MGM Resorts International

Good afternoon and welcome to the MGM Resorts International first quarter 2021 earnings conference call. Joining the call from the company today are Bill Hornbuckle, Chief Executive Officer and President, Corey Sanders, Chief Operating Officer, Jonathan Halkyard, Chief Financial Officer, Hubert Wong, President and Chief Operating Officer of MGM China, and Jim Friedman, Senior Vice President 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 note, this conference is being recorded. Now, I would like to turn the call over to Jim Freeman. Please go ahead.

Good afternoon and welcome to the MGM Resorts International first quarter 2021 earnings call. This call is being broadcast live on the Internet. at investors.mgmresorts.com. And we have furnished our press release on form 8K to the FCC. 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 FCC. Except as required by law, we undertake no obligation to update these statements as a result of new information or otherwise. And during the call, we will also discuss non-GAAP financial measures in talking about our performance. You can find the reconciliation to GAAP financial measures in our press release and investor presentation, which are available on our website. Finally, this presentation is being recorded, and I will now turn it over to Bill Hornbuckle.

Thank you, Jim, and thank you all for joining us this afternoon. We're excited to be speaking to you given the significant progress that we've observed in COVID trends, vaccination, consumer sentiment, and state-by-state operating restrictions throughout the quarter. Since we last spoke in mid-February, our domestic business has improved significantly, and the work we've done has allowed us to maximize the pace of our recovery while positioning us for long-term sustainable growth. As business trends improved, we remain focused on our long-term vision to be the premier gaming entertainment company in the world. Our strategy for achieving this vision centers on four strategic focus areas. First, investing in our people and planet, providing fun and inspiring experiences for our guests, delivering operational excellence at every level, and allocating our capital to drive the highest return for our shareholders. I thought it might be helpful to provide an update on each of these focus areas before turning to the details of our first quarter performance and our outlook for the rest of the year. Our people and planet strategy is part of everything this company does. At the pinnacle of this strategy is the investment in our amazing people. Reflecting on the past year, to say it has been tough would simply be an understatement. But throughout the year, our employees have been the one consistent bright spot across the organization. I am humbled and in awe of their dedication, their hard work, and resilience in the face of unprecedented uncertainty. That is why I'm so passionate about the investment in them. We got to this because of their consistent commitment to this company and ultimately our guests. As we continue to bring employees back across the US to meet heightened levels of demand, we of course prioritize their health and safety. To that end, we've dedicated significant resources to getting our people vaccinated. We recently opened our onsite vaccination clinics here in Las Vegas, as well as our regional properties for not only our employees, but also their families as well as our entertainers and partners who work at our properties. As the largest private employer in Nevada, these efforts are far reaching in the local community and I believe we are doing more than our part to help combat the virus with the ultimate goal of getting our city back open 100% by June 1st. I'm also proud to share what our team has been able to accomplish to solidify MGM Resorts as a leader in environmental sustainability. In just a few short months, we will flip the switch on MGM Resort's Mega Solar Array. This 100-megawatt solar array at full production will provide up to 90% of total daytime electricity needs for all of our Las Vegas Strip properties, representing over 65 million square feet of buildings. Our second focus area is all about providing fun and inspiring experiences for our guests. To date, we've opened eight shows across our portfolio, adhering to current health and safety restrictions. We continue to work with our local leaders to safely bring large-scale events back both in Las Vegas and our regional properties starting in early summer. In July, T-Mobile Arena is set to host the McGregor UFC fight, and you can't get tickets for this event. We sold 20,000 tickets in 22 minutes. This is just one of the many examples of the clear demand for entertainment, and we're excited to see a path to delivering these differentiating offerings to our customers. It's important to note, however, that we've not just focused on what experiences we provide, we've also focused on how we provide them. Delivering the highest quality guest service through a culture of yes is an attribute that remains deeply embedded in our values. We will continue to empower our employees to do what they do best, providing world-class service to all of our guests. Turning to operational excellence, we refined our operating model in late 2019, increasing spans of control and simplifying organizational layers to accelerate decision making, bringing us closer to the guest, and ultimately reducing costs. Driven in part by these efforts, our first quarter domestic margins grew significantly over the fourth quarter, and we are confident that these sustained changes will enable us to deliver our full target of $450 million of cost savings when business demands return to 2019 levels. And finally, we are disciplined allocators of capital, always driven by the goal of creating value for our shareholders. Our targeted growth opportunities align with our long-term vision. We, along with our partners in Tain, continue to invest in BetMGM as it grows its leadership position in U.S. sports betting and iGaming. I hope you all listened in on their investor day last week. We're also investing in our digital journey to drive deeper customer loyalty and engagement over time. And with recent developments in New York, we look forward to working with the legislature on a potential path for a full-scale casino license at Empire City. With that, I'll now provide some high-level comments on the results and future business outlook, and then Jonathan will discuss the first quarter in more detail. In Las Vegas and across our regional properties, our initial recovery has been strong. It's been great to see Las Vegas come alive again to the vibrant destination that we've all come to know and enjoy. Our gross bookings in March were one of the best months in the company's history. clearly backed by pent-up leisure and casino demand, and our operating performance naturally followed the broader demand trend lines, and adjusted property EBITDA was heavily driven by the back half of the quarter. Booking trends are bound to normalize over time as we continue to fill out the resorts in future periods, but good news is we've built up a large enough base to start strategically yielding our business, especially now on the weekends. As we look ahead, we expect robust leisure demand throughout the spring and summer months with hotel occupancies in the 90% range on the weekends. Weekdays will increasingly be driven by meetings and conventions, and our group business remains solid in the back half of this year. With more clarity around Nevada's gathering guidelines, we're actively working to secure more in-the-year, for-the-year business and to partially offset the anticipated levels of wash and attendance per group. Our differentiated Convene with Confidence program designed to safely accommodate events large and small, has received great feedback from our clients. With the larger groups expected to return at scale in 2022, our business in 2022 and 2023 is on pace with pre-COVID levels. While our high-end international casino business will still depend on travel restrictions, our domestic casino demand, which we've successfully leveraged through the crisis, remains extremely healthy. We're also proactively engaging more with our fly-in and 50-plus age demographic, and we've seen increased receptivity to travel from that group. Our regional properties delivered strong results in the first quarter despite some inclement weather, aided by easing statewide restrictions. It's been encouraging to see, again, our rated 50-plus and higher value players begin to return as well, with a strength particularly in slots. And in March, rated Theo for our 50 to 64 age segment was close to that of 2019 levels, and we saw a noticeable improvement in our 65 plus age segment as well. These trends are also continuing now into April. I'm especially pleased with our regional team's persistent ability to drive operational efficiencies, resulting in our first quarter regional adjusted property EBITDA surpassing that of 2019, despite lower revenues. In fact, our regional EBITDA and margins this quarter were both all-time first quarter records. As statewide restrictions ease further and other attainment alternatives begin to expand consumer options, we will monitor the broader top line environment, but assuming COVID trends remain stable, we are confident through our cost discipline efforts and resulting structural margin gains, we can sustain full EBITDA recovery this year. I'd like to share some thoughts now on Macau. While market-wide GGR in the first quarter improved sequentially compared to the fourth quarter, Macau's business violence remained well below pre-COVID levels. MGM China once again outperformed the market pace of recovery. Our quarter GGR recovered to approximately 40% of pre-pandemic fourth quarter 2019 levels compared to the market's overall recovery of 33%. It is evident that our strength in premium mass is positioning us well as the market gradually turns the corner. The rate of Macau's recovery, we believe, will remain heavily dependent on broader sentiment as well as the pace of vaccination rollouts throughout the region, which would ultimately lead to the easing of travel restrictions. Nucleic acid testing requirements and other bottlenecks currently impact this marketplace. The opening of the Macau-Hong Kong border is also another important variable in Macau's recovery. I am, however, confident in Macau's longer-term growth prospects and believe our investment will ultimately bear much fruit. We expect construction of the additional suites in the south tower of Mjimkotai to be complete in the third quarter of this year. We're also remodeling our MGM Macau villas and the gaming space on level 35. And at both properties, we are adding food and beverage options focusing on our gaming floors. We're also organizing themed property attractions to drive visitation. And over time, we have the ability to build out another hotel tower at MGM Cotai, along with meaningful entertainment assets to help diversify our overall offerings in the destination. And finally, last week at the Investor Day, BetMGM executive team provided extensive color on its business, and we are incredibly excited about its trajectory in the sports betting and iGaming market. Today, we see this space as a three-horse race where BetMGM offers unique and unparalleled online and offline experiences. Given the positive momentum to date, BetMGM now expects its revenues from operations to reach over $1 billion in 2022. It also is now targeting its long-term U.S. market share to be between 20% and 25% range and long-term EBITDA margins in the 30% to 35% range. One of BetMGM's key competitive advantages is its ability to lever MGM's destinations, our broad-based offerings, and our MLIFE loyalty program as efficient and effective customer acquisition and retention tools. MGM also benefited from this relationship. Not only are new customers being introduced to MLIFE, But through BetMGM, we're also reigniting relationships with customers that had gone dormant. In the first quarter, 10% of BetMGM's new players came from MGM, and 44% of the new MLife signups have come from BetMGM. Putting this together, we see significant value in this opportunity over time, and that's why both partners remain committed to ensuing and ensuring BetMGM's leadership in this space. With that, I'll turn it over to Jonathan to discuss our first quarter in more detail. Jonathan? Thanks a lot, Bill.