MGM Resorts International — 2023 Q2

Thanks, Joe. Let me take those. As it relates to digital, we're focused on working alongside our partners with a collective goal to maximize the growth and profitability of MGM and LeoVegas. I think we're making good progress on both those fronts. And that's really all we're going to say. I think on the second one, it has been interesting. I'm hopeful in the next month or so that we're going to hear something from the commission and ultimately get the process rolling.

I'll kick it off and turn it over to my colleagues. Look, obviously, Formula One is a unique opportunity. And it sounds like one that's going to repeat itself for us often and the economics around that are substantial. That being said, we've relooked at our forecast for the second half of the year and particularly on top line, driven by rooms and driven by luxury, feel really good about it, both individually by property, and particularly as you go up the luxury spectrum and then ultimately overall.

It's Jonathan. Shaun, I'll add a couple of comments. Year-on-year, we're experiencing some increases in Las Vegas and the regional markets in our FTE counts, not severe low single-digit increases, and that's because of the dynamics we described during our prepared remarks, mostly around full staffing in the regions around actually a fairly dramatic increase in non-gaming revenues in our regional properties.

I think you covered it, Jonathan. And Shaun, I would just for reaffirmation on margins. We've now landed, I think, what we said we would land. I think that's pretty history would say that, and we intend to stay there. And so we'll continue to adjust the business accordingly. But we understand the importance of the margins and where we are and where we need and want to be. And I think we're just about there.

No. We see that as net of -- net benefit to the company and also doesn't include benefits in the regional markets and in occupancy recognizing we already operate at very high occupancies, but that's a net number.

Yes, David, it's Corey. I think the business is fairly stable as we look across all of our lines of business. The one area we're seeing a little bit of a decline in is our table games at a few of the properties that Jonathan mentioned earlier about the decline in our business. The non-gaming amenities are holding up extremely well and have been very strong this summer.

I was just going to add a couple of comments, which is that ours is a unique regional portfolio in that not only are virtually all of the properties have commanding market positions but now with the conclusion of the room renovation at the Water Club as well as the Beau Rivage, these are properties which are as a group point to be extremely strong free cash flow generators for the enterprise over the next several years with a lot of the major CapEx behind us. So they play a very important part for the portfolio because of that.

Sure. Most of our investments in the loyalty program have been around technology enablement for our MGM Rewards members so that they can make their reservations online, they can check-in through mobile check-in, et cetera, and also introducing benefits to the program whereby they can redeem their MGM Reward points for non-gaming as well as other amenities and earn the points on non-gaming amenities.

And just a few other points, Jonathan. We just have changed our platforms, which will allow us to do gamification, which we think from a loyalty perspective will help increase wallet share. And then we just announced that The Cosmopolitan in Las Vegas in February will shift to our loyalty program. So we're looking forward to the opportunities there also.

And maybe last comment our casino segmentation is up almost 10 points as a percentage of our mix generally. The program and all of its attributes have been a key driver in that. And so we've seen a good deal of pickup throughout the course of the last year. Even if I take out BetMGM, which is, as I've said in my prepared comments, a huge driver of new sign-ups.

No, I'm still comfortable with that range, and I appreciate the observation. We look at it very closely where we get very specific in terms of where that margin improvement is coming from. But then again, 2019 was a long time ago. So we're focusing on the business as it is now, but we're still comfortable with that as a benchmark.

Ultimately, it's our ability to market to their customers and then their customers having an opportunity to do BetMGM MGM in its context. We have a program, I think, that's going to motivate Bonvoy points for those folks ultimately. It sits independent with BetMGM today, but I think it will be a key driver.

The -- in terms of the margin performance year-on-year, again, it was fairly consistent with what we experienced in the second quarter in terms of margin performance in Las Vegas. But as we look year-on-year, a lot of the difference is coming from labor. As we came out of this -- came into the second quarter in 2022, we weren't yet fully staffed. And so we were comping against a lighter labor load in the second quarter of 2022.

I mean, I'd prefer not to parse the quarters. I think you're directionally correct in terms of the relative strength of the different quarters. We think the second quarter calendar result was terrific, and we stand by that second half profitability comment.

Yes. You've gotten football, obviously kicking up in the third quarter. So the answer is yes.

Yes. Look, I think -- and we've said this on a prior call, and I think the great news is we finally got single wallet in motion. I think the opportunity with Angstrom will drive more product, more parlay, more frequency and recency around bets in-game and otherwise. And those are big margin businesses. And so if you look at, I think gross, we're a little over 9%. I know there's a goal to break through 10 once we get Angstrom fully deployed, which will probably come in a couple of phases through football and then post football.

And Stephen, it's Jonathan. If you look at our second quarter, some of the KPIs that we called out in the earnings presentation, I mean, as the leading indicators, we're very excited about them for the profitability of the business, lower customer acquisition costs, higher margin on online sports betting, increased play by our loyal known customers and then all of our pre-2023 markets now contribution positive. I mean all those things bode very well for improving profitability in the future.

Well, I think, in macro, it's beginning to be a slight factor. But I think if you look at it in aggregate, obviously, what's happened in a place like Michigan where it's gone almost 100% more than brick-and-mortar. It's meaningful to the business and meaningful collectively. We continue to hold our market share. I don't know, Corey, recently, what it is 48% or whatever it is...

46%.

46%. So in totality, we think it's to our betterment, and we're excited by it long term. And again, I think once we get more of this omnichannel in play, we can begin to motivate back into the property level with tournaments and other activity cases that will drive people back into brick and mortar.

Yes, clearly.

This is for you, Corey.

Yes. So 2024 from a convention booking perspective looks really positive for our company. We'll be up about 6% in room nights. Just as a reminder, Mandalay Bay has been under remodel. So that's impacted the number of convention room nights we've had in the second and third quarter here. So we have been a little bit down on the convention side, which puts some pressure on the legacy properties in the midweek.

And then if you think just more macro in terms of events activity, the great news is we're still a net beneficiary where carriers like to bring their aircraft. I think we're sitting at 115% or 116% of inventory seats over where we were prepandemic. So that's been great news. Conventions, as Corey mentioned, will pick pace. We have yet to see the full return of international business to Las Vegas, particularly from Asia. I think that will pick some pace.

And then thinking of the Sphere with U2, which at 20,000 people a night has to help the entire city. And I think boxing is definitely coming back. We just hosted fight last week and that was spectacular for us. So...

It's 2 things. You kind of touched on both of them. Drive to profitability, we see cohorts maturing in 24 to 36 months, particularly in sports. Hopefully, a little sooner in iGaming -- hopefully, they are maturing a little sooner in iGaming. We've seen our CPAs come down from 400s down below 300s. And so there's active maturity there in the context of how we're marketing into whom and we're more disciplined about all of that.

Sure. Yes, at the Borgata, it was a matter of a couple of pretty significant table game events moving from June into July. And MGM Detroit, it was some issues around hold for the property in the quarter. But again, going forward, we're comfortable being in that range.

Borgata was the big dragger of the margin.

I'll kick it off and turn it over to Hubert, who obviously lives this every day. Look, we are uniquely positioned in the way we've historically shaped for decades our marketing organization around knowing our own customers and delivering them to our properties. And obviously, now with the demise of junkets, we've seen that network go to work. And frankly, we're expanding on that network. We've opened a couple more offices, and so that's been meaningful and helpful.

Yes. Thank you, Bill. Other than the table and floor optimization you talked about, I think that we are also looking at sales team expansion. Obviously, I think that this is going to be very important for our customer acquisition. Another thing is that we're going to leverage our network that MGM Resorts has internationally to push the overseas market.

Robin, the whole agreement is basically a hybrid, given the nature of Las Vegas, given our occupancies. And so yes, we're paying fees on some rooms, not all. And so look, I think you long understand the nature of the story here and what we've been able to do, whether it was more of -- just a loyalty program. This goes a little deeper and longer, which we're excited by, but it is rewarded on performance.

Yes. We're not going to go into the details of the agreement. We actually feel like we've been pretty transparent in terms of what we think they'll deliver, what they think they'll deliver in terms of rooms and the incremental value associated with those rooms on a net basis, but that's as far as we're going to go in terms of describing the transaction.

John, thanks for the question. I think the answer is yes to a degree. I mean we're going to keep the velocity of capital we spend in Las Vegas when we're sitting here, particularly on that corner when we own all 3 properties in measure. Having said that, it's a $1.5 billion stadium. It's going to deliver hundreds of thousands of new folks. MGM is 30 years old and need some love anyways.

John, I'll take it off and turn it to Corey because he knows this more intimately. But I would say this park is enjoying its best year ever by far. And so it sits in the epicenter with T-Mobile of activity. And we see bleed over from Luxor when conventions are there. Obviously, we'll see bleed over in Luxor and Excalibur when sports kick -- when sports -- when football kicks back up. New York, New York is enjoying a decent year. So it's a little bit of a mixed bag, but generally, Corey?

Yes. I think, in general, there's plenty of demand to fill the properties. It just comes to the rate on midweeks. And in particular, when you look at Luxor and Excalibur, they've been impacted by Mandalay's construction going on over there. So they haven't had the flow over from those convention room nights.

Yes. Thanks for the question. This is an important part of our capital allocation program. It has been now for over 2 years. We try to be consistent but also opportunistic depending upon where we see the shares as compared to our own estimated value of the company. And this quarter was aggressive, although not terribly more so than the first quarter. This will continue to be a part of our capital allocation approach and the pace will be dictated by the market as well as some of the other opportunities that we have before us.

Yes. I think that's a great question. I think the stimulation package that the government instituted in China, I think it's going to be another push for the mass segment and particularly at the mid- to lower end of mass. This market, frankly, I think that is so far driven by the premium mass segment. But I think the longer-term recovery of growth will be a broad spectrum -- much broad spectrum than just that, particularly with all the nongaming programs that all the concessionaires are implementing.

Thank you, operator. Just quickly, before you all go, look, I think you've heard, we continue to have a really strong top line story in Las Vegas. It's led by event activity, it's led by luxury, which we -- again, to Jonathan's comment, 80% of our earnings are coming from the luxury segment and sector. You heard us talk about Marriott think about what we just did. We've just partnered with the world's largest hospitality organization and with 180 million members directly tied to our programs and ultimately to our properties.