MGM Resorts International

Good afternoon and welcome to the MGM Resorts International first quarter 2020 earnings conference call. Joining the call from the company today are Bill Hornbuckle, Acting Chief Executive Officer and President, Corey Sanders, Treasurer and Chief Financial Officer, Grant Bowie, CEO and Executive Director of MGM China Holdings Limited, and Aaron Fisher, Chief Strategy Officer. 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 conference over to Aaron Fisher. Let's go ahead.

Good afternoon and welcome to the MGM Resorts International first quarter 2020 earnings call. This call is being broadcast live on the internet at investors.mgmresorts.com. and we have also furnished our press release on Form 8K to the SEC. On this call, we will make forward-looking statements under the safe harbour 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 materially differ from these forward-looking statements is contained in today's press release in our filings with the SEC. Thank you, Aaron, and good afternoon, everyone.

This is my first earnings call as acting CEO of MGM Resorts, but as most of you know, I've been with the company for over 22 years and the industry for over 40. I've seen many difficult periods in that time, including the original MGM fire, 9-11, the global financial crisis, 1 October, but the COVID-19 pandemic is truly unprecedented. I'm proud of the discipline and focus that has defined our response to the crisis, and I'm confident we are taking the necessary actions to position MGM Resorts for sustainable recovery. We usually start these calls with results, but since many of you have already seen our first quarter numbers we disclosed last week, I'd like to address the impacts of COVID-19 on our business, our employees, and our communities, and then I'll walk you through the quarter and our longer-term outlook. Before I do, I'd like to acknowledge the stewardship of our Board of Directors and and the partnership of our chairman, Paul Selim of Providence Equity Partners. I'm grateful for their counsel as we manage through the current environment. Paul's background provides valuable expertise on capital allocations and we work together to enhance the company's overall return on investment. The COVID-19 pandemic represents a tremendous challenge to the global economy, to society as a whole, and of course, to a company like ours, which exists to offer guests world-class entertainment and hospitality experiences. On an individual level, the suffering imposed by COVID-19 has been enormous. Our hearts go to all of those who have lost family members, friends and colleagues. We have also lost 11 of our own at MGM. We're all extremely grateful to the medical personnel and first responders who are serving on the frontline of this pandemic and also like to recognize the MGM employees who are reporting to work every day and are essential to keeping our properties safe and secure. The most difficult step, however, was to furlough nearly 63,000 employees. This was painful and a hard decision to make, but we are actively preparing for the day and we can welcome them back. As a result of these actions and our real estate transactions, MGM has $4.6 billion of cash on its balance sheet, excluding MGM China and MGP, an estimated domestic cash outflow of approximately $270 million per month while we are closed. During this international health crisis, we have focused on the safety of our employees and guests and in strengthening the communities in which we operate. This has been and continues to be our top priority. As such, we have committed to continue providing health benefits to our impacted employees, and while difficult, this experience has again confirmed the strength of our values and our culture. The company, our employees, and our partners collectively have raised $12.8 million in for the Employee Emergency Grant Fund to provide relief for employees and immediate families in need. We've also given over $1 million in food and products to local communities, provided logistics for 250,000 COVID-19 tests in Nevada, and donated over 1 million units of PPE. MGM China has also made significant efforts to supporting the region through the crisis, including donating $20 million MOP, or approximately $2.5 million to the Hubei Province, Thank you for joining us. I'm going to briefly walk you through some of the key strategic questions that will play a major role in our performance going forward. Right now, we are intensely focused on but a few. How and when do we reopen, and what does it mean to gather safely? While we have always put health and safety at the forefront of all that we do, there are new imperatives. Consumer confidence is key to economic recovery, and thoughtful reopening strategies are vital to building public trust. Thank you for joining us. and both state and federal governments to come up with a set of protocols that will help deliver a secure environment. These will include measures like physical distancing, stringent sanitation and cleanliness protocols, the provisions of PPE, crowd management and more. We're also developing digital innovations for touchless interactions across the guest experience to improve protection and create greater overall confidence in the hospitality environment and their overall experience. We'll continue to be driven by data, by science and by public health guidelines as we evaluate and evolve our operating practices and guest interactions. This brings us to the second question, when we would be able to reopen our domestic properties. Ultimately, the precise reopening dates depend on decisions by elected officials consulting with public health authorities. In MGM's case, that means the governors of Nevada, New Jersey, Maryland, Michigan, Massachusetts, Mississippi, Ohio, and New York. Thank you for joining us. will have made decisions about property openings based on consumer demand and the economics of individual properties. We'll also balance those needs of our employees, our local regulators, and other key stakeholders. In all cases, we will open in a way that protects the health and safety of our guests and our employees, and again, I must stress, that is our highest priority. Now let's spend a few minutes looking back over our Q1 results. Our net income was $807 million versus $31 million in the prior period Thank you for joining us. As expected, performance deteriorated dramatically in March when we were required to close all of our domestic properties. As a result, our Q1 consolidated adjusted EBITDA was down 61% to $295 million, with Las Vegas down 34% and our regional down 28%, and MGM China recording an EBITDA loss of $22 million. Looking ahead, our strategic planning is being driven by three overriding goals. To simplify our operating model, maintain a commitment to strict capital discipline and bring an intense focus on executing our current initiatives such as MGM 2020. Let me touch on a few of these areas. We are significantly reducing our operating expenses by cutting expenses across all properties and corporate departments. This is crucial to achieving long-term recovery. We moved quickly to reduce operating costs through furloughs and freezing positions as well as eliminating non-essential expenditures. Thank you very much. We're carefully also managing our cash to protect the company's financial position. We have deferred or reduced our expected 2020 domestic capital expenditures by at least 50% or approximately $200 million. We've announced that the board reduced our dividend to $0.01 per share annually, resulting in quarterly savings of approximately $73 million. And importantly, we will continue to meet our rental obligations to MGP and Blackstone. We also have strengthened our liquidity positions. In addition to the $4.6 billion of cash on our domestic balance sheet today adjusted for the bond offering, MGP has also agreed to redeem $1.4 billion of our OP units in cash should we elect to have them redeemed. We have additional liquidity levers including our remaining stake in MGP, our 50% stake in CityCenter, and the ROFO asset, MGM China. We also have a 56% stake in MGM China, although to be clear, We continue to believe in the future of Macau and look forward to continuing to invest in our presence there. We have no debt maturing prior to 2022 and just yesterday closed in our credit agreement and addendum providing additional flexibility on our financial covenants. MGM China is also well positioned with over $800 million of liquidity and earlier this month it further amended its credit agreement to provide for additional financial covenant relief as well. Thank you for joining us. Sports Betting, and Online Gaming. And in particular, I want to emphasize we remain fully committed to our partnership with Oryx to develop a world-class integrated resort in Osaka. Let me spend but a moment on Macau. I was recently elected to be chairman of MGM China alongside Pansy Ho as co-chair. I am personally just as excited today about Macau as I was 20 years ago when I first visited. We believe the market will rebound rapidly with the visa scheme once other restrictions are loosened. Our properties are currently incurring cash operating expenses of approximately $1.5 million per day, which is in excessive amounts being earned, obviously, by those properties. While we are currently focused on managing the current situation and driving efficiencies with our current footprint, we will continue to invest in our properties and expand our offerings, especially on non-gaming with more suites and more room product. I look forward to working with the new chief executive of Macau and its administration and to support the strategies for further development in Macau. In summary, we remain confident in the long-term outlook of our business. We had a strong start of the year, which was encouraging and points to the success of a number of initiatives such as MGM 2020 that we had recently implemented. In Las Vegas, our margins were back over 30%. We have leading assets in most of our markets, which will further support a healthy recovery to our business. We will continue to simplify the way we operate and refocus resources into areas that create the most value for our shareholders. On a more personal note, to wrap up, as someone with four decades of experience in this industry, I'm honored for the opportunity to lead a great company like MGM Resorts. The efforts I've outlined today speak to my intent of being clear and focused, of being disciplined in all things, and to striving to be transparent and my leadership of this organization. Hopefully, they will become the hallmarks of what I want to stand for and what this company stands for going forward. While there's no proven playbook for the current challenges we face, I have faith in our deep operating experience, our expertise in safely managing public gatherings, the strength of our long-term plan and our tenure in this business. And more than that, I have a tremendous amount of confidence that the men and women of MGM Resorts and our partners around the world will rise to this challenge Thank you. We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the key.

To withdraw your question, please press star then 2. As a reminder, in all fairness, please limit yourself to one question and one follow-up. And our first question today will come from Joe Greff with J.P. Morgan. Please go ahead.

Good afternoon, everybody. Good afternoon, Bill. I was going to start off, Bill, with you and ask specifically you what you might be doing differently than, say, Jim did in his tenure at TO, but I kind of thought you laid it out pretty eloquently, so... I will not take that as one of my two questions. So starting with question number one, and I know you talked about it. It's premature to talk about the timing of when you can reopen your domestic properties. And so just maybe can you talk about how you think about how you will start to phase in properties, particularly on the Las Vegas Strip? I think before maybe it was on CNBC you said that maybe you would start with properties that are not at the higher price point like Excalibur, nor would it be those properties that have traditionally hosted a large percentage of international visitors if the Las Vegas Strip opens for the summer. How many properties by the end of this year realistically, optimally do you anticipate to be open by the end of this year? How many by the middle of next year? How much of your views will be in reaction to airline capacity coming back and how much of it is dependent on the group business?

Thank you, Joe. I appreciate begging off the first question and focusing on a short and simple one. So I'll go through this maybe in three buckets, and obviously Corey can and will chime in here. Macau speaks for itself and grants on the phone to the extent at the end of this you want to ask some additional questions, but we are hopeful that early this summer, given all the indicators and things we see in China, that that market will begin to open up. Guangdong province of note, which is critical to us. is feeling better, although it goes back and forth, as you know, but the order of magnitude of caseloads there are significantly down, and we feel better about what's happening, and we think there's some opportunity there in early summer. The regional properties, obviously, like I said in my prepared comments, are going to be, as all of these places are, going to be predicated on what the government says. What governors are saying is at least the baseline mandate and our regulators are Thank you for joining us. Mississippi, potentially Maryland down the road of note, and then begin to roll out. You've all seen what's going on in Michigan, so obviously we're in the midst of all of that in Detroit, so we'll take one step at a time. More specific to your question, Las Vegas, we have a view and don't know exactly when. The governor's been speaking almost daily now on when to open. He, like most governors, is looking at a three-phase process trying to open up small businesses, things like golf courses, etc. Understand what happens with the community in that respect. Then go to the next bucket. In some areas, we're in that next bucket, Nevada of note. And in some areas, potentially like Maryland, we may be in the third bucket of activity. But in there, it's believed that gaming will open universally, meaning all of gaming in Southern Nevada will have a chance to open at the same time when it's deemed safe. Again, we just don't know. We're probably looking at two or three offerings initially. Obviously something of a value set. We tend to lean into New York, New York because it's one of our simpler places to run. It's 2,000 rooms. We're probably looking at Bellagio at the other end. I'm wanting to ensure, I'm sure the competitive set down the street is going to open because they only have one in the context of when in Sands. So I want to be in the high-end business. and then from there we're talking about what other properties should open if any at that point in time and you know we'll go slow we'll be responsive and responsible we'll look to the economics of some of it most of these properties need to be between 30 and 50 percent to generate any kind of cash that is meaningful i.e. meaning not going backwards from being closed and so we're going to see how the market responds You did mention the airlines. We were in a conversation last week with Southwest, its president, and remaining of its leadership team. They're still bullish on Las Vegas. The interesting thing, I think, is the point-to-point carriers will come first. Obviously, the hub guys, the United, the Americans, the deltas of the world have other challenges with hubs that may restrict some activity here. But Southwest feels relatively bullish. They won't start here first. But I think over time you'll see them focus on this market because, as always in these circumstances, Las Vegas presents a great deal of value.

Corey, I don't know if you want to... Yeah, I think you hit all the key points, Bill. I mean, obviously safety is a key thing. We want to avoid any spikes in numbers and things like that, so we'll do it cautiously. And in general, a lot of it will be demand-driven. Just as a reminder, about 50% of the traffic coming into Las Vegas is from automobiles. and we do think there will be some pent-up demand and as the opportunity comes about, we'll definitely open up properties to maximize our cash flow.

Grant, anything to add on McHale? Grant?

I think, Bill, I'll just reiterate again. Yeah, Bill, thank you. I guess the challenge is that it's about opening up as you've seen. The critical point for us is that Thank you very much. Thank you. We're very positive. We're very comfortable that we're trying to manage as best we can. But most importantly, from our discussions with our customers, the demands there, the opportunity for them to travel is the only thing they're looking for. Thank you.

Great. That was my question to you, Grant. You answered it. Thank you very much, guys.

Thanks, Jim.

The next question comes from Carlos Santorelli with Deutsche Bank. Please go ahead.

Hey guys, thank you guys for asking my question. So guys, you guys have spent the last several quarters years actually kind of putting together a top-down framework of how to run the business more efficiently and whatnot. One of the questions I had was as you sit from that perspective now having consolidated a lot of your expense rationale and thinking along those lines, how much does that help you in an environment like this where you're almost starting from a very low baseline in terms of expenses and the ability to kind of bring those expenses back on in a smart kind of demand-driven way.

Again, I'll kick it off, and Corey, look, I think it's been immensely valuable. You know, if you recall, we actually started in 2016 with, what did we call it, Corey? PGP. Obviously, 2020... I became Chief Operating Officer last March or something along those lines. And so our ability to understand, frankly, at most every level, whether it was corporate centers of excellence or the various properties, regions, how we were operating, what the things we were doing, why we were doing them, what was really bringing value, we have a very clear lens on. And so now as we think about relaunching in a post-COVID environment and the ramp it's going to take and a number of others. and all the places that we serve.

What I would add, Carlo, is MGM 2020 really is less than a year old. And as we've stood up the COEs and centralized components of it, we've evolved since then. This closing has allowed us to really rethink that and we think there's opportunities to become even more efficient. The other thing that MGM 2020 gave us the discipline on is on our variable labor and staffing to business volumes. We've become very disciplined which is helping out tremendously in a time like this.

Thank you guys both. And then if I could just one follow up. Bill, you mentioned it earlier obviously that the $1.4 billion that's kind of available to you there. Clearly with the balance sheet as it's structured today and the more nimble it's been, the paradigm that you guys are in, there's plenty of kind of runway with respect to liquidity. Is the decision to kind of pull the string on that $1.4 billion more dependent on how this situation evolves six, nine months down the road? Or would you be advantageous in the event that you saw the valuation of that stock more fairly reflect kind of what you and myself included think it's worth?

Carlos, Corey, I'll take that. Look, I think based on the agreement we have with MGP, we really do have a long-dated option. As you mentioned, I think we feel really good about our liquidity position and it does give us, especially what we did last week, it gives us the ability to not be in any big rush. We'll transact when we believe it's the right time to transact and the right point and whatever is the most efficient manner for us. Just as a reminder, MGP is a pretty important stock for us. We have over $5 billion of value in MGP.

The next question comes from Steven Grambling with Goldman Sachs. Please go ahead.

Thanks. I think in the opening remarks you mentioned still being committed to Japan.

Can you just provide an update on the milestones investors should be watching, how the investment timing and size may have evolved, and any color on expected returns? Sure. Japan, like most places in the world, is being impacted by COVID-19. I think literally as early as today, you may see Abe stick additional restrictions for up to another 30 days is what has been rumored to be discussed. I think the impact of that is it will slow down, although we are not definitively sure of the RFP process. As it currently sits in Osaka, and we are ready for this, by the way. We have an RFP submission that is due end of July. Our team has worked hard on this. As you know, we're the lone standing applicant there and we would submit, but I think what may happen is that whole process gets pushed closer to the end of the year, which I think is appropriate and fine by us. In terms of its scale, you see, in terms of other opportunities in Japan, Yokohama has expressed sincere interest, is now working its way through its own process and time to tell whether others actually joined. We still see Asia as a huge build and as a huge upside for the company and frankly for the industry. We're very bullish on Macau in the long run and we're absolutely bullish on Japan in the long run. You're still zoned $10 billion investment and the returns on that to be determined once we get through all the regs but they're significant and they would be significant to the company Thank you. Thank you. Thank you for joining us. that regionally we will see a substantial amount of drive-in. I mean, there's obviously pent-up demand. You saw what happened in the beaches of California when they opened for a weekend. I think they're going to close again, which is not what we want to do, to be clear. But I think you'll see leisure demand. I think you'll see drive traffic, and it'll push what happens from that perspective. The casino has always been active. Our offer set that remains out there, people are still booking into the balance of this year and into next already. They're anxious. They have pent-up demand as well here and in Macau to want to come back. And so irrespective of large-scale events, I think Championship Fight hosted with 15,000 people, the casino segment is anxious to come back. Group obviously will be the last. I would tell you this on group as a way to think about it. We have lost a little less than half of our group business because of the pandemic. and so on. who want to come back to this market and do it in a meaningful way. So we're encouraged by that longer term. Then ultimately, obviously we have a partnership with AEG. We do a lot with Live Nation. Getting back major events is really going to get down to the protocols it requires to host an event of that scale and time. I think that simply is going to probably be the last to cure and to heal Corey, you want to talk maybe the environment inside and the costs?

I think in general we're going to be following a lot of the protocols like many of our competitors are. We'll have the supplies, the gear we'll need, the distancing we'll need. We're sizing that up right now on what that would mean and how we open in all the jurisdictions. We should have a fairly good idea of that by the next time we talk The other area I think where we're going to probably see some decent play, especially in Las Vegas, at a property like Bellagio or any of our high-end is the high-end casino customer. As Bill mentioned, we have been in contact with them, and they were the last to leave when we closed down.

Yes, they were.

And I have a feeling some of them will be back the day we open, so that's positive. But I think the key for us to get our margins back up will be as that group business returns. and what's strange is we still have quite a few rooms on the books for the back half of the year and as Bill mentioned, booking for next year has been very strong and in particular, in comparing it to where we were at the same time last year, looking at 2019 and 18, which is more apples to apples, which was our best year, by the way, in convention room nights, we have more rooms on the books now for 2021 than we do We did for 2019 at the same time in 2018. Great, thanks so much.

The next question comes from Thomas Allen with Morgan Stanley.

Please go ahead. Corey, respecting your last comments, you're still working through this. I'm just trying to figure out, when you do reopen these properties and they're going to be clear social distancing measures, like having to skip a space between slot machines, Can you just give us a rough sense of what kind of percentage of positions you can get back online versus history? It would be 30%, 50%, 70%, any rough sense of the difference between Vegas and regional?

We're still working on those numbers. We'll be able to give you some good ideas. I could tell you the regionals will have more of an impact. The floor is in Las Vegas. were built 10, 15 years ago, and this is our chance to probably right-size them with the proper distancing and positioning. The regionals will take a little bit more effort, and we'll be able to talk more about it in the next quarter.

And, Tom, at PARC, MGM, and at ARIA, we're actually putting down, particularly two of those places, new casino carpet. Now is a good time to do it, and so we're reconfiguring those floors with the space in mind for distancing. and so, you know, the environment will feel a little different when people walk in from day one.

And the only other thing I would add is some of these jurisdictions might have limits to number of people in the building and if that would be the case, our four format would be adjusted for that.

Helpful, thank you. And then, look, this may be a long shot, but you're in a lot better liquidity position than some of your peers. Have you given any thought about going on the offense?

Bill, yes, we've given it, of course you always give it thought, but look, we're going to stay very focused. We don't know how long this is going to take. We like the projects that ultimately, if we come out of this, we've defined sports betting, hopefully an extension of a license and continuation in Macau and Japan on principle. You never say never, but that's not going to be our focus. and, again, not knowing how long all of this takes and what it does to our balance sheet. Look, right now it's strong. If we were up and operating, it would be stronger than it's ever been, I think, in the history of the company in many, many decades anyways. And so we are fortunate in that respect, but, again, we just don't know. Thank you.

The next question will be from Sean Kelly with Bank of America. Please go ahead.

Hi, good afternoon. Hi, Bill. Just wanted to, you have a unique position on some of these larger scale group events, and Bill, I know you spent a lot of time in some of your prior roles in some of these bigger sports relationships and whatnot. Just kind of any insights maybe there? I mean, obviously you've said that the group piece, which I think you're thinking more maybe convention may take time to come back, but what are your thoughts specifically on some of the event-like things? So let's call it sports and some of the key entertainment pieces here, just What are you hearing? What are some of those vendors, you know, the Live Nations of the world saying at the moment? Could you just give us a little bit more color there? Because I think this is important to so many people.

Yeah, I mean, obviously, this is coming from our perspective, so I don't want to speak for Live Nation or EG, but I would say this. As it relates to First Entertainment here, we have a mindset that we will open some of our smaller showrooms, and I'll give a simple example, a Carrot Top or something that's small and intimate with a one-person show. can be open and relatively simplistically. We can provide the proper protections, et cetera. Obviously, that begins to scale a little bit differently when you get to Cirque and then when you get to the big events. On the convention side, it's not easy, but remember, we're fortunate. We have 3.5 million square feet of space in Las Vegas. And so our ability to stretch things out more than most, if not all, is unique. And so we can host an event, and yet it will be a bit of a space pig and a number of others. Long-term, the Raiders stadium is in our backyard, but we may see a few games this year without people. A simple example, we were creating a large pre-game environment outside of Mandalay in Luxor, which can be pretty special. You'd walk over to the bridge, you'd go to the game, you'd be able to come back, tailgate party. We put that on hold because it's our general view that if we're fortunate enough to see real fans, it won't be 65,000. and so we'll probably see stuff like that spring. We have been in ongoing dialogue with leagues and other sporting activities around televised only events. I think boxing, MMA, NBA, NHL, etc. And we can host some of that. We are working diligently with those to do that. But I think the idea that we're going to get 15,000 people in T-Mobile for a concert any time this year is probably a stretch.

That's helpful. And then As my follow-up, and this one's a little bit technical, so my apologies, but just I think in the covenant waiver that came through yesterday, some of the MGP shares were pledged as collateral for the credit facility. And so I was just wondering if you could elaborate on what kind of restrictions that means for either the OP unit repurchase or specifically maybe the ability to sell down MGP shares in the future.

Sean and Corey, we did agree to pledge our OP units as collateral under our revolver credit facility. We did not agree to any restrictions on our ability to monetize the units for cash. So we are not limited in our ability to pursue, for example, the cash redemption of up to $1.4 billion or future other sales. In the amendment, it does provide that if we sell units under a certain level of falling below 30%, then incremental proceeds would have to be used to reduce the commitments as long as we're in this waiver period.

Great. Thanks for that, Corey.

The next question will come from Harry Curtis with Instanet. Please go ahead.

Hi, Bill. I wanted to ask a question about CapEx first. And now that you've been in the CEO chair for such a long period... Thanks, Eric. As you look at CapEx, not in the next six or 12 months, but... How do you feel or maybe prioritize CapEx projects globally and their potential returns once your core business settles down? What are the best opportunities and maybe Grant can chime in on this as well.

Maybe a general overview and then Corey and Grant can clearly clean up. Look, you've seen that we've reduced our capex. I think I mentioned in my pre-opening remarks in half this year. There are things that are going to be essential to maintain the stores in the condition that we think they ought to be. Simple things like room remodels, Bellagio, and others that are just going to be ongoing maintenance costs and things that we're going to want to do. We will become more disciplined on some of the projects. We will become more focused on what's to be accomplished and why. with a real mindset for margin around it in terms of just the day-to-day CapEx stuff. Domestically, with maybe the exception of New York, I think our primary focus is going to be Asia. And so to the extent we can work our way through a license in Macau and a renewal, which we're very hopeful for, and I think, frankly, all this activity around COVID-19, Grant and the team have done a magnificent job putting us in good stead there with the government. But time to tell That would be a large priority. And then ultimately for us, it's still all about Asia and it's Japan. Japan represents without a doubt the chance to move the needle. I mean, we're talking about something that would generate EBITDA in the 20 odd percent range to boost our company and put Asia at roughly a 50% EBITDA percentage in terms of our total EBITDA. So we're focused on that.

To Bill's point, our main focus, especially on growth, will be increasing our return on investment. Domestically, as Bill mentioned, outside of New York, the digital technology components have become big. And I think as we open up in this environment, you'll start seeing benefits from that. And we still think there's a future there. Grant, I don't know if you want to talk a little bit about Asia.

I think the critical issue, I just repeat what we've said previously. We've got the South Suites coming on and that's really important. More accommodation for us is really important. In terms of the existing capital allocation we have, we've critically reviewed all those items and we're actually pulling back on ones because what we also want to be prepared is we want to have some money left in the kitty. We don't want to spend for the sake of spending. So we're actually taking monies we would have allocated. and then identified when we reopen there may be some adjustments we need to make, maybe some food and beverage things. So rather than spending and then having to come back and do it again, we're pulling back. Reiterating what Bill said as well, the focus for all of us is all about the concession renewal and we have significant plans that we've discussed earlier about opportunities to develop but we also need to be mindful what the expectations of the Chief Executive are and he does have different views and what we're excited about is that and we're putting aside funds that we will be in a position to obviously respond to the diversification strategies that he's putting forward.

And then, Harry, it's not huge capital dollars in respect to some of the other things we're talking about, but sports betting, iGaming is a real opportunity. I was just reading this morning Morgan Stanley's piece. I think the market's 8.5, 10 billion. Whatever it is, it's becoming real. In New Jersey, this month alone, If we paced out what we did the last couple weeks in iGaming, it's a $100 million business for us. Pennsylvania's around the corner, Michigan's around the corner, and Colorado's around the corner. And given what's happening in states because of the stress of COVID, we think that'll open sooner than later. And while not extensive capital dollars, it does run in the hundreds of millions, a couple hundred million potentially, before we, quote, turn the corner and really make something of this. But It is without a doubt, I think, one of the things that's not been unlocked in our value, in our valuation, but it can and it will be over time.

I appreciate that. And maybe one more for Grant. And this is a very broad leading question, but can you do enough to satisfy the chief executive? I'll leave it at that.

I think clearly all the concessionaires that are in Macau I think are well positioned and clearly we will do what's necessary. Bill's made it very clear this is the focus of the company. We're very confident, we're very positive. I think the simple thing as I keep saying is we just have to keep doing the things we're doing better. We need to do the right thing by the people. We need to do everything well. I think during this difficult time I think ourselves and all the concessionaires have demonstrated Our true commitment to Macau, to the people of Macau and the future of Macau. And I think that's just how we need to always focus it. One day at a time. It's not a single day decision. It's all about accumulative effort. And that's what we're good at. We're building confidence. We're building respect. And then hopefully for us, the rewards will flow.

Thanks. Thanks, Grant and Bill. Thanks, sir.

Next question comes from Felicia Hendricks with Barclay. Please go ahead.

Hi, thanks so much. So, Bill, you know, there are buyers of assets out there. You know, you have Las Vegas fans that talked about M&A. We've seen news, you know, Blackstone. You know, acknowledging that you might not make that kind of decision now, would you be open to selling further assets?

Thank you very much. but, you know, given where we are today, we've got a lot in front of us.

Look, I think we're in a really good position and I don't think we could get the value that we got for Bellagio or MGM today. And so, we'll build that business back up and if there's an opportune time, we'll look for that.

Okay, thanks. And just, Grant, you had talked about the quarantine in Guangdong and just, you know, kind of watching that as we all are. Just, Adding Hong Kong into that picture, how are you thinking about Hong Kong and the ability to travel to and from there and how important is that to your thoughts about recovery in Macau?

Well, I think it's pretty clear that Hong Kong, Macau and Guangdong, the Greater Bay Area are all inextricably linked. We already know that the quarantining requirements in Hong Kong will not be lifted until the 7th of June. at the earliest. Hong Kong is always an important feeder market. Even many of our customers coming in from China come via Hong Kong as you know. But on the other side of it there is a possibility and we obviously are sitting here hoping it's happening and the Chief Executive even acknowledged that he is in dialogue with Guangdong to see if there cannot be some relaxation or some progressive opening up of the Zhuhai-China border. So We know the Hong Kong date for review. We're still positive and somewhat expectant that we may see some opportunities coming up in May for China and it'll be multi-step. The first will be the removal of the return to China quarantining and then the ultimate objective that we see coming out in the next weeks and months is is the releasing of the IVF system. And that's really the critical point for us once the IVF comes back. So Felicia, I'm sorry, I don't have the specific timings. Those are the steps. As I said earlier, talking to the customers, they're positive, they're confident. All of us are just sitting here waiting to make sure that it's safe to travel. They're confident that we can take care of them. I think we're being very good at communicating that. So we're ready to go. And frankly, after all this time, we're very anxious to get started, as you can imagine.

Yes. Okay. Thank you.

The next question will come from John Decree with Union Gaming. Please go ahead.

Hi, everyone. Thanks for taking my question and all the details so far. Just one for me, maybe for Corey. Last slide in your deck talked about the CARES Act and some of the possible benefits there related to payroll tax and carrybacks. I was wondering if you Give us some insight as to what that quantum might be or if you've kind of sized that up. Is it meaningful for you? It might be a little too early, some of those carrybacks, but I just wanted to get your initial thoughts on what that means for your company.

Yeah, I'll go through each one. I'm not sure I could quantify them all because not knowing where our numbers are going to be, that would be dependent on that. But obviously, the refund of the federal income tax five-year carryback That will play on our 2020 return, which we'll file in 21. That will be a pretty good number based on where our projections are. We haven't quantified it yet, but hopefully over the next few months we'll be able to. On the interest expense deduction limitation for income tax benefits, we also expect to see a little bit benefit of that in 21, but more in 22 since we'll be carrying back most of our loss. There's actually two payroll provisions. One is actually on the payments of furlough and health benefits. We'll receive a 50% deduction on that component. Those regulations are getting written right now. We had a pretty significant payment that we will receive that credit. Actually, right now we're receiving it. And then finally, there's the deferral of the FICA tax of the employer portion. Any of those payments would be deferred to 21 and 22. So we haven't quantified the amounts yet over the next few months. We'll try to put some numbers around that and get that out there.

That's helpful. I appreciate the call, Corey. Thank you.

And we'll take the last question, please.

Sure. And that question will be from David Katz from Jeffrey. Please go ahead.

Last. Thank you for taking my question. Seriously, I appreciate it and all of the detail. Look, there's a bit of dissonance that I was hoping you could talk a bit more about because you have talked about the efforts to size the business appropriately that were ongoing pre-crisis that are still ongoing and may change. At the same time, you know, Reopening may bear some incremental costs as well. Have you had a moment to lay those side by side? Ultimately, I suppose the thrust of my question is, which one's bigger? Does it come out to be net positive at the end of the day? Is that what you're ultimately hoping to solve for?

Let me kick it off and then Corey can... I would argue the other side of that which would simply say if I'm a guest in Bellagio I want to know that my room is pristine when I go in and during my stay unless I want and need clean towels I'm probably not going to let a guest room attendant or any other service personnel in my room and so I think you'll see a varying degree of offsets things like restaurants even though we're talking about opening Bellagio potentially first it won't be full service all restaurants there will be some there will be pick up pick and go if you will for pick up opportunities for food and beverage. And so we're going to take the current state in mind. Until we get through all of the health protocols, it's a bit difficult. And that's why I said two weeks in my prepared comments. But we will be by then to then put in Corey and his team are working diligently around some of the costs. We definitely think they offset kind of the moves we're talking about in terms of structure.

What I would say, David, is we do have a decent understanding of what those costs are going to be. We think we'll end up on the better side of that. And by the way we open the properties and ramp them, we will be able to manage a component of that. More in particular, we think we should be able to offset most of these costs at fairly low occupancy. So As we open properties and determine that, the demand for the town will be a big component of that.

Yeah, David and Taryn, just to clarify something. So obviously we're not giving disclosures in terms of our break-even points, but naturally we recognize that our occupancy and utilization rates are going to be lower as we ramp up. So what we're aiming to do through the cost cutting is lower our break-even points. Got it. Thank you very much. Appreciate it.

Maybe if I could just offer up a couple of closing thoughts, and I appreciate everyone's time today. First and foremost, for me and the company, getting these properties up and operating, doing it in a safe manner, both for our employees and our guests, is priority one. I think, again, we're ideally positioned to do that. We understand the environment well. We understand the organization well. And candidly, we feel the responsibility, particularly here in Southern Nevada, Our industry to this state is the most important industry in any state in the country. More than autos are to Michigan, more than tech is to California, and we are the largest taxpayer and largest employer in the state. So I can assure you we are keenly focused on wanting to reopen, but we will only do it safely. We are going to be a better, more efficient organization moving forward. You have our commitment on that in mind. We know how to do this, and we will do this, and we'll make this as effective as it can be. Obviously, as we roll out, there are going to be things we've never experienced before, so we'll have some ups and downs, but I can assure you collectively we'll end up with a more efficient organization when we fully come out of the other side of this thing. Despite all of it, we are not going to lose track of our long-term strategic initiatives. We are keenly focused particularly on sports and iGaming in this timeframe. There is real money, particularly in iGaming today, and sports will begin to unfold this fall and hopefully sooner. And our real estate strategies in creating, yet again, a fortress balance sheet are critical. The notion of asset light moving forward is critical. And ultimately, my goal, my desire, my push, and I know it's shared by our board, is to be ever-present and larger and more meaningfully involved in Asia, both in Macau and hopefully in Japan if we're fortunate enough to win a license there. So I thank you for your time. Everyone be safe and be well and I look forward to talking to you again next trip. Thank you.

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