MGM Resorts International held its Second Quarter 2023 Earnings Conference Call, which was broadcast live on the internet. Participants were in a listen-only mode and were asked to limit themselves to one question and one follow-up. The call discussed forward-looking statements and non-GAAP financial measures. The presentation was recorded and was turned over to Bill Hornbuckle, Chief Executive Officer and President.

In the second quarter, MGM Resorts posted an all-time record for consolidated net revenues. Las Vegas saw strong demand with casino drop and handle up year-over-year and hotel revenues forecasted to be the highest of all time. Regional operations also achieved year-over-year top line growth on a same store basis. MGM Resorts' employees were credited for their commitment to offering world class service and memories for guests. The company recently announced a long-term agreement with Marriott International, which will allow more than 180 million members to book rooms and earn and redeem Marriott Bonvoy points at 17 MGM Resorts domestic properties. This agreement is expected to enhance profitability by driving lower customer acquisition costs and a better mix in higher ADRs and on property spend.

Marriott is expecting to have a meaningful segment of their hotel mix at premium rates by 2025. Tony Capuano and his team have collaborated on this effort and bookings are strengthening for the rest of the year. For Formula 1 in November, occupancy is double and rates are four times higher compared to last year. Super Bowl weekend is showing stronger rates with three to four times higher room rates on the books. Long-term, a 30,000 seat stadium is proposed at the Tropicana site which could bring 400,000 new tourists midweek.

Las Vegas has become a premier sports and entertainment destination, and Macau has seen a strong performance in the second quarter of 2019 with margins in the high 20s. MGM China has positioned their properties to maintain market share and is making investments in art and culture, entertainment, and international customers. BetMGM is also a priority, with investments beginning this year.

BetMGM is making progress towards single account, single wallet, which is expected to increase customer satisfaction and margins. MGM Resorts brings 37,000 rooms in Las Vegas to BetMGM, which provides a large source of customers. BetMGM is also working to grow its international digital business through LeoVegas and Push Gaming, and is hoping to receive a license in New York and an implementation agreement in Japan in the first half of 2024.

Bill and Jonathan both thanked employees for their hard work in delivering another strong quarter of results. They then discussed the financial benefits of MGM's agreement with Marriott, which includes the potential to replace 5-7% of their lowest yielding rooms with Marriott direct bookings, representing 600,000-800,000 rooms per year. They concluded by noting that MGM Resorts is well positioned for growth with their free cash flow yield and reduced share count since the beginning of 2021.

MGM Resorts is excited to be partnering with Marriott to upgrade their lower yielding room nights, which is expected to increase profit per room by approximately $100 per night, driving $60-$75 million in annual profit. In the second quarter, their consolidated businesses generated record revenues of $3.9 billion and adjusted EBITDAR of $1.1 billion. In Las Vegas, revenues were steady and adjusted property EBITDAR was down 6%. The luxury segment, which represents approximately 65% of their rooms and over 80% of their EBITDAR, is where they are seeing the most strength.

In the second quarter of 2023, MGM's regional operations saw a 3% decrease in revenue and a 14% decrease in adjusted property EBITDAR compared to the prior year. However, excluding the Gold Strike, same store revenues increased by 2% and adjusted property EBITDAR decreased by 7%. Macau's adjusted property EBITDAR increased by 21% compared to the second quarter of 2019, and BetMGM saw a 55% increase in net revenues associated with operations in the first half of 2023 compared to the first half of the prior year. MGM reported a 50% operating loss of $22 million from BetMGM.

Jonathan outlines the financial impact of the acquisitions of the Cosmopolitan and the disposal of the Mirage and Gold Strike, noting that the transaction resulted in a net increase of $188 million on $460 million of capital, implying a return on investment of 41%. He also mentions that the company has returned capital to shareholders by purchasing over 28 million shares for $1.2 billion, and that the current trading levels provide an attractive valuation of five times trailing adjusted EBITDA.

MGM Resorts has a fortified balance sheet that allows them to make optimistic investments and acquisitions, as well as return capital to shareholders through share repurchases. They believe their shares are priced at an attractive level and that their core business is trading at multiples below their competitors. In terms of digital, MGM Resorts has aspirations in international and North American markets, though there is a size constraint. Lastly, they have three downstate licenses in New York.

William Hornbuckle discussed MGM and LeoVegas' progress in digital and their expectation for the New York licensing process. He believes the process will begin soon and they hope to be licensed by 2024. Joseph Greff asked Shaun Kelley to dig into the Las Vegas outlook from a margin and cost perspective. Kelley noted that the top line is beginning to normalize after a good year last year.

William Hornbuckle discusses the potential revenue growth MGM could experience in the back half of the year driven by the Formula 1 opportunity, as well as the potential impact of wage negotiations. Jonathan Halkyard adds that they are experiencing some increases in their FTE counts in Las Vegas and the regional markets.

MGM is expecting low single digit increases in profits and views the fourth quarter of the year as a seasonally higher quarter due to events such as F1 and the Raiders. William Hornbuckle reaffirms that MGM has landed where they said they would land in terms of margins and intend to stay there. Jonathan Halkyard then clarifies that the $60-75 million in annual profit outlined in the agreement with Marriott is a net benefit to the company and does not include benefits in the regional markets.

David Katz asked Corey Sanders and William Hornbuckle about the regional business, to which Sanders responded that the business is stable, with the exception of table games, and that labor costs are well managed. Hornbuckle added that MGM's regional portfolio is unique in that all properties have a commanding market position, and with the completion of the room renovations at the Water Club and the Beau Rivage, these properties are expected to be strong free cash flow generators for the enterprise. Katz then asked about digital investment and investment in the loyalty program.

MGM has made investments in their loyalty program, such as enabling customers to make reservations online and introducing benefits to the program that allow customers to redeem points for non-gaming amenities. Additionally, MGM has changed their platforms to allow for gamification, and the Cosmopolitan and Las Vegas will be shifting to the loyalty program in February. The program has been a key driver in the casino segmentation, leading to 12-13% growth in the program. Overall, the investments have been beneficial in increasing awareness of the program and its associated benefits.

William Hornbuckle of MGM Resorts International is comfortable with the previously stated range of 400 to 600 basis points of margin improvement on 2019 for the domestic properties. In his discussion of the MGM and Marriott deal, he explains that Bonvoy points will be rewarded to customers and that there will be a fee for acquisitions for MGM Resorts. He also states that the deal will open up benefits programming to all of their members and MGM's members.

William Hornbuckle discussed the margin performance of Las Vegas stores in the second quarter of 2022, noting that labor costs were lower than the same period in 2021 due to staff shortages. He also mentioned that hold was not a significant factor in the margin performance. Carlo Santarelli asked about the accounting for BetMGM and the resulting EBITDA loss in the quarter, to which Hornbuckle responded that June was a positive month and July and August were seasonally softer months.

William Hornbuckle and Carlo Santarelli discussed the profitability of BetMGM, with Hornbuckle noting that the second quarter was strong and that the company stands by its comment that the second half will be profitable. He also noted that the gross margin was around 9%, but that they have a goal to break through 10% with the deployment of Angstrom.

William Hornbuckle explains that the company is seeing increased profitability due to lower customer acquisition costs, higher margin on online sports betting, and increased play by loyal customers. He also notes that while there is some cannibalization from iGaming and BetMGM, the company has maintained a strong market share and is excited for the future potential of omnichannel activity that will drive people back to brick and mortar.

William Hornbuckle and Corey Sanders discussed the outlook for Las Vegas in 2024, which looks positive with 6% more room nights booked for conventions. Hornbuckle also mentioned that there are more airline seats than pre-pandemic and that international business from Asia has yet to return to Las Vegas.

William Hornbuckle is discussing the opportunities for Marietta from increased occupancy, bids for tournaments, and programming such as Legion and Beyonce. He also mentions the 20,000 people night that helped the entire city, and the fight that was hosted last week. Lastly, he talks about the priorities for the JV level in terms of profitability and market share, and how cohorts are maturing in 24 to 36 months in sports, and hopefully sooner in iGaming.

Jonathan Halkyard explains that the performance of the Borgata and MGM Detroit in the quarter was affected by some table game events and hold issues, respectively. However, they are still confident that they will be able to stay in the 32-33% margin range going forward.

William Hornbuckle and Hubert Wang of the Borgata discuss their confidence in their ability to hold onto market share gains in Macau. They attribute this confidence to their long-standing marketing network and their reconfigurations and velocity of games on the casino floor. They have opened a couple of more offices and are expanding their sales team in order to increase customer acquisition. They have also deployed 200 tables, with 150 currently in play.

MGM Resorts is leveraging its international network to push the overseas market, and is looking to increase headcount, sales, and marketing personnel. Capital projects and enhancements are also important to improve customer experience, and MGM Macau is set to undergo renovations. July results have been strong and robust, showing improvement on many fronts. The Marriott agreement is a hybrid, as MGM Resorts will pay a share of room revenues from the lower occupancy rooms.

The speaker is asked if there are potential reinvestment opportunities on the south end of the strip for their properties that may have higher ROI than before. The speaker responds that they will keep the velocity of capital spent in Las Vegas, particularly on that corner where they own all three properties, but that the $1.5 billion stadium is a major factor.

MGM is 30 years old and in need of some improvements, particularly to the front end of the property. William Hornbuckle and Corey Sanders discussed the strength of the luxury properties on the Strip and the opportunities for the non-luxury properties. They noted that there is plenty of demand to fill the properties, but the rate on midweeks needs to be adjusted.

Jonathan Halkyard discussed MGM's share repurchasing program, noting that they try to be both consistent and opportunistic in their approach. He added that they have close to $2 billion of excess cash and that repurchasing their own shares is one of the best uses of that capital. Hubert also discussed MGM's performance in Macau, noting that the July trends were positive and that the Chinese State Council had recently published a 20-point measure to potentially expand consumption in China.

Hubert Wang answered a two-part question about the potential for further out travelers and visitors to the market to drive growth. He discussed the government's stimulus package and its potential to drive growth in the mid to lower end of the mass market. He also noted that MGM is already beyond recovery and is focusing on growth across all segments. William Hornbuckle then concluded the call with a brief statement.

Marriott and BetMGM have partnered to create a hospitality program with 180 million members. BetMGM is at an inflection point and is working towards margin retention and stabilization. The balance sheet is in great shape and presents value to shareholders. The conference has concluded and those on the call are thanked for their support.

This summary was generated with AI and may contain some inaccuracies.