MGM Resorts International

Good afternoon and welcome to the MGM Resorts International Second Quarter 2020 Earnings Conference Call. Joining the call from the company today are Bill Hornbuckle, Chief Executive Officer and President, Corey Sanders, Treasurer and Chief Financial Officer, Hubert Wang, President of Hospitality and CFO of MGM China Holdings Limited, and Jim Freeman, SVP of Capital Markets and Strategies. 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 also note, this conference is being recorded. Now, I would like to turn the conference over to Jim Freeman. Sir?

Thank you. This call is being broadcast live on the Internet at investors.mgmresorts.com. and we have also furnished our press release on Form 8-K 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 periodic 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 in talking about our performance. You can find the reconciliation to the GAAP financial measures in our press release and investor presentation, which are available on our website. Finally, the presentation is being recorded. And I'll now turn it over to Bill Hornbuckle.

Thanks, Jim. Thank you all for joining us today. I hope you and your families are safe and well. On the heels of our announcement yesterday, I am pleased and honored to be addressing you as the CEO and president of MGM Resorts. I'd particularly like to thank Paul Salem, our chairman, and the entire board of directors for placing their confidence in me and in our entire management team. This is a vote for them, for not only them, but also myself. They have stepped up during an incredibly challenging time. Our ability to reopen, remain operational, and provide world-class experiences is a tribute to our dedicated workforce and engage in support of board of directors, civic leaders across the nation, and a sincere commitment to health and safety by all of us at MGM Resorts and the broader gaming industry. While we are proud of the role we've played in helping to restore economic stability to the people and communities that depend on us, we know the public health crisis is far from over. We continue to evolve our seven point safety plan and our overall response to varying infection rates, including mandating masks at all of our domestic properties and continuing to manage hotel occupancies and facility capacity. We are committed to learning from each new opening and from each new operational challenge we face. We are focused on implementing both our MGM 2020 plan as our revised operating model and remain diligent in affecting and managing costs. We are proactively engaged with local governments, regulators, and public health experts, acting as an informed and sought-after voice in conversations about public health and safety trends, restrictions and protocols as they continue to change and evolve. And we remain focused on ensuring we maintain our strong balance sheet and an operating strategy designed to maximize cash flow despite these very difficult times. Necessarily, our focus is on operating with diligence and restoring stability in the short term. But for many of the reasons I just noted, and more detail we'll get into in a moment, I accepted the role of CEO believing our long-term outlook remains positive and that our future is strong. Our strategy remains unchanged with a discipline focused on operations and execution of targeted growth opportunities. With that, let's talk about the quarter and the state of the business. In the second quarter, we opened nine domestic properties, and we have subsequently reopened five more. Today, we have a total of 14 properties from our 18, if you count Vidar, at the start of the pandemic. Domestic properties that opened in the second quarter generated positive EBITDA faster than expected, and we saw significant growth in our domestic margins driven by optimizing our business to serve higher quality customers given the pent-up demand, primarily in our casino market side, Leveraging our MGM 2020 plan and operating model work to manage costs and discipline, and we remain selective in keeping lower margin amenities closed. In Las Vegas, revenues at reopened properties declined 50% year over year, adjusted property EBITDA declined 44, and our margins increased roughly 450 basis points over the same period. Despite the lack of conventions, shows, concerts, and sporting events, We leveraged our MLIFE database to drive better-than-expected demand in quality casino customers. We also had a higher-than-normal table games hold, which positively impacted our strip-adjusted property bidar by approximately $8 million in the quarter. Transient and wholesale leisure business also performed better than expected as we entered the summer pool season, and as expected, drive-in traffic levels are recovering faster than fly-in. Looking at the regional operations, second quarter revenues at Reopen Properties declined 31% year-over-year, and during that period they were open. Adjusted property EBITDA was down 14, but margins increased approximately 880 basis points during that same period. Our regional operations include larger integrated resort properties like those in Las Vegas, which rely on air travel and lodgers like Beaurevage and Borgata, and to drive markets, which are naturally performing better. During the period they were open, our drive to regional markets grew EBITDA by 18% with margin improvement by over 1400 basis points. We have been encouraged by the dedication of our teams to create high quality experiences for our guests that they can enjoy and believe that our messaging is resonating well in all of our marketplaces. We are diligently focused on managing costs while continuing to do everything necessary to ensure the health and well-being of our guests and our employees. During closures, we reduced 85% of our operating expenses. And as we reopen, we are managing variable labor to closely match demand. We also identified certain expenses and amenities that we believe we can eliminate as they are not essential to guest satisfaction or demand. And as such, we believe we can reduce our overall domestic operating and corporate costs by approximately $450 million compared with the 2019 levels. These savings are a combination of one, MGM's 2020 initiatives that were put in place at the end of 2019, and as you heard and remember, yielded tangible results in January and February before the nationwide shutdown. As well, new initiatives that were adopted in a post-COVID world is part of our revised operating model. Therefore, we believe when demand returns, we'll be in a much stronger company. In the near term, Some of these cost savings will be partially offset by approximately $100 million of annual health and safety expenses for a period of time. Further, as we mentioned last quarter, we remain disciplined on capital spend and have deferred or permanently reduced our domestic capex by 50% this year to approximately $200 million. Liquidity is of utmost importance, especially in current times, and we continue to take steps to further bolster our already strong liquidity positions. During the second quarter, MGM Resorts, MGM China, and MGP collectively raised $2.45 billion in the debt capital markets. As of June 30, MGM had over $8 billion of consolidated liquidity and $4.8 billion at our domestic operations, excluding MGM China and MGP. Our current stake in MGP is 57%, and in addition to our strong liquidity, we also have the right to have MGP redeem an additional $700 million of OP units under our current agreement for cash. And finally, we anticipated about $270 million of monthly cash overflows while our properties were closed, and we did a little better than that in April and May. With our properties beginning to reopen in June, we significantly reduced the cash burn rate, although it remains negative. Turning to our longer-term domestic outlook, all of our Las Vegas properties are open with the exception of Mirage and Park MGM Nomad, and six of the eight regional properties have opened. We just announced that MGM Grand Detroit will open to the public on August 7th, with VIP guests coming in a couple days before. And Empire City, as you presumably know, will be the last to open out of our regionals. Currently in Las Vegas, COVID-related headlines continue to have a meaningful impact on booking trends and cancellations. And candidly, our visibility is limited to booking windows that are currently less than a week. We are seeing slower occupancies on the weekdays, and we're offsetting this on the weekends with demand where the demand is far more robust. All of our reopened Las Vegas properties are burning less cash with the exception of Mandalay Bay are currently EBITDA positive. However, we continue to believe that material recovery will be dependent on the return of conventions, entertainment, and significant air travel. We continue to see results in July at all of our regional properties. We see strong results in July at all of our regional properties and our drive-to properties continue to show EBITDA growth and margin improvement and our integrated resort properties are simply just now ramping up. We're encouraged by the relative stability and demand that we have seen thus far. The current situation, however, is fluid. Further openings of our Las Vegas resorts as well as amenities across our domestic properties will continue to be based on expectations for demand and maximizing cash flow while balancing the needs of our guests, our employees, local regulator and other significant stakeholders. Despite the current challenges, there are two important assurances. First, we absolutely believe the fundamentals of our business and industry have not changed and will ultimately recover. And second, our cost-saving efforts are yielding tangible and seeable results. Taken together, this means we're poised to emerge from the crisis a stronger, more efficient, and sustainable company. Moving on to BED MGM, we are focused on targeting growth opportunities. We're excited to announce that just a few weeks ago that MGM and GBC have committed to an additional $250 million of capital in support of our sports betting vertical, BetMGM. This brings our total commitment of capital to $450 million and demonstrates our continued commitment to positioning BetMGM as a leader in sports betting and iGaming. BetMGM is a business that was created from scratch and is now showing strong momentum. Evidence of this can be seen in what we've been able to achieve in New Jersey with BetMGM's FedMGM has gained market share and significant growth in the iGaming revenues. Driven by this success, FedMGM is now on track to generate over $130 million of net revenues this year. We have secured access in 19 states, are live in 7 states, and expected to be live in 11 by year end. We also feel that our omni-channel experience is unmatched and a significant competitive advantage in this space. BetMGM offers a consistent experience through its web, mobile, and desktop platforms, as well at all of our U.S. land-based resorts, a clear differentiating factor that nobody else can claim. The new BetMGM app officially started to roll out last fall in New Jersey and launched in Las Vegas and Michigan right before the shutdown in March. Equally as important is that we believe BetMGM will allow us to more frequently engage with our guests and drive deeper loyalty to the MGM brand. To that end, BetMGM achieved a major milestone last week when we integrated our MLife customer loyalty program with the BetMGM platform. Players will now be able to view their MLife tier status, earn tier credits over time, and ultimately redeem credits for MGM experience beyond sports betting and iGaming. In addition to our $34 million MLife database, we also believe we have the right partners to drive efficient customer acquisition. For various professional sports leagues and team partnerships, as well as exclusive deals with Buffalo Wild Wings and Yahoo Sports. In fact, we just launched to Yahoo's 64 million monthly active users last week. We made a lot of progress, but there's a lot more to be done. And since launching, we have become convinced that the market opportunity is larger and will develop more rapidly in the US. We believe that we have the assets to be a long-term winner in this space, and we are focused on execution to unlock true value. We continue to believe strongly that this is the largest growth opportunity in U.S. gaming. Having covered the U.S., let's spend a few moments on Macau. While MGM China's properties were open in the second quarter, the Macau market continued to experience significant year-over-year declines driven by border and travel restrictions, driving second quarter market-wide GDR down 96% and visitation nearly down 100%. A couple of weeks ago, the 14-day mandatory quarantine between Guangdong and Macau was lifted to certain major cities within Guangdong, and yesterday it was extended to the entire province. Today, we heard that mainland China was resuming the issuance of visas, with the exception of tourist visas, starting on August 12th. These are initial steps in an encouraging direction. However, Hong Kong borders remain shut, and the IBS and tour visa programs have not yet restarted, which we believe is necessary for a meaningful recovery. MGM China's monthly cash outflow are currently about 65 million a month and with 1.5 billion of liquidity, they have over 22 months of buffer in a near revenue scenario. We continue to believe that this market can recover quickly once the current restrictions are lifted and we have an experienced leadership team who is ready when that time comes. Speaking of leadership, we recently announced the departure of Grant Bowie as CEO of MGM China. Grant was with the company for over 12 years and the industry for longer, and he had deep experience and knowledge in the marketplace. While he is no longer involved in the day-to-day, he's on retainer to help us with key strategic opportunities over the next couple of years. We've had a seamless transition with joint presidents both Hubert Wang and Kenneth Fang taking on new leadership roles last year as COO and CFO, respectively, in preparation for this development. The MGM China team is in great hands, Pansy as co-chair, and I as chair will continue to be deeply involved, providing additional continuity and strategic leadership. In closing, our long-term outlook remains fundamentally unchanged and I draw confidence from five key advantages. One, strong MGM 2020 plan implemented even before COVID and our revised operating model work has created 450 million in permanent cost savings to our business, meaning when we recover from this crisis, we will be a stronger company. Two, our proven ability to learn quickly and adapt swiftly. Our skill as sophisticated and experienced operators has been affirmed by this crisis. Three, the high quality of our assets and our market leadership across the U.S. where we have a significant presence. Four, and maybe most notably, our people who despite extraordinary stress and hardship have shown up to deliver safe, welcoming, and entertaining experience for our guests, and finally, An amazingly strong balance sheet that will help us weather the storm. Furthermore, while we are currently focused on day-to-day operations, we continue to make progress in our key growth opportunities, developing BetMGM as a leader in U.S. sports betting and iGaming, expanding our footprint in Macau and our re-licensure, and developing a world-class integrated resort in Osaka with our partner Oryx, which we remain excited about and committed to. For these reasons and many more, I was proud to lead MGM Resorts through this period of uncertainty towards a more promising future. With that, we'll be happy to take your questions. Thank you.

Thank you. We will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad. 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. We will pause momentarily to assemble the roster. And our first question will come from Joe Greff with JP Morgan. Please go ahead.

Good afternoon, everybody. Bill, congratulations.

Thank you, Joe.

All deserved and unsurprising. Thank you. Also unsurprising, maybe, is that my first question, my follow-up questions relate to Las Vegas. I'm estimating that the five reopened Las Vegas strip properties in June generated about $50 million of EBITDA with margins of about 33%. Are these five properties ramping run rate EBITDA higher or lower in July and have the three new properties newly reopened properties, have they had any kind of cannibalized impact and are they generating positive EBITDA? I heard your comment about Mandalay Bay and then I had the follow-up.

Let me start it off and then obviously Corey can pick up with some limited detail. Obviously there was a great deal of pent-up demand leading into June and so we saw it and then I think you all saw and heard clearly you did the national news that impacted the Southwest and Las Vegas and so we were off to a strong start. Our casino segment responded well. About a third of our market mix was casino. There was pent-up demand there. And so we got off to a really good start, clearly here in Las Vegas and regionally as well, at least on those properties we've had open. July stabilized, for lack of a better word. We have not seen nor would we have opened because we took into consideration as we opened each property what the cannibalization would be. and so we believed as we opened each property that we'd be net benefit cash. We'd get more people back to work and that ultimately in the long run it would serve us well.

Corey, I don't know if you want to answer any of the specifics, but... No, just going into a little bit in July, Joe, as a reminder, we held pretty well in June, which would help not only the EBIT and the margin. As Bill mentioned, the color is, you know, on the weekdays... We're eking out some profit in some places and others we're burning less cash. And the weekends continue to perform the way that they performed in June. So all in all, I think Las Vegas is challenging. And the trends in July are a little bit less than they were in June because of the hold. But I think we're seeing some pretty strong demand in our limited capacity on the weekends.

Just on the pace or the rate of strip property reopening, obviously happy to see them open, but the pace seemed, I don't want to say hurry is the right word, but at an accelerated level, that kind of surprised us. Why wasn't there a more measured staggering or spread out of property reopenings? And maybe I'll help you answer that question. What is the difference between keeping, say, a core strip property closed and opening it with limited demand in terms of daily OPEX run rate levels?

Well, I guess at 40,000 feet, sticking to what we said earlier, the only place that's not making cash flow positive is Mandalay. So collectively, we've made the right decisions. Remembering there are a series of protocols throughout all of our properties, regional and most notably Las Vegas, that tie us to between social distancing, so many people at the gaming position or the gaming table. The pool of note has been a big restrictor in terms of an amenity that people want and frankly not need, but need in a summertime environment, summertime resort. And so we were answering to demand. We're running roughly 30s, midweek, 50s weekends. And we believe we can, you know, and we've proven it to date, continue to make a profit at that. But remembering there's a lot of protocols put on us If you go into a restaurant, it's at 50% capacity at best case. And so it is about you can only get so much and so far with the restrictions we have on us. And frankly, we thought it was important to keep the brands alive and keep people motivated and excited to come to Las Vegas.

And Joe, what I would add is as we approach this, because of the way we approached it, getting all the cost out of the organization right away, we've been able to staff based on demand and to Bill's point, we are able to burn less cash even at low occupancies on the weekdays. So from an MGM perspective, we think we're increasing our EBITDA by having these properties open even though we may not be making a ton of profit on the weekdays. Exactly. Great. Thank you very much, guys.

Thanks, Joe. The next question will come from Thomas Allen with Morgan Stanley. Please go ahead.

Good afternoon. I'm just focusing on sports betting and iGaming a bit. You highlighted your impressive share in iGaming and our numbers suggest you've been taking share in sports betting too. Can you just talk about some of the initiatives that drove the higher share? I mean, you mentioned you launched MLife, but that was relatively recent. So can you just talk about some more of the things you've been doing? Thank you.

Look, you know, like any large-scale organizations, we were large-scale GBC, just getting the business up and operating was its first hurdle. Then getting it orientated, particularly on the sports side, to U.S. customers, U.S. betting behaviors was an education. And then candidly, understanding what it was going to take to win the market and win the day was just that more marketing, more dollars, more commitment to it. And so, We got aggressive, and frankly, we're going to continue to be aggressive. We think there's three or four key winners in this space, and we intend to be one of them, hence the reason for the doubling down, if you will, with the additional investment both from GBC and ourselves. It's hard to catch up when you're behind in a market like New Jersey. We have viable and significant competitors, but our brands do stand for something, and the fact that people can come on, do a loyalty experience, and ultimately translate it into a brick-and-mortar real experience is a key differentiator that I think long-term is going to pay dividends. And so we've simply turned it up and gotten aggressive. And particularly because of COVID, iGaming, it's paid off. We're gaining share in sports. I think we're up, I mean, if you count ping pong as sports, but we're up to 7%. And we have high hopes for Michigan and some of the other states we've just launched in.

Alpha Color. And then just on the brick and mortar side, and maybe specifically around Vegas, What do you see in terms of customers coming back? I respect you haven't had the properties open that much, but the experience has fundamentally changed for the time being.

Are you still seeing people come back at the same rate? Well, when you say the same rate, I mean, look, the average customer from Las Vegas comes like 1.2 times a year. Our average MLive customer comes between 3 and 5. So the cycle's been too early to tell. We've seen some repeat, but again, remember my comment earlier The booking cycle is literally five or six days. And so some are motivated by, you know, promotion, particularly the casino marketing, those that are near and dear to their heart, and some are motivated by news or not, as the case may be. And so, frankly, Tom, it's just a little too early to tell, I think. That's right. Thank you. Thanks, Tom.

Our next question will be from Steven Grambling with Goldman Sachs. Please go ahead.

Thanks. Two follow-ups. First, on sports and iGaming, as you look at the growth in New Jersey both before and after COVID, how would you characterize the customer demographic of iGaming and how much is incremental versus your existing brick-and-mortar customer? And does that iGaming customer differ from sports betting customers?

I'll take your first shot. Look, there is clearly some overlap between our customer database and what the iGaming market was. I just told you we just integrated MLife, so it wasn't like it was an extensive MLife integration. So those were self-defined customers that were motivated by the promotion and the activity case around the market. We can and will do, I think, a much better job gaining them. There is overlap, you know, 20 to 30 percent, I think, of iGamers or sports bettors and vice versa, give or take. And so I think you'll see a lot of that convergence as we go forward. And the ability to to equally promote and give reward against both activity cases. I think we'll grow that and grow the scale of convergence back and forth. Obviously, we've only had Borgata open a couple of weeks, but I will tell you two weeks ago was our best iGaming week after Borgata opened in our history. I can tell you that as a point.

Great. And as a change in gears as a follow-up on Las Vegas, perhaps I missed this, but can you just talk a little bit more about what you're seeing on the group side and maybe even what – What would normally be the group percentage at this point of the year in June and July versus as we're looking at 3Q, 4Q?

Well, let me give you the macro and then Corey can get into the specifics. Look, we've lost just over 2 million group room nights. 83% give or take have been in 2020. And as you probably heard, CES trickled into the first quarter and so we're losing some activity in the first quarter. Flip side of that and why I am fundamentally solid on our business is that we've only lost two groups of substance beyond the first quarter of next year. And so what groups are saying and what they're doing is they're hanging in as long as they possibly can. Fundamentally, they want to come back. They understand this experience. They want and need it. And I think we're ideally positioned, given our scale, we've got like 3.7 million square feet of space here, to spread groups out, make a meaningful opportunity for them as they think about coming back. But the short term, it's going to be challenging. Corey, the numbers?

Yeah. In the second quarter and third quarter, this is an area where Las Vegas has done a really good job over the last few years. And we were able to get our mix up in the high teens. Pre, you know, three, four years ago, that used to be a high single digit, low double digit occupancy percentage. So The summer is usually not as much on the convention side as we would expect to see in the fourth quarter.

Got it. Helpful. Best of luck in the back half. Thanks so much.

And our next question will be from Sean Kelly of Bank of America. Please go ahead.

Hi. Good afternoon, everyone, and congratulations, Bill. I just wanted to ask about the Vegas margin piece a little bit more. So specifically, it sounds like there was clearly some hold benefit in the quarter. So when we look at the 450 basis points of improvement that you saw, could you help us split out just for the operating piece that was open, what maybe the hold impact on that was? And then probably much more importantly, can we just talk a little bit about kind of your thoughts on perhaps, you know, when things do normalize and stabilize out probably several years from here, you know, is that 450 basis points sustainable for Vegas or how much of that do you kind of think sticks when you think through some of the initiatives that you've made, the complexing of the property presidents, you know, etc.?

So let me take the second one first and I'll turn the first one back over to Corey. Look, we think the $450 million we talked about earlier in my prepared comments is sustainable. We think it's real. It's a combination of about half of it comes a little less than half carryover from 2020. Part of it is the restructuring of the organization that we did during COVID. And part of it's just other margin increase programs in terms of amenities and things we've consciously made a decision to candidly never go back to. and just a keen focus on the broader pieces of our business. So the 450 is sustainable. You may recall we'd spoken about margins that were over 30 historically. And so in terms of how we looked at 2020 initially before this all hit. And so I'd like to think we can improve on that with the 450. But I think to your comment, We've got a long way to go before we get back to 19 levels. So, Corey.

So, yeah, of the 450, we would be up about 100 basis points on hold. Just as a reminder, our biggest impact is on the hotel side. And that is very high margin business that will always impact our hold. But as we look forward in the future, as Bill mentioned, with the 450 of savings in there, that... should be equal to the 4.5% of basis points. And put that to where we were in the past, in 2019, and I think you'll see margins that are exceeding what we had even before 2019. Great, Corey.

And that sort of builds on, I guess, the follow-up, which is really a portion of the 2020 plan was obviously in process throughout 2019. I think some significant run rates had been hit by the third and fourth quarters, if I recall correctly, though obviously a lot's changed over the last six months. So is a portion of the 160 sort of like already in the base, if you will, or can we look at that 450 million I'm speaking to as basically entirely incremental to where we started in 2020?

It's all incremental. The run rate did not include this 160. A lot of these initiatives were implemented in the third or fourth quarter last year, including some of the things we talked about, robo bars, cashiering, a lot of the components that we started really seeing the benefits in January and February. As Bill mentioned, the remaining amount, the corporate expense, the Thank you for joining us today.

So today, 25 to 30% of our market mixes, our customers are checking in digitally. They never come by the front desk. Their iPhone is basically their room key. And that is before business and corporate America shows up. And so obviously there's a greater, we believe, a greater likelihood they'll even use that. It is an experience. It's seamless. You don't have to wait in a line. It's effective. It's working. We are now launching literally this week the same thing for menus and ordering food all digitized. You don't have to make a phone call. And so this is helping us get really efficient and effective in many of the operating things that we've done. And so, you know, our basis will improve. That 450 we think is very, very real.

Thank you, everyone.

And the next question comes from Alicia Hendricks with Barclays. Please go ahead.

Hi, thank you so much. I will add to the list of folks who are congratulating you, Bill. Thank you. Sure. So looking at the 450 basis point improvement that you saw on the strip and then the 880 on the regional, Corey, just wondering, is that a good metric to use as we're trying to figure out what your monthly OPEX is today in both of those areas?

I think to look at it from that, there's so many variables and obviously the high quality of customers, the pent up demand, the revenue side I think is something obviously we can't control as much as the cost. We're really comfortable where our labor components are. We have brought back less than 50% of our employees based on what we're allowed to do and I'm not sure we'll see a change in that anytime in the near future. Just as a reminder, and Bill said this in his opening remarks, we took out 85% of our costs. We're running about $20 million a day in total cost. We're actually, when we were closed, we're running about $3 million a day. Payroll is our biggest expense. Being under 50%, I think you guys could probably do some work there and get to a number.

Okay. Thank you. And then just Hubert, get you going here. How are you? So, you know, look, there was an announcement today, you know, that China, from China, that, you know, the visas are going to be issued to Guangdong residents for business travel and family, not tourists. So just wondering how you're viewing that announcement, and do you think it's a good leading indicator for the IVF? And also, is it fair to assume that people who have a business visa could be visiting the casinos?

Yeah, so let's go back a little bit just to see what has happened since mid-July this year. So first of all, on July 15th, Nine cities in Guangdong province quarantine was lifted for these cities. And then on 29th, yesterday, quarantine was lifted for the entire Guangdong province. And the news came out also that non-tourist visa will start to issue on August 12th. So you can see a pattern that every two weeks there is some new development and loosening of the border restrictions. These are magic steps, I believe, towards IBS resumption in the end, and we believe that this will happen sometime in mid-September, or could be even a little bit earlier if you go by the two-week intervals, maybe starting with Guangdong province. So in terms of business impact, those people with Business visa before COVID-19 or when they obtain the business visa, yes, they will be able to travel to Macau. And when they return, they won't be subject to quarantine. This will be helpful to our business.

Okay, that's a very helpful overview. Appreciate it.

Next question will come from Carlo Santorelli with Deutsche Bank. Please go ahead.

Hey guys, thank you and congratulations. Just a quick housekeeping one, and I'm not sure, Corey, if you have this information, but for your Las Vegas operations, could you quantify what the negative EBITDA was for the period of April and May prior to the openings? You know what, Carl, we'll come back to you on it. Give Kathy and Jim a call. I think we'll be able to get to those numbers. Got it. Thank you. I'll do that. And just holistically with respect to kind of the invited guests and things like that that you started with and then kind of opening to a broader subset, if you guys could kind of just talk about what you're seeing kind of post that

Early opening period that you kind of focused on your Better M Life customers and whatnot.

And what you're seeing maybe more recently as we've moved into July, you've moved four weeks from specific property opening and whether or not there's a meaningful bifurcation of the trend that you're seeing in your regional assets versus your Las Vegas assets.

So let me kick it off, Carlos. The regional assets remain strong. The biggest restrictor, and I use National Harbor as the example, where we're doing exceptionally well since opening is the number of gaming positions. It is the restrictions around what the government has placed on us in terms of gaming positions, things that you can do, et cetera, number of units that are actually open on the floor. The rev pours, if you will, more applicable I think here in Las Vegas, are up like 25%. Back to the regionals, it remains strong and consistent, particularly in places like Tunica, Ohio, National Harbor, where there's real drive-in. Places like the Bow, and Atlantic City is too early to tell, and Atlantic City, as you know, has very difficult restrictions where you have to literally eat outside. By the way, the first three days we were open to rain, so that was a pleasurable experience. But, you know, even at the Bow, we're just now getting back into our summer air program. You know, air is critical to feed that market and that property, but the pure drive-in properties are doing exceptionally well. Here, it's been consistent. Yes, the tampering a couple weeks ago of news around increasing COVID cases and the whole Southwest going red, if you will, every time you turned on CNN, has been a challenge, but not really in that segment. And so it's more about leisure. It's more about leisure coming and goings. And again, like I said, it's a short-term window, even for casino customers. But we've seen a lot of high-end action. I mean, you heard the number even for June. and we continue to see that mostly through the weekends.

Understood. Thank you very much guys.

Thanks Coach.

Our next question is from Chad Beynon with Macquarie. Please go ahead.

Thanks for taking my question and congratulations Bill. Thank you. Sticking on Las Vegas, you touched on the convention market in 2020 actually holding in quite strong, or 2021 on the sensation side. How should we think about the entertainment, the residencies, Cirque? Those types of events, how quickly can these be reprogrammed once we get a vaccine and airlift is sufficient?

Yeah, once we get to an environment where we can fill a better part of 50% of those venues, and that's really up to the government more than anything, we have an opportunity. And so, you know, using O is the most significant example. We've been looking at how long would it take to gear it up, and it's between three and four weeks. The great news is the vast majority of those performers still reside in Southern Nevada. They've not left the community because, candidly, there's not a lot of places for them to go in this world. And so everyone's hanging in there waiting. Obviously, in Cirque's case, they're going through a bankruptcy. But in every case, everyone we've talked to who are seeking to control that company, recognizing and understands that Las Vegas is basically the foundation of that company, and so we have high hopes for Cirque. Frankly, some of our smaller shows are easier. Comedians could be back in a week or so and then some of the larger events, of course, whether it's sporting, T-Mobile, et cetera, you can't necessarily do it on 50% and so we're gonna have to wait, I think, unless the artists themselves are prepared to do different economics and to date they have not. I think you're gonna have to wait to see a full recovery for T-Mobile to host 20,000 for pick your favorite artist.

Thank you. And then on, I guess, medium term regional gaming margin expectations, a lot of your competitors are massively reducing labor and marketing, you know, starting from a fresh sheet of paper. I think you guys were right around 27, 28% pre-COVID. Do you have an updated view on kind of where this could go if revenues are close to normal, just a different level of expense expectations?

Yeah, I think this is Corey. Obviously, we have observed the same type of trends, and we would expect some of these costs not to come back, and they are part of the numbers that we have given you as the cost savings. I think the cost structure, I think, is pretty predictable. I think it's the revenue structure and the top line on how strong that could remain given the CARES Act is going to – The unemployment is actually going to go away. I think you had a pent up demand where some of your players who used to come weekly had a big wallet. And so to see how that fulfills and how long that lasts, that's going to be the important thing to determine what the margins are going to be at those properties. Thank you.

Next question is from John DeCree with Union Gaming.

Hi, everyone, and I'll join in. Congratulations, Bill. Thank you, Jeff. I wanted to maybe, Bill, get your a little bit more update, if any, on Japan, kind of near-term, medium-term milestones. Obviously, a lot has gotten maybe brushed to the side a little bit as we all deal with the pandemic, but wondering if you could give us a little bit more information on kind of what you're looking for over the next couple of months as it relates to moving forward in Osaka.

Sure. I think as everybody knows on the phone, we have a really great partnership we formed after a lot of hard work for many years with Oryx. At the end of the day, we'll have between a 40% and 45% stake in that operation, so it's relative to the overall investment and the risk-reward, if you will. We see over the next couple months, we were prepared by end of July, which was the latest deadline to submit an RFP. That process has been stopped. We don't have an extension date yet, but we do believe it will be delayed, presumably to the first part of next year, but officially we don't know that yet, but that's the presumption. We are ready to submit either way. As you know, there's a great deal of things to be worked out there. We'll only make this investment if we think it's going to be prudent, if we think it's going to pay the kind of returns that it needs to pay and to meet our expectation. So there's a long way to go. We love where we're sitting. We love the opportunity in Osaka. We love our partner in Oryx. We like that we're not fully all in on this investment. and we like the fact that there's probably going to be a delay and a reopening of some of the conversations that will hopefully make this a better investment for anybody interested in it, most notably us.

Thanks, Bill. That's helpful. And if I could bring one back to Las Vegas, maybe a little bit abstract, but I'll take a shot at it. When you talk, Corey, to group and meeting planners and they look ahead, you've indicated that particularly outside of one queue of next year, demand is holding up and attrition has been limited. What do they need to see? What are they telling you, level of comfort? I mean, what are they looking for to get going again? And maybe the direct question is beyond cancellations, are you still seeing people book longer out, a year, two years out for larger conventions? Has that business kind of continued to go? I mean, planners kind of really looking forward to get back to, I guess, what are they telling you? What are they thinking about as they think about planning the next couple of meetings ahead? Is there kind of any insight you could offer into kind of the customer behavior on the event planning side would be helpful?

Well, yeah, I could tell you this definitively. Over half of the groups have rebooked for future dates. So of the two million room nights I mentioned, a million of them have asked to rebook. And so the ultimate desire to want to come back, is in fact in play, whether it's an extension in 24, whether it's Let's Go earlier next year versus later this year. And so there's an appetite to do that. They have become very comfortable, generally speaking, with the safety protocols that Las Vegas has put in play. Our team has extensively been involved with national organizations around, with meeting planners, MPI, and others. around what's required, what's needed, what's necessary, what are people thinking about, what are companies thinking about to make sure the experience is safe. So obviously a lot of it has to do with just the incidence of COVID cases, getting that back under control, opening up the airline inventory, and not as much about will it be ultimately safe when I get there in the environment that we've created. I think we've managed to convince customers that once you get here, it will be, It's frankly our ability to get them here and our ability to host them at scale. Right now we're restricted to no more than 50 people. But again, I think the predominant reason I have long-term fundamental belief we're going to be fine, that group, which is really the only window we have into the future, if you think about it, has been very promising and very deliberate about wanting to stay engaged. Anybody who sells product, most notably, and it happens often in Las Vegas, whether it's CES or corporate America that comes here, you've got to get in front of people to sell product. And so if you think about the tech companies we host, you think about the trade shows that come to Las Vegas and our company at Mandalay, it's all, not all, a vast majority of it is about sales and selling something. And so you've got to do that one-on-one. And so they're anxious to return to that to grow their own revenues.

And the other thing I would add, John, look, I think it's individually, these groups are trying to figure out how to do this. Just this week, you heard CES cancel, but on the same day, SEMA, who's supposed to be in here in November, is saying they want to be here, they are hoping to be here, and it will all be about the COVID test numbers. So, you know, I think, not that we think it's going to be great over the next few quarters, There are opportunities where you'll see some groups meeting. We actually had our first group, although be it small, at Luxor today. But I think people are dying to get back and meeting, but they want to do it in a safe and in the right environment.

And John, just to set the stage, I mean, look, we think the first half of the year is going to be hampered. Obviously, the first quarter is. Then you run into summer. So it's going to take probably a full year from now before we get back into Real Mode, and then Group Business takes a time. If it hadn't pre-booked, it takes time to re-book. So we're optimistic, but we want to be realistic with you all.

Bill, Corey, thanks. I don't think I articulated my question that well, but you've certainly answered it. Thank you. Thank you.

The next question is from Barry Jonas with SunTrust.

Hey, first off, congrats, Bill. I guess I'd start with you in your new permanent role. Are there any new, maybe longer-term philosophical or strategic changes you'd evaluate? Maybe it could be the composition of the property portfolio or anything else worth highlighting.

I'd tell you some of the operating principles and how we're thinking about both short, mid, and longer term. First and foremost, it's ensuring that we're extremely disciplined. We got a little less than, frankly, at times. We saw ourselves in things that maybe didn't matter as much to the ultimate bottom line, which took time, energy, and manpower. And so being disciplined is incredibly important. Being laser focused on our expenses. We have heard you loud and clear, although I haven't been on the speaker as much, sat in this room for the last couple years and heard you loud and clear on margins. And so being laser focused on that. and being transparent about where we are. I think those are some operating disciplines that hopefully we can deliver to all of you. In terms of longer term, you heard us say it, sports betting is a push now. It's not even midterm. We're on a board call today for several hours about where are we going, what do we do and how are we reinvesting, how aggressive are we going to be and where are we going to do it and what's the governmental affairs push, if you will, to open up additional marketplaces where we see optimism in the short and the long term, actually. And then my other bigger push and my other bigger thing, and that's why I'm so focused on Japan and ultimately Macau, its growth and its relicensing, is to put this company in a place where it's extremely well balanced, where half of our revenues, give or take, are coming from Asia, where 30-35% are coming from Las Vegas and the balance for regional, where Irrespective of what's happening in the world, we probably have and hopefully have the most balanced portfolio there is. We're not really in the M&A mode right now. We're still asset light. We believe in that original strategy. The world has changed, so of course we will look at that and all things that are tied to that over the next impending year, give or take. But I think longer term, Asia is a big push. Now it's about sports betting. and really the key thing for us to do is to not only survive this year but to learn from it and to structure an organization that's really prepared to take advantage of what it's created over so many years of hard work.

Great, that's really helpful. And then maybe just diving deeper into the margin, is it possible to give some examples of those lower value amenities that might not come back? I know non-gaming is such a big part of your business so and competitors have talked about stuff like buffet, but I guess that's more in the regional markets where the mix is different. So any examples I think might be helpful.

Well, look, I think buffets not only in the regions, but I think in Las Vegas, does every property have to have a buffet? Does every property have to have full room service? I think we will look to see Do we have too many slot machines? Are the floors too big based on the fact that they were built a long time ago? There's a lot of opportunities in all of these areas that we think now's the time to really zone in on it. Now's the time to experiment and try things. The risk of failing is more than outweighed by the benefits of what we can learn. and we look for some more opportunities that hopefully we'll be able to talk to you about in the future quarters.

Great, thank you so much.

The next question will come from Robin Farley with UBS. Please go ahead.

Great, thanks. I know that you talked a bit about group already, but can you talk a little bit about, you said limited cancellations after Q1. Does that mean Q1 group is itself mostly canceled? and then a second question is, with a lot of your properties open for going on two months, when do you expect that 50-person limit might be revisited? Thanks.

Well, let me work backwards. The governor had gone from a three-phase approach where we were opened in the second phase, meaning here in Nevada, not the regionals. The third phase was going to be to lift, among many things, 50 cap per gathering. He's now broken that down, and he's going to take it day by day. You've probably heard, if you go back a couple weeks ago, we were in the high teens to 20% testing ratio of COVID to positive cases. That number has come down dramatically over the last 10 days, thankfully, and so now we're down at an average, down about 35%, seven-day positivity rate of about 8.5%. He will look closely at that. He'll look closely at, frankly, deaths. And more importantly, he'll look at ICU beds and what's going on in the hospitals. And the good news in both those cases, they've been relatively stable because he's got to make sure the environment here is capable of handling what comes its way in terms of COVID and people who need ventilators, et cetera. That's what's on his mind. He put it off until September. I don't think he'll say anything in August in terms of gatherings is my general view. I've and frankly, I had the opportunity to talk to him often. He's very transparent. And I think post that, we'll begin to hopefully get somewhere. We'd originally talked about 50% or up to 750 people as the next step. If we can get our prevalence rate back down to low single digits, maybe we can get back in that conversation. But I think we're four to six weeks away from a real conversation there and with some real success, if you will, in driving down these rates. So that's, I think, the immediate thinking here. As it relates to the first quarter, the cancellations have begun to seep into there for sure. Again, the benchmark is now CES, which will be a meaningful miss. And every week that goes by, a meeting planner has to ask themselves, is the time, energy, and money I'm going to spend in advance of something that may or may not happen worth it? Not that do I want to go or not. And so to the extent we can get some rulings in the next four or six weeks, it'll help Slow that conversation. And right now we're in the middle of that quarter. If it goes on another month, it may go to the end of that quarter. And so the story goes.

Okay, great. Thanks very much. Thanks. We'll take the last question.

Sure. That question will be from David Katz with Jefferies. Please go ahead.

Hi, good afternoon, everyone. Congrats, Bill. I very much enjoyed your time. You know, you're sharing your time and attention. Thank you. I look forward to it continuing. I just wanted to you've given out quite a bit of information. I just wanted to hear you contemplate the notion, you know, of certain properties, you know, that that, you know, may remain closed. Could we, you know, be in a situation where The portfolio is partially opened for an extended period of time. How have you thought about the range of contingencies that are out there, given just how fluid this whole situation has been?

Look, we have no intent of retreading unless, God forbid, we run into a problem. So let's start with that basic assumption. After Michigan opens on the 5th or the 7th for the public, will be down to Empire. And I think you guys, particularly most of you, know the New York story better than I. So the governor is very cautious, but I have to think and believe post-Labor Day we'll have a very earnest, if not before, conversation around that. Obviously, that's a huge taxpayer given the way that's structured for the state, and we all understand the state coffers in this challenging environment. As it relates to Las Vegas, remembering we're down to two. Mirage is important to us. It's an amazing brand. Holy schmoly, I opened it back in 1989. God forbid. But the reality is, particularly midweek, unless we see an increase in demand, I'm not worried about Labor Day because the numbers are looking actually quite well for there because as of today, we're taking reservations. Well, we were taking reservations through August. We've moved it now to August 27th. And that's Park MGM, Nomad, and Mirage. We'll see in a couple weeks how we feel about that again. We know Labor Day will be fine, but I do want to understand how people are thinking about school. No school. Is the summer travel going to extend itself through September? By the way, September is probably the prettiest month of the year here, particularly for the pool and resort experience. So if kids aren't back in school, will it just be an extended summer? We just don't know yet. And so it's not our intent, though, to keep them closed forever. Obviously, Park MGM was a building brand and a new brand. We might take a look at Nomad first and then maybe the balance of the property. But we just don't know. But I can't imagine, and it could be, so be careful what I say here, an environment where they're closed for the balance of the year. That I will say. And hopefully we can get there sooner.

And I think a lot of it's going to be based on COVID numbers because the bookings we're seeing in Las Vegas, the gross bookings are fairly consistent. They've been pretty decent. Good point. When we see the demand start suffering is when the COVID numbers spike up and we start seeing some cancellations. When those numbers are down, the cancellations reduce and we start seeing some additional rooms picking up. So if we could keep the COVID numbers down, things start flowing in a positive way, hopefully we could get these properties open. We want to get employees back to work and get the strip going to where it needs to be going.

And if I can ask one very short follow-up, Bill, in response to your thoughtful vision of balancing the company just a bit more, could that potentially include divesting some domestic assets entirely?

Look, everything is on the table, everything is off the table. There's no discussion around that at this point. Thank you very much and good luck. Thank you all.

Ladies and gentlemen, this concludes today's question and answer session and thus concludes today's call. Thank you for joining MGM Resorts International second quarter 2020 conference call. You may now disconnect your lines.