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spk06: Good afternoon, and welcome to the MGM Resorts International First Quarter 2023 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. In fairness to all participants, please limit yourself to one question and one follow-up. Please note, this conference is being recorded. Now, I would like to turn the call over to Andrew Chapman. Please go ahead.
spk19: Good afternoon and welcome to the M. Jim Zorth International first quarter 2023 earnings call. This call is being broadcast live on the internet at investors.mgemsource.com. We've also furnished our press release on Form 8K 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. Additional information concerning factors that could cause actual results to differ from these forward-looking statements is contained in today's press release and in our parity filings with the SEC. Except as required by law, we undertake no obligation to update these statements as a result of new information or otherwise. During the call, we will also discuss non-GAAP financial measures and talking about our performance. You can find the reconciliation of the GAAP financial measures in our press release and investor presentations, which are available on our website. Finally, this presentation is being recorded. I will now turn it over to Phil Hornbuckle.
spk18: Thank you, Andrew, and good afternoon, and thank all of you for joining us today. I'd like to start by highlighting the recent news that the Japanese central government officially certified our area development plan in Osaka, which is a recognition of our perseverance and the great partnership that we have forged after more than a dozen years. This is one of the final steps that paves the way for us to begin our development process in Osaka to create what will likely be the first integrated resort in Japan. I'd like to thank the government of Japan, the city of Osaka, our local partner Oryx, and Ed Bowers and the development team and the many MGM employees who helped make this a reality. It's truly an honor and we look forward to getting started on this major development to increase our global reach and fulfill our strategy to increase our geographic diversification. Turning to results, MGM Resorts posted just an outstanding quarter of financial performance to start 2023, driven by another record Las Vegas quarter and significant recovery at our MGM China. MGM China is experiencing a rapid recovery following the lift of public health policy restrictions. Our first quarter outperformance in Macau is a direct result of the meticulous preparation and well-executed plan put together by our team at MGM China who ensured that we were ready to capture market share and drive results upon reopening. A point to a few KPIs that reflect our impressive start to the year in Macau. In the first quarter, our MGM China properties generated adjusted property EBITDA of $169 million or 88% of our first quarter 2019 adjusted property EBITDA. Our market share was 15% during the quarter, and we are confident in our ability to sustain shares as we put in place key structural advantages, including one, we gained an additional 200 tables as part of the concession renewal process. This represents a 33% increase in the tables for MGM in a market with fixed table allocations. Currently, our half of our incremental tables are fully in use, and the remaining will be added as demand returns, and we complete further refurbishments on the casino floors. We also enhanced our property and remodels on the casino floors with both MGM Macau and MGM Cotai to focus on mass and premium mass, along with adding 57 high-end villa suites at our Cotai property. In addition, we also have the advantage of our global sales international branch marketing network, We are actively leveraging our customer database to bring global customers to our properties. While we recognize that additional hotel supply will enter the market, these drivers, along with a deep customer understanding from our property leadership, I believe will allow MGM China to maintain a share in the teens. I'd also like to thank the Macau SAR government for their partnership, and we look forward to working alongside them as we support Macau's positioning as a world center for tourism and leisure. Moving stateside, we have once again achieved exceptional results in Las Vegas with a record-breaking first quarter. This marks our seventh consecutive quarter of record EBITDA, and we owe it all to the hard work and dedication of our thousands of employees. This quarter's strip performance was fueled by a fantastic calendar of sports events, including for the first time hosting Sweet Sixteen and March Madness, and other entertainment and convention events at our properties and throughout the city. The quality and consistency of entertainment and sports programming at MGM Resorts and throughout Las Vegas has been a catalyst for the permanent transformation and strength and demand of our offerings. This is no better example than Formula One, which as you know will come to Las Vegas for the first time this November. Additionally, we are laser focused on continuing to invest in our properties with a handful of capital and projects on the strip. At Bellagio, we are completing a three-year remodel of all rooms and suites with our spa tower. This is in addition to enhancing our high-end gaming offering with a newly remodeled club purveyor for high-end table games customers, and our Baccarat Lounge just reopened after a full renovation. We have begun construction of a pedestrian bridge to connect the Cosmopop in Las Vegas with Bellagio and Vidara. We are undergoing a full upgrade of our Mandalay Bay Convention Center, along with numerous restaurants, bars, entertainment outlets, and significant room remodels at New York, New York, MGM, and the Water Club at Borgata. By the way, we'll soon carry the MGM flag alongside Borgata's brand. These initiatives will be drivers of our customer loyalty and spend and ultimately future free cash flow. Onto our regional portfolio, it showed consistent year-over-year top-line growth with stable profitability. I'd like to specifically recognize the Beau Rivage team and congratulate them for exiting well on a beautiful roomy model which is completed in 2022 and is seeing a very strong customer response turning now to bet mgm in the first quarter we expanded our footprint by launching in ohio and massachusetts bringing our total active markets to 26. based on results thus far but mgm remains on track to hit fiscal 23 revenue guidance of 1.8 to 2 billion dollars but mgm is also continuing to make progress towards profitability later this year all while continuing to expand and improve its product offering with our joint venture partner, Entain. As we look at this business, we're encouraged by the improving economics that will translate into long-term profitability. As a reminder, as states mature and we focus on growing our NGR, optimizing retention, bonusing, and focusing on most profitable players, overall CPAs will decrease and the conversion from GGR to NGR will increase, ultimately driving profitability. Internationally, we announced today that the first major investment by our subsidiary, Leo Vegas, with Leo Vegas entering into an agreement to acquire the majority of a game developer, Push Gaming. Push is a proprietary content provider that will allow Leo Vegas to grow its library of games as they extend their digital gaming presence to new markets. Push offers several industry-leading games to over 200 operators globally. On a development front, we're working through the RFA process in New York, We plan to submit our official application in the summer and hope to receive a response by the first half of next year. We continue to expect total spend in New York to be approximately $2 billion, inclusive of the licensing fee. And should we win a license in New York, our plan is for extensive property improvements, such as a new 5,000-seat theater, new food and beverage outlets, covered parking, and an increase overall to the casino floor space. We will share more specifics as part of our submission process continues. Now back to Japan. As we progress, we see great opportunity. Osaka has approximately 30 million people within a three-hour transit time of our site in Yumeshima. Our site in Osaka is also expected to drive international tourism in Japan, given its proximity to other major Asian countries. And I will remind all that Osaka is closer to many northern Chinese cities than any other gaming market. Considering that, we will likely be our first integrated resource offering For some time in Japan, we believe this project will generate a minimum to high teens' free cash flow yield. Putting it all together, MGM Resorts offers steady earnings power through our existing operations and world-class brands, plus significant growth opportunity through our digital business, through recovery in Macau, and our development opportunities. Our balance sheet boasts impressive strengths, with $4.5 billion of cash, including MGM China, as shown in the presentation. Now to Jonathan for more detail on the quarter.
spk15: Thanks, Bill. And I, too, want to congratulate our employees for delivering another record quarter of financial results. I'd also like to recognize and thank our teams in both Japan and Macau for their outstanding wins this quarter. Digging into the numbers, our consolidated businesses generated revenues of $3.9 billion this quarter, up 36% from last year, and adjusted EBITDA of 1.1 billion. An even more impressive story was our free cash flow. During the quarter, net cash from operating activities was 704 million. Less capital expenditures, free cash flow was $564 million. It's important to note that 184 million in cash flow from operating activities and $6 million of CapEx related to MGM China in the quarter. This was a particularly strong quarter in free cash flow due not only to our operating results, but also timing of taxes, interest payments, and ramping of capex. Our operating results certainly benefited from a recovery at MGM China as Macau reopened and our team executed on their reopening plan. Growth gaming revenue, or WIN, at MGM China ramped to 78% of 2019 in the first quarter, or $663 million. compared to less than 50% market-wide GGR recovery. This increase was driven by our main floor GGR, which exceeded 2019 levels in the first quarter. Adjusted property EBITDA was $169 million, 88% of 2019 first quarter levels, and margin was 27% compared to 26% in 2019. Here in Las Vegas, margins of 38% remain in line with our performance the last several quarters. On a year-over-year basis, our revenues grew $513 million and our adjusted property EBITDA grew $242 million, representing a flow-through of 47%. These results are a testament to the market leadership of our properties, our pricing strategy, and expense controls. First quarter occupancy was 92% and ADR was $258, an increase of 31% year over year. Looking forward, our pace, which reflects on the books rooms, is up year over year for every month from now until November. Food and beverage is also worth highlighting this quarter as it benefited from the 14 percentage point increase in occupancy and a 38% increase in restaurant covers. Food and beverage revenues were up 52% and banquet spend, which is one of our highest margin businesses, grew 84% due to the recovery in our group segment versus a year ago. In the regionals, first quarter same store revenues, that excludes gold strike, grew 10% with adjusted property EBITDA up 6% year over year. BetMGM generated net gaming revenues from operations of $476 million in the first quarter representing a 76% increase over 2022. BetMGM's market share was 28% in iGaming, and when blended with online sports betting, had 17% market share in the U.S. across states in which it operates. Our 50% share of BetMGM operating losses was $82 million, which represents our highest expected loss of the year. As the first quarter is a heavy acquisition period with Super Bowl and March Madness plus launches in two states, At the cohort level, the data is showing robust player economics and a successful bonus optimization strategy. Same store NGR from online sports increased 100% in the first quarter and BetMGM remains on course to profitability later in 2023. Before turning it back to Bill, I'll conclude as usual with a few observations on our free cash flow and our financial algorithm more generally. We're in an enviable position financially. Our collection of superior properties in Las Vegas, together with the stable operating performance of our regional portfolio, generates ample free cash flow from our domestic operations. BetMGM is fully capitalized now, growing rapidly and turning toward profitability later this year. Our Macau enterprise is already operating at near pre-pandemic levels. Our balance sheet is strong and highly liquid, At the end of the quarter, excluding China, we had approximately $4.5 billion of cash, as shown in the presentation, and more cash than debt, creating a net cash position of $1.3 billion. All of this allows us to invest for growth, de-lever, and repurchase shares, steadily reducing our share count. In the first quarter, we completed the sale of the Gold Strike Tunica for $450 million in gross proceeds. We received $170 million in the early prepayment of a note receivable that was secured by excess land from our Circus Circus transaction. We were paid $1.25 billion for our 6% notes. In April, we paid $138 million to a minority investor in National Harbor as a result of the sale of their economic interest, and we agreed to purchase real estate between the Bellagio and the Cosmopolitan of Las Vegas to enable connectivity among these properties going forward. And this morning, we announced the acquisition of Push Gaming, augmenting our international digital strategy. The Japan and New York development opportunities lie before us, and we expect them to offer attractive free cash flow yields for our shareholders. This year, through today, we've repurchased 16 million shares for $654 million, excluding excise tax, and that represents 4% of our share count. And we'll continue to repurchase shares capturing the free cash flow yield in our shares, reducing our share count, and growing free cash flow per share. Bill, back to you.
spk18: Thanks, Jonathan. A couple of comments, and then we'll open it up for questions. I've got to say I'm extremely proud of the entire team. It's arguably one of our best quarters ever. If you think about the overall performance, Las Vegas, Macau, the major development news we had in Japan, our pursuit of New York, Things are going exceptionally well there. Jonathan just mentioned and obviously it's our intent that MGM is an inflection point and then we continue to push through Leo Vegas in growing our digital business on an international scale. We are obviously now almost a year into our acquisition of Cosmopolitan and so we couldn't be happier with the position in the leading resorts we have here in Las Vegas. We have four of the country's top eight regional casinos in terms of performance. which fortifies the effort that we have here in not only those markets but sending people back to Las Vegas. And we have a fortified balance sheet that still continues to allow us to buy back the shares when we think appropriate and invest in our company's future. With that, operator, we'll open up to any questions.
spk06: Thank you. We will now begin the question and answer session. To ask a question, you may press star then 1 on your touchtone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. As a reminder, in all fairness, please limit yourself to one question and one follow-up.
spk05: At this time, we will pause momentarily to assemble our roster. And the first question will be from Joe Greff from JP Morgan.
spk06: Please go ahead.
spk03: Good afternoon, guys. Hope you're well. Jonathan, your comments in Las Vegas in terms of looking ahead and talking about your bookings pace and how it's up year-over-year every month now through November, very interesting comment. Can you talk about how even that is or how even performance in Las Vegas between the higher end and the lower end between midweek and weekend? Then I will follow up.
spk15: Sure. I'll make a couple of comments, Joe, and then I'll certainly invite Corey to add his perspective as well. The strength in Las Vegas really has been driven mostly, not entirely, but mostly by weekend rates. That's where the real pricing power has been. It's been certainly supported by the event schedule Bill referenced in his remarks. But we're still seeing, during the quarter, saw growth in the midweek room rates as well. But the real strength has been from the weekends. And then going forward, any differences in terms of the pacing on the books is typically driven by the group customers that are on the books. The groups are a bit lighter during the summer months than they are, say, deeper into the fall months. But I would say on balance that it's a pretty even outlook we have in terms of the way the pace is building.
spk16: I would agree.
spk03: Great, and thank you. And then, obviously, significant recovery in Macau, and it's been a long time coming. Obviously, we got good market-wide news this morning on market-wide performance in April. Can you talk about what you've seen thus far in April, and maybe to us, what we see from the industry-wide market performance is, I guess, more grind or base mass recovery. Can you talk about what you're seeing in terms of the recovery thus far in the second quarter?
spk18: Joe, we've got Hubert on the phone. I'm going to turn it over to him. Before I do, though, I just want to recognize that team. Thank Hubert, Kenny, and Pansy of note. Their leadership has gotten us to a great place. April's been amazing. Maybe, Hubert, you can speak a moment on Golden Week, how it's kicked off. But over to you, Hubert.
spk10: All right, thanks. I think that we look at the daily visitation to Macau. It has been steady on the rise month after month, you know, since January after travel restrictions were lifted. Inbound daily visitor counts averaged about 50% in the first quarter, and April is already at 75% of 2019 level. So if you walk around the streets, you can already see the pre-COVID hustle and bustle and atmosphere has really emerged in Macau integral results and the streets. We have seen similar patterns in terms of recovery, in terms of the daily GGR recovery, particularly in March and April and leading towards the Golden Week. We think that the market will continue to recover as more and more gaming customers and legal travelers make their first post-pandemic trip to Macau. Another source of recovery is the concerted efforts by concessionaires. to attract overseas players. Now, obviously, I think that MGM has led the market in our recovery pace. For example, our daily mass GGR has already exceeded 2019 level, as Bill noted. The trend continues into April at an elevated level. We're already, in terms of mass, we're already 115%. of 2019 mass level.
spk03: Do you think you maintain the market share gains from the 1Q thus far in April?
spk10: Yeah, I think that the market number was released yesterday and we have seen the share being stable.
spk18: Joe, reflecting on my comments earlier, Look, it's not lost on us. This is probably 10,000 rooms, give or take, left to open in Macau. And so arguably that will have an impact. But I think the team's ability to drive high-end mass and into some VIP has been demonstrated. We're well over 90% both in GGR and EBITDA in April. And the first couple of days of Golden Week, we've seen just under a quarter of a million people hit the markets. and we're getting more than our fair share of that, but we do recognize there's 10,000 rooms to go.
spk03: Great, and then just one quick one here. I know I'm sort of going above my follow-up allotment of one question. If we adjust for normal VIP hold in Macau, what was that property level EBITDA performance?
spk10: Hubert? I think it was 169 EBITDA.
spk03: It's 169 with high VIP hold. If we adjust that for normal, Yeah. It's 14 million, Joe, is the answer.
spk08: Perfect. Thanks, guys.
spk06: Thank you. And the next question will be from Sean Kelly from Bank of America. Please go ahead.
spk00: Hi. Good afternoon, everyone. Congrats on the results and specifically the news out of Japan. So if I may, I just wanted to start with the Japan project. Bill, obviously you've been working on this milestone for a long time. Can you help us think about key remaining milestones and very specifically when should investors start to prepare for capital commitments needing to go into the ground and maybe a little discussion about broad-level plans around project financing for it?
spk18: Sure. I'll leave the last part to Jonathan, but let me kick it off. Obviously, the Area Development Plan and the certification by the national government was the big outstanding item to get across the finish line, and that's just been accomplished. We have a land lease, and we have various agreements with the municipality that we have to get done. Presuming this next quarter, those will get done. That being said, we're looking to break ground either late this year or first part of next year, and it's between a $4.5 and $5 million, I wish it was $5 million, five-year build It is probably going to open first quarter-ish, second quarter of 2030. So we've got some time to go. There's obviously a lot of work to be done. It's a man-made island in terms of borings. And so that's the general timing around it. On financing, John?
spk15: Yeah. We and our partners, Oryx, will be putting together a bank financing for the project. That financing, that work has already been underway actually for some period of time. Our equity investments will begin in earnest in late 2024 and into 2025 really through 2027, at which point we'll be tapping into this financing for the completion of the project.
spk00: Great. Thank you for that. And then my follow-up just to switch gears would be an online, you gave some great color about some of the KPIs and how the GGR, NGR side is going. Could you just talk a little bit about the operating loss cadence as we move throughout the year? And can you reiterate the sort of joint contribution of around $150 million commitment for the full year? Is that still in play or does that need to be tweaked a little bit as we sit here today?
spk18: No, Sean, I'm hoping not. Look, if you think about last year, think about this year, obviously football, an investment into it with Super Bowl, March Madness, we opened two states. Actually, we came in a little under our own plan. And so, you know, we don't think we're going to have to put any more cash in of substance. We had one more cash call recently, and I think we're hopefully done. And so we look forward to the back half of this year beginning to show some EBITDA. So nothing has changed, I think, to answer your question.
spk15: And I would just add under our plan, you mean under the investment that we anticipated putting into the venture. And in terms of the pace, we do expect as we go through the year that we're going to be turning towards EBITDA profitability and that we'll reach that during the second half of the year.
spk00: Thank you very much.
spk05: The next question is from David Katz from Jefferies.
spk06: Please go ahead.
spk13: Hi. Afternoon, everyone. Thanks for taking my questions. I wanted to just drill a little deeper on BetMGM, which obviously is going better than as planned. It's going very well. When we look at the partnership and think about the MGM database and its benefits to the BetMGM-JV in conjunction with those customers that are coming in through BetMGM, both of which have added to the productivity here, I suppose the question we ponder with a lot of investors is, the bigger that gets, how does that arrangement work and sort itself out, et cetera? And I'm not asking... you know, when are you going to go back and make another offer? I'm really just trying to get a layer down. Thank you.
spk18: Look, David, we're very excited by what's been created. Obviously, to think after this amount of time we could have a $2 billion top-line business this year, which is showing all signs of profitability is exciting for us. You know, we have tens of thousands of customers that are driving on an omni-channel basis over $100 million a year back and forth, And so that part of the business is starting to click in and starting to work. And we have work to do on product. We need single wallet, single account to be really effective in places like Maryland, places like New Jersey, Pennsylvania, and New York. So we've got some work to do on the sports product. Obviously, we're market leading in gaming at 28% share. And so no one even comes close to that. But we're mindful that people are trying. So we're very focused on it. I'm not going to have a precursor where we go with all of this. I think we're in great shape. We've got another couple of years to mature this business and see where it ends up, and then we'll take it from there.
spk13: Fair enough. If I can just follow on with a question about Macau and how we think that or we might theorize how that revenue mix turns out, with one of the questions being how much direct VIP returns? And, you know, ultimately what that mix and what that margin settles in at as we, you know, progress through this year. Any help there would be appreciated.
spk18: Yeah, Hubert, why don't you handle the first part of that, and I'll try to do cleanup.
spk10: All right. So, David, I think that the IP component as total GI is probably around 15% of the number, of the total number. And in terms of margin, I think that we'll see a little bit higher margin on the direct premium business, probably around 13% to 15% in that neighborhood.
spk05: So Bill, anything to add? No, David.
spk18: Look, obviously we're leaning into MAS. I think the way to look at the totality of the business, obviously the junket operatives were not cheap to do business with. I mean, they took a lot of the margin out of the business. The fact that now we're on our own doing this, there's a formula that suggests somewhere under 100% of former GGR levels, we could drive over 100% EBITDA. It's arguable where that's going to land 85% or 90% of total top lines. But we do believe that that we think the business will settle in in the mid-20s in terms of a margin business overall And so, you know We do have a unit not unique But we do have a special opportunity only because we've been at it 30 to 40 years In terms of driving and knowing customers and where they live in Malaysia and the rest of Asia We just had a very significant group come in from Thailand that was driven by our branch office there And so, you know, we think it's net advantage And we think ultimately our margins would be better than once they were, given the nature of the junket business.
spk13: Okay, fair enough. Thanks very much. A nice quarter. Thank you.
spk06: And the next question is from Stephen Grambling from Morgan Stanley. Please go ahead.
spk17: Hey, good afternoon. Sticking with the digital side, you referenced some of the aspirations to continue to expand worldwide. What are the criteria or priorities that you're focused on, or what deal-breakers are there to any potential partnership or transaction as we think global? And do you generally expect them to be more bolt-on deals, or could you even contemplate something more transformational?
spk18: Well, for now, we've been looking to try to build a fundamentally strong business. So we're With Leo Vegas, we saw a team we liked a lot. And frankly, the good news is nine months later, we still do. We saw technology that lived in the cloud versus .NET or something else of that nature. So a business that could grow and ultimately scale easily. We had three other pillars. We wanted to get into the content business. And it's interesting with Porsche, they have several of the leading games in the world in the context of things that they've created. So we're excited by that. and ultimately potentially transforming that and those games from digital to brick and mortar and vice versa. We think there's a long-term play there. We're interested in live dealer. There's nothing that suggests, given the nature of our business, that we should not be in that business. And so I think through Leo Vegas, there's an opportunity to do that. Leo Vegas currently does live dealing now through a third party, but I think it's a place we'd like to get to and ultimately have our own sports betting technology as well for the rest of the world. take BetMGM aside from that discussion. Look, we've looked at everything. We'll continue to do so. There are some things that would be substantive out there, but it's too early to tell. I'm trying to build a business with the team there. Gary Fritz has been a big part of this, obviously. He's the front. And with Gustav and the team at Leo Vegas. And so we're excited by where we are. We've got a ways to go. And it's one of these things, hopefully two or three years from now, upon reflection, when we look back, we've built something meaningfully.
spk17: Makes sense, and maybe as a follow-up on the digital side in the U.S., in thinking through the March deposit EBITDA and beyond, we saw FanDuel, I think, hit profitability about a year ago and then ramped a bit lumpy thereafter, given the seasonality and mix of sports. Given your skew towards iGaming, how might the magnitude of that flip deposit EBITDA and then consistency compare and contrast to maybe some of the peers?
spk18: I think you make a good point. Look, the second quarter last year for us showed a little bit of profit, if you may recall. The third quarter, like everyone, we bounced into or bumped up to football, which is always a big promotional push at the beginning of football. I don't suspect that will change much. Obviously, there are a few players. We've all become a lot more disciplined. But I think it will be a little lumpy, but I think the bottom line will be going in. The second half of the year, we're going to show profitability in totality. And obviously, iGaming for us is a key thing. Recognizing it's in five states, six states, of which three are meaningful for us.
spk05: Fair enough. Thanks so much.
spk06: The next question will be from Brant Montour from Barclays. Please go ahead.
spk02: Hey, good evening, everybody. Thanks for taking my questions. I just wanted to follow up on Joe's first question about Las Vegas room rates and understanding that the weekend is driving most of it, but I was also curious if you've seen any difference in pricing elasticity between the higher end properties and the lower end properties recently?
spk15: You know, the growth for us has really been in the higher end properties. I mean, we think all our properties are higher end, but certainly the luxury properties have seen more of the growth. You know, price elasticity is a tough concept to apply here since The properties like the Bellagio, Cosmopolitan, Aria have different customer segments in some ways from the ones, say, at Mandalay Bay or Luxor or Excalibur. We're attempting to drive price wherever we can at each of these properties, but I would say the general matter, the weekends are where we have greater pricing power and in the luxury properties.
spk02: Okay, that's really helpful. And then one follow-up on Las Vegas. Jonathan, might care to comment on the seasonality for Las Vegas this year, if you think it would be different than pre-COVID years and anything you'd call out out there.
spk15: I wouldn't say there's any difference in seasonality. If anything... Just the strength of the event calendar and just the increased sophistication with which we're marketing to all of our segments, if anything, might reduce the seasonality that we face. We've already, on previous calls, called out the differences in 2023 against last year with the first quarter and the fourth quarter for different reasons probably being a bit stronger year over year, but that's really not seasonality as much as just some idiosyncratic issues during this year and last.
spk18: In the fourth quarter, we'll see obviously Formula One for the perceivable future. Time to tell how meaningful it ultimately is. There's estimates it'll bring a billion dollars to the Valley, which obviously will take more than our fair share of hopefully. And then if you go back to 19, the Raiders have just gotten going. In fact, they didn't start until 2020 in the middle of COVID. So, you know, that programming is consistent and extremely strong. So in the fourth quarter, it ought to look better than the average pre-19. But, you know, time to tell ultimately where Formula One, where it brings us.
spk02: Great. Thanks so much.
spk16: Thanks, Brent.
spk06: The next question is from Dan Pulitzer from Wells Fargo. Please go ahead.
spk04: Hey, good afternoon, everyone. Thanks for taking my questions. First on Macau, how would you say that the margins should trend over time? I think last time you guys talked about high 20s as an exit rate for this year, but it seems like we're tracking above that. I know there was some benefit of holding the quarter, but would you say you're fully ramped in terms of where you need to be and there should be a lot of leverage as we go forward, or are there additional headcount that you'd look to add?
spk18: You're right. Why don't you take it?
spk10: Yeah, I think our goal remains the same. Our margin should be in the high 20s. There are a few things in favor of that. Further recovery of the mass-driven market and also the continuous deployment of our incremental tables on the mass floor. So these will help to generate high-margin mass business. Some of the labor savings from COVID period will be permanently particularly at management level. And we're also looking at some innovative games to further attract mass play. So these are the things that will be helpful. But on the flip side, I think that we do know that the gaming tax increased 1% under the new concession contract. And I think some of the labor savings, you know, will be rectified through recruitment for understaffed situations. So in the second half of this year, I think that the labor costs will increase because we'll have to fill some vacancies to address service issues. But overall, I do believe that we will be able to maintain our margin in the high 20s.
spk04: Got it. And then just turning to New York, I think you mentioned about $2 billion of CapEx there. I know timing is kind of kind of a moving target here. But as you think about the cash that would come out and maybe the options to finance this through VG, is there any flexibility there where you might be able to pull forward some type of sale leaseback or is it, you know, you have to build it and then go forward to get an agreement in place?
spk15: Yes, I think there is some flexibility, not to speak for VG, of course, but they are fantastic partners of ours and And as we plan for that project and think about the ways in which we will finance it and the best way to allocate our capital, doing a sale-leaseback with VG at some point certainly could make a lot of sense for us, and that's part of our planning.
spk05: Got it. Thanks. The next question is from Chad Bayman from Macquarie.
spk06: Please go ahead.
spk14: Good afternoon. Thanks for taking my question. On slide seven and eight in the deck, you pointed out really strong slot handle and table drop, looks like, in the regional market and in Vegas. Is there anything to talk about just in terms of additional detail within the segments, strength at the high end? Has that kind of continued as we've expected for the past couple quarters? Any weakening at the low end or anything else to call out to kind of help frame out where the consumer is within your database? Thanks.
spk07: Yeah, hi Chad, it's Corey. We're seeing some really strong strength in our database, especially in our Gold Plus customers. Those are ones that may not be hosted, but are around 400 plus, and those numbers are pretty significantly. We see not only their trips continuing to increase, but also their play continue to increase. And in most areas of our database, we're seeing increases in both trips and in spend. The one area where we may be seeing a little bit less is the younger customer. They're probably a little bit more impacted than anything we've seen, but nothing materially.
spk18: And then, Chad, maybe one final point, and I'll be interested to see how this manifests itself over the next three to six months. With China reopening up, the one segment we still miss is the high-end Asian-slash-Chinese gamer. And so time to tell. We've gotten about 80% of our visitation back from international play. but those players made up like 50% of the play, particularly when you think about something like Baccarat. And so I see it as an opportunity. I don't know how it manifests itself yet, given policy, given capital restraints, but we do see it as something we're going to focus on trying to drive.
spk15: The final thing I'd add, Chad, around segmentation is we've now seen it for a sufficient number of quarters to say that it's a nice trend, which is just the return of our 65-plus players. players here in Las Vegas, but more importantly in the regions, their trips just steadily increasing each quarter for the past three or four quarters. Age 65 plus.
spk14: Okay. Thank you all. And then given the conclusion of the UK white paper, a market that you'll be in soon, seems like a win for both the operators and responsible gaming in general. Does anything change positively or negatively in terms of
spk18: Timing or just you know your expectations your excitement about that market and other global markets as you look to to grow this digitally Yeah, so let me look we're excited that it's finally out I don't think there was any harm in it matter fact to the contrary I think it was a good piece a good piece not legislation yet, but a good piece of overview It set up standards obviously for protecting folks at the same time it enabled and let VIP continue and And so there are some promotional opportunities. At one point, if you remember, there was consideration that you would have to stop all of that activity. For us, I think with Leo Vegas, potentially the opportunity presents itself. We're now excited to go look at that market as a real market to push into and push on. And so I think bottom line, it was done responsibly. It was modified, I think, to a point of it does what it needs to accomplish but still enables our businesses and others like it to continue to go forward progressively.
spk14: Thank you very much.
spk06: And the next question is from Robin Farley from UBS. Please go ahead.
spk01: Great, thanks. I just wanted to ask about Japan. You laid out a timeline, which was really helpful. I'm just wondering at what point does it become where you're committed in terms of the capital investment there? I know you mentioned potentially breaking ground later this year, but I assume somewhere in between now and then it becomes sort of, you know, where it's a full commitment. I'm just wondering about time frame.
spk18: Yeah, Robin, look, I think at this point we're fairly committed. There's, you know, the idea of going in reverse would be something hard to contemplate. We have to sign the land lease, and I think given the nature of that lease and given the other documents we have to sign with the government of the city of Osaka, they're definitive in nature, and therefore we're paying out cash. And so, you know, within the next three months, it's as hard as it's ever going to get. And so we're going to go forward with some excitement from that.
spk01: Okay, great. Thank you. And just for my follow-up, I had a question on Vegas. And in your slides, you break out the same-store Vegas casino revenue down, and I think it's the third consecutive quarter. And I'm just wondering if this is – and obviously it hasn't hurt your profitability, of course, as you're – as the room revenue comes back so strongly. But I'm curious when you look at that trend with the same store gaming revenue, is this just kind of, do you think like a resetting of, there was this sort of COVID driven strength and then it kind of resets and it'll grow again from there? Or I guess, so in other words, maybe there's another quarter where that declines and then we've kind of anniversary that COVID bump and then it goes back to growth or just how should we think about that? Thanks.
spk15: The way to think about that is that the gross gaming revenue we have net against that for rated players, the customer complementaries that we provide to them, and those are generally priced at retail. The largest portion of that are rooms, but there's certainly food and beverage as well. And the price of those has increased dramatically. Our ADR year-over-year grew 31%. the cost which is then assessed to that and therefore reflected in the casino revenues goes up. And so the demand for gaming in our business has never been higher across segments, but the cost of the rooms that we provide to these guests to earn those complementaries has gone up. So the profit associated with it The revenue and profit at the margin is being monetized in our hotel and food and beverage operations and not as much in gaming. The trick of it is at the margin is that we're making the right decisions about which customers and segments to have on property weekday and weekend to maximize profitability for the company. I would not interpret that as any reduction of demand on the gaming side.
spk01: Okay, great. Thanks for the color. Thanks.
spk06: And the next question is from John Decree from CDRE. Please go ahead.
spk09: Hi, everyone. Thank you for taking my questions. Maybe one, particularly in the regional U.S. markets on the non-gaming spend that has been coming back really strong the last couple of quarters. Obviously, a longer tail to the recovery, but curious if you could give us some insights into the consumer and that non-gaming spend. How much is driven by price? Jonathan, I think you mentioned in your last response that the cost of obviously F&B and those types of things has gone up, but is it new customers coming back that you haven't seen in a while, or are customers just opting to to spend more on F&B? Is it timing with, you know, the opening of additional restaurants or additional hours in regional markets? How would you characterize the recovery in the non-gaming spend that's been so strong?
spk07: Yeah, John, this is Corey. I think last year in the first quarter, especially in our bigger boxes in the regionals, we were constrained on hotel rooms. In this quarter, we had full accessibility, both in Borgata and, as Bill mentioned, the brand-new Beaurevage rooms. So we're seeing... huge demand in the boudoir rooms from current customers and new customers, but it's also driving a significant amount of hotel revenue and food and beverage revenue that would not have been there last year.
spk09: Got it. Thanks, Corey. Maybe revisiting a question from earlier or a comment about the Chinese or Asian gaming play potentially coming back to Las Vegas. Corey, I don't know if you know, if you're the best person, if you could kind of remind us how big was that business, I guess, pre COVID, um, and then maybe in the context of, of Cosmo, if they had a, a good size Asian gaming business as well, um, you know, which is now a part of your portfolio that wasn't previously just to get a sense of, you know, how much more opportunity there could be if that, if that customer does come back.
spk07: Yeah. Uh, John. So if we looked at Q1 of 19, um, That customer would have made up about 45% of our rated win at that time. They're currently about 20% of that. So if that comes back from that perspective, it's pretty meaningful. From a cosmopolitan, they are pretty big in the international business. And in particular, the Far East and Korea are very strong markets for them. their size is about a tenth of what we do.
spk18: And, John, if you think about Baccarat back in 19, it's like $450 million top line.
spk08: Got it.
spk18: Okay.
spk08: Yeah, real number. That's helpful. Thanks, Bill. Thanks, Corey.
spk05: And the next question will be from Barry Jonas from Truist Securities.
spk06: Please go ahead.
spk11: Great, thanks. Yeah, I was hoping I could get more color on the non-same-store components of Vegas. You know, how is the Cosmo integration or ramp going relative to your expectations? And then for Mirage, to what extent have you been able to redirect revenues to your remaining properties? Thanks.
spk07: Yeah, this is Corey. The Cosmo Pulse integration is going extremely well. We're very happy with the results we're seeing there. The business is continuing to be strong. We are in the process now of defining when we will be converting them over to MGM Rewards. We will make sure, from a customer perspective and employee perspective, it will be a smooth transition. So more to come on that in the upcoming quarters. The Mirage is interesting. When we put it up for sale, we started seeing customers starting to convert and come over to our other properties. So in general, obviously, there are pure Mirage customers that have stayed pure Mirage customers. But in general, we're happy with what we've been able to obtain in our business.
spk15: And as I kind of rewind the tape and look at the capital that we applied to the Cosmopolitan versus that which we freed up from the sale of the Mirage and the incremental EBITDA And more importantly, EBITDA after rent associated with that. This has just been a fantastic set of transactions for MGM and the shareholders.
spk11: That sounds great. And just as a follow-up, can we get an update on your project in Dubai? I'm just curious if you think gaming will come at some point. to Dubai or any of the other Emirates for that matter, beyond what's been announced by Wynn. Thank you.
spk18: Yeah, I'll take that one. As it relates to Dubai, we are still doing pylons. That property continues to evolve. We, the managers, but the owners yet again want to upgrade the property, I think with gaming in mind. But, you know, it's up to Abu Dhabi and the national government to ultimately decide. We've had people on the ground there basically nonstop since the first of the year trying to understand the opportunity in Abu Dhabi and ultimately if it'll open up to the, well, if passed and when passed, it will open up to the other Emirates. Whether the rulers of each Emirate then take it upon themselves to approve it is A, up to them. Obviously, we're focused on Dubai, given the nature of our project. We think it would be ideal. There happens to be 150,000 to 200,000 square feet of space that could be converted into such a thing. But time to tell there, and we're not saying no to Abu Dhabi either. We find both those markets, given the location of the airport right in between both of them, as compelling. We're hoping, quote-unquote, any day, but I've got to believe it's the summer of fulfills itself. We'll hear more news on that.
spk11: Sounds great. Thank you so much.
spk06: And our final question today will come from Steve Leszczynski from Stiefel. Please go ahead.
spk12: Hey, guys. Good afternoon. It's obviously very late in the call. Most of my questions have been answered, but I'll just ask one. And this question might be way out there in left field, but I'm going to ask it anyway. So You know, if we think about the impact that the Raiders, the Knights have had on visitation to the city, you're now going to get the A's at some point, probably in the near future. You know, and we're talking about, let's call it 81 home games or so in typically slower visitation periods. You know, it might be too early to know, but just wondering if you guys have thought about this at all and maybe what type of impact you might eventually see there.
spk18: We have, and obviously given the location and the conversation of a pedestrian bridge from it to the park, which is obviously where T-Mobile sits, you know, we think it could bring about 400,000 tourists a year to the valley that wouldn't otherwise come. We think that's a reasonable number. That's a number that's been created by a bunch of folks looking at it. And so we think that part's accretive. You know, we're not a fan of any more tax dollars put into this. We yield the governor's position. and assume that this will be done responsibly for the state and ultimately for Clark County. All that said, I, like you, believe it will happen, and it will be accretive, I think, to the overall visitation.
spk12: Okay, great. Thanks, guys. Appreciate it. Good quarter. Thank you.
spk06: And, 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.
spk18: Thank you, Alfred. I'll be quick. I know it's late. Again, I want to thank everyone for joining us. Just on my earlier comments, we couldn't be happier about the quarter and the progress that we've made on so many fronts. And again, I want to thank all of our employees, particularly this particular quarter on the Macau team, for successfully launching. I'm going to be participating with Jonathan in J.P. Morgan's forum in Toronto next month, and I'll be doing a couple of meetings with Deutsche Bank in New York as well. I thank everyone for their time and hope you all have a great evening. I look forward to speaking to you guys in a couple of months. Thank you.
spk06: And thank you, sir. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
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