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.