MGM Resorts International Q1 2022 Earnings Call Transcript

Quartr
Provided by Quartr
May 2, 2022

There are 16 speakers on the call.

Operator

Good afternoon, and welcome to the MGM Resorts International First Quarter 2022 Earnings Conference Call. Joining the call from the company today are Bill Hornbuckle, Chief Executive Officer and President Corey Sanders, Chief Operating Officer Jonathan Halkyard, Chief Financial Officer and Treasurer Hubert Wang, President and Chief Operating Officer of MGM China and Andrew Chapman, Director of Investor Relations. Participants are in a listen only mode. After the company's remarks, there will be a question and answer session. In fairness to all participants, please limit yourself to one question and one follow-up.

Operator

Please note, this conference is being recorded. Now I would like to turn the call over to Andrew Chapman. Please go ahead.

Speaker 1

Good afternoon, and welcome to the MGM Resorts International First Quarter 2022 Earnings Call. This call is being broadcast live on the Internet at investors. Mgmresorts.com. We've also furnished our press release on Form 8 ks to the SEC. On this call, we will make forward looking statements under the Safe Harbor provisions of the federal securities laws.

Speaker 1

Actual results may differ materially from those contemplated in these statements. Additional information concerning factors that could cause actual results to differ from these forward looking statements is contained in today's press release and in our periodic filings with the SEC. Except as required by law, we undertake no obligation to update these statements as a result of new information or otherwise. During this call, we will also discuss non GAAP financial measures in talking about You can find a reconciliation of the GAAP financial measures in our press release and investor presentation, which are available on our website. Finally, this presentation is being recorded.

Speaker 1

I will now turn it over to Bill Hornbuckle.

Speaker 2

Thank you, Andrew, and good afternoon, and thank you all for joining us today. I'd like to begin today's call by once again thanking our employees at MGM Resorts for the determination, agility, Perseverance and commitment to Agilent has helped fuel another strong quarter for our company. We were challenged in January by the Omicron variant, We've pivoted quickly into recovery mode leading to multiple all time EBITDA records at several of our Las Vegas and regional properties in March. These results showcase the strength of our talented team across the country, our focus on operational efficiency and the continued strong demand for the service and We provide at MGM Resorts. Today, I want to acknowledge and thank our employees again for all that they do every day to take care of our guests and each other.

Speaker 2

As a company, we remain laser focused on our strategic plan and our long term vision to be the world's premier gaming entertainment company. As a reminder, our strategic plan consists of the following four priorities: Investing in our people and our planet, providing unique experiences to our guests by leveraging data driven customer insights and digital capabilities, delivering operational excellence at every level and allocating our capital responsibly to yield the highest return for our shareholders. Over the last several quarters, we've discussed the meaningful steps we've taken to simplify our corporate structure and monetize the real estate assets to meaningfully bolster We reached another important milestone in this journey Friday, April 29, when we closed The strategic transaction with MGM Growth Properties in VICI. I'd like to thank James Stewart, Andy Chen and the Board and employees of MGP for all their support and for the great relationship we have built over the years. Our transaction with VICI allowed us to fully deconsolidate MGP Financial reporting and it also netted us approximately $4,400,000,000 in cash, which we will use to invest in our core business will also continue to pursue meaningful growth opportunities.

Speaker 2

One such opportunity is our announcement today of the tender for LEO Vegas. Our success with BetMGM in United States gives us more conviction than ever about the potential for digital gaming and our ability to grow share in the exciting new marketplace. And with this conviction, we are expanding internationally with the team at LeoVegas. Its strong technology platform and pipeline For growth present a compelling opportunity for our business to grow online. We'd like to thank the management team at LEO Vegas for the professionalism and support throughout the process and we look forward to working with that team when the deal closes in the second half of this year.

Speaker 2

Another opportunity that we're quite excited about is pursuit of a commercial gaming license in New York. The recently enacted fiscal year 2023 budget includes provisions that will allow the issuance of up to 3 new licenses in the state. We'd like to thank Governor Holcomb, Hi, I'm New York legislature for getting this important issue across the finish line. We're eager to begin the RFA process and share our vision for the future of the property in Yonkers, where if we receive a license, we plan to replace the existing VLTs with slot machines and add table games to our existing casino floor and construct new amenities on portions of our 97 Acres site. Again, we're excited by this opportunity and look forward to investing this discipline in New York to create new jobs and foster economic growth in the region.

Speaker 2

Turning to our Las Vegas growth strategy, we made solid progress towards our acquisition of the operations of the Cosmopolitan of Las Vegas and are on track to close this quarter. The Cosmopolitan is an iconic brand with a loyal and complementary customer base that will further enhance our Las Vegas Strip portfolio. We've met with key leaders at The Cosmopolitan over the last weeks months and are impressed by the quality of their team as well as the culture and the brand that they have built. We look forward to welcoming all the costars of the Cosmopolitan Tam Gym Resorts and adding this existing portfolio property excuse me to our portfolio. We've also made progress on the sale of the operations of the Mirage to Hard Rock International, which we announced last year.

Speaker 2

We are working closely with regulators to ensure a smooth transition and expect this transaction to close in the second half of this year. Shifting to our international growth strategy, last week, we submitted our area development plan to the government of Japan with our partners at ORIX and the City of Osaka. This is the final milestone before a licensing decision will be made hopefully in October of this year. We continue to work closely with the national government to obtain a license that will be hopefully awarded later this year and bring a fully integrated resort into Japan. In the UAE, we continue to make progress on beginning the MGM brand family to Dubai, where we have a management agreement for an integrated resort being developed in partnership The project is broken ground in the development process and we remain diligent for opportunities to bring the MGM brand to other locales around the world.

Speaker 2

During the BetMGM, we are now live in 23 markets with New York, Illinois, Louisiana and Puerto Rico coming online in the Q1 and Ontario launching in early April. In February, BetMGM commended 24% market Share in active markets in both U. S. Sports betting and iGaming, which put us in the number one position nationwide. BetMGM is the clear leader in iGaming having reached 28% market share in February.

Speaker 2

The BetMGM management team will be able to provide more color on results and the strategy at their investor meeting on Thursday, May 12. Finally, I'd like to spend a few minutes on our organic growth strategy. On February 1, we relaunched our loyalty program as MGM Rewards with the goal to target high value non gaming customers in addition to gaming customers, Increased cross property patronage and tier progression while motivating benefits and further activate that MGM customers at our properties. We've seen solid results since the launch of MGM Rewards in Q1, particularly as it relates to our omni channel growth strategy with that MGM. In the Q1, 57% of our MGM Rewards enrollments came via BetMGM driven by the Super Bowl compared to 39% for the full year in 2021.

Speaker 2

We've committed to our strategy of building loyalty between our different channels and ultimately creating a seamless experience for our customers to play both online and in person. Before I turn this over to Jonathan, I'd like to hit a few Highlights of our current trends and our future outlook. In Las Vegas, we maintained strong margins in the Q1, A reflection of the sustainable operating learnings implemented from the pandemic, strong weekend occupancies in ADR were driven by a robust event calendar We see that trend continuing into the Q2. For the mid week, our occupancy is still behind 2019, but an improving mix of business and a growing group base will allow us to ramp in the remainder of the year. We continue to expect our convention room nights to reach 90% of 2019 levels in the back half of twenty twenty two.

Speaker 2

Importantly, we are seeing increased spend levels for our groups year to date, including catering and banquets. And to spotlight our international leisure trends, we're beginning to see positive indicators of the return of international flight capacity. In fact, by this summer, The LVCVA expects international flight capacity to return to 80% of pre pandemic levels. Further highlight events in Las Vegas, we were honored to host the Grammys at MGM Grand Garden. We welcomed the BTS Army to our properties for 4 sold out shows at Legion Stadium, this past weekend, we also hosted the NFL Draft, which activated the entire Las Vegas Strip.

Speaker 2

We also have big sporting events coming With the NCAA men's basketball regionals on tap for March of next year, along with the first of a kind along the one race in the Las Vegas Strip in November of 2023. And of course, we'll host the Super Bowl in February of 2024. All of these big events show the incredible progress the city has made as an entertainment and sports destination. Looking to our regional properties, we had a very strong Q1 with competitive margins to 2021 And we are focused on driving strong rated gaming revenues by yielding our database with the highest value players. Finally, I want to touch briefly on our operations in Macau.

Speaker 2

We continue to see headwinds in the short term with public health policies impacting the ability for customers to enter Macau. Despite this, our 13% market share is higher than we have seen historically, and our properties are well positioned to capture premium mass business as volumes begin to return. Concession renewal process is underway and we remain I'm confident in the government's judicious and fair approach to this process. Macau is an important part of our future and we will continue to work with the government to ultimately Get our license renewed. We look forward to further promoting the long term development in Macao's gaming industry and supporting the government's tourism and diversification goals for the region.

Speaker 2

With that, I'll turn it over to Jonathan to discuss the details of the quarter.

Speaker 3

Thanks very much, Bill, and good afternoon, everyone. I'd like to echo Bill's words by thanking the entire MGM Resorts team for their professionalism and resiliency in the face of an ever changing operating environment. I'd also like to thank the Cosmopolitan of Las Vegas team for their support as we plan for closing and I look forward to welcoming the Co Stars into the MGM Resorts family this quarter. Now let's spend a few minutes on our Q1 results in some detail. Our consolidated Q1 net revenues were $2,900,000,000 And our net loss attributable to MGM Resorts was $18,000,000 a significant improvement when compared to net revenues of 1 point Our Q1 Las Vegas Strip net revenues were $1,700,000,000 and adjusted property EBITDAR for the Strip was $594,000,000 Net revenues were down 1% on a same store basis due to 343,000 fewer occupied rooms nearly all in January.

Speaker 3

However, same store adjusted property EBITDAR of $472,000,000 was up 21% versus the Q1 of 2019 demonstrating our broad based margin improvement. 1st quarter occupancy was 78%, but it was a different story each month of the quarter. The Omicron impact was significant in January, during which occupancy was 65%. We recovered to an occupancy of 78% in February and finished the quarter with occupancy of 90% in March. The strength continued into April where we saw an occupancy of 92% on the Strip.

Speaker 3

Despite the pandemic impact, ADR in the first quarter was $197 or $184 on a same store basis, which was a dollar above the Q1 of 2019. And same store excludes ARIA and VEDARA in 2022. Again, A different story each month for ADR. ADR had a similar cadence as occupancy, down 11% versus the Q1 of 2019 in January, then up 4% in February and up 9% in March, driven by strong weekend demand. Simultaneous increases in volume and pricing improved our financial performance dramatically as we went through the quarter.

Speaker 3

Las Vegas Strip margins were 36% for the quarter and 35% on a same store basis, an improvement of over 600 basis points versus 2019 on a same store basis. We have the blueprint in place to sustain margins well above 2019 levels through our cost efficiency efforts and operating leverage. As Bill mentioned, together with robust group demand, there is exciting programming in the 2nd quarter that will drive increased leisure business in Las Vegas and support occupancies in the low 90s. Our first quarter regional net revenues were $891,000,000 an increase of 11% versus the Q1 of 2019. We delivered regional adjusted property EBITDAR of $313,000,000 which was 48% above 2019.

Speaker 3

Our regional casino business was quite strong despite the typical seasonality in the business during the Q1. Our casino revenues improved 23% versus the Q1 of 2019. Our Q1 regional margin of 35% grew 882 basis points versus 2019. Promotional expenses in the regional markets are stable and a few points below 2019 levels. Room nights were down in the Q1 due in part to staffing challenges, but that situation is improving nicely this quarter.

Speaker 3

Moving to Macau. Net revenues of $268,000,000 in the Q1 represent a 9% decrease compared to the Q1 of 2021. Adjusted property EBITDAR was a loss of $26,000,000 in the first quarter versus a positive $5,000,000 in the prior year quarter. Now the current quarter also included a charge of $18,000,000 related to litigation reserves. We're confident in Macao that our product offering and in our product offering and we believe that once demand returns, We're very well positioned to grow particularly in our premium mass and mass segments.

Speaker 3

Turning to BetMGM. Our 50% of BetMGM's losses And the Q1 amounted to $92,000,000 which is reported as part of the unconsolidated affiliates line of our adjusted EBITDAR calculation. This was driven largely by the initial investment in New York, but we expect these losses to narrow in the upcoming quarters. The growth story for BetMGM is a key pillar in our long term strategic plan. Connecting BetMGM with MGM Rewards allows us to develop a strong omnichannel link with our customers that will optimize our guest experience both online and in person.

Speaker 3

Our Q1 corporate expense, including share based compensation, was $111,000,000 which included $9,000,000 of transaction costs. We're strategically investing our corporate expense in growth areas including improvements to our IT infrastructure, enhancing our digital offerings and our IR efforts in Japan. And before we wrap up our prepared remarks, I would like once Again, to reiterate our approach to capital allocation. First, we'll maintain a strong balance sheet with adequate liquidity. 2nd, we'll invest where we have clear advantages, exercising prudence and measuring prospective returns for our shareholders.

Speaker 3

And finally, we'll return cash to shareholders. And I think our actions thus far this year amply demonstrate our priorities in allocating capital. We had the closure on Friday of our strategic transactions with VICI and realized $4,400,000,000 in proceeds for MGM, bolstering our liquidity and strengthening our balance sheet. This quarter we announced or will close 2 strategic growth investments to augment our digital and Las Vegas market position, LEO Vegas and the Cosmopolitan of Las Vegas. Finally, during the Q1, we repurchased 23,300,000 shares for $1,000,000,000 In April, we repurchased another 6,200,000 shares.

Speaker 3

So since the beginning of 2021, We've repurchased 72,700,000 shares for approximately $3,000,000,000 or 19% of our market capitalization. This activity brings our share count down to about 425,000,000 shares. With that, I'll turn it back to Bill for his closing remarks.

Speaker 2

Thanks, Jonathan. We've made solid progress as a company coming out of the pandemic and our operating model is the strongest It's ever been. I'd like to again thank all of our team members for their commitment and dedication to MGM Resorts. We'd not be in the position we are today without all of their hard work. Obviously, we are looking forward to the rest of 'twenty two and beyond with confidence and feel our best days are yet to come.

Speaker 2

With that, operator, I'll turn it over and take questions.

Operator

Thank you. We will now begin the question and answer session. As a reminder, in all fairness, please limit yourself to one question and one follow-up. The first question will come from Joe Greff with JPMorgan. Please go ahead.

Speaker 4

Good afternoon, everybody. Hope you're well. Bill, Jonathan, I want to ask you from where you sit, how you view Your typical consumer and how they're maybe behaving both in Las Vegas and regionals, are you starting to see any slowdown given obviously What's out there in terms of higher gas prices, higher interest rates, an equity market that hasn't really done well this year? And is that translating at all into any kind of pushback on hotel pricing, food and beverage pricing, particularly on the Strip? Any pushback on maybe out year kind of group bookings?

Speaker 4

And then are you rethinking maybe how you're pricing Hotel and SMB product.

Speaker 2

Thanks, Joe. Look, I think generally the answer is we have not seen any of that yet. We've seen obviously a tremendous amount of strength in March. April has continued. I think it may be Corey is probably best suited to answer some of this and maybe Jonathan can finish it up.

Speaker 2

But Corey, if

Speaker 5

you want to Sure, Joe. We're not seeing anything Any change in customer behavior, pricing power is still strong, food and beverage revenues are breaking records, so we're not seeing it.

Speaker 4

Great. And then I know it's relatively small or very small, Lille, Vegas. Can you talk about how that fits with your joint venture? And then can you just talk about that company's exposure maybe to Presently gray markets and would you expect that business to maybe see a trend change in revenue trajectory as some of those gray Markets tend to transition into legitimate more developed markets?

Speaker 2

Sure, Joe. Let me take that one. First, I think I want to start by just stressing, our partnership with NTEEN as it relates Particularly the BetMGM and what we've accomplished has never been better. I think we've finally really caught stride. You can see that in some of our numbers and our market shares.

Speaker 2

We're excited for the next launch that the guys will go through and define some of the product that's becoming our way. And you'll hear a whole lot more about that Your day on May 12. As it relates to Intain specifically, we tried a year ago, as you know, to buy that. And I don't think a whole lot has changed. You've probably watched the basis of their shares and our shares kind of go hand in hand.

Speaker 2

And we said then, and I'm going to repeat now, we need and want to diversify the revenues in this company. We absolutely thought the space was the right space and we did the BetMGM deal. It's now been double validated by that, particularly the iGaming segment, which Leo Vegas is extremely strong in. And so we made our move. To your point, it's not the world's largest acquisition, it's bite sized.

Speaker 2

It does though give us exposure to 9 global markets that we don't currently have. We love that team, what they've been able to accomplished over the last 11 years, they've had over the last 5 years, 16% compounded growth year over year. And so the team has been great. Gustaf and all these been able to accomplish the tech is great. The platform is It's down on the cloud.

Speaker 2

So all of the technology we look at, and I can assure you, we look at it a lot. It's 1st class. And we're going to get about 850 employees. There's several 100 of them who are technologists, something our company can desperately use and need, Not only obviously for this effort, but potentially for other things long term in the company. And so for us, all good things.

Speaker 2

As it relates to markets, about 75% of their current markets are in regulated markets. There are a few, And only but a few that are single digit that we will close down, because of our BetMGM, New Jersey being one of them. I don't think I know they had 1% share in New Jersey market last month. So I don't see any of it is You know, considered any kind of real hurdle to get through and they have demonstrated and we know because we have growth potential within that organization There are other things to go out and capture. I think this last quarter would demonstrate when others potentially have struggled.

Speaker 2

They again had a great quarter. I think they just reported this morning EUR 14,000,000 EBITDA, which is about a 35% gain over the Q1 of last year. So couldn't be more excited by the transition, even more so by the team and the ultimate technology and just the opportunity I think it provides us longer term It's pretty exciting for us.

Speaker 6

Great. Thank you.

Operator

The next question is from Carlo Santarelli from Deutsche Please go ahead.

Speaker 7

Hey guys, thank you for taking my question. Jonathan, maybe this one's best suited for you, but as you think about kind of The current kind of outlook for Las Vegas and you guys provided some color on the group stuff. Clearly, Las Vegas has had Seasonality over the years, but as you think about the balance of 2022 and obviously the challenging January with the variant Spike and everything else that came with it, with group business coming back, is it kind of do you get the sense that maybe the market could just build Quarter by quarter as we move through the year. And secondly, I did just want to revert back to something you guys said a couple of quarters ago is that when the group business returned, It would be a slight hindrance to margins, but greater EBITDAR dollars. As the cost structure sits today, I'm assuming you still feel pretty confident that that's what you'll see.

Speaker 3

Yes, thanks. Let me take those two questions in turn. First of all, As the year unfolds, we do see the group business continue to build. In particular, The Q2 will be very strong for our group business and that's because our team was able to rebook many of the group customers that Canceled back in January into the Q2. So all that being said, our business as we've grown it, we've diversified our revenue Streams is not as seasonal as you might think, that through our event strategy and through our marketing strategy, we've been able to really, I think drive levels of business across the year that really keep our properties Running at an optimal level.

Speaker 3

But the group business is, of course, was down in the early part of the year, but we've seen it continue to grow in The year at about 90% of 2019 levels. As far as the margin dynamic you described, yes, Clearly, as we bring back that important segment of the business, it's going to drive additional EBITDAR. And depending upon the types of groups that we get, It may have a slight diminishing effect on the margins. The margins this quarter are really interesting Dory, as you know, in Las Vegas, we reported about 36% EBITDAR margins for the quarter, but those started out in the low 30s and ended in the low 40s as we drove that additional occupancy. So generally speaking, occupancy is really good for margins in our business.

Speaker 7

Understood. Thank you very much.

Operator

The next question is from David Katz from Jefferies. Please go ahead.

Speaker 8

Afternoon, everyone. Thanks for taking my question. I wanted to ask about LeoVegas a little bit, just having sued on it through the day. It Looks as though it has an inherent CAGR growth rate the way it is. But are you able to change the brand?

Speaker 8

Does MGM sort of wind up sort of on the shingle in some way? What do you need to Accelerate that from, I think it's a 16% CAGR that's in some of the information out there and what's where is the ceiling for this? What's the long term vision for it?

Speaker 2

Look, David, I think we see it as a vehicle to continue to grow globally. And it's a great starting spot because we again fundamentally liked the The foundation of the company both in management and technology, particularly in iGaming. Leo Vegas in Sweden, they have a dominant share. They're over 35% in the Nordics. Well, 5th gen of markets from the Nordics and in Sweden in particular, they have a dominant share.

Speaker 2

So that's of interest to us. They will use our they we ultimately if we are able to get this through, we use our brands MGM, Bellagio and others, because obviously it will be our company. And one of the things that kept them restrained was capital. And obviously given the balance sheet, given our desires and Our aspirations in this space, they won't be capital restrained in the near term and it's something that we hope to have them lean into and we're happy to help with that. We'll be cautious about it.

Speaker 2

We'll be as always wanting to understand growth and regulatory environments and all things that are out there. But again, we've seen them demonstrate their ability to grow both organically and with acquisition. And we have a couple of targets in mind with them to continue to grow that we think makes us a bigger piece of the pie for us and ultimately puts us on the map.

Speaker 3

If I could add, David, if I could add one thing to that as well is that, while We're very proud of the progress we've made on our share repurchases. Just over a year, we've repurchased 19% of the market Capital company and that was an important part of the asset light strategy. But this allocation of capital to move company like Leo Vegas and perhaps Follow on investment into that platform with other M and A opportunities is exactly the also the type of allocation of capital that we had in mind when we Nationally, so it really does complement our capital allocation strategy.

Speaker 8

Understood. And if I can Just to follow-up quickly regarding Vegas, and I think you touched on this from a few different perspectives. But as the mix Rolls into April and the mix changes and we get start getting more convention and midweek stuff back. What happens to ADR As we sort of roll through the year, any thoughts about that would be helpful.

Speaker 5

Yes, David, it's Corey. What the convention business will do is it will help us in our mid week ADR, which we've had a little bit less pricing power. With that business that will allow us to yield up those rates. Our casino base continues to be strong and we don't see that business displacing that. To the contrary, we'll displace the lower end package business before we do any of the casino business.

Speaker 8

So up is the answer more or less?

Speaker 7

Yes.

Speaker 8

Thank you very much.

Operator

The next question is from Shaun Kelley from Bank of America.

Speaker 9

Thank you very much. Jonathan, I just wanted to start with Margins, you gave an interesting trajectory there, just how the quarter unfolded related to the growth and improvement in occupancy. Any Reason that we should be more cautious as we sort of move through the year relative to what you delivered in the March timeframe, I think one thing you've highlighted in the past is a little bit around mix shift, but as gaming remains pretty strong so far, just maybe help us think about puts and takes On Las Vegas margins?

Speaker 3

Yes. I mean performance, It's almost impossible to overstate just how strong our performance was in March. This company was firing on all cylinders and it was held Certainly by a very strong event calendar in the month. So revenue levels to a property And margins in the Vegas market and regions were very strong because of that. Going forward, there's no meaningful changes to the cost structure that we're going to see as we go through the year.

Speaker 3

The strength that we're seeing in group demand and what that means for rates, particularly in midweek, We'll be healthy for margins. The casino business has been particularly strong. As we've said on prior calls, We do in our business planning expect some of that spend to normalize over the year. And to the extent that happens, is that could The take on our margin levels, but like I said in the call, we're certainly comfortable With margin levels being sustained in Las Vegas that are well above those that we delivered in 2019, and we certainly did that in

Speaker 2

And Sean, Bill, maybe just a little added color because I can't help myself. So in January, in the midst of Omicron, we're in the low 60s. Las Vegas margin was still 31%. And by the time March rolled around and we reacted to the business that improved a 1,000 basis points in March, Led by and this is another thing I'll brag on them because I'm proud of this for the team and the company particularly, Bellagio did and I know we don't normally give these, but I can't help myself. Blaggio to date $4,500,000 in EBITDA in March.

Speaker 2

Don't go times 12 now. Having said that, it just shows the strength and it is a property 22 years into its history at an all time month. And a lot of it was helped by margin. When you're doing 41% margin, it just helps.

Speaker 9

Thank you for the color. And then Just as a follow-up, sort of a similar question, but on capital allocation this time. Obviously, I think the number given was 6,200,000 shares repurchased in April. You kept a very strong pace as we looked through Q1. And of course, there was a I think a

Speaker 10

little bit of

Speaker 9

a repurchase or a tender Offer there by a single shareholder. So can you just help us think about programmatic versus opportunistic as we think about The buyback pace going forward, obviously, a ton of cash on the door. So maybe just help investors think about the balance of the year and continuing some buyback in addition to all the other You're able to invest in.

Speaker 3

Yes. We in just over

Speaker 8

a year, we've done

Speaker 3

Just over $3,000,000,000 of share repurchases. I think it's fair to say that this is a bit ahead of the pace that we might have predicted last It's because we've been opportunistic with opportunities the market presented in terms of the pricing of our shares, which we believe Are undervalued. That being said, we now have largely come to the conclusion of the asset monetization Strategy that we set out with the closure of the VICI MGP transaction last week, and we have before us A number of interesting M and A opportunities and other growth projects. Bill mentioned 2 of them, New York and of course, Leo Vegas in our prepared remarks. So we're going to keep powder dry to be able to jump on those opportunities as they present themselves.

Speaker 3

So I think it's fair to say that our pace of share repurchases might be lower as we go through the balance of the year. But again, a lot of it is driven by Opportunities the market provides us.

Speaker 9

Thank you very much.

Speaker 7

Thanks.

Operator

The next question is from Thomas Allen from Morgan Stanley. Please go ahead.

Speaker 11

Thank you. So one of your comments earlier piqued my interest This LeoVegas acquisition was going to be potentially a platform for other deals.

Speaker 2

Can you just talk about that a little bit more?

Speaker 11

I mean, I think LeoVegas has being really an iGaming first platform. I know they use Canby for the sports betting part of their business. Are you interested in potentially buying a sports betting platform? What other opportunities do you think and see in the digital space? Thank you.

Speaker 2

Clearly to us, I think there as the industry continues to expand, whether you talk about Africa, South America, Brazil, Other places, we will continue to look at that through that vehicle. There are other like minded acquisitions of scale In Europe, it still exists, particularly Eastern Europe that potentially exists. And so look, recognizing it's a bite sized and mid sized opportunity Boris, the goal of buying it wasn't to keep it there. When we've talked about diversifying revenue and ultimately cash It's going to take some volume to do that. And so this is our start into that genre and we like that team From an acquisition perspective, we've got the right mindset.

Speaker 2

And again, we like the way they think about the business. We like the way they market the business. Their margins have been good and not been for reinvestment in the business, it would have been great. And so we'll use that. I don't know about tomorrow, but I can expect very soon once we get through this transition and transaction, We'll be back at looking how to grow that business both organically and through acquisition.

Speaker 11

Perfect. And then on the BetMGM side, I think last quarter you talked about having about $450,000,000 of losses this year. Do you think that that's So a fair estimate. And then,

Speaker 2

like what are your latest thoughts

Speaker 11

on the competitive environment on the revenue environment for the U. S. Sports bank and IBM business. Thanks.

Speaker 2

Look, first answer is yes. Second one is, I don't want to take Adam's thunder. If you tune in May 12 at Investor Day, they've got several hours of it, but generally good from where we sit. We love what we see. We understand the noise around it all, but we're seeing through it, particularly with iGaming.

Speaker 2

And so, I think Adam and that team, Matt and Company will be Dig into it in some great detail, Joe.

Speaker 11

Thank you very much.

Speaker 2

Thanks.

Operator

The next question is from Robin Farley from UBS. Please go ahead.

Speaker 12

Great. Yes, I wonder if you could talk a little bit about what kind of Churns you may be targeting in New York.

Speaker 5

Well, look,

Speaker 2

Arguably, as we know to date, the opening bid and this is obviously an RFP process It's $500,000,000 for license. We know the tax is currently set at an opening minimum of $10,000,000 in $25,000,000 which is favorable. It's kind of interesting. We're talking about a $500,000,000 license fee is favorable. It's the highest in the history of industry by 5x.

Speaker 2

Having said that, we like where the governor went with it. We like the opportunity it creates. We had hoped to invest up to a couple of B in the 1st round Phase 1 to Put us into the table games business, to expand some of the amenity, to put a much needed parking garage there, to put an entertainment facility there And potentially some other things we think that will attract the kind of market that's available to us, both in the neighborhoods and the surrounding areas. Like all of our stuff, we target mid teens and beyond and this wouldn't be any different. And so I think that's a good way to think about it.

Speaker 12

Okay, great. Thanks. And can you talk a little bit about LeoVegas, the tech capabilities and how that compares to what you have in the U. S?

Speaker 2

Look, I would say the key differentiator there is it's Cloud based and therefore when you talk about expansion and scalability and you talk about the ability to bifurcate the front end from the back end, It presents that fairly easily. And so we're not running around having to deal with a bunch Hardware, we're not running around having to deal with code base that goes back a decade or so. And so it enables us to be quick and scale quickly, Probably the principal 2 differentiators. And then they've demonstrated an ability to in house game studios and others to have a casino business is meaningful. Obviously, we'd like to think and we've seen this through BetMGM when we put our brand on things, it works.

Speaker 2

It works exceptionally well. Some of the best games on BetMGM are MGM branded games. And so we intend to do the same and grow that business from there. And then I think the last thing and the thing that's noteworthy both here and there Is live dealer. It's a space and a place we want to continue to push into.

Speaker 2

This will give us one of the vehicles to do that. And if you think about it and you all understand some of the valuations in the industry when it relates to live dealer providers, at our core, It's our stores that represent what they do. If we can't do this in a fun and compelling and exciting way, then shame on us. And so we think there's a great opportunity to do that as well. And again, Vegas' backbone and background enables us to do exactly that kind of offering.

Speaker 12

Okay, great. Thanks very much.

Operator

The next question is from Dan Politzer with Wells Fargo. Please go ahead.

Speaker 6

Hey, good afternoon, everyone. Thanks for taking my questions. So I just wanted to hit one more on Las Vegas. Can you talk maybe about the booking trends across different properties in your portfolio in terms of luxury versus core, is there any discernible differences in bookings just given the volatility in airfares and fuel prices?

Speaker 5

Dan, this is Corey. We're not seeing anything different that we would have seen in the past. I mean, these luxury properties obviously don't have any challenges. Mid week, when you don't have convention business in, The legacy properties have probably more a little bit more of a pricing challenge, but that's very similar to what we saw pre COVID.

Speaker 6

Got it. And then just actually on the regionals. I think in the deck you mentioned that staffing is expected to continue to ramp. But the margins in this business have been pretty remarkable in that mid-30s range. I mean, as we think about You continue to ramp, bring back non gaming amenities and maybe the labor and cost inflation that's out there.

Speaker 6

How should we think about the cadence of the margin structure for the regionals business Over time, is this current rate a good enough level? Or should we moderate our expectations over time?

Speaker 3

I think we're getting to the finer strokes in terms of the opening of non gaming amenities, These ones that are important but are not financially material enough to meaningfully move the margins One way or another. So and what's happened also is, in recent months, we've because of the labor availability has improved, the hotel capacity open that we really Need in order to meet the demand, that of course helps margins when we can add more customers in the hotel. So I think the impact going forward in the regional markets The amenities on margins are going to be very small.

Speaker 6

Got it. Thanks so much.

Operator

The next question is from John DeCree from CBRE Securities. Please go ahead.

Speaker 13

Hi, Bill. Hi, Jonathan. Thanks for taking my question. I know that international business and group business is really just starting to ramp up now, but Curious or maybe Corey, if you have any insights as to the spending patterns of those customers as they come back to Las Vegas. We saw that Raveen, your spending of the U.

Speaker 13

S. Domestic leisure traveler and trying to get a sense of how well some of the other customer segments are spending when they're actually getting back to Las Vegas?

Speaker 2

Let me kick this off, John, quick and turn it over to Corey. Cutsi International, one of the interesting things is and I mentioned in my comments, the 80% return to international air, despite the success we've seen so far, Last 90 days or last 75 days, Canada has not fully returned yet. And so that's good news and why. But the good news is we've only seen about half of that come back. And so we think there's a substantial uptick to come when that finally opens up.

Speaker 2

We think Mexico is there, Europe has been about half as well. And then obviously, we have not seen much from the Far East, whether it's either leisure or at the higher end of the business. The international marketplace is holding up from a casino perspective. And so I think the genesis of all of that between Canada, Europe and ultimately, whether it be 6 months, a year or God knows from now, the balance of Asia returning, It will all be accretive and additive to where we are today.

Speaker 13

Thanks, Bill. That's helpful. Maybe one on Japan. I know you gave an update, hopefully towards the end of the year, Licensing process and if you're successful, could you give us a ballpark sense of what a timeline might look like from there? 1 of the Probably most exciting projects you guys have on the horizon.

Speaker 13

Curious as rough outline as to when you might Be able to get a shovel in ground and potentially get moving if the licensing process kind of goes under the current timeline?

Speaker 2

Thanks, John, for the question. And we agreed to think we would have a crack at this market at scale and be one of the long standing survivors, I And then this is given its scale, this is a 4.5 year project to build. So this is a late 2018 into 2019 project really the way to think about it, I think.

Speaker 13

Got it. Thanks. Thanks, Bill. Thanks, Jonathan.

Speaker 7

Take care.

Operator

The next question is from Chad Beynon with Macquarie. Please go ahead.

Speaker 14

Hi, good afternoon. Thanks for taking my question. Wanted to dissect the casino segment. You noted in the slide deck that slot revenue on a 2 year or I guess On a 3 year stack basis, it was up 20% to 30% in the regionals in Vegas, where tables was flat to up 10%. I understand that Vegas is probably, because of the higher end baccarat Hasn't returned that you just touched on Bill, but what's the disconnect in the regional markets?

Speaker 14

And is this something that could be a Structural change to the business, just higher percentage of slots versus table revenue going forward? Thanks.

Speaker 5

Hi, Chad. It's Corey. In the regionals in particular, and Jonathan touched on this a little bit with the room limitations, especially at Properties like Borgata and Bo that had an impact on tables. We are starting to see some of that play come back. In Las Vegas, the table game play is pretty solid, and you're doing that without any Asian play.

Speaker 5

So Just to even be up there, I

Speaker 2

think is a testament to the strength of that market.

Speaker 5

And Chad, I think to your core question,

Speaker 2

fundamentally, is there a change? I mean, time to tell, but it might be, but we don't see one. I mean, I think we're seeing some of the same activity case, whether it's the extreme amount of cash business we see in Maryland. We just had a very successful tournament this weekend in Borgata, which proved yes, it was once again the marketplace is there for us on tables for blackjack. And so fundamentally, we don't see it.

Speaker 2

We understand the numbers you're dissecting. But you look at a place like here, we're all in Detroit, by the way, for the day. If you look at Detroit, where they still have some restrictions here that are hampering this business. And when they begin to ultimately and finally come off, We hope to see some lift as well.

Speaker 14

Okay, great. And then regarding the Cosmopolitan and Las Vegas acquisition, How quickly after the close can the asset be implemented into your, I guess, your portfolio in Vegas and just your loyalty system? Thank you.

Speaker 2

It will take depending on the system and the environment, some stuff is pretty quickly and some of it will take ultimately out to a year. When you think because we want to do it properly, we want to integrate the property, we want to make sure for both employees and guests, particularly their rewards guests There are no takeaways. And so it just depends on what segment and what piece of that environment you're talking about. But again, it's anywhere from 90 days to a year depending on how we're what the particular subject matter is. We're in no hurry, like I think we've said earlier, to Make a mistake, that place has done exceptionally well.

Speaker 2

I think it's like, if you look back, trailing 12 is like $450,000,000 of cash flow or something around that number. And so we're going to go cautious and relatively slow.

Speaker 14

Perfect. Thank you very much. Appreciate it.

Operator

The next question comes from Barry Jonas from Truist Securities. Please go ahead.

Speaker 10

Great, thanks. I appreciate you're not seeing any impact to the consumer yet from inflation, but can you just talk about how long the booking window is in Vegas today? And then to what extent you have forward visibility across your markets given all the macro uncertainty out there?

Speaker 5

Yes. Barry, the booking window is similar to what it's been in the past. It's past 90 to 120 days. We have plenty of And we're pretty comfortable with that. We're not seeing any slowdown in those areas.

Speaker 10

Great. That's great to hear. And then just as a follow-up question, you note in the deck And I think in the remarks how BetMGM will integrate seamlessly into MGM Rewards. But how are you thinking about cashless gaming, Maybe the ability to allow players to use their BetMGM wallet to fund purchases and play at your physical casinos? Thanks.

Speaker 2

I don't want to take Adam's thunder, but he'll go over that product offering come May 12. But a single wallet is literally in the making and he'll talk more about that on Investor Day.

Speaker 10

He'll talk about integrating that with your physical casinos.

Speaker 2

Yes. Obviously, given the environment, given the state, there's a lot of regulatory that goes along with that. But structurally And from a technology perspective, our ability to do that is coming soon.

Speaker 10

Great. Looking forward to it. Thank you so much.

Speaker 8

Thanks, Mark.

Operator

And the next question is from Ben Chaikin from Credit Suisse. Please go ahead.

Speaker 15

Hey, how's it going? In Vegas, you gave some very helpful intra quarter margin commentary. Could you give some color on where we stand on the same store sales basis on some of the non gaming, non hotel spend? So I guess F and B, entertainment, etcetera, just ballpark versus

Speaker 5

'nineteen. Sure. Ben, it's Corey again. The food and beverage numbers are at 'nineteen levels now Even with less covers, a little bit less covers, as occupancy picks up, we come pretty close to there. The Entertainment spend is pretty close to where it is in 2019 also.

Speaker 5

There's a lot more supply out there. We're seeing our average ticket prices up in many of our venues with occupancy remaining fairly consistent. So all in all, we're pretty comfortable with what we're seeing in the spend in the other areas. And then as eventually the catering and banquet business And March was a great month for that. We had some properties that had actually record catering banquet business.

Speaker 5

Once again, that is a higher margin business than just normal restaurant business. So we're pretty optimistic about that also.

Speaker 15

That's really helpful. Thank you. And then on Downstate New York, if you do receive one of the licenses, you mentioned Slots, tables, some new amenities. Would it ever make sense to start on those new amenities now? And then I guess dial up or back I guess the thought process being to get a head start.

Speaker 15

At one point, there was discussion of netting out any

Speaker 2

Yes. I don't know that given the competitive nature of this, the netting out piece will sustain. I suspect it won't. Look, we don't want to be presumptuous. Obviously, we like where we stand.

Speaker 2

I think we've served that community well and in turn they're prepared to support us. We're going to go like hell to make sure that the day this happens that slot machines are ready to go into the building. And we're going to flip out roughly 1,000 machines give or take to bring in tables as soon as we possibly can within months. And we're going to make an assessment on a parking facility and when to go on that once a master plan. We are ultimately get our head around a master plan, which we're working on diligently now.

Speaker 2

I wouldn't mind under any circumstance parking needs to be a real piece of this. But it's a couple of $1,000,000,000 and we're going to be thoughtful about how quickly we do go when it's all said and done.

Speaker 6

Makes sense. Thank you.

Operator

Ladies and gentlemen, this concludes our question and answer session. I would like to turn the conference back over to Bill Hornbuckle for any closing remarks.

Speaker 2

Thank you. So thank you all for joining us today. Again, I just want to emphasize the resiliency of our Team and the company and the team in the industry, I mean, given how quickly we all came out of COVID and what we were able to do and particularly examples like the When I mentioned at Bellagio in March, kind of unprecedented, so I couldn't be more excited by it and thankful for everyone's effort on that. Our future has never been bright. We're sitting on an extensive amount of liquidity.

Speaker 2

You saw us put it to work immediately with Leo Vegas in the space that we're Highly interested and highly motivated by it. And our balance sheet is fortress. I mean, we have never been in this position. And so we're going to continue to look at proper ways to allocate capital, whether it's stock repurchase or more notably, I think at this venture, ways to grow our cash flow. And we've continued to enjoy the growth of Las Vegas in the context and events capital of the world now in sports With all the things I mentioned earlier, Formula 1 of note coming forward, every weekend that we had a game or an event Down at the south end was a teens digit growth on norm for those properties.

Speaker 2

And so that's all inherently built into our future now. And so we're very excited by that as well and what's happening in Las Vegas. We're excited by New York, of course. And then ultimately, I think John put a point on it, Long term, Japan has been very exciting thing for the company. We'll help massively diversify our revenues more globally.

Speaker 2

And so with that, operator, I thank you and I thank you all for joining us today.

Operator

And thank you, sir. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

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Earnings Conference Call
MGM Resorts International Q1 2022
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