Sign in

    MGM Resorts International (MGM)

    Q1 2024 Summary

    Published Jan 10, 2025, 5:10 PM UTC
    Initial Price$44.29January 1, 2024
    Final Price$47.78April 1, 2024
    Price Change$3.49
    % Change+7.88%

    What went well

    • MGM expects to grow EBITDAR in Las Vegas in each of the next three quarters, with the third quarter showing greater growth due to easier comparisons, and plans for additional capital investments to further increase growth.
    • The company is targeting a mid-teens compound annual growth rate of free cash flow per share through 2028, fueled by mid-single-digit growth in domestic operations, higher growth in China, and strategic investments.
    • MGM plans to use excess cash flow to buy back shares, enhancing shareholder value, and will continue to do so if no better opportunities arise.

    What went wrong

    • The exceptional margins of 35% achieved in March in regional properties are not expected to be sustained going forward, indicating potential margin pressures.
    • MGM is facing challenges with its digital business, BetMGM, in North America, including product deficiencies that require significant work, which could impact growth in this segment.
    • The recovery of Chinese visitor volumes to Las Vegas is hindered by limited flight capacity and geopolitical issues, affecting the high-end segment's performance.

    Q&A Summary

    1. Vegas EBITDAR Growth Outlook
      Q: Will Las Vegas EBITDAR grow this year?
      A: Management is confident that Las Vegas EBITDAR will grow in each of the next three quarters, with greater growth expected in the third quarter due to last year's cyber incident. This growth is based on strong room rates, an increased convention mix, and strategic initiatives underway.

    2. Regional Asset Divestment Strategy
      Q: Are you considering selling regional assets?
      A: While they cannot comment on specific reports, management regularly evaluates their portfolio for strategic fit. They focus on market positioning, scale, growth potential, and how properties contribute to the overall strategy, including cross-marketing to Las Vegas and digital linkages. Properties not demonstrating real growth potential may be viewed differently.

    3. Digital Business Strategy and Investments
      Q: What are the plans for digital investments and BetMGM?
      A: Management plans to continue investing in the digital space, including potential acquisitions in sports, content businesses, and live dealer offerings. They see significant long-term growth potential, especially in iGaming, and aim to solidify their strategy with further tuck-in acquisitions. The partnership with Entain is strengthening, with improved product development roadmaps and supportive management.

    4. Capital Allocation and Share Repurchases
      Q: How are you approaching share repurchases and capital allocation?
      A: MGM repurchased $500 million worth of shares in the quarter and plans to continue repurchases programmatically, considering upcoming equity investments like Japan. They have about $1.2 billion in excess cash and view share repurchases at current values as a meaningful part of their capital allocation program.

    5. Macau Recovery and Margins
      Q: What are the expectations for Macau's recovery and margins?
      A: Management is targeting an EBITDA margin in Macau of around 30%, consistent with historical levels. They have recovered market share to approximately 15.8% and expect margins to remain stable as the business continues to recover.

    6. New Markets Expansion (Thailand, UAE, Texas)
      Q: Which new markets are you most excited about?
      A: Management is optimistic about opportunities in the UAE, believing legalization will come to fruition, with Abu Dhabi or other Emirates likely to move forward. Thailand presents compelling margins and growth, but developments depend on government actions. In Texas, they are monitoring potential opportunities but do not expect immediate developments, particularly in brick-and-mortar.

    7. M&A Opportunities in Land-Based Gaming
      Q: Are there strategic M&A opportunities in land-based gaming?
      A: While always considering interesting opportunities, management currently sees nothing imminent in land-based gaming acquisitions. They remain focused on new markets and digital businesses, returning excess cash to shareholders through buybacks when there are no better uses for the capital.

    8. Omnichannel Strategy Progress
      Q: How is the omnichannel strategy progressing?
      A: About 15% of BetMGM's database plays both online and offline. Management sees significant future potential, especially with single account and single wallet integration in Nevada. They are working on better connectivity between MGM Rewards and BetMGM's loyalty system to drive traction.

    9. Slot Volume Trends vs Room Rates in Vegas
      Q: Are you seeing shifts between slot volumes and room rates?
      A: The increase in room rates and convention mix led to a strategic reduction in lower-end casino customers, affecting slot volumes. Management believes they compensated for the lost slot revenue with higher hotel and convention revenues.

    10. Macau Smart Tables Benefits
      Q: What benefits are you seeing from smart tables in Macau?
      A: Smart tables enhance game security, operational efficiency, and data collection, enabling precision marketing and real-time rewards. They also allow for new game development, like insurance bets, and are favored by regulators. Competitors are trying to implement similar technology, but MGM believes they have several years' lead in implementation.

    Related Publications