MGM Resorts International — 2023 Q4

Let me give some broad stroke and then Corey and Jonathan both kick in. Look, F1, when you balance it out year-over-year, it was actually a $70 million increase year-over-year. But if I neutralize the year before, it was about $50 million. We didn't run lucky the year before.

What I would add, Joe, on F1 in particular, the south Strip in particular, we would treat that probably more like a normal weekend going forward because of the lack of activation there. So we think there's opportunity there. And on Super Bowl, I mean, every cash register, from food and beverage to entertainment, was ringing. So it was much more widespread at every property compared to F1, which was isolated to the luxury.

No. Look, I was at ICE last week, I met with Stella, our partner. We're still very focused on making sure everyone's focus is on BetMGM. And particularly this is a critical year, I think, for all of us. So it's about product, product, product and focus. And so that remains the focus for now.

Carlo, it's Jonathan. Yes, we've tried to get out of the business of giving quantifying hold impacts because, as you know, there's a lot of things that cut both ways when trying to isolate the impact of hold. It's certainly true that we experienced good hold in the fourth quarter. But I would also say that, first of all, with this customer segment that drove some of those results, the nature of the play is such that it can lead to higher hold anyway. So the whole idea of what a normal hold is, is a little bit different.

Let me kick it off, Kenny, I'll turn it over to you. Some of it is simple activity case, to your point, I mean, we have done like all the operatives, a good job going after some of the -- and I'll use our concert that we just had is a great example of an expansion and overhead item, but to drive overall tourism with Bruno Mars, et cetera. So part of it's adhering to that.

Yes. Thanks for the question. Actually, as you can see, like Q4 was a record high in MGM China, basically. We are happy to see that our January performance has continued to grow. So actually, our January performance has exceeded even October levels across all segments, including EBITDA and market share. Currently, we are in the middle of Chinese New Year basically, which is about 8 days' celebration. As to the visitation to the city, it has reached about 90%, 95% of 2019 same-period levels. As to MGM China, 2 properties combined, the visitation, the players count, the table drop, the slot handle as well as the VIP turnover have all well exceeded 2019 same-period levels. So we are confident and we are optimistic with the Chinese New Year as well as the rest of this quarter.

And Kenny, I just might add, look, contras are growing as our high volume continues to increase because, again, that's on us versus a junket operative in the middle of that. And I'll remind everybody, on our margins in particular, we do not, I wish we did, but we do not have a large retail segment, which obviously, there's a massive amount of flow-through if you're making $100 million a year in rent, which I know some of our competitors are. The flow-through on that is a lot. We don't have that luxury. So it does impact some of our margins.

Yes, that's right. The reinvestment rate actually is pretty flat over the quarters for the past year.

Sure, David. I'll take that. Look, I think the answer is yes, you're spot-on. This will be a reinvestment year. Obviously, you've seen we've lost share, literally, in both instances. And the two folks that sit above us were being outspent 2, 2.5 to 1 in terms of raw marketing spend in dollars. We want and need to get our product in a better and different shape. We want more parlays. Obviously, the acquisition of Angstrom by our partner will be a big add to that. We'll be able to stick out more product, we'll have more confidence in it, speed to market will be better, et cetera. And so that's part of what will be developed starting with baseball this year.

David, I would only echo what I said. Look, with Stella as the interim CEO, the focus on the team for product for BetMGM is the focus. I don't want to comment on any other further discussion with them at this point. I don't think it'd be prudent.

Yes. Actually, I think that's probably a good way to characterize it. When we look at the drivers of growth this year, and we've talked about a few of them already, a lot of it relates to yielding, pricing, of course, growing demand through this new Marriott partnership and so on.

Conventions.

Yes, and the conventions business. Thank you, Bill. So those are going to be the main drivers of top line growth. As it relates to OpEx, while, of course, we don't provide guidance for either the top line or the bottom line, we are looking at increases, the main increases associated with our new labor agreement here in Las Vegas with a culinary union. So that will be at least a year-over-year factor for the first half of the year, not really in the back half of the year, since we already incurred that in the last 6 months of the year. That will be the main issue for us. We'll be able to offset that in part through some work we're doing around productivity as well as improvement in cost of sales through leverage procurement activities. But I think kind of a low to mid-single-digit OpEx growth rate, I wouldn't be surprised if we incur that this year.

The upper bound of leverage would be 4.5x lease-adjusted leverage, and we're a full turn below that right now. I think I mentioned in the prepared remarks, we retired 14% of our outstanding shares last year. It may have been our largest share repurchase year-to-date. I wouldn't anticipate continuing at that pace this year. But we're still active in the market. We still think that the shares are attractively valued. And we still have a fair amount of dry powder, just augmented with our revolving credit increase, to enable us to do that. So I would say it's likely going to be less than it was in 2023, but we're still being aggressive.

Sure. When we kind of parse it out, accounting for unusual items or things that we wouldn't expect to recur, we think that the margin in the fourth quarter in Las Vegas was maybe benefited by about 100 basis points. So that still puts us right in the mid-30s, which is where we've kind of expected the margins to be for some time. That's where we expect them to be for 2024.

We've got just top line, off the top of my head, Madonna's coming, Springsteen's coming, The Stones are coming, to name three. We've got a great football kickoff with USC, LSU coming. To your point, obviously, March Madness is always a big deal around here. And then Formula 1 rolls back around again. We are going to miss the Pac-12 championship next year. No, we've got 1 more year, I take that back, so we won't miss that. And so we all must admit, 2023, and if you think about the recent stretch we've just been through, was an amazing year and an amazing stretch. So replicating that won't be easy. But having said that, we still have plenty of content and activity case that kind of fill the void and fill the dates.

And from a city perspective, I think the Sphere has been a great addition. The T-Mobile will be programmed more than it was last year. So all in all, I think it's going to be a really strong year. As you think about March, it won't only be CON/AGG, we also have Easter ending in March. So that will have a slight impact in March on the convention business but will be picked up in April.

Well, I'll tell you one thing and Corey can pick this up. But the flow-through, or the spill-off, I should say, from the 100,000 more room nights principally at Mandalay for conference and convention business does flow into Luxor with setup crews, pieces and parts of these various groups, even in the Excalibur. So I think that's an opportunistic thing. Obviously, whether it's resort fees on through, we've gone through with a pricing exercise. We'll continue to do that to try to recapture, particularly the culinary increase, which we all know this year is going to be an extensive one. Then it falls off and basically flattens out for the balance of the 4.5 years.

Yes, the legacy properties, the growth is going to be a little bit limited there. It's a small percent of our Vegas revenue. As Bill mentioned, the convention mix, not just here but in town, in citywide, will help some overflow there. But it definitely won't have the same benefits that the luxury properties are and will see.

Sure. We contemplated 4 key pillars to getting and setting up our own shop, if you will. And so we bought LeoVegas with that in mind. We've obviously now gone and bought Push Gaming, which is a content studio. By the way, their first game, MGM Millions, or MGM Money Millions, whatever it's called, #1 game on our network; #1, first game out, branded with MGM. We are on the heels of buying Sports Technology. We want to obviously be in our own sports betting business with our own technology. And over time, we have Kambi that we use for LeoVegas.

Kenny, maybe you could speak to this more intelligently, but I can tell you broad stroke, remember, the requirement we have, we have to spend $1.1 billion in 10-year commitment in OpEx driving tourism, and there's about $900 million or so in actual capital expense. So we've got a little over $2 billion commitment to the government, of which the $1.1 billion is pure OpEx. And so a lot of the activity case in driving international tourism and driving tourism isn't necessarily tied to the usual marketing programs that we'd think about in gaming.

Okay. This is Kenny. As you know, like for the past year, with the new concession, we added another 200 tables. Of course, we added a little bit more FTEs. We have more daily table open hours. But in general, we are very, very tight regarding our OpEx control. You can see from our EBITDA margin, over the quarters of the last year, we are very stable, in the high 20s, along with our market share gains and the business growth. As Bill just commented, we do not have so much high-margin retail rental EBITDA, but our gaming EBITDA margin is really way up there in this marketplace. I can see for the next for these next couple of quarters, we should be quite stable with our margins.

Look, it's interesting. It just started, as you know. So we have high hopes for it. We had literally 100 million people, when they flipped on X yesterday, day before, are going to be exposed to that offering and that opportunity. That team is probably much better positioned to give you some input on what they think the outcome is going to be. I can remember from the various presentations that if you captured about 0.1% of those folks, it was a significant uptick to the company, and it's efficient. The way we've structured this deal compared to other even general bonusing, it's an extremely efficient deal for us. So we'll see. Our customers live there. But everyone was on X, I guess, but we particularly think the demographic fits well for what we do.

Yes. I would say that certain of our properties were affected by the weather. Springfield comes to mind as one. Empire is another. But we also saw some pockets of strength in January as well. I would say both because of weather effects as well as the calendar a bit coming off of New Year's, January saw some of those impacts in our regional markets.

Players are pretty stable from all age groups and all spend. During COVID, we actually eliminated a lot of that low end play. So in general, what we're seeing in February, we're pretty positive on. And we feel pretty comfortable that what you saw in January was a weather-related component of the business.

Yes, this is Bill. No, I wish there was. I know they're going through some of these zoning things by all of the boroughs. I think, ultimately, we're going to wait and see what happens. I suspect they're going to wait and see what happens there. It may make a decision for them. And then in fact, they'll come back to us with the round 2 questions, and then that gives our 90-day clock going. But we're hopeful, by the middle of this year, we get something submitted and that by the end of '24, something is awarded. But we don't know anymore, unfortunately.

Very interesting question. We've been thinking about that, talking about it. For us, obviously, the place to invest capital, first and foremost, if in fact that all happens, is MGM. I mean it's our brand. It's our name's sake. It's on the corner of Las Vegas Boulevard drop. It would literally be adjacent to the stadium, and it needs some love. It's a 30-year-old property. We're going to reinvest in the rooms this year. We've got some new show concepts. We've done a few restaurants. But the front end of the property, as you get closer to Las Vegas Boulevard, needs some attention and some reprogramming. We're waiting to see where that lands. I have to believe, in the next 30 to 60 days, we should find out more. I've been shown three versions of it now in terms of where it will actually sit on the site and how it will connect. Once it settles in, we'll get serious about what we might want to do and how we might want to communicate with it, if you will, in terms of pedestrian traffic, et cetera. But that's how to think about where we might go first is really MGM and see how it all plays out.

As I think we suggested last year, we spent some time on the ground there, specifically in Abu Dhabi, trying to understand the license in general for U.A.E., but ultimately, the opportunity in Abu Dhabi. We believe it would be on the Yas Island. That opportunity still exists. To the extent there is a submission to be had, we may participate in that. Obviously, we have Dubai. We have our project there, which is an amazing project. It's going to be over a $2.5 billion project without a casino in it. And so if and when both Abu Dhabi itself as the general license granter for all or any of the Emirates goes, and then ultimately, one by one, the Emirates say they would like it, we hope to be positioned either for Dubai or Abu Dhabi, but time to tell. And it may start with digital first, a lottery, potentially digital.

Yes. The $60 million, roughly half is related to the strike and the other half to the National Harbor.

We did give some expectations, I believe it was second quarter earnings call in August of last year, Robin. And although our implementation was delayed from October to a few weeks ago to January, our estimation of what the arrangement can bring us has not changed. So I'd just refer you back to those measures that we gave in August.

The answer is yes. It's early days. But as I think Bill noted in his opening remarks, we're very encouraged by what we're seeing in the first few weeks.

Yes. It's Jonathan. I'll offer a couple of comments. The answer is yes, but really for different reasons. In the regional markets, I think, as Corey mentioned, we've really directed our marketing efforts, and to a certain extent, the property amenities themselves, to higher-worth guests. We've reduced our marketing investments and promotional investments on the lower end. And that really started in the aftermath of the pandemic, and it's carried forward. So the fact is that the increases that we've seen in those regional properties are really predominantly from the higher average daily worth customers.

I would say no. I've been at MGM for 3 years, and I've been amazed at our operator's ability to manage through disruption and room renovations as well as on the casino floor, but mainly in the room renovations. If you think what we've done just in the last year or so with New York-New York, the spa tower, The Water Club, the Borgata, et cetera. This year, we have, the ones I mentioned, Chelsea suites, we're starting in the MGM Grand and so on, and also in the Bellagio Main Tower suite. So no, I would not advise you to really incorporate any disruption from those investments.

Yes. There were a lot of things going on this quarter. I would say that we can do 30% margins in the regions. We do have a number of tools at our disposal, but we're also facing some labor cost increases there. But when we do the forensics on the fourth quarter and look ahead to this year, we believe that, that's achievable.

And in the regionals, especially fourth quarter because of weather and it's a little slower, you'll have a little bit lower margin in the fourth quarter, but 30% for the year is attainable.

No. Look, I think the answer is yes. I think we've budgeted to that. We've convinced our Board of that. We're incentivized to do that. And I think the answer is yes. Obviously, '23 was an amazing year. We've got some headwinds with particularly labor costs. But there's enough programming out there, enough momentum that, in macro, we think we surpass. And so it's not going to be like double-digit, I can assure you, but I think we surpass.

Thank you, operator. Thank you all for joining us today. Just a couple of thoughts. I mentioned this word earlier, again, resiliency, our troops have demonstrated, so I again want to thank them. '23 was an incredible year. We had an all-time EBITDA year, 7 of our properties continue to break records, and so we're anxious for the future. Macau is well positioned. We've ended up in a great space in digital, and we're in the game for real for the long haul, and so you'll see us continue to do that. And we launched our own digital brand and business in rest of world, and so excited by it, excited by the balance sheet and the development opportunities. Remember in '23, Japan came our way, which is one and only and a very unique thing for the company in the long term. And so we're excited by that and potentially the opportunity that New York may bring. So '23 was a great year. We hope to replicate it and then some in '24. And we thank you for your time.