Release Date: July 31, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- MGM Resorts International (MGM, Financial) achieved both top and bottom line growth in Las Vegas, with net revenues growing 3% year over year.
- The strategic relationship with Marriott contributed significantly, with over 410,000 room nights booked, enhancing room rates and occupancy.
- MGM China saw a 37% year-over-year increase in net revenues and a 40% increase in adjusted property EBITDAR, with margins at 29%.
- The company has successfully integrated the Cosmopolitan of Las Vegas into the MGM Rewards program, enhancing customer loyalty and benefits.
- MGM Resorts International (MGM) has a strong balance sheet with low net debt and excess cash, enabling continued investment and share repurchases.
Negative Points
- The Formula 1 event in Las Vegas is showing some softness in room rates, which could present a potential headwind in the fourth quarter.
- There is a noted decline in core gaming metrics in Las Vegas, with some softness in slot revenues due to a shift in mix from casino customers.
- The regional markets have seen some softness, particularly in the lower end of the database and unrated play.
- The company faces challenges with wage inflation, although most increases are expected to lapse in the second half of the year.
- BetMGM's sports betting segment has lost market share, necessitating heavy investment to improve the product and regain customers.
Q & A Highlights
Q: Can you provide more details on the contribution from the Marriott strategic partnership in Las Vegas?
A: Jonathan Halkyard, CFO: The 410,000 booked room nights number is for the year-to-date. About 60% of these have already stayed, with the rest reserved for the coming months. The incremental benefit comes from higher rates paid by Marriott customers and increased on-property spending. We started the partnership later than planned due to a cyber incident, but we still expect the benefit for calendar 2024 to be in the range of $65 million to $75 million.
Q: What are you seeing out of the core gaming customer in Las Vegas?
A: Corey Sanders, COO: The core gaming customer remains solid, particularly the high-end and database customers. The change in revenue on the slot side is tied to a shift in the convention mix. We continue to focus on maximizing the right customer in the room, especially during weekends.
Q: Can you provide an update on the BetMGM investment and its cost structure?
A: Gary Fritz, President of MGM Interactive: The product enhancements, particularly with Angstrom, are expected to improve gross gaming margins. This should positively impact the overall cost structure. The recent bank loan for BetMGM will be at the BetMGM level, with any credit support from the parents still under discussion.
Q: How do you view the potential for market share growth in Las Vegas?
A: William Hornbuckle, CEO: We see further opportunities to gain market share, particularly in the high-end retail and nightlife segments. Our investments in luxury properties and the personalization of data will help us attract and retain customers.
Q: What are your thoughts on the Formula 1 event in Las Vegas and its impact on Q4?
A: William Hornbuckle, CEO: The event is off to a soft start compared to last year, particularly in room rates at luxury properties. However, the NFL game that weekend should help fill the south end of the strip. Overall, the impact is estimated to be around $30 million, but we are still hopeful for better performance as the event approaches.
Q: Can you elaborate on the digital strategy and its long-term outlook?
A: William Hornbuckle, CEO: We are committed to our digital strategy, including BetMGM and international markets through LeoVegas. While we are past the major investment phase, we will continue to focus on yielding from our existing investments. We believe in the long-term growth potential of digital gaming.
Q: How are you managing labor costs and maintaining margins in Las Vegas?
A: Jonathan Halkyard, CFO: We have managed labor expenses effectively, with FTEs down in Las Vegas and other regions. Going forward, unit labor cost increases will be lower as we lap previous increases from new labor agreements. We are comfortable maintaining margins in the mid-30s.
Q: What are your plans for future capital investments in Las Vegas properties?
A: William Hornbuckle, CEO: We will continue to invest in room remodels and other enhancements, particularly at Aria and MGM Grand. While we will be creative with properties like Excalibur, we believe in maintaining a proper cycle of room renovations to avoid long-term issues.
Q: How do you view the potential for online gaming in the UAE?
A: William Hornbuckle, CEO: We are excited about the potential for online gaming in the UAE, particularly with our partner in Dubai. The recent announcement of a lottery is encouraging, and we expect more clarity on licensing and opportunities in the coming months.
Q: What is your outlook on the regional markets and customer segments?
A: Corey Sanders, COO: The regional markets have seen some softness at the lower end of the database and in unrated play. However, the middle and high-end segments remain strong. We are focused on maintaining our market-leading positions and generating steady free cash flow.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
