Debt Service Devours It
| Metric | FY2023 | FY2024 | FY2025 |
|---|---|---|---|
| Operating Cash Flow | $1.2B | $1.4B | $1.4B |
| Net Income | $0.73B | $0.50B | $0.33B |
| **CFFO / Net Income** | **1.64** | **2.80** | **4.13** |
| CapEx | ~$0.4B | ~$0.5B | ~$0.7B |
| **Free Cash Flow** | **$0.8B** | **$1.0B** | **$0.7B** |
| Depreciation & Amortization | — | $659M | $621M |
The CFFO/NI ratio of 4.13 looks unusual but reflects genuine cash-backing of low reported earnings. Net income of $331M is depressed by $621M in depreciation and amortization, $97M in deferred income taxes, and stock-based compensation. The accruals ratio of -7.8% is deeply negative, confirming that cash flow substantially exceeds accrual-based earnings.
However, free cash flow of $0.7B must service $12.2B in debt — providing less than one month of debt coverage if no refinancing were available. This is the structural vulnerability.
The Debt Mountain
| Metric | FY2022 | FY2023 | FY2024 | FY2025 |
|---|---|---|---|---|
| Total Debt | $13.7B | $13.4B | $12.2B | $12.2B |
| Cash | $3.7B | $3.7B | $2.4B | $2.1B |
| Net Debt | $10.0B | $9.7B | $9.8B | $10.1B |
| Debt/EBITDA | — | — | — | 6.9x |
| Interest Coverage | — | — | — | 1.9x |
The filing warns: "The applicable rates with respect to a portion of the interest we pay on our debt are variable." Per the filing, debt covenants include "total debt to earnings before interest, tax, depreciation and amortization and a minimum earnings before interest, tax, depreciation and amortization."
Debt/EBITDA at 6.9x exceeds the 4x threshold significantly. Interest coverage at 1.9x is below the 2x safety threshold — meaning for every dollar of interest expense, only $1.90 in operating earnings is available. A modest revenue decline could push coverage below 1x.
Net debt actually increased from $9.8B to $10.1B year-over-year as cash declined from $2.4B to $2.1B while debt remained flat at $12.2B.
The 18-Point Screening
Revenue Quality
| # | Check | Result | Detail |
|---|---|---|---|
| A1 | DSO Change | ✅ | DSO 21 days, +4 days YoY |
| A2 | AR vs Revenue Growth | ⚠️ | AR +24.3% vs revenue +0.1% |
| A3 | Revenue vs CFFO | ✅ | Revenue +0.1%, CFFO -5.2% |
A2 is a watch item — accounts receivable surged 24.3% while revenue was essentially flat. In the casino industry, AR typically represents credit extended to VIP gaming customers. Per the filing, "Our table games play is a mix of cash play and credit play" and "inventories, prepaid expenses, and payables" are discussed alongside gaming receivables. Rising AR against flat revenue could indicate loosening of credit terms to attract VIP players, or slower collection on existing credit lines.
Expense Quality
| # | Check | Result | Detail |
|---|---|---|---|
| B1 | Inventory vs COGS | ✅ | Inventory +16.8% vs COGS +3.8% |
| B2 | CapEx vs Revenue | ⚠️ | CapEx +56.4% vs revenue +0.1% |
| B3 | SG&A Ratio | ✅ | SG&A/Gross Profit = 37.8% |
| B4 | Gross Margin | ✅ | 41.4%, -2.1pp |
CapEx surged 56.4% while revenue was flat, reflecting investment in the Wynn Al Marjan Island project (UAE) and property upgrades. Gross margin contracted 2.1 percentage points — the filing should show this in Macau operations where concession renewal costs and regulatory compliance are increasing.
Cash Flow Quality
| # | Check | Result | Detail |
|---|---|---|---|
| C1 | CFFO vs Net Income | ✅ | CFFO/NI = 4.13 |
| C2 | Free Cash Flow | ✅ | FCF $0.7B, FCF/NI = 2.11 |
| C3 | Accruals Ratio | ✅ | -7.8% |
| C4 | Cash vs Debt | ❌ | Cash $2.1B covers 17% of $12.2B |
Balance Sheet
| # | Check | Result | Detail |
|---|---|---|---|
| D1 | Goodwill + Intangibles | ✅ | $0.2B, manageable |
| D2 | Leverage | ❌ | Debt/EBITDA 6.9x, interest coverage 1.9x |
| D3 | Soft Asset Growth | ✅ | Other assets +13.6% |
| D4 | Asset Impairment | — | No data |
Acquisition Risk & Manipulation Score
| # | Check | Result | Detail |
|---|---|---|---|
| E1 | Serial Acquirer FCF | ✅ | FCF positive |
| E2 | Goodwill Surge | ✅ | Goodwill -18% |
| F1 | Beneish M-Score | ✅ | -2.53 (clean) |
Key Risks from the 10-K
1. Macau Regulatory and PRC Economic Exposure
Per the filing, "Because a significant number of our customers come from the PRC, Hong Kong and Taiwan, the economic condition of Macau and its surrounding region, in particular, affects the gaming industry in Macau and our Macau Operations." Wynn Macau Limited is publicly listed in Hong Kong and operates under a concession from the Macau government. The filing warns of "changes in discretionary spending or consumer preferences brought about by factors such as perceived or actual negative general economic conditions."
The Macau gaming concession was renewed in recent years with new conditions including investment commitments, local employment requirements, and social responsibility obligations. These increase operating costs.
2. UAE Development Risk — Wynn Al Marjan Island
The 40% equity interest in Wynn Al Marjan Island represents a major development bet. The filing states the resort is "currently expected to open in 2027." Construction risks, regulatory approvals in a new jurisdiction, and the untested UAE luxury gaming market all represent execution risks. This investment will require additional capital contributions.
3. Interest Rate and Refinancing Risk
With $12.2B in debt and portions at variable rates, Wynn is exposed to rising interest costs. The filing warns: "We may not be able to obtain additional financing, if needed." With interest coverage at 1.9x, any increase in rates or decrease in EBITDA could breach covenant thresholds.
4. Luxury Consumer Cyclicality
Wynn is at the extreme luxury end of the casino market. "Consumer demand for hotels, casino resorts, trade shows, conventions and the type of luxury amenities that we offer is particularly sensitive to downturns or perceived downturns in the economies in which we operate."
Summary
Grade: F. Two genuine red flags on leverage metrics — this is real financial risk, not a framework artifact.
Unlike retailers where the F grade often reflects lease-accounting effects, Wynn's leverage is genuine: $12.2B in debt is primarily long-term borrowings, not operating leases. Debt/EBITDA at 6.9x and interest coverage at 1.9x are below safety thresholds. Net income declined 34% while revenue was flat, signaling cost pressure.
The silver lining: CFFO of $1.4B substantially exceeds $331M net income, the M-Score is clean at -2.53, and the business did generate $0.7B in free cash flow. But the leverage profile means any significant revenue disruption — a Macau downturn, a PRC travel restriction, or an economic recession affecting luxury spending — could quickly stress debt covenants. The Z-Score of 0.72 in the distress zone is not just a statistical artifact for this company.
**Disclaimer**: This report is based on Wynn Resorts' FY2025 10-K filed with SEC EDGAR on March 2, 2026. This is NOT investment advice.
Data: SEC EDGAR 10-K + Yahoo Finance
Auditor: Ernst & Young LLP (Unqualified opinion)
Fiscal year ended: December 31, 2025