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    MGM Resorts International (MGM)

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    MGM Resorts International is a global gaming and entertainment company that operates through various segments, including domestic and international casino properties, online gaming, and other hospitality services. The company's primary business involves operating casino properties that offer gaming, hotel accommodations, convention spaces, dining, entertainment, retail, and other resort amenities . MGM also has a significant presence in online gaming through its consolidated subsidiary LV Lion Holding Limited (LeoVegas) and its 50% owned venture, BetMGM, LLC .

    1. Las Vegas Strip Resorts - Operates casino properties on the Las Vegas Strip, offering gaming, hotel accommodations, food and beverage services, entertainment, retail, and other resort amenities.
    2. MGM China - Manages casino operations in Macau, focusing on gaming and hospitality services.
    3. Regional Operations - Includes casino properties outside of Las Vegas and Macau, providing gaming and hospitality services.
    4. Online Gaming - Engages in online gaming through BetMGM and LeoVegas, offering digital gaming and betting services.
    Initial Price$47.49April 1, 2024
    Final Price$42.86July 1, 2024
    Price Change$-4.63
    % Change-9.75%

    What went well

    • Strong Las Vegas performance with record-breaking results, driven by transient group demand and the successful Marriott integration, leading to continued growth expectations in this market.
    • MGM China is outperforming the Macau market, with MGM Macau now the top producer on the Peninsula side, achieving high EBITDA margins and market share in the mid-teens, even as the Macau market has only returned to 80% recovery.
    • Attractive share valuation leading to aggressive share repurchases, with management considering additional financial leverage to fund buybacks due to strong free cash flow growth and low net debt.

    What went wrong

    • MGM's digital segment, particularly BetMGM, is underperforming expectations, losing market share in sports betting, and requires continued investment, raising concerns about the effectiveness of their digital strategy.
    • Core gaming metrics in Las Vegas have declined for the second quarter in a row, indicating potential weakness in the core gaming customer base and reliance on non-gaming revenue to drive growth.
    • Increased labor costs due to collective bargaining agreements are pressuring margins in Las Vegas, posing challenges to maintaining profitability despite management's efforts to control expenses.

    Q&A Summary

    1. Formula One Impact on EBITDA
      Q: How will F1 softness affect Q4 EBITDA?
      A: Management acknowledges that the fourth quarter depends greatly on the performance during Formula One. Currently, F1 is off to a soft start compared to last year, with softer ticket and room sales, especially at luxury properties like Aria, Cosmo, and Bellagio. While they hope for improvement, they're concerned enough to note the distinction from last year. They believe other events, like an NFL game, will help fill properties, particularly in the south end of the Strip.

    2. Marriott Partnership Benefits
      Q: What is the contribution from the Marriott partnership?
      A: Year-to-date, they've booked 410,000 room nights through Marriott, with about 60% already stayed. The incremental benefit comes from a $100 rate premium and $50 increased daily spend per room night. Despite a later start due to a cyber incident, they expect the annual EBITDA benefit of $65–$75 million for 2024 remains a good estimate.

    3. Digital Strategy and BetMGM Investment
      Q: Any changes in BetMGM investment outlook?
      A: They believe the identified investment is sufficient and do not anticipate needing more funds. Product improvements are expected to positively impact gross gaming margins. While acknowledging challenges in the digital segment, they are not giving up on digital and see it as key to growth. If investments don't pay off, they are prepared to pull back.

    4. Las Vegas Gaming Customer Trends
      Q: How is the core gaming customer performing?
      A: The core gaming customer remains solid, especially the high-end segment. Revenue changes, particularly in slots, are tied to midweek and convention mix shifts. Rated play is up 4–5% in regional markets. However, the lower end of the database has seen some softening.

    5. Share Repurchases and Capital Allocation
      Q: Will you add debt to fund share repurchases?
      A: Management believes their shares are undervalued and will continue aggressive repurchases. They have $800 million in excess cash and $1.3 billion remaining on the repurchase authorization. They would consider adding financial leverage but don't need to do so currently.

    6. Market Share Gains in Las Vegas
      Q: How do you plan to gain more market share?
      A: Beyond absorbing customers from closed properties like Tropicana and Mirage, they believe there's more share to capture. Plans include targeting the high-end retail and nightlife scene and enhancing properties like Cosmopolitan and Aria to keep guests within their portfolio.

    7. MGM China Margins
      Q: How did MGM China achieve high margins despite a slowdown?
      A: They focused on customer-centric investments and disciplined reinvestment. An increased mass component in the revenue mix contributed to margin improvements. EBITDA margins remain high, and their revenue share is maintained at mid-teens.

    8. Las Vegas Margins and Labor Costs
      Q: What is the outlook for Las Vegas margins amid labor cost increases?
      A: They are comfortable maintaining margins in the mid-30% range. While unit labor costs have increased due to collective bargaining agreements, they've managed expenses well, with FTEs down in Las Vegas. Future labor cost increases are expected to be lower.

    9. Development Pipeline in UAE
      Q: Any updates on the UAE development opportunity?
      A: They are encouraged by recent announcements like the lottery launch. Timing is still uncertain, but they expect more details by the end of the quarter or early next. They're excited about their under-construction property in Dubai, designed to accommodate large-scale casinos.

    10. Las Vegas Capital Expenditure Plans
      Q: Will you defer any planned renovations?
      A: They plan to proceed with major renovations at Aria and MGM Grand. While they consider capital allocation carefully, they believe in continuing room remodels to maintain proper cycles. Anticipated maintenance CapEx will remain around $600–$700 million annually.

    11. Regional Market Trends
      Q: What are you seeing in regional markets?
      A: Middle to high-end customers remain strong. The lower end of the database has seen slight softening, and unrated play is down slightly, partly due to calendar shifts.

    12. Cross-Selling Initiatives
      Q: How have cross-selling efforts progressed?
      A: They've made significant progress in capturing in-market customer spend. Investments in connecting properties and cultural shifts in marketing teams have encouraged guests to stay within their portfolio. Their geographic positioning also enhances this strategy.

    NamePositionStart DateShort Bio
    William J. HornbuckleChief Executive Officer and PresidentJuly 2020William J. Hornbuckle has served as the Chief Executive Officer and President of MGM Resorts International since July 2020. He was the Acting CEO and President from March 2020 to July 2020 .
    Corey I. SandersChief Operating OfficerDecember 2020Corey I. Sanders has served as the Chief Operating Officer of MGM Resorts International since December 2020. He was previously the CFO and Treasurer from March 2019 to January 2021 .
    Jonathan S. HalkyardChief Financial Officer and TreasurerJanuary 2021Jonathan S. Halkyard has served as the Chief Financial Officer and Treasurer of MGM Resorts International since January 2021. He was previously CEO of Extended Stay America, Inc. .
    John M. McManusChief Legal and Administrative OfficerSeptember 2022John M. McManus has served as the Chief Legal and Administrative Officer and Secretary at MGM since September 2022. He was previously the EVP, General Counsel, and Secretary from July 2010 to August 2022 .
    Gary M. FritzPresident, MGM Resorts International InteractiveOctober 2022Gary M. Fritz has served as President, MGM Resorts International Interactive since October 2022. He was previously the Managing Director of Digital Mergers & Acquisitions from November 2021 to October 2022 .
    1. Given the increases in unit labor costs due to collective bargaining agreements, how confident are you in maintaining Las Vegas margins in the mid-30s, especially as non-gaming revenue grows and potentially offsets stability in the gaming business?

    2. With the reported decline in midweek slot revenue and a shift in convention mix impacting the core gaming customer, what strategies are you implementing to drive growth in the gaming segment and attract higher-margin customers?

    3. Considering the significant investments in BetMGM and other digital ventures, is there a point at which you would reconsider investing in the digital segment if it doesn't deliver the expected results and instead allocate more resources to your core business?

    4. Given your aggressive share repurchase program and the remaining excess cash, do you anticipate needing to increase leverage to finance future buybacks, and how would that impact your balance sheet and ability to invest in growth opportunities like the New York expansion?

    5. Noting some softness in the lower end of your regional markets and slight declines in unrated play, are there macroeconomic concerns you foresee that could further affect these segments, and how are you mitigating potential risks related to consumer spending patterns?

    Program DetailsProgram 1Program 2
    Approval DateMarch 2022 November 2023
    End Date/DurationCompleted Ongoing
    Total additional amount$2.0 billion $2.0 billion
    Remaining authorization amount$0 $946 million
    DetailsCompleted Active, part of strategy to enhance free cash flow per share

    Q2 2024 Earnings Call

    • Issued Period: Q2 2024
    • Guided Period: Q3 2024, Q4 2024, FY 2024, and beyond
    • Guidance:
      1. Las Vegas Market Share: Expected to increase, focusing on luxury customers .
      2. Free Cash Flow Growth: Mid-teens free cash flow per share CAGR through 2028 .
      3. Share Repurchases: Continued use of excess cash for share repurchases .
      4. MGM China: Achieved 16% market share, 37% revenue growth YoY, $294 million adjusted property EBITDAR .
      5. Marriott Partnership: Significant revenue contribution expected, with 410,000 room nights booked YTD .
      6. Formula One Event: Concerns about room rate softness impacting Q4 .
      7. Labor Costs: Expected to stabilize after previous increases .
      8. Digital and Interactive Business: Investment in BetMGM, which was profitable in Q2 2024 .
      9. Expansion Plans: Exploring opportunities in Japan, UAE, New York, and potentially Thailand .

    Q1 2024 Earnings Call

    • Issued Period: Q1 2024
    • Guided Period: Through 2028
    • Guidance:
      1. Las Vegas EBITDAR Growth: Expected growth in each of the next three quarters, with significant growth in Q3 2024 .
      2. Free Cash Flow Growth: Mid-teens CAGR through 2028, driven by domestic and China operations .
      3. Macau EBITDA Margin: Targeting high 20s to around 30% .
      4. Digital Business: BetMGM expected to generate significant free cash flow in the coming years .

    Q4 2023 Earnings Call

    • Issued Period: Q4 2023
    • Guided Period: FY 2024
    • Guidance:
      1. Las Vegas Operations: Growth expected in the transient segment due to the Marriott partnership .
      2. Operational Expenses: Low to mid-single-digit increase expected, offset by productivity improvements .
      3. EBITDA Growth: Possible full-year growth despite labor cost headwinds .
      4. Regional Margins: Aiming for 30% margins in regional markets .
      5. Macau Operations: Optimism for increased visitation and gaming activity .
      6. BetMGM: Focus on product development and market share maintenance .

    Q3 2024 Earnings Call

    • Issued Period: Q3 2024
    • Guided Period: N/A
    • Guidance: The documents do not contain information about MGM's guidance from the Q3 2024 earnings call, so specific metrics and periods cannot be provided.

    Competitors mentioned in the company's latest 10K filing.

    • Gaming companies and hospitality companies in the markets where MGM operates, neighboring markets, and other parts of the world, including non-gaming resort destinations such as Hawaii .
    • Casinos located elsewhere in or near Asia, including potential new entrants if additional concessions are granted by the Macau government .
    • Major gaming centers located in other areas of Asia and around the world, including Singapore, South Korea, Vietnam, Cambodia, the Philippines, Australia, and Las Vegas .
    • Major gaming and hospitality resorts with well-established and recognized brands .
    • Smaller hotel offerings and peer-to-peer inventory sources, which allow travelers to book short-term rentals of homes and apartments from owners .