MGM-RESORTS-INTERNATIONAL Earningcall Transcript Of Q2 of 2024

Jonathan S. Halkyard -- Chief Financial Officer

Thanks, Andrew. And good afternoon, everyone. Before I get into our quarterly results, I would like

to  congratulate  and  thank  all  of  our  employees  for  another  great  quarter  across  all  of  our

businesses.  Their  high  level  of  execution  is  clearly  evident  in  our  results,  and  I  couldn't  be  more

proud of the team for our performance this quarter.

Turning to our second-quarter results. In Las Vegas, we achieved both top and bottom line growth

year-over-year against a strong comparison. Net revenues grew 3%, driven by both higher rate and

occupancy. Our strategic relationship with Marriott contributed to our performance this quarter now

with over 410,000 rooms, room nights book.

The future for hotel bookings in Las Vegas is bright. Looking ahead at our pace, room rates on the

books in Las Vegas are up year-over-year for every month in the third quarter, and group rooms on

the books are pacing up mid-single digits for the rest of 2024 and 2025. Our success in the quarter

was  underpinned  by  our  luxury  resorts,  which  are  responsible  for  the  vast  majority  of  our  top  line

growth in Las Vegas. We invest meaningfully in our Strip luxury offerings as this is where we see the

most opportunity for profitable growth.

In fact, 75% of our 2024 domestic property capital budget will be focused on these properties. This

includes room remodels, which are underway now at the MGM Grand and suite updates across our

Las  Vegas  portfolio.  On  the  technology  side,  we've  now  completed  the  integration  of  the

Cosmopolitan  of  Las  Vegas  into  our  MGM  Rewards  program,  which  will  now  allow  our  MGM

Rewards  members  to  enjoy  full  benefits  at  the  Cosmopolitan  and  vice  versa.  In  the  regions,  net

revenues  remained  stable,  driven  by  relatively  flat  year-over-year  handle  with  our  market  share

holding steady across each of our markets.

We  also  have  seen  a  full  recovery  at  MGM  Detroit,  which  we  all  know  it  faced  headwinds  since

midway  through  last  year.  Margins  were  within  our  targeted  range  of  the  low  30s  as  we  remain

vigilant on improving our variable labor effectiveness and executing on revenue initiatives, such as

our expanded air charter program, just one of many examples. In Macau, MGM China net revenues

grew 37% year-over-year, achieving a market share of 16%. Adjusted property EBITDAR reached

$294 million for the quarter, marking a 40% increase with margins at 29%.

During the quarter, we strengthened MGM China's balance sheet by extending our maturity profile

with the issuance of a new $500 million 7 and 8 notes due 2031. The proceeds of this offering were

used to pay down outstanding borrowings under the revolving credit facility. I'll conclude my remarks

with  some  thoughts  on  the  free  cash  flow  algorithm  we  introduced  last  quarter.  An  algorithm  that

enables us to achieve a mid-teens free cash flow per share compound annual growth rate through

2028.

Simply  put,  we  expect  to  grow  our  EBITDAR  at  a  faster  pace  than  our  rent  escalators,  interest

payments, maintenance capital and taxes, while investing for growth and reducing our share count.

First, we'll generate recurring free cash flow from our resort operations by optimizing the operating

model to achieve incremental revenue growth and realize cost savings. We'll grow our market share

in  Las  Vegas  through  reinvestment  into  our  properties  with  a  focus  on  luxury,  we'll  maintain  our

market-leading  positions  in  the  regional  markets,  including  an  expansion  in  New  York  and

generating a growing dividend from MGM China. Next, we anticipate generating free cash flow from

our  digital  businesses  in  the  coming  years  as  BetMGM  reaches  an  inflection  point  and  LeoVegas

delivers on its numerous market entries.

We'll  also  be  investing  for  long-term  growth  in  Japan  and  other  markets  where  our  development

expertise  and  brand  awareness  provide  a  distinct  advantage.  Finally,  we'll  repurchase  our  own

shares.  Through  our  strategy  of  using  excess  cash  for  share  repurchases,  our  share  count  has

decreased to around 300 million shares from close to 500 million, an approximately 40% reduction

in  our  float  in  just  3  years.  Taken  together,  the  increase  in  free  cash  flow  and  reduction  in  share

count would result in a mid-teens free cash flow per share compound annual growth rate by 2028,

even without a contribution from MGM Japan.

Bill, over to you.

William Joseph Hornbuckle -- President and Chief Executive Officer

Thanks, Jonathan. And good afternoon, everybody. I'd like to start by doubling down on Jonathan's

comments  on  congratulating  all  of  our  employees.  Their  continued  attention  to  detail  in  guest

service, has been amazing, and it continues to show through in our NPS scores and also just take a

second to identify and thank our management teams into a challenging wage inflation environment.

I think you've seen through our margins, they've all done a great job managing their way through the

first part of 2024. And I will remind everybody that most of those increases now lapse as we go into

the  second  half  of  this  year.  Turning  to  the  quarter,  we  had  excellent  results  against  a  strong  '23

comparison. We see continued strength, as Jonathan mentioned, in Las Vegas, driven by transient

group demand.

The  Marriott  integration  is  going  exceptionally  well,  and  Mandalay  Bay  is  fully  leveraging  on  its

updated  space.  MGM  China  continues  to  hold  its  market  share  and  margins  against  a  very

competitive and evolving market. And our regions continue to hold top line and operating efficiency

and it's great seeing Detroit finally returned to its earlier prowess in that marketplace post-strike --

post cyber last year. In Las Vegas, we believe Las Vegas growth continued its top line and maintain

margins in the mid-30s.

Group  pace,  as  mentioned,  is  up  in  '24  and  '25,  anchored  again  by  the  refreshed  space  at

Mandalay. Benefits from the Marriott program will only continue to increase, particularly on the group

side,  unique  to  MGM.  We  have  a  favorable  supply  dynamic  with  the  closing  of  the  Mirage  and

Tropicana taking approximately 1.5 million room nights off of the circuit. Again, we'll see lower years

2 through 5 labor contract increases.

And  organic  same-store  growth  driven  by  further  database  optimization  is  just  stepping  in,

particularly now with the integration of the Cosmopolitan, which we finally got on yesterday. So we're

very excited by that. Noting in the third quarter, I think all of you know this, but remembering back,

we had the cyber attack last year in the third quarter, and that should prove to be successful for us.

However, in the fourth quarter, and I think many of you see this through our room rates, Formula 1 is

showing some softness.

We  are  hoping  and  believing  that  this  race  will  continue  to  pace  up.  But  I  think  you  can  see  that

we're a little focused on trying to make that the best event that it can be, but that presents a potential

headwind in the fourth quarter. Overall, though, given where we are to think about records into the

second quarter of Las Vegas at this point is pretty compelling and pretty exciting for all of us. To the

regions, business remained stable with margins holding at 30% plus against an established and a

consistent promotional environment, and we continue to have best-in-class properties with leading

market share, providing a real steady free cash flow generation.

Macau,  the  story  continues.  We're  outstanding  performance  and  the  drivers  of  strength  in  that

market,  starting,  I  believe,  with  our  leadership  team.  We  have  Kenny  and  Hubert  on  the  phone.

Pansy has clearly leaned in on many things that impact the property in our market and ultimately our

market share.

And so we're thankful for that. And there are many tactics that they deploy. I think the thing that's

most  compelling  is  they  truly  understand  our  customer,  our  customer  base  and  their  wants  and

needs.  And  without  any  real  capital  enhancements  from  where  we  left  this  market  in  2019,  we're

obviously outperforming.

MGM Macau is now the top producer on the Peninsula side, something in a position -- something

we're  proud  of  in  a  position  we'd  like  to  keep.  And  so  we're  going  to  continue  to  invest  into  that

property. And ultimately, overall, remembering the market has only returned to 80% recovery. Well,

MGM is well above that.

We still see opportunities not only for growth in the market, but ultimately for us to steal additional

share.  Before  I  turn  this  over  to  Gary  Fritz,  who  you've  not  yet  met  to  talk  more  about  MGM

Interactive, I'd like to comment on Entain's recent announcements in BetMGM's domestic business.

First,  I'm  excited  by  the  relationship  that  we've  created  with  Stella  David  as  the  interim  CEO  and

now  the  Chair.  I'm  equally  excited  by  the  progress  that's  been  made  by  the  team  and  BetMGM's

product enhancements with a key focus by the Entain Group.

And now the recent addition of Gavin Isaacs as CEO is comforting, someone MGM and I have not

known for a long time, have a great relationship and I think he'll do wonders for that business. And

ultimately, the market. I'd also like to make a general comment on BetMGM's Monday release and

some  promising  green  shoots  reported  by  competitors  in  the  space.  We  have  stated  that  2024

would be an investment year, recognizing that we've lost shares in sports and that it was impacting

our  leading  market  position  in  iGaming,  we  righteously  decided  to  invest  heavy  into  our  sports

product and continue to invest in customer acquisitions for iGaming so long as we saw both market

growth and overall market share growth.

For  the  record,  BetMGM  was  also  profitable  in  the  second  quarter  of  '24,  driven  by  our  iGaming

business, which annually contributes about $400 million to the overall business. The second piece is

improving  our  sports  product.  We've  made  substantial  steps  with  Angstrom,  and  we'll  deploy  a

whole  variety  of  new  products  into  the  football  season.  As  well  as  single  account,  single  wallet  in

Nevada, establishing customers to carry a wallet with funds back to their home state.

We  think  it's  a  big  deal  for  the  business  and  for  our  omnichannel  efforts.  And  so  we'll  obviously

invest into the fall with these new product offerings, trying to win back customers on sports. In the

big picture, we love what BetMGM has done for our brand. We love the long-term prospects, and we

enjoy having a partner during this development stage that is equally focused on the business.

We are patient and have a strong belief in the growth of this business now and long into the future. I

want  to  turn  it  over  to  Gary.  Gary  is  going  to  talk  a  little  bit  about  BetMGM,  but  really  focus  on

MGM's other interactive activities in the rest of the world. Gary?

Gary Fritz -- President, MGM Interactive

Thanks, Bill. Beginning a couple of years ago, we embarked on a journey with the vision of creating

our own proprietary iGaming and sports betting platforms. The goal was to develop a differentiated

product capable of capturing market share in both established and emerging markets. The crux of

this strategy is based on 4 pillars, and I'll walk through them.

The first pillar was for MGM to own its tech ecosystem so that we were not reliant on third parties. A

tech ecosystem that is scalable and cloud-based. We achieved this in 2022 through our acquisition

of  LeoVegas.  Not  only  did  we  buy  the  technology,  but  we  acquired  an  exceptional  management

team with an aggressive strategic plan that we have been executing.

We also recognize the importance of having an owned sports betting platform to further highlight our

brands  and  generate  more  cross-sell  opportunities.  We  took  a  large  step  forward  to  achieving

technical independence with the purchase of Tipico's U.S. Sports betting platform, which will close

soon  and  drive  important  synergies.  The  second  pillar  of  our  strategy  was  to  own  our  proprietary

iGaming content with unique intellectual property.

We found this through our acquisition of Push Gaming in 2023. Our strategy with Push is to develop

games that are not only exclusive to our owned and operated platforms, but also to create titles that

can be marketed to other operators. Since our acquisition, MGM Resort branded games have been

our  highest  performing  titles  in  the  Push  ecosystem.  The  third  pillar  of  our  strategy  is  to  target

organic growth in attractive regulated markets with the BetMGM brand.

Just  a  reminder,  we  own  the  BetMGM  brand  and  can  use  it  anywhere  in  the  world  outside  of  the

territories that the JV operates in. We do this using our LeoVegas proprietary tech stack. We have

already launched the brand in the United Kingdom and the Netherlands, with great early results, and

we plan soon to enter Latin America. The final component of our strategy is our live dealer product,

enabled by our recently announced strategic relationship with Playtech, making us the only U.S.

operator to offer live casino content for International markets directly from the Las Vegas Strip. We

have already launched at Bellagio and MGM Grand and are thrilled with the positive response, both

from  our  live  and  online  customers.  The  next  phase  involves  constructing  a  dedicated  space  at

MGM  Grand  featuring  table  games  and  in  the  future  game  shows  from  well-known  third-party

brands.  We  believe  the  synergy  among  all  of  these  pillars  will  yield  significant  long-term  returns,

starting with a double-digit stabilized return by 2027.

In  the  near  term,  after  2  years  of  investment,  we  see  the  core  businesses  at  LeoVegas  and  Push

Gaming beginning to show positive momentum. Over the next few years, we will focus on expanding

our sports platform and making further investments in our new owned and operated -- fully owned

and operated BetMGM markets. Back to you, Bill.

William Joseph Hornbuckle -- President and Chief Executive Officer

Thanks,  Gary.  And  obviously,  excited  by  all  the  progress,  and  we  look  to  scaling  this  business,

particularly the live dealer piece here in Nevada, I think, is interesting and unique to us and exciting

format.  Before  I  turn  this  open  to  Q&A,  just  a  couple  of  overviews.  Again,  I  think  we  enjoy  a

magnificent position in Las Vegas.

We  have  made  significant  capital  investment  in  our  luxury.  We've  put  over  $1  billion  into  our

properties in the last 3 years. Principally focused on the building we're in Bellagio. All of our rooms

and suites now have been redone among many other new amenities.

We're  also  continuing  to  explore  ways  to  further  connect  the  heart  of  Las  Vegas  Strip  meaning

Bellagio, Aria and the Cosmopolitan together. Some of you may have seen over the last couple of

weeks, a set of plans that was submitted to the county here. We are in the midst of trying to create

something that we believe will be unique and special to Bellagio, something deserving, something

that will have an experiential component, entertainment component must see as well as retail and

ultimately nightlife components that begin to marry itself up with some of the other things we have

here that bring nightlife back to Bellagio in the long run. So we're excited by that.

We'll have more of those plans for the next quarter to announce in terms of content and pricing. But

we're  excited  by  launching  that  product,  hopefully,  over  the  next  several  months  here.  As  I  think

about  our  regional  properties,  again,  I  want  to  reiterate,  they're  stable  and  they're  free  cash  flow

generating, and we're excited to have the properties that we do within our portfolio. Many of them,

as you know, are market-leading.

We have shown and demonstrated now, I think, in Macau, our growing EBITDAR prowess and our

ability to have set a whole new plateau of economic performance. We are excited, and I am by the

idea  of  omnichannel  for  the  football  this  coming  season  for  BetMGM.  I  think  it  finally  unlocks  our

database  and  enables  people  to  take  their  wallets  and  go  home  to  places  like  Colorado  and  still

have funds that they can share. I am equally excited by the overall digital strategy that Gary has laid

out.

I  just  recently  returned  from  Japan  and  that  it's  moving  along  nicely.  We  are  in  the  ground  as  we

speak,  and  we  hope  to  start  pylons  by  May  or  June  of  next  year  with  a  target  state  still  middle  of

2030 for opening. I think we are -- if I think about expansion, I think about the UAE and New York, I

think, in our project in Dubai of note, we're ideally situated in UAE and there has finally been some

progress in New York at least by the end of 2025. We all have to make our submissions and move

that along.

And  I  love  our  position  in  the  Yonkers  and  what  we've  been  able  to  accomplish  with  the  local

community there. I think -- and I know we're in good standing as of this date. So I look forward to

that. And ultimately look forward to additional markets.

Next month, myself and Pansy Ho will be in Thailand looking at that opportunity. That is a venture

that we're interested in. And if we do that, we'll do it through MGM China Holdings. And then finally,

I'm excited by some of the news -- or not news, but some of the information Jonathan consistently

provides.

I think we have an amazing balance sheet. We have low net debt. We have excess cash still able to

deploy, whether it's into things here or against some of Gary's propositions. And I think we ultimately

have a pipeline of short-, middle- and long-term value creators.

With that, operator, I will turn this over to questions.

Operator

Questions & Answers: