MGM Resorts International Q4 2022 Earnings Call Transcript

Quartr
Provided by Quartr
February 8, 2023

There are 16 speakers on the call.

Operator

Afternoon, and welcome to the MGM Resorts International 4th Quarter and Full Year 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. Please note, this conference is being recorded.

Operator

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 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. Actual results may differ materially from those contemplated in these statements.

Speaker 1

Additional information concerning factors that could cause actual results to differ from these forward looking statements This contains today's press release and our periodic filings with the SEC. Except as required by law, we undertake no obligation to You can find the reconciliation to GAAP Financial Measures in our press release and investor presentation, which are available on our website. Finally, this presentation is being recorded. I will now turn it over to Bill Hornbuckle.

Speaker 2

Thank you, Andrew, and thank you all for joining us today. I'm proud to announce that MGM Resorts International drove record 4th quarter adjusted property EBITDAR for Las Vegas and Regional Resorts. What's more, our full year Las Vegas Strip adjusted property EBITDA increased by more than 80% year over year. These outstanding results are evidence of our focus on optimizing growth in our business and operations as well as our strategic vision of becoming the world's premier gaming Entertainment Company. These outcomes are also a testament to our employees who will go above and beyond every day to take care of our guests And create an amazing great experiences, which drive loyalty among our customers.

Speaker 2

Our employees are true heroes of this story and we need to be celebrated. I couldn't be prouder of them for delivering these financial results alongside the steady improving guest and record employee satisfaction scores we are enjoying. As we look forward, we expect many of the drivers of our 2022 performance to continue into 2023. Importantly, we are well positioned on weather change In a variety of environments given the inherent long term benefits of MGM's diverse portfolio, in fact, we have the most diverse offerings In the gaming space and as such, we're a well balanced organization that benefits from both scale and a host of premier brand offerings. The distinct pieces of our business that create this diversification are number 1, our number of 9 Las Vegas Strip and 8 regional domestic properties in the U.

Speaker 2

S. That cater to all market segments and produce consistently strong profitability 2 integrated resorts in Macau that pre pandemic generated EBITDA of over $700,000,000 and are just now beginning to see a Very real return to profitability. 3, our digital strategy with 50 percent ownership of BetMGM, one of the leading U. S. BetMGM is the leader in what is financially the most important segment in the nation, iGaming, and is making overall progress towards its profitability and our ownership of LEO Vegas, which we are using to grow our digital business internationally and extend both MGM's brand and content reach and ultimately our balance sheet allowing significant flexibility to invest in areas with the highest return on capital, including New York, Japan, as well as funding and continued share repurchases.

Speaker 2

In fact, as you know, we have just announced that our Board approved another $2,000,000,000 repurchase program. Looking ahead, we see multiple opportunities for growth and momentum in our business. Coupling these opportunities with a relentless focus on free Cash flow per share, our operating model, our margin control and disciplined expense management, which we believe gives us a great confidence that our best days are ahead of us. Let me walk through the business case for 2023 starting with our U. S.

Speaker 2

Properties. First, we are encouraged by the early success of the Cosmopolitan in Las Vegas As we migrate the business into MGM Resorts Infrastructure, on an annualized basis, we have double digit growth in revenue and EBITDAR compared For the reported 12 month period prior to the acquisition, we are already beginning to produce cross property play with hundreds of high end players in the Casa Pollen database Attending M. Jeremy's Rewards customer events and driving 1,000,000 in wins at our other sister properties. This is a trend that we saw continued for the Lunar New Year celebration at our properties in Las Vegas and we expect to expand to the mass market as we integrate MGM Rewards into the Cosmopolitan system. Next, we have a strong event calendar in Las Vegas.

Speaker 2

CES has 115,000 attendees last month, up from 45,000 in 2022. ConExpo and ConAg next month is setting up to be the best ever and March Madness, Suite 16 and the Elite 8 games are coming to Las Vegas. Together, the calendar in March is positioned to have us have the best hotel revenue month we believe in our history. Additionally, Formula 1 is which has brought 40 events and over 1,500,000 visitors to Las Vegas in 2022 and is expected to bring even more visitors, even higher quality events In 2023, driving significant spend, particularly at our South End properties. Another tailwind is the ongoing growth in visitation.

Speaker 2

The LBCBA expects domestic flight growth capacity to reach 120% of 2019 in the Q1 of 2023 And international recovered further with 80 percent of 2019 available seats. Harry Reid Airport hosted a record 52,600,000 Passengers in 2022. Outside of our domestic business, we also see tremendous opportunities for growth. Starting with China, fully stated Macau is back. As you well know, COVID restrictions impacted our Macau operations in 2022, Causing an operational loss that negatively impacted our overall results, but we are experiencing a rebound in 2023 as our guests are returning in force just as they did in Las Vegas Restrictions were lifted here.

Speaker 2

In fact, quarter to date, we are excited to report that MGM China's combined properties are the highest earning businesses within our company. As part of the concession renewal process, we committed to bring non gaming entertainment events to Macau. Those events were strong drivers to visitation to our property during the Lunar New Year and at the end of January. We see these early results as validation in our confidence in the Macao market's recovery and the long term viability upon which we are retendering commitments were built. And unique to MGM China, we have secured 200 additional tables Part of our new gaming concession, which combined with our premier mass positioning should allow us to drive market share into lowtomidteens.

Speaker 2

In fact, during the month of January, our market share was 16%, which compares to high single digit market shares pre pandemic. This outstanding performance was driven by the MGM China's team strategic focus delivering full gaming full renovation, a complete hotel product mix for our targeted customers, Various marketing efforts in producing strong non gaming events, shows and promotions, plus our team's improvement in service levels and operational efficiencies. These collective efforts position us for a long term growth story in Macau. We've also reason to be optimistic about the growth prospects of our business Well into the remainder of this decade, especially in light of the 2 new gaming licenses we hope to receive in the near future. We expect to submit our RFA in New York in the first half of this And we hope for response in the near future.

Speaker 2

One advantage we have over the competition in this market is our ability to add tables We expect to spend about $2,000,000,000 in New York inclusive of the license fee. We will fine tune our program and planning, but right now we're expecting extensive property improvements such as a significant entertainment offering, new food and beverage opportunities, covered parking and an overall increase in the casino floor space. As you may recall, we also submitted our RFP in Japan for an integrated resort license to operate in Osaka approximately 10 months ago. Unfortunately, I'm still waiting for the response from the government, but we are being patient and believe we will hear so soon. MGM Resorts has presented a compelling offer with our partner, Oryx, to develop an integrated resort, which will develop international tourism and growth to that region.

Speaker 2

We're extremely excited for the ROI opportunity in a market in which we may be the sole operator for some time in the future. Each of the projects I just mentioned are expected to generate returns well above our current free cash flow yield. These and all future capital investment decisions we weighed upon That same standard. In closing, 2022 was a phenomenal year for MGM Resorts, and we're confident we will see progress into 2023 and beyond. With that, I'll turn this over to John to have more color on the Q4 and the year.

Speaker 3

Thanks very much, Bill. Before I dig into the financial results, let me also thank my colleagues here at MGM Resorts for an outstanding quarter and a truly amazing year. I'll now share with you some of the exceptional financial results that we achieved. Las Vegas Strip same store revenues, and so that's Excluding the Cosmopolitan and the Mirage grew 11% and adjusted property EBITDAR grew 6% in the 4th quarter compared with last year. 4th quarter occupancy of 91% was up 500 basis points year over year and ADR was $2.60 in the 4th quarter, which grew 30% over last year.

Speaker 3

Several volume metrics for us set records as well as our Las Vegas slot handle set Its 7th consecutive quarterly record in the 4th quarter. Demand in Las Vegas remained strong across all segments, driven by our exceptional entertainment offerings and other customer demand drivers. The strength continued into January, where occupancy was 90% And rooms booked during the month were on record pace with rates up double digits to last year. In the regions, 4th quarter revenues grew 10% and adjusted property EBITDAR grew 3% year over year. While EBITDAR was down 1% versus the 3rd quarter, This sequential decline is in line with normal seasonality for the Q4.

Speaker 3

Importantly, labor expense as a percentage of revenues was flat sequentially And our current headcount remains approximately 20% below 2019 levels, all while we achieved historic highs and NPS and other indicia of customer satisfaction. In the 4th quarter, corporate expense excluding stock compensation was $113,000,000 which includes $5,000,000 related to MGM China, global development costs of $6,000,000 and transaction costs of 2,000,000 Going forward, we expect corporate expense for the full year 2023 to be approximately $380,000,000 to $400,000,000 A decrease of approximately $30,000,000 to $50,000,000 from 2022. Included in MGM's corporate expense This year is $44,000,000 for MGM China and approximately $37,000,000 development expense related to Japan and New York. We intend to invest approximately $800,000,000 in domestic CapEx in 2023. And this compares to the $727,000,000 in CapEx invested in 2022.

Speaker 3

Maintenance capital will be approximately $600,000,000 of this spend this year. And this year, it includes room remodels The Bellagio Spa Tower, Borgata's Water Club and the completion of our New York, New York room renovation. Since 2019, we've reduced the average age of our rooms since renovation by roughly 3.5 years and our room age will continue to decrease over the coming years as we refresh our room offerings. The remaining CapEx in 2023 is growth Projects that include the Mandalay Bay Convention Center remodel, a new pedestrian bridge connecting the Cosmopolitan Fedora and investments in technology to drive better customer experience, ease and engagement. Finally, on the development front, We expect to contribute $75,000,000 to BetMGM in 2023 and the only material investment in New York This year will be the $500,000,000 license fee depending upon the timing of the license awards.

Speaker 3

I'll conclude with just A few comments on our strategy for capital allocation. 1st and foremost, we'll maintain a strong balance sheet by sustaining adequate liquidity for And as you can see in the presentation that we posted today, we concluded 2022 with $5,300,000,000 of domestic cash against domestic debt of $4,500,000,000 Our resources this year were bolstered by the disposition of the Mirage in December for 850,000,000 and net cash proceeds after tax. Next week, we expect to close on the sale of the Goldstrike in Tunica, which will bring $350,000,000 and net proceeds after tax. Next, we'll prioritize capital investment to deliver the highest return for our shareholders. Our acquisition of the Cosmopolitan Las Vegas expanded our reach into the high end of the Las Vegas market.

Speaker 3

Our acquisition of LEO Vegas jump Our new President of Interactive, Gary Fritz and his team are evaluating a number of opportunities in this area And our shareholders should expect that we'll be deploying more capital to grow the MGM brand internationally in iGaming and in digital content development. And finally, we're going to return capital to shareholders. During 2022, we repurchased 76,000,000 shares for $2,800,000,000 Since the beginning of 2021 through yesterday, we've repurchased $124,000,000 for a total $4,700,000,000 and have reduced our share count to 375,000,000 shares. And we're not done. As Bill mentioned, our Board of Directors yesterday approved an additional $2,000,000,000 share repurchase program.

Speaker 3

In evaluating our share repurchase strategy, I consider a number of factors, including the liquidity profile of the company as well as the development and M and A opportunities that are before us. But I also consider the free cash flow yield available in our own shares. So as I conclude, consider the following. Adjusted property EBITDAR from Las Vegas last year was approximately $3,100,000,000 and from our regional operations was $1,300,000,000 From that, we had adjusted domestic corporate expense of $400,000,000 and cash rent of $1,700,000,000 on an annualized basis. Consolidated cash interest was $574,000,000 but that includes $205,000,000 related to MGM China.

Speaker 3

And cash taxes and domestic CapEx totaled about $750,000,000 But our company also has Significant reservoirs of value that did not contribute cash earnings in 2022. This includes excess cash of over $2,500,000,000 Our ownership position in MGM China, which yesterday had an approximate value of $2,600,000,000 and of course our stake in BetMGM. It's a lot of numbers, but when taking all of this into account, I see a double digit yield opportunity in our shares, which is why I see share repurchases as a responsible and accretive use of our capital. Bill, back to you.

Speaker 2

Thanks, Jonathan. I hope the comments that you've conveyed the excitement that we all have Towards our business this year and ultimately beyond, in all my time with the company, I've never been more excited about our present and future as I am right now.

Operator

Thank you. We will now begin the question and answer session. Question will come from Joe Greff from JPMorgan. Please go ahead. Joe, perhaps your line is muted on your end.

Operator

Your line is open. Please proceed.

Speaker 3

Joe, are you there?

Operator

Our next question then will be from Shaun Kelley from Bank of America. Please go ahead.

Speaker 4

Hi, everyone. Good And thank you for all the detail and color. So a lot of different places we could start, but I'm going to start with a high level strategic Jonathan, you ended on walking through a really robust liquidity position, still a lot of cash on the balance sheet that's Either collecting interest at a better yield than before, but not a huge yield. So the question we get all the time remains Kind of that ownership interest in upping the stake in maybe one of those areas that you discussed, BetMGM being The big one and obviously we know there's a partner there, but if you could give us your latest thoughts around the strategic value there and how you fold that in with your comments around maybe a more organic or

Speaker 2

Thanks, John, for the question. And I'll step in and kind of give the first part of it, So I think it's time to be definitive and give a little direction. The simple answer on Intain is no, we've moved on. While we remain highly focused on BetMGM's business through our partnership with Intain and making sure that that business continues to grow, We see great potential in Leovay's expansion capabilities. I've said before, we like their technology platform and their leadership team.

Speaker 2

We're also interested in the content studio business. We think there's a real play there. We've seen that proven effective with brand when we combine great product in our brands at BetMGM. And over time, we like the live dealer business and the expansion of other global markets and frankly, indirectly under our own purview. So for now, the answer is no, not with Intain.

Speaker 2

We're going to go down our own direction and we began to allocate capital. We think Gary Fritz has Got the right motive, the right drive and the right person to help us lead this forward. We value the relationship we've entertained. We value BetMGM. But as it comes to rest of the world, we're going to move forward with a different proposition.

Speaker 3

And Sean, just a couple of comments, the broad strokes around Capital allocations, we look forward. We do have a maturity in March, dollars 1,250,000,000 at 6%. So our present Plan is to, of course, redeem those bonds and that will capture about $75,000,000 of free cash flow for the business. We were active share repurchases just in the past three quarters. We spent almost $2,000,000,000 at At a price of about $33 to $34 So we'll continue to be repurchasers of our shares, but we'll moderate that Depending upon market conditions.

Speaker 3

And then of course funding what Bill described, which is our interactive ambitions, which We'll be predominantly through M and A, but we're reserving a significant amount of capital for those activities as well.

Speaker 4

Thanks. And I'll I don't want to be greedy with my time here, but just the follow-up to stay on the same theme then. Jonathan, You directly hit it kind of M and A or could you just give us some parameters around are we thinking more bolt on options or are there still Platform level investments that could be made to drive up and expand that opportunity to be meaningful to the base business?

Speaker 2

It's a combination thereof. When you talk studio business or even live dealer, the technology aspect of that is On our scale relatively de minimis, when you talk about stepping up to other marketplaces, whether it's South America over time or rest of Europe, We'll have to take a different view on that as these opportunities unfold. But for now, It's more bolt on and relatively small.

Speaker 4

Thank you very much.

Operator

And for the next question, we'll move back to the line of Joe Greff from JPMorgan. Please go ahead.

Speaker 5

Can you hear me okay now?

Speaker 2

Hi, Jim.

Speaker 6

All right.

Speaker 5

That was weird. Nice speaking with you. In Las Vegas, can you talk about how you're thinking about FTE count and payroll expenses and How about trend this year? Maybe you could break it up between both sort of on a same FTE basis as well as just wages? And what kind of revenue growth do you need to offset wage expense growth in Las Vegas, put another one.

Speaker 2

And I'll open it and I'll kick it to Corey. Well, if you go back and you look at FTEs, particularly in Las Vegas against 2019, we're down anywhere from 12% to 15% depending on the property. Obviously, wage inflation since 2019 has crept. And just so we're all on the same page looking forward, we have substantive labor negotiations later this year with about 28,000 of our colleagues, Which we're going to have to contend with and work our way through. And so, Corey, maybe the second part of that just

Speaker 7

how we

Speaker 2

see it all goes.

Speaker 7

Yes, I think from the And point of levels of FTs, from a fixed cost perspective, there will be no increases. It will all be on variable. So if there's additional catering in Banggood's Business, it would match that revenue component of it. But I think we're pretty comfortable that we could Service our properties, service our guests at the levels we're at today. And then Jonathan, if you want to take the revenue.

Speaker 3

Yes. I think On the revenue growth side, if we're running now occupancies that are Basically full on the weekends. There's a bit of room during the weekdays. So really it will need to come through pricing as opposed to occupancy gains largely in Las Vegas. And I think that's in the low single digits.

Speaker 3

We should be able to cover any increases in payroll adequately.

Speaker 2

I mean, overall, I think we think our margins are going to sustain. It's really the answer to that.

Speaker 5

Got it. And then Bill, we're dealing with another earnings call and release today as well. So I have to make sure I understood your comment, your prepared comments you talked about With Macau being back that in the month of January, it led the company in profitability or something along those lines. Can you just explain that or give a little bit more detail on it.

Speaker 2

Yes. I can put a little color around it. And then we have Hubert on the line and these guys have worked hard at this for 3 years. So I'll let him talk a little bit about the business. But Look, the rebound was interestingly come January 8th fairly instant.

Speaker 2

I think we peaked during Chinese New Year's making a little over $5,000,000 a day. I mentioned in my prepared comments 16% share. And for us, for all the reasons I mentioned, Our mass piece volumes were 100% over our 2019 levels. Now, we're talking about a whopping 30 days here. But for the company, Particularly from where we have come from, we activated 150 of the 200 new tables we have.

Speaker 2

We're very excited by what's happened in the 1st 30 days. And so Hubert, maybe any other color would be helpful.

Speaker 8

Sure. Thanks, Bill. Thanks, Gil, for the question. Since the beginning of the year, I think the market has been growing back and has exceeded the expectation of many participants and observers. For us, in January, on the gaming side, we have seen very healthy above the market average recovery In both Mass and Direct VIP segments and for the month of January, as Bill has mentioned, our market share reached 16%, which is a record high for us.

Speaker 8

Our daily mass SGGR was on par with the 2019 level for the month of January and during Chinese New Year, far exceeded last year's Chinese Year level actually. And we are also encouraged to see that direct VIP segment In terms of rolling volume, far exceeded 2019 level as well. It is also very encouraging So all in all, we are very confident in a solid and sustainable recovery of Macao market this year and beyond.

Speaker 9

Excellent. Thank you

Speaker 5

very much guys.

Operator

The next question will be from David Katz from Jefferies. Please go ahead.

Speaker 10

Hi, this is Cassandra on David's behalf. I want to expand on Mac How's margin longer term? As we think about the shift in the IT mix from junket to direct, I believe your competitors have also called out increased labor costs and some labor shortage and increased utility. So How should we think about the margins in Macau longer term?

Speaker 2

Well, again, I'll kick this to you, but my only initial comment is I believe everyone knows this. The junket business, I mean, when it was all said and done, it was a 20% margin business. And so while there was a great deal of volume in that business and we all was accretive to us and obviously a vehicle for capital into the market, It didn't help the margin, I can assure you. So Hubert, I don't know if you want to talk about more generally what you think will happen there, but I do like where we're positioned for VIP, mass VIP, remembering our branch environment and system is broader than almost anybody else's in the market. We've been doing it for 30 years into Las Vegas and we've now taken that network and put it to work directly to the benefit of Macau.

Speaker 2

Hubert?

Speaker 10

Great.

Speaker 9

Yes.

Speaker 8

I think that in terms of margins, I think that we expect in This year and beyond probably will at the high end of in the 20s, In the high side of the 20s. And in terms of junket to direct, Certainly, there are some conversion in that space, but it's too early to give you any concrete numbers. But from the strength we have observed in January and Chinese New Year in our direct business, I think that we're still very Confident in the growth of the direct business and particularly given the wide network of MGM Resorts In terms of global reach of high end customers.

Speaker 10

Great. Thank you. And for the follow-up, if I may shift to Las Vegas. Substantially higher than pre COVID levels. Do you think that is sustainable?

Speaker 10

And looking beyond 2023, Especially if we are thinking about recession, how resilient do you think that ADR should be?

Speaker 7

Yes, this is Corey. Yes, I

Speaker 1

think it's sustainable.

Speaker 2

As we look at

Speaker 7

the event calendars on weekends and our forward looking Pacing and what we're booking rates at now, we have pretty good visibility further out. On the mid week, we see Not only our convention business getting better, but the whole city's convention business getting better. So the pricing that we're seeing today, we should be able to sustain Given where the economy is today.

Speaker 10

Great. Thank you so much for taking my questions.

Operator

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

Speaker 6

Hey, guys. Thank you. Just looking at some of the disclosure in Las Vegas and trying to decipher what is Kind of the delta between gaming revenue and your net casino revenue has widened in the last few quarters. I'm assuming that is kind of all mix Related with Cosmo coming online and is that kind of a range that delta that Pretty much

Speaker 2

we'll hold firm moving forward. Yes, Carlos, hi, Bill. I think the answer to the question is yes. We got as we needed to through COVID because obviously the group segment of note went away, very active with our casino marketing, our casino marketing database, personalization And other things we might do in that sector and we've sustained it. And so it's helped that tremendously.

Speaker 2

Obviously, now convention business is going to come And Corey, what 18%, 19% of our mix this year? Yes. But I think it is sustainable is the way to think about the business.

Speaker 6

Great. And then Corey, just on that on the topic of convention mix, I you made a comment earlier, I believe that The bookings that were done were done at double digits. If you look at kind of the entirety of the group business on the books or the targeted group business on the books From a pricing perspective, how does that look year over year or relative to 2019, however you guys kind of want to think about it?

Speaker 7

Yes, I think, look, many of those contracts were in place over 2019, 2020. I think they have price escalators in there. It's Probably an area of opportunity for us in the future as we look at future convention booking. But just as a reminder, it's 18% of our business. The new business is getting booked based on where rates are today.

Speaker 8

Okay.

Speaker 6

Do you believe like when you think about it overall just that taking the pricing aside, thinking about the visibility that it provides you, Do you believe as you look through 2023, all things equal economically and from a macro perspective, That there should be pricing power year over year on a same store basis?

Speaker 7

Yes. I think there should be some pricing power Based on the amounts we have on the book and the foundation we have in our bookings.

Speaker 2

And remember, Carlos, one thing we have strategically decided to do is push More business out of weekends and back into mid week. And so that has an overall play in ADR. Obviously, it brings down the convention ADR, but it raises the company's ADR because it gives us more opportunity weekends to where we see frankly and continue to see real upside particularly in the luxury segment Cross Cosmo, MGM, Mandalay, Aria, Bellagio.

Speaker 8

Great. Thanks guys.

Operator

The next question is from Stephen Grambling from Morgan Stanley. Please go ahead.

Speaker 6

Hey, thanks for taking the question. Maybe turning to Japan, that was another one that you referenced is still out there. You're waiting on some approval, but Still looking for a return that's above, it sounds like your free cash flow yield. Wondering if you could just elaborate on any of your updated Expectations for that market and anything that's either evolved from the terms of the transaction or even the timing of when construction could start

Speaker 2

Steve, I'm going to be a little careful because some of this is End date with the government, etcetera. But having said that, we had hoped to hear in October, obviously, we sit here now in February not having heard The process lies today with MLIT, the government agency that is going through and consistently asking us questions about the project, About the contract with the government of Osaka, etcetera, time to tell whether we get through that efficiently over the next 30 days. We'd like to think and believe we might, but we've been thinking that for a while now. As it relates to macro, Look, I'm excited to think that we may be the only player. And so instead of a market of 19,000,000 people, we're talking about a much larger market.

Speaker 2

Having taken the journey many times from Tokyo, which is only 2.5 hours away by high speed train, etcetera, So we see upside. Inflation has not hit Japan like it's in other places. And particularly for us at our end of the partnership, The value of the yen is gone tremendously in our favor, but we're still looking at a $10,000,000,000 project. We're looking at a return on that project we think can bring 15% plus in cash flow, and then maybe then some, but it has to mature. And overall timing, the goal was Now we're going to be challenged for that if we don't hear soon to get this thing open before the decade close in 2029.

Speaker 2

But since there's a bridge to getting there.

Speaker 6

That's helpful. And maybe a follow-up on BetMGM, just to make sure I understand you correctly, I guess, are you anticipating the car out, but any additional capital Being put into that JV beyond this year, given the targets for kind of profitability or standalone at this point?

Speaker 2

No, none substantively. If BetMGM gets into the M and A business for some particular product, maybe. But generally, no, it's the $50 odd 1,000,000 I think we've collectively, but call it our $35,000,000 or $45,000,000 we've identified. It gives us every reason to believe it should hit its target this year, starting to make profitability in the second half of the year. We all have to be rational players.

Speaker 2

There is growth left. There are 6 additional states yet to go that were that been identified. But no, there's no large scale capital. That business should begin to mend and take care of itself.

Speaker 6

Thanks so much.

Operator

Next question is from Chad Beynon from Macquarie. Please go ahead.

Speaker 11

Afternoon. Thanks for taking my question. Bill, Jonathan, another one on Vegas. Just given your diverse portfolio with Luxury and Core, can you just kind of help Think about broadly, how these segments compared against each other in 2022? Bill, I think you said, obviously, a lot of The group events in the citywides in 2023, just those compression nights should help probably a little bit more in luxury, but just trying to see, I know you're not breaking it out, but kind of where the which way the wave is moving luxury and core?

Speaker 11

Thanks.

Speaker 2

Yes. I think core your best.

Speaker 3

In 2022, the majority of the growth here in Las Vegas was driven by The Bellagio, ARIA, Cosmopolitan and the MGM Grand. Mandalay Bay had a fantastic year as they Of course, capitalized on the return of the group business to Las Vegas. I mean, in the Q4, just an example, our group Room nights were up about 50% versus the Q4 of 2021. So it Certainly has skewed to the luxury properties. But I will tell you from a portfolio strategy perspective, All of these properties here in Las Vegas are really important role players.

Speaker 3

We've invested some capital in the Luxor So in the last year, we've just we're doing the rooms in New York, New York right now and those businesses we expect are Going to be very solid cash flow generators over the next several years, but no question the growth is coming from the luxury segment.

Speaker 11

Thanks. And then can you just talk a little bit more about the omni channel opportunities With driving your players from BetMGM back to Las Vegas, given it's probably one of the more important years of your players wanting To come out and see some of the events kind of where that stands now and how that should progress in 2023? Thanks.

Speaker 2

So I think simple answer is more. And when I say that in the context, it's now becoming thousands of players that have Obviously, you touched both brands. It's interesting, the combination of the 2, the players spend about 40% more. That's kind of But 40% more is interesting. The other thing that plays to the events, whether it's sports or otherwise sporting events, Is that 85% of the players are under 49 years old.

Speaker 2

And so that network and that combination is bringing us a younger player, Bringing us people who have to date have the propensity to spend more when combined with both brick and mortar and digital activity, We've set up fairly elaborate CRM systems both at BetMGM and ultimately a hosting program here that captures them. And so there's one to one dialogue about certain VIP players and what their needs, wants and desires are. And so we've treated that network like we would treat any of our branch offices, if you will. When the phone rings and they have somebody of substance, we're set up to take care of them. So excited by it.

Speaker 2

We need over time to automate it more So that there's true connectivity between BetMGM and its loyalty system and ultimately MGM Rewards system. But for now, focused on the high end between the spend, the use and the numbers, all pretty exciting.

Speaker 11

Thank you very much. Appreciate it.

Operator

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

Speaker 12

Great. Thanks. I wanted to ask a little bit about, you showed the breakdown of same store gaming revenue in Vegas being down about 10% and I think it was down a little bit in Q3 as well. I wonder if you could give us some sort of color on what's happening with The gaming consumer in the last two quarters, is that kind of fewer trips year over year because there are more options in the world? Or is it just lower What do you think is driving that in the last few quarters?

Speaker 12

Thanks.

Speaker 3

We've seen same store Handle and drop and win growing modestly in Las Vegas, although there's No question. The majority of the growth that we've seen in this quarter on a same store basis has been on the hotel side. So the gaming customer is healthy here in Las Vegas. It is Driven mostly by our higher value gaming customers, but it's very healthy on a same store basis.

Speaker 12

With are the declines just to sorry to Jim, you're saying it's coming from the higher end gaming Player or you meant they're holding up it's the sort of broader market player with the same store decline?

Speaker 3

No. We're what I'm talking about that our slot handle and table game drop And slot win and table game win increasing.

Speaker 12

Okay. I was looking at your slides showing Casino revenue is down 10% on a same store basis in Q4. So I know there were some properties in and properties out, but I was just Using the number from your slide.

Speaker 3

Yes. Some of that will be on a net basis after accounting for The cost of hotel rooms that are comped against those players and so that is having an impact on What we're describing is that gaming revenue. But in terms the way I consider the health of the gaming customer Is to look at the volume metrics and the gross gaming revenue, which are growing on a same store basis. That makes sense, Robin. That's kind of when I think about what the behavior of these customers actually is, it's on the gross basis.

Speaker 12

Okay. Okay. Just trying to clarify that number. That's helpful. Thank you.

Speaker 12

Also, I was just curious given obviously the Strength of your liquidity and cash position and what you have going. Why suspend the dividend? And I realize it was a small dividend only remaining I'm just curious why suspend that when you liquidity is certainly not the issue.

Speaker 3

Yes, it's not. It was really an administrative issue. It was burdensome. It was complex And that measured against the size of the dividend itself, which was de minimis and just how much Capital, we've returned and we can expect to continue to return through the form of share repurchases. We just felt that it was a practice That we did not need to continue.

Speaker 3

That doesn't mean that we wouldn't reconsider it or our Board wouldn't reconsider it at some point and in so doing Would make it a more substantial dividend than a de minimis dividend, but it was mostly an administrative solve.

Speaker 12

Okay, great. Thanks very much.

Speaker 3

Thanks.

Operator

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

Speaker 13

Hi. Thanks for taking my questions. Maybe just, Jonathan, a quick follow-up on Robin's question regarding casino revenues. So Just to clarify with the higher ADR now, essentially the dollar amount that you need to net against casino revenue is what's causing that kind of Accounting decline?

Speaker 3

Yes. That is the major issue that that's the major dynamic which is causing This topic that we are

Speaker 8

talking about. Okay.

Speaker 3

And not just ADR, but also the size of the casino segment generally.

Speaker 13

Okay, understood. Thank you for that additional clarity. Maybe just for a follow-up question, Bigger picture, I think it was pretty clear as to where you target growth investments, digital international, but The last 24 months or so, you've moved a lot of chairs and upgraded the asset base in Las Vegas and opportunistically, I think Divested Goldstrike. So curious if you could give us some comments on how you feel about the domestic portfolio Today, both regionally and in Las Vegas and if there's potential opportunities you'd consider More on the M and A side and we kind of know the plans in New York and if other big markets were to open, but on the M and A front either buy or sell, Anything that you'd think about doing or might make sense?

Speaker 2

Well, let me kick it off. A, I think particularly after the moves that we've made, we truly enjoy the portfolio we have. In terms of Las Vegas, obviously, we own 40 odd percent of this marketplace And we love the properties that we have here. We love the positioning and what's happened at the south end of the Strip, particularly via Allegiant has been productive. When it comes to our regionals, obviously, we're in a different regional game in most of our markets, A, whether it's Detroit, Atlantic City or Mississippi, We lead in a big fashion.

Speaker 2

We're market leaders there. We tend to want to do that and try to tie out the product offering integrated resort to integrated resort. We just think there's an opportunity to get the right kind of customers to transition to Las Vegas and otherwise. I would Never say never on any M and A acquisition. There's always, I suspect, an asset here or there that might be of interest, but don't think we have any immediate designs or plans on anything substantive sitting here today.

Speaker 2

I think our growth will come to the development opportunities we've defined through the digital opportunities that we have defined to date and are going to seek. And we're always got an eye in the ear Open, but there's nothing specific that nor I actually tell you if there was.

Speaker 13

Fair enough, fair enough. Just engaging the strategy. Appreciate it, Bill. Thank you.

Operator

And the next question is from Barry Jonas from Truist. Please go ahead.

Speaker 14

Hi. Guys, given Strong strip outlook for 2023. Is the high end of that 400 basis point to 600 basis point margin expansion The right place to think about how the year could shake out or could you still go higher? And then just with that, can you remind me what the starting point is here? Is it the reported pre COVID 2019 number or based on sort of a pro form a portfolio?

Speaker 14

Thanks.

Speaker 3

Yes. When we use that 400 to 600 basis points sustainable margin improvement, we're referencing The 2019 year. So we're not trying to adjust it for acquisitions or dispositions just because we're getting Pretty far back in the past at that point. We're very comfortable that across all of our domestic properties That we can be within that range or possibly exceed it. And exceeding it will be driven mostly by our The pricing environment, but we're comfortable with that and that compares to 2019.

Speaker 14

Great, great. And then just a follow-up, I think iGaming, we're hearing that the industry is taking more of

Speaker 3

a push.

Speaker 14

I'm curious how you think about the impact that iGaming is having on land based gaming. Not sure if you're able to quantify what you've seen more recently in say Michigan, but can you help us understand some of the puts and takes with what would seem to be some cannibalization threat? Thank you.

Speaker 2

Yes. I'll take that. Obviously, in Michigan, to your point, is the best example where we have Market leading brick and mortar and we have obviously a market leading digital. The digital business now has out surpassed They brick and mortar by about 25 percent -ish. They're both doing well over $300,000,000 GGR.

Speaker 2

Digital is approaching almost $400,000,000 in GGR. It's interesting market when you look at because it's gone through smoking and non smoking. COVID lasted longer there in terms of its policies than anywhere else. I will tell you, There was some concern early in the middle part of last year. The last 3 months in Detroit, now that we've come off of most of those COVID restrictions, We've made allocations for smoking and some smoking opportunities for customers who still want to do that.

Speaker 2

Our numbers have not only stabilized, but it continued to grow in Detroit. While it's obvious that there's a substantive amount of play going on in digital, the chance to connect that With brick and mortar and ultimately reward and recognize and simple things like bonusing or jackpots that I Leave that I'm playing at home, I can come pick up in the brick and mortar where I left off as a player and have a contiguous experience It's things that we're highly focused on. And so, we think it's been a great opportunity. We think it can continue to be one. And we are we've seen nothing Michigan.

Speaker 2

We have the best laboratory in that. Michigan gives us confidence that going forward, we can replicate some of that in any of these other states, I think we'll be in great shape.

Speaker 3

Perfect. Thanks and great quarter.

Speaker 2

Thank you.

Operator

The next question is Steve Wieczynski from Stifel.

Speaker 15

There's a fear out there in the investment world that at some point some of these consumers could start to slow down. And we've heard from a lot of So far that there really hasn't been any softness as of yet. And I just want to understand, have you guys seen the same fundamentals there, meaning no real weakening? And then Also margins were impacted by the inclusion of non gaming amenities in the quarter. I'm just wondering how much more of that potential margin headwind could those present going forward?

Speaker 2

So let me take the top of that and Corey can speak to the margins. We have Several different kinds of regional properties. And so Maryland this year had an all time record and then some. It was fantastic. We always dreamed of that property making over $300,000,000 and it did.

Speaker 2

And I know I'm getting dirty looks from some of my folks, but and it did. Atlantic City, given All of the competitive set and the reawakening of Hard Rock and what happened with Oceans, It's a highly competitive market and we're holding our own and that property continues to do the same kind of EBITDA it's done traditionally no matter where the marketplace has been. It's kind of interesting. Detroit, as I just mentioned, continues to do well. We saw a little softening with Empire as it came out of COVID.

Speaker 2

Springfield has enhanced and been improving. Look, obviously, it will be the place that I think any major recession activity shows. But I will say to date,

Speaker 7

Bruce, mainly in the Q3, we increased many of our non gaming amenities. And I think we're to the level where we're comfortable with what we have for our guests. So from an additional margin impact on that, I don't think there's much there. And then just on the business, December had a little bit of softness as Bill mentioned, but what we're seeing in January February so far is all of our regional markets are performing extremely well.

Speaker 15

Got you. Good to hear. And then second question real quick and it's more of a follow-up here. But going back to Macau, it sounds like Bill, I think you said or Hubert said this, you were doing about $5,000,000 a day during Chinese New Year. And again, I'm not sure if this is you, Bill or Hubert, but did I hear you say that Even after Chinese New Year, which look I know is only let's call it 7 days or so, but you're still somewhere in that ballpark?

Speaker 2

It was me. I said 5 Main during Chinese New Year, but no, but we are at a great pace and a great place. And so no, but that's extreme. Having said that, it's still very profitable and this last it's been 5 days or 6 days, whatever it's been, but it's been good. And so but no, I mean Chinese New Year is a one it's a unique environment that happens once a year.

Speaker 15

Okay. Yes, I was just making sure I was not going crazy.

Speaker 2

It's not 5 Yes, don't do 5 minute a day times 365.

Speaker 3

It's already done. Thanks guys. Appreciate it.

Operator

Thank you. And our next question will be from Dan Politzer from Wells Fargo. Please go ahead.

Speaker 9

Can you hear me?

Speaker 8

Yes, Tim.

Speaker 9

Great. So first question just on Macau, it's a 2 part question. The 16% share you guys called out, to what extent do you think that's sustainable? And if you can maybe parse that out, how much that step up has been driven From growth in mass or premium mass or direct VIP versus pre COVID? And then that quarter to date comment about the MGM China Properties, The highest earning business in the company.

Speaker 9

I mean, should I if I kind of go back and piece together some math, should I interpret that that they're pacing well over $100,000,000 of EBITDA for the Q1?

Speaker 8

No.

Speaker 2

No. For the month, not the quarter, for the month. So you could think about it. If we put them together, it'd be the highest EBITDA property we had for the month in our system. Way to think about it.

Speaker 8

Okay.

Speaker 2

And so you can kick in here. Obviously, you're living this every day on the continuity of going forward.

Speaker 8

Yes. In terms of the market share question you asked, It's too early to give you a definitive answer on whether it's sustainable or not, but there are good things that Ahead of us because as you know, we have additional tables, almost 200 additional tables And we haven't fully deployed all these tables yet. We're in the process of doing that along with some Casino floor reconfiguration. So we plan to deploy all these tables by the end of Q1. And I think that that's number 1.

Speaker 8

Number 2 is that in the re tendering commitments in terms of investment, we also have A lot of, I think, earning accretive projects and I think that these offerings that will drive additional traffic. I mean just to give you some color on the non gaming side for Chinese New Year, I mean our room occupancy Approach 100% and our restaurant covers actually exceeded 2019 Chinese New Year level. And a lot of that was because of all the Non gaming events and concerts that drew a lot of incremental visitors to us and we also seen a longer stay By our hotel customers, I think that as we invest more in these non gaming amenities, That will help with our market share growth down the road or sustain at that level.

Speaker 9

And then just for my thought, this is for John. On the pace of buybacks, obviously, you have the new $2,000,000,000 authorization. I mean, it sounds like trends are very stable, it's not outright encouraging. I mean, to what extent would you feel more comfortable giving kind of a And then also, I think it was last quarter or maybe a couple of quarters ago, you mentioned kind of a decelerating pace of buybacks. So Given the outlook on Vegas, is there kind of a run rate we can think about here?

Speaker 3

I don't want to give a quarterly pace. I do think you can look at our pace Over the preceding 4 quarters, I think we actually did a bit more in the 4th quarter than we did in the 3rd quarter. And so all I would say is that we have a healthy authorization from our Board. I hope I was able to communicate during the prepared remarks value we see in the shares and despite all of the opportunities we have before us, the liquidity position the company has is going to allow us to continue to be An active share repurchaser. Beyond that, Dan, I just don't want to give any more specific outlook.

Speaker 9

Got it. Thank you.

Operator

And our final question will be from Jordan Bender from JMP Securities. Please go ahead.

Speaker 13

Great. Thanks for taking my question. Can you just talk about the contribution from Far East Play during the quarter in Las Vegas? And then What do bookings look like from Far East play for this point or for this year at this point?

Speaker 2

You're referring to the Q4 or Chinese New Year?

Speaker 13

4th quarter and then I guess quarter to date as well.

Speaker 2

I know the Chinese New Year number fairly well, Corey, I'll lean on you for the Q4. Last year Chinese New Year, we had about $35,000,000 in THEO. This year that number was just under 100. And so the opportunity and what that opportunity provided us this year It was 3x where it was last year. And so while not back at the 2019 levels or 2018 levels, it was meaningful.

Speaker 3

And the safari's Play during the Q4, it was up about at least a third over The Q4 of 2021 constituted pretty much all of the growth in our international play during the Q4, so very encouraging.

Speaker 13

Great. 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, operator. And I just want to thank everyone for joining us. I know it gets late back on the East Coast. Just a couple of thoughts. Obviously, we continue to show organic growth here in Las Vegas, particularly in our premium product, our Luxury brands.

Speaker 2

If you think about ARIA and Bellagio last year that made over $1,200,000,000 in cash flow and we see hopefully that's sustaining. You think about now Macau and the returning and I think our 200 extra tables will make a difference throughout the course of this year. You think about Our development pipeline, you think about both brick and mortar digital, I would say without any disparaging comments to our competitors that we think about the balance of Regional location, domestic location, Las Vegas, international, digital, we are the most well balanced and prepared for growth. We have no net debt. We're sitting on about $5,300,000,000 of cash liquidity.

Speaker 2

And since Jonathan and I have joined the senior roles, the company has bought back over 25 And all of it on the back of an amazing team that we've put together here that's got extensive experience over many decades in many different jurisdictions. And so to say I'm excited by our future would be an understatement. I thank you all for your attention and most importantly, your support. Thank you.

Operator

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

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Earnings Conference Call
MGM Resorts International Q4 2022
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