MGM Resorts International

Good afternoon and welcome to the MGM Resorts International fourth quarter and full year 2022 earnings conference call. Joining the call from the company today are Bill Hornbuckle, Chief Executive Officer and President, Corey Sanders, Chief Operating Officer, Jonathan Halkierd, Chief Financial Officer and Treasurer, Hubert Wang, President and Chief Operating Officer of MGM China, and Andrew Chapman, Director of Investor Relations. Participants are in a listen-only mode. After the company's remarks, there will be a question and answer session. In fairness to all participants, please limit yourself to one question and one follow-up. Please note, this conference is being recorded. Now, I would like to turn the call over to Andrew Chapman. Please go ahead.

Good afternoon. Welcome to the MGM Resorts International fourth quarter and full year 2022 earnings call. This call is being broadcast live on the internet at investors.mgmresorts.com. We've also furnished our press release on Form 8K to the SEC. On this call, we will make forward-looking statements under the safe harbor provisions of the federal securities laws. Actual results may differ materially from those contemplated in these statements. Additional information concerning factors that could cause actual results to differ from these forward-looking statements is contained in today's press release and 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 and talking about our performance. You can find the reconciliation of GAAP financial measures in our press release and investor presentation, which are available on our website. Finally, this presentation is being recorded. I will now turn it over to Bill Hornbuckle.

Thank you, Andrew, and thank you all for joining us today. I'm proud to announce that MGM Resorts International drove record fourth quarter adjusted property EBITDA for Las Vegas and regional resorts. What's more, our four-year Las Vegas Strip adjusted property EBITDA increased by more than 80% year over year. These outstanding results are evidence of our focus on optimizing growth in our business and operations, as well as our strategic vision of becoming the world's premier gaming entertainment company. These outcomes are also a testament to our employees who will go above and beyond every day to take care of our guests and create an amazing, great experiences which drive loyalty among our customers. Our employees are true heroes of this story, and we need to be celebrated. I couldn't be prouder of them for delivering these financial results alongside the steady improving guest and record employee satisfaction scores we are enjoying. As we look forward, we expect many of the drivers of our 2022 performance to continue into 2023. Importantly, we are well positioned on weather change in a variety of environments, given the inherent long-term benefits of MGM's diverse portfolio. In fact, we have the most diverse offerings in the gaming space, and as such, we're a well-balanced organization that benefits from both scale and a host of premier brand offerings. The distinct pieces of our business that create this diversification are, number one, Our number of nine Las Vegas strip and eight regional domestic properties in the U.S. that cater to all market segments and produce consistently strong profitability. Two integrated resorts in Macau that pre-pandemic generated EBITDA of over $700 million and are just now beginning to see a very real return to profitability. Three, our digital strategy with 50% ownership of BetMGM, one of the leading U.S. digital sports betting and gaming operators. BetMGM is the leader in what is financially the most important segment in the nation, iGaming, and is making overall progress towards its profitability. And our ownership of Leo Vegas, which we're using to grow our digital business internationally and extend both MGM's brand and content reach. And ultimately, our balance sheet, allowing significant flexibility to invest in areas with the highest return on capital, including New York, Japan, further expanding our digital footprint via Leo Vegas. and other substantive international opportunities we're pursuing in that space, as well as funding and continued share repurchases. In fact, as you know, we have just announced that our board approved another $2 billion repurchase program. Looking ahead, we see multiple opportunities for growth and momentum in our business. Coupling these opportunities with a relentless focus on free cash flow per share, our operating model, our margin control, and discipline expense management which we believe gives us a great confidence that our best days are ahead of us. Let me walk through the business case for 23 starting with our U.S. properties. First, we are encouraged by the early success of the Cosmopolitan in Las Vegas as we migrate the business into MGM Resorts infrastructure. On our annualized basis, we have double-digit growth in revenue and EBITDA compared to the reported 12-month period prior to the acquisition. We are already beginning to produce cross-property play with hundreds of high-end players from the Cosmopolitan database attending MGM Resorts customer events and driving millions in wind at our other sister properties. This is a trend that we saw continue for the Lunar New Year celebration at our properties in Las Vegas, and we expect to expand to the mass market as we integrate MGM Rewards into the Cosmopolitan system. Next, we have a strong event calendar in Las Vegas. CES has 115,000 attendees last month. up from 45,000 in 2022. ConExpo and ConAg next month is setting up to be the best ever, and March Madness, Sweet 16, and the Elite Eight games are coming to Las Vegas. Together, the calendar in March is positioned to have us have the best hotel revenue month we believe in our history. Additionally, Formula One is expected to bring $1 billion in economic value to the city, of which we believe we're the best position to take advantage of. Las Vegas also has Allegiant Stadium. which has brought 40 events and over 1.5 million visitors to Las Vegas in 2022 and is expected to bring even more visitors, even higher quality events in 2023, driving significant spend, particularly at our south end properties. Another tailwind is the ongoing growth in visitation. The LBCBA expects domestic flight growth capacity to reach 120% of 2019 in the first quarter of 2023 and internationally recover further with 80% of 2019 available seats. Harry Reid Airport hosted a record 52.6 million passengers in 2022. Outside of our domestic business, we also see tremendous opportunities for growth, starting with China, fully stated Macau is back. As you well know, COVID restrictions impacted our Macau operations in 2022, causing an operational loss that negatively impacted our overall results. But we are experiencing a rebound in 2023 as our guests are returning to in force just as they did in Las Vegas when restrictions were lifted here. In fact, quarter to date, we're excited to report that MGM China's combined properties are the highest earning businesses within our company. As part of the concession renewal process, we committed to bring non-gaming entertainment events to Macau. Those events were strong drivers to visitation to our property during the Lunar New Year and at the end of January. We see these early results as validation in our confidence in Macau markets recovery and and the long-term viability upon which we are re-tendering commitments were built. And unique to MGM China, we have secured 200 additional tables as part of our new gaming concession, which combined with our premier mass positioning should allow us to drive market share into the low to mid-teens. In fact, during the month of January, our market share was 16%, which compares to high single-digit market shares pre-pandemic. This outstanding performance was driven by the MGM China's team strategic focus delivering full gaming floor renovation, a complete hotel product mix for our targeted customers, various marketing efforts in producing strong non-gaming events, shows and promotions, plus our team's improvement in service levels and operational efficiencies. These collective efforts position us for a long-term growth story in Macau. We've also reasoned to be optimistic about the growth prospects of our business well into the remainder of this decade, especially in light of the two new gaming licenses we hope to receive in the near future. We expect to submit our RFA in New York in the first half of this year, and we hope for response in the near future. One advantage we have over the competition in this market is our ability to add tables to our existing casino floor and thus incremental tax revenue for the state almost instantly once approved for license. We expect to spend about two bid in New York inclusive of the license fee. We will fine tune our program and planning, but right now we're expecting extensive property improvements such as a significant entertainment offering, new food and beverage opportunities, covered parking, and an overall increase in the casino floor space. As you may recall, we also submitted our RFP in Japan for an integrated resort license to operate in Osaka approximately 10 months ago. Unfortunately, I'm still waiting for the response from the government, but we are being patient and believe we will hear so soon. MGM Resorts has presented a compelling offer with our partner, Oryx, to develop an integrated resort which will develop international tourism and growth to that region. We're extremely excited for the ROI opportunity in a market in which we may be the sole operator for some time in the future. Each of the projects I just mentioned are expected to generate returns well above our current free cash flow yield. These and all future capital investment decisions we weighed upon that same standard. In closing, 2022 was a phenomenal year for MGM Resorts. And we're confident we will see progress into 2023 and beyond. With that, I'll turn this over to John to put more color on the fourth quarter and the year.

Thanks very much, Bill. Before I dig into the financial results, let me also thank my colleagues here at MGM Resorts for an outstanding quarter and a truly amazing year. I'll now share with you some of the exceptional financial results that we achieved. Las Vegas stripped same-store revenues, and so that's excluding the Cosmopolitan and the Mirage. grew 11% and adjusted property EBITDAR grew 6% in the fourth quarter compared with last year. Fourth quarter occupancy of 91% was up 500 basis points year over year and ADR was $260 in the fourth quarter, which grew 30% over last year. Several volume metrics for us set records as well as our Las Vegas slot handle set its seventh consecutive quarterly record in the fourth quarter. Demand in Las Vegas remains strong across all segments driven by our exceptional entertainment offerings and other customer demand drivers. The strength continued into January where occupancy was 90% and rooms booked during the month were on record pace with rates up double digits to last year. In the regions, fourth quarter revenues grew 10% and adjusted property EBITDA grew 3% year over year. While EBITDA was down 1% versus the third quarter, This sequential decline is in line with normal seasonality for the fourth quarter. Importantly, labor expenses, the percentage of revenues was flat sequentially, and our current headcount remains approximately 20% below 2019 levels, all while we achieved historic highs in NPS and other indicia of customer satisfaction. In the fourth quarter, corporate expense excluding stock compensation was $113 million, which includes $5 million related to MGM China, global development costs of 6 million, and transaction costs of 2 million. Going forward, we expect corporate expense for the full year 2023 to be approximately $380 to $400 million, a decrease of approximately $30 to $50 million from 2022. Included in MGM's corporate expense this year is $44 million for MGM China, and approximately $37 million in anticipated development expense related to Japan and New York. We intend to invest approximately $800 million in domestic CapEx in 2023, and this compares to the $727 million in CapEx invested in 2022. Maintenance capital will be approximately $600 million of this spend this year, And this year, it includes room remodels in the Bellagio Spa Tower, Borgata's Water Club, and the completion of our New York, New York room renovation. Since 2019, we've reduced the average age of our rooms since renovation by roughly three and a half years, and our room age will continue to decrease over the coming years as we refresh our room offerings. The remaining capex in 2023 is growth capital, projects that include the Mandalay Bay Convention Center remodel, a new pedestrian bridge connecting the Cosmopolitan Fedora, and investments in technology to drive better customer experience, ease, and engagement. Finally, on the development front, we expect to contribute $75 million to BetMGM in 2023, And the only material investment in New York this year will be the $500 million license fee, depending upon the timing of the license awards. I'll conclude with just a few comments on our strategy for capital allocation. First and foremost, we'll maintain a strong balance sheet by sustaining adequate liquidity for our enterprise. And as you can see in the presentation that we posted today, We concluded 2022 with $5.3 billion of domestic cash against domestic debt of $4.5 billion. Our resources this year were bolstered by the disposition of the Mirage in December for $850 million in net cash proceeds after tax. Next week, we expect to close on the sale of the Gold Strike in Tunica, which will bring $350 million in net proceeds after tax. Next, We'll prioritize capital investment to deliver the highest return for our shareholders. Our acquisition of the Cosmopolitan Las Vegas expanded our reach into the high end of the Las Vegas market. Our acquisition of Leo Vegas jump-started our international iGaming strategy. Our new president of Interactive, Gary Fritz, and his team are evaluating a number of opportunities in this area, and our shareholders should expect that we'll be deploying more capital to grow the MGM brand internationally in iGaming and in digital content development. And finally, we're going to return capital to shareholders. During 2022, we repurchased 76 million shares for 2.8 billion. Since the beginning of 2021 through yesterday, we've repurchased $124 million for a total of 4.7 billion and have reduced our share count to 375 million shares. And we're not done. As Bill mentioned, our board of directors yesterday approved an additional $2 billion share repurchase program. In evaluating our share repurchase strategy, I consider a number of factors, including the liquidity profile of the company, as well as the development and M&A opportunities that are before us. But I also consider the free cash flow yield available in our own shares. So as I conclude, consider the following. Adjusted property EBITDA from Las Vegas last year was approximately $3.1 billion, and from our regional operations was $1.3 billion. From that, we had adjusted domestic corporate expense of $400 million and cash rent of $1.7 billion on an annualized basis. Consolidated cash interest was $574 million, but that includes $205 million related to MGM China. And cash taxes and domestic capex totaled about $750 million. But our company also has significant reservoirs of value that did not contribute cash earnings in 2022. This includes excess cash of over $2.5 billion, our ownership position in MGM China, which yesterday had an approximate value of $2.6 billion, and of course, our stake in BetMGM. It's a lot of numbers, but when taking all of this into account, I see a double-digit yield opportunity in our shares, which is why I see share repurchases as a responsible and accretive use of our capital. Bill, back to you.

Thanks, Jonathan. I hope the comments that you've conveyed the excitement that we all have towards our business this year and ultimately beyond. In all my time with the company, I've never been more excited about our present and future as I am right now. I think we're stronger, more agile, more focused, and more determined than ever to win. And with that, we're happy to take your questions.

Thank you. We will now begin the question and answer session. To ask a question, you may press star, then 1 on your touchtone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star, then 2. As a reminder, in all fairness, please limit yourself to one question and one follow-up. And our first question will come from Joe Greff from J.P. Morgan. Please go ahead.

Joe, perhaps your line is muted on your end. Your line is open. Please proceed. Joe, are you there?

Our next question then will be from Sean Kelly from Bank of America. Please go ahead.

Hi, everyone. Good afternoon, and thank you for all the detail and color. A lot of different places we could start, but I'm going to start with a high-level strategic one. Jonathan, you ended on walking through a really robust liquidity position, still a lot of cash on the balance sheet that's either collecting interest at a better yield than before, but not a huge yield. The question we get all the time remains that ownership interest in upping the stake in maybe one of those areas that you discussed, BetMGM being You know, the big one, and obviously we know there's a partner there, but if you could give us your latest thoughts around the strategic value there and how you fold that in with your comments around, you know, maybe a more organic or standalone international online expansion. Thanks.

Thanks, John, for the question. And I'll step in and kind of give the first part of it because I think it's time to be definitive and give a little direction. The simple answer on Entain is no, we've moved on. While we remain highly focused on BetMGM's business through our partnership with Intane and making sure that that business continues to grow, we see great potential in Leo Vegas expansion capabilities. I've said before we like their technology platform and their leadership team. We're also interested in the content studio business. We think there's a real play there. We've seen that proven effective with brand when we combine great product in our brands at BetMGM. And over time, we like the live dealer business and the expansion of other global markets, and frankly, indirectly under our own purview. So for now, the answer is no, not with Intane. We're going to go down our own direction, and we begin to allocate capital. We think Gary Fritz has got the right motive, the right drive, and the right person to help us lead this forward. We value the relationship with Intane. We value BetMGM. But as it comes to the rest of the world, we're going to move forward with a different proposition.

And, Sean, just a couple of comments, the broad strokes around capital allocation as we look forward. You know, we do have a maturity in March, $1.25 billion at 6%. So our present plan is to, of course, redeem those bonds, and that will capture about $75 million of free cash flow for the business. We were active share repurchases, you know, just in the past year. We spent almost $2 billion at a price of about $33 to $34. So we'll continue to be repurchasers of our shares, but we'll moderate that depending upon market conditions. And then, of course, funding what Bill described, which is our interactive ambitions, which will be predominantly through M&A, but we're reserving a significant amount of capital for those activities as well.

Um, thanks. And I'll, um, I don't want to be greedy with my time here, but just the, the, the followup to stay on the same theme, then Jonathan, you, you, you directly hit it, you know, kind of M and a, or could you just give us some parameters around, are we thinking more bolt on options or, you know, are there still platform level investments that could be made to, you know, to drive up and, and expand that opportunity to be meaningful to the, to the base business?

It's a combination there of, you know, when you talk studio business, um, or even live dealer, the technology aspect of that is, on our scale, relatively de minimis. When you talk about stepping up to other marketplaces, whether it's South America over time or rest of Europe, we'll have to take a different view on that as these opportunities unfold. But for now, it's more bolt-on and relatively small.

Thank you very much.

And for the next question, we'll move back to the line of Joe Greff from JP Morgan. Please go ahead.

Can you hear me okay now?

Hi, Joe.

All right. That was weird. Nice speaking with you. In Las Vegas, can you talk about how you're thinking about FTE count and payroll expenses and how it will trend this year? Maybe you could break it up between both sort of on a same FTE basis as well as just wages. And what kind of revenue growth do you need to offset wage expense growth in Las Vegas? Put another one.

I'll put it and I'll kick it to Corey. Well, if you go back and you look at FTEs, particularly in Las Vegas against 2019, we're down anywhere from 12% to 15% depending on the property. Obviously, wage inflation since 19 is prepped. And just so we're all on the same page looking forward, We have substantive labor negotiations later this year with about 28,000 of our colleagues, which we're going to have to contend with and work our way through. And so, Corey, maybe the second part of it.

Yeah, I think from the standpoint of levels of FTEs, from a fixed cost perspective, there will be no increases. It will all be on variables. So if there's an additional catering and bank puts business, it would match that revenue component of it. But I think we're pretty comfortable that we could service our properties, service our guests at the levels we're at today. And then, John, if you want to take the revenue.

Yeah, I think on the revenue growth side, if we're running now with occupancies that are basically full on the weekends, there's a bit of room during the weekdays. So really, it will need to come through pricing as opposed to occupancy gains, largely in Las Vegas. And I think, you know, if that's in the low single digits, we should be able to cover any increases in payroll adequately. I mean, overall, I think we think our margins are going to sustain is really the answer to that.

And then, Bill, you were dealing with another earnings call and release today as well. So I have to make sure I understood your comment, your prepared comments you talked about. Macau being back, that in the month of January it led the company in profitability or something along those lines. Can you just explain that or give a little bit more detail on that?

Yeah, I can put a little color around it. And then we have Hubert on the line, and these guys have worked hard at this for three years, so I'll let him talk a little bit about the business. But, look, the rebound was, interestingly, come January 8th, fairly instant. I think we peaked during Chinese New Year's, making a little over $5 million a day. I mentioned in my prepared comments 16% share. And for us, for all the reasons I mentioned, our mass piece of volumes were 100% over our 19 levels. Now, you know, we're talking about a whopping 30 days here. But for the company, particularly from where we have come from, we activated 150 of the 200 new tables we have. We're very excited by what's happened in the first 30 days. And so, Hubert, maybe any other color would be helpful.

Sure, thanks, Bill. Thanks, Joe, for the question. Since the beginning of the year, I think the market has been rolling back and has exceeded the expectation of many participants and observers. For us, in January, on the gaming side, we have seen very healthy above-the-market average recovery in both mass and direct VIP segments. And for the month of January, as Bill has mentioned, our market share reached 16%, which is a record high for us. Our daily mass GGR was on par with the 2019 level for the month of January, and during Chinese New Year, far exceeded last year's Chinese New Year level, actually. And we're also encouraged to see that direct VIP segments in terms of rolling volume, far exceeded 2019 level as well. It is also very encouraging to see that January run rates extended into the first week of February so far. So all in all, we are very confident in a solid and sustainable recovery of Macau market this year and beyond.

Excellent. Thank you very much, guys.

The next question will be from David Katz from Jefferies. Please go ahead.

Hi. This is Cassandra on David's behalf. I want to expand on the cows margin longer term as we think about the shift in the IT mix from junk to direct. I believe your competitors have also called out increased labor costs and some labor shortage and increased utility. Um, how should we think about the margins and the cow longer term?

Well, again, I'll kick this to you, but my only initial comment is that I believe everyone knows this, the junket business. I mean, when it was all said and done, it was a 20% margin business. And so while there was a great deal of volume in that business and we all was accretive to us and obviously a vehicle for capital into the market, uh, it didn't help the margin. I can assure you. So you, but I don't know if you want to talk about more generally what you think will happen there, but, um, I do like where we're positioned for VIP, mass VIP. Remembering our branch environment and system is broader than almost anybody else's in the market. We've been doing it for 30 years into Las Vegas, and we've now taken that network and put it to work directly to the benefit of Macau. Hubert?

Great. Yeah. I think that in terms of margins, I think that we expect, you know, in 2000, this year and beyond, probably we'll... at the high end of the 20s, in the high side of the 20s. And in terms of junket to direct, certainly there are some conversion in that space, but it's too early to give you any concrete numbers. But from the strength we have observed in January and Chinese New Year in our direct business, I think that we're still very in the growth of the direct business, and particularly given the wide network of M-Gen resorts in terms of global reach of high-end customers.

Great, thank you. And for the follow-up, if I may shift to Las Vegas, there were a lot of very bullish or favorable commentaries. The ADR has been substantially higher than pre-COVID levels, Do you think that is sustainable? And, you know, looking beyond 2023, especially if we were thinking about recession, how resilient do you think that ADR should be?

Yeah, this is Corey. Yeah, I think it's sustainable. As we look at the event calendars on weekends and our forward-looking pacing and what we're booking rates at now, we have pretty good visibility further out. On the midweek, we see not only our convention business getting better, but the whole city's convention business getting better. So the pricing that we're seeing today, we should be able to sustain given where the economy is today.

Great. Thank you so much for taking my questions.

The next question is from Carlo Santorelli from Deutsche Bank. Please go ahead.

Hey guys, thank you. Just looking at some of the disclosure in Las Vegas and trying to decipher what is kind of the delta between gaming revenue and your net casino revenue has widened in the last few quarters. I'm assuming that is kind of all mixed related with Cosmo coming online. Is that kind of a range, that delta, that pretty much will hold firm moving forward?

Yeah, Carlos, hi, Bill. I think the answer to the question is yes. We got as we needed to through COVID because obviously the group segment of note went away, very active with our casino marketing, our casino marketing database, personalization, and other things we might do in that sector, and we've sustained it. And so it's helped that tremendously. Obviously now convention business is going to come back, and Corey, what, 18%, 19% of our mix this year? Yes. But I think it is sustainable is the way to think about the business.

Great. And then, Corey, just on the topic of convention mix, you made a comment earlier. I believe that the bookings that were done were done at double digits. If you look at kind of the entirety of the group business on the books or the targeted group business on the books from a pricing perspective, how does that look year over year or relative to 2019, however you guys kind of want to think about it?

Yeah, I think, look, many of those contracts were in place over 2019, 2020. I think they have price escalators in there. It's probably an area of opportunity for us in the future as we look at future convention booking. But just as a reminder, it's 18% of our business. The new business is getting booked based on where rates are today.

Okay. Do you believe, like, when you think about it overall, just that Taking the pricing aside, thinking about the visibility that it provides you, do you believe as you look through 2023, all things equal economically and from a macro perspective, that there should be pricing power year over year on a same store basis?

Yeah, I think there should be some pricing power based on the amounts we have on the book and the foundation we have in our bookings.

And remember, Carlos, one thing we have strategically decided to do is push more business out of weekends and back into midweek. And so that has an overall play in ADR. Obviously, it brings down the convention ADR, but it raises the overall company's ADR because it gives us more opportunity weekends to where we see, frankly, and continue to see real upside, particularly in the luxury segment. Cross Cosmo, MGM, Mandalay, you know, Aria, Bellagio.

Great. Thanks, guys.

The next question is from Steven Grambling from Morgan Stanley. Please go ahead.

Hey, thanks for taking the question. Maybe turning to Japan, that was another one that you referenced. It's still out there. You're waiting on some approval, but still looking for a return that's above, it sounds like, your free cash flow yield. I'm wondering if you could just elaborate on any of your updated expectations for that market and anything that's either evolved from the terms of the transaction or even the timing of when construction could start and when the property could be coming out of the ground.

Yeah. Uh, Stephen, you have to be a little careful because some of this is NDA with the government, et cetera. But, but having said that, uh, you know, we had hoped to hear in October, obviously we sit here now in February, not having heard, uh, the process lies today with MLIT, the government agency that is going through and consistently asking us questions about the project. about the contract with the government of Osaka, et cetera. Time to tell whether we get through that efficiently over the next 30 days. We'd like to think and believe we might, but, you know, we've been thinking that for a while now. As it relates to macro, look, I'm excited to think that we may be the only player. And so instead of a market of 19 million people, we're talking about a much larger market. You know, having taken the journey many times from – Tokyo, it's only two and a half hours away by high-speed train, et cetera. So we see upside. You know, inflation has not hit Japan like it's hit other places. And particularly for us, at our end of the partnership, the value of the yen has gone tremendously in our favor. But we're still looking at a $10 billion project. We're looking at a return on that project we think can bring 15% plus in cash flow. And then maybe then some. But, you know, it has to mature more. And overall timing, you know, the goal was, now we're going to be challenged with that if we don't hear soon, to get this thing open before the decade closes in 2029. But, you know, there's a bridge to getting there.

That's helpful. And maybe a follow-up on that MGM, just to make sure I understand you correctly, I guess. Are you anticipating, far out, but any additional capital changes being put into that JV beyond this year, you know, getting the targets for kind of profitability or standalone at this point?

No, none substantively. If BetMGM gets into the M&A business for some particular product, maybe, but generally, no. It's the 50-odd million, I think we've, well, collectively, but call it our 35 or 45 million we've identified. You know, it gives us every reason to believe it should hit its target this year. starting to make profitability in the second half of the year. We all have to be rational players. There is growth left. There are six additional states yet to go that have been identified. But, no, there's no large-scale capital. That business should begin to mend and take care of itself.

Thanks so much.

Next question is from Chad Bannon from Macquarie. Please go ahead.

Afternoon. Thanks for taking my question. Bill, Jonathan, another one on Vegas, just given your diverse portfolio with luxury and core, can you just kind of help us think about broadly, you know, how these segments compared against each other in 22? Bill, I think you said, you know, obviously a lot of the group events in the city-wides in 23, just those compression nights should help probably a little bit more in luxury, but just trying to see, you know, I know you're not breaking it out, but kind of where the, you know, which way the wave is moving luxury and core. Thanks.

I think we're your best. In 2022, the majority of the growth here in Las Vegas was driven by the Bellagio, Aria, Cosmopolitan and the MGM Grand. Mandalay Bay had a fantastic year as they they of course, capitalized on the return of the group business to Las Vegas. I mean, in the fourth quarter, just an example, our group room nights were up about 50% versus the fourth quarter of 2021. So it certainly has skewed to the luxury properties. But I will tell you from a portfolio strategy perspective, You know, all of these properties here in Las Vegas are really important role players. We've invested some capital in the Luxor in the last year. We've just we're doing the rooms in New York, New York right now. And those businesses we expect are going to be very solid cash flow generators over the next several years. But no question, the growth is coming from the luxury segment.

Thanks. And then can you just talk a little bit more about the Omnichannel opportunities with driving your players from BetMGM back to Las Vegas, given it's probably one of the more important years of your players wanting to come out and see some of the events, kind of where that stands now, and how that should progress in 23. Thanks.

So I think the simple answer is more. And when I say that in the context, it's now becoming thousands of players that have obviously touched both brands. It's interesting, the combination of the two, the players spend about 40% more. That's kind of intuitive, but 40% more is interesting. The other thing that plays to the events, whether it's sports or otherwise, sporting events, is that 85% of the players are under 49 years old. And so that network and that combination is bringing us a younger player, bringing us people who to date have the propensity to spend more when combined with both brick and mortar and digital activity. And we're now reaching thousands of them coming in. We've set up fairly elaborate CRM systems both at BetMGM and ultimately a hosting program here that captures them. And so there's one-to-one dialogue about certain VIP players and what their needs, wants, and desires are. And so we've treated that network like we would treat any of our branch offices, if you will. When the phone rings and they have somebody of substance, we're set up to take care of them. So excited by it. We need over time to automate it more so that there's true connectivity between BetMGM and its loyalty system and ultimately MGM reward system. But for now, focused on the high end between the spend, the youth, and the numbers, all pretty exciting.

Thank you very much. Appreciate it. The next question is from Robin Farley from UBS. Please go ahead.

Great. Thanks. I wanted to ask a little bit about you showed the breakdown of same-store gaming revenue in Vegas being down about 10%, and I think it was down a little bit in Q3 as well. I wonder if you could give us some sort of color on what's happening with the gaming consumer in the last two quarters. Is that kind of fewer trips year over year because, you know, there are more options in the world, or is it just lower spend per trip, or kind of what do you think is driving that in the last two quarters?

Thanks. No, we've seen same-store handle and drop and win growing in Madison and Las Vegas, although there's no question the majority of the growth that we've seen in this quarter is on a same-store basis has been on the hotel side. So, you know, the gaming customer is healthy here in Las Vegas. It is driven mostly by our higher-value gaming customers, but it's very healthy on a same-store basis.

Are the declines, just to sort of, you're saying it's coming from the higher-end gaming customers? or you meant they're holding up, it's the sort of broader market player with the same store decline?

No, I'm talking about our slot handle and table game drop and slot win and table game win increasing.

Okay, I was looking at your slide showing a casino revenue is down 10% on a same store basis in Q4. I know there were some properties in and properties out, but I was just using the number from your slide.

Yes, some of that will be on a net basis after accounting for the cost of hotel rooms that are comped against those players. And so that is having an impact on what we're describing is that gaming revenue. But in terms, the way I consider the health of the gaming customer is to look at the volume metrics and the gross gaming revenue, which are growing on a same-store basis. Does that make sense, Robin? That's kind of when I think about what the behavior of these customers actually is. It's on the gross basis.

Okay, just to try to clarify that number, that's helpful. Thank you. Also, I was just curious, given obviously the strength of your liquidity and cash position and what you have going, why suspend the dividend? And I realize it was a small dividend only remaining at this point, but I'm just curious why suspend that when liquidity is certainly not the issue.

Yeah, it's not. It was really an administrative issue. It was burdensome. It was complex. And that measured against the size of the dividend itself, which was de minimis. And just how much capital we've returned and we can expect to continue to return through the form of share repurchases. You know, we just felt that it was a practice that we did not need to continue. That doesn't mean that we wouldn't reconsider it or our board wouldn't reconsider it at some point, and so doing would make it a more substantial dividend than a de minimis dividend, but it was mostly an administrative solve. Okay.

Great. Thanks very much.

Thanks. The next question is from John Decree from CBRE. Please go ahead.

Hi. Thanks for taking my questions. Maybe just Jonathan, a quick follow-up on Robin's question regarding casino revenues. So just to clarify, with the higher ADR now, essentially the dollar amount that you need to net against casino revenue is what's causing that kind of accounting decline?

Yeah, that is the major issue that – that's the major dynamic which is causing this topic that we are talking about. Okay. And actually – not just ADR, but also the size of the casino segment generally.

Okay. Understood. Thank you for that additional clarity. Maybe just for a follow-up question, bigger picture, I think it was pretty clear as to where you target growth investments, digital, international, but the last 24 months or so, you've moved a lot of chairs and and upgraded the asset base in Las Vegas and opportunistically, I think, divested GoldStrike. I'm curious if you could give us some comments on how you feel about the domestic portfolio today, both regionally and in Las Vegas, and if there's potential opportunities you'd consider more on the M&A side. We kind of know the plans in New York and if other big markets were to open, but on the M&A front, either buy or sell M&A.

uh... anything that if you think about doing it might make sense well let me let me kick it off uh... a i think particularly after the moves that we've made we we truly enjoy the portfolio we have uh... in terms of las vegas obviously we own forty odd percent of this marketplace and uh... we love the properties that we have here uh... we love the positioning and and what happened at the south end of the strip particularly allegiant has been productive uh... When it comes to regionals, obviously we're in a different regional game in most of our markets. Whether it's Detroit, Atlantic City, or Mississippi, we lead in a big fashion. We're market leaders there. We tend to want to do that and try to tie out the product offering integrated resort to integrated resort. We just think there's an opportunity to get the right kind of customers to transition to Las Vegas and otherwise. I would never say never on any M&A acquisition. There's always, I suspect, an asset here or there that might be of interest, but I don't think we have any immediate designs or plans on anything substantive sitting here today. I think, you know, our growth will come through the development opportunities we've defined, through the digital opportunities that we have defined to date and are going to seek. And, you know, we've always got an eye and an ear open, but, you know, there's nothing specific that – nor would I actually tell you if there was. Yeah.

Fair enough, fair enough. Just engaging the strategy. Appreciate it, Bill. Thank you.

And the next question is from Barry Jonas from Truist. Please go ahead.

Hey, guys, given the strong strip outlook for 23, is the high end of that 400 to 600 basis point margin expansion the right place to think about how the year could shake out, or could you still go higher. And then just with that, can you remind me what the starting point is here? Is it the reported pre-COVID 2019 number or based on sort of a pro forma portfolio?

Thanks. Yeah, when we use that 400 to 600 basis point sustainable margin improvement, we're referencing the 2019 year. So we're not trying to adjust it for acquisitions or dispositions just because we're getting pretty far back in the past at that point. We're very comfortable that across all of our domestic properties that we can be within that range or possibly exceed it. And exceeding it will be driven mostly by the pricing environment. But we're comfortable with that, and that compares to 2019.

Great, great. And just to follow up, you know, I think iGaming, we're hearing that the industry is taking more of a push. I'm curious how you think about the impact that iGaming is having on land-based gaming. Not sure if you're able to quantify what you've seen more recently in, say, Michigan, but can you help us understand some of the puts and takes with what would seem to be some cannibalization threat? Thank you.

Yeah, I'll take that. Obviously, in Michigan, to your point, is the best example where we have market-leading brick-and-mortar and we have, obviously, market-leading digital. The digital business now has out-surpassed the brick-and-mortar by about 25%-ish. They're both doing well over $300 million in GGR. Digital is approaching almost $400 million in GGR. It's an interesting market when you look at it because it's gone through smoking and non-smoking. COVID lasted longer there in terms of its policies than anywhere else. I will tell you, there was some concern early in the middle part of last year. The last three months in Detroit, now that we've come off of most of those COVID restrictions, we've made allocations for smoking and some smoking opportunities for customers who still want to do that. Our numbers have not only stabilized, but it continued to grow in Detroit. So, you know, while it's obvious that there's a substantial amount of play going on in digital, the chance to connect that with brick and mortar and ultimately reward and recognize and simple things like bonusing or jackpots that I leave, that I'm playing at home, I can come pick up in the brick and mortar where I left off as a player and have a contiguous experience is things that we're highly focused on. And so, you know, we think it's been a great opportunity. We think it can continue to be one and we are, We've seen nothing. Michigan, we have the best laboratory in that. Michigan gives us confidence that going forward, we can replicate some of that in any of these other states. I think we'll be in great shape.

Perfect. Thanks, and great quarter.

Thank you. The next question is Steve Wasinski from Stifel. Please go ahead.

Hey, guys. Good afternoon. So actually, I want to ask about your regional assets. And obviously, there's a fear out there in the investment world that at some point, some of these consumers could start to slow down. And we've heard from a lot of your peers so far that there really hasn't been any softness as of yet. And I just want to understand, have you guys seen the same fundamentals there, meaning no real weakening? And then also margins were impacted by the inclusion of non-gaming amenities in the quarter. And just wondering how much more of that potential margin headwind could those present going forward?

So let me take the top of that, Corey. You can speak to the margins. You know, we have several different kinds of regional properties. And so Maryland this year had an all-time record and then some. It was fantastic. We always dreamed of that property making over $300 million, and it did. And I know I'm getting dirty looks from some of my folks, and it did. You know, Atlantic City, given all of the competitive set and the reawakening of Hard Rock and what happened with Oceans, You know, it's a highly competitive market and we're holding our own. And that property continues to do the same kind of EBITDA it's done traditionally, no matter where the marketplace has been. It's kind of interesting. Detroit, as I just mentioned, continues to do well. You know, we saw a little softening with Empire as it came out of COVID. Springfield has enhanced and been improving. Look, obviously it will be the place that I think any major recession activity shows. But I will say to date, particularly up into and through January, we haven't seen it.

On the other regional properties, mainly in the third quarter, we increased many of our non-gaming amenities. And I think we're to the level where we're comfortable with what we have for our guests. So from an additional margin impact on that, I don't think there's much there. And then just on the business side, December had a little bit of softness, as Bill mentioned, but what we're seeing in January and February so far is all of our regional markets are performing extremely well.

Gotcha. Good to hear. And second question real quick, and it's more of a follow-up here, but going back to Macau, it sounds like, Bill, I think you said, or Hubert said this, you were doing about $5 million a day during Chinese New Year. And again, I'm not sure if this was you, Bill, or Hubert, but did I hear you say that even after Chinese New Year, which, look, I know is only, let's call it seven days or so, but You're still somewhere in that ballpark?

It was me. I said 5 May during Chinese New Year, but no. But we are at a great pace and a great place. And so no, but that's extreme. Having said that, it's still very profitable. And it's been five days or six days, whatever it's been. But it's been good. But no, I mean, Chinese New Year's is a unique environment that happens once a year.

Okay, yeah, I was just making sure I was not going crazy.

It's not 5 May. Yeah, don't do five-minute day times 365. It's already done.

Thanks, guys. Appreciate it.

Thank you. And our next question will be from Dan Pulitzer from Wells Fargo. Please go ahead.

Can you hear me? Yeah, Dan.

Great. So first question, just on Macau, it's a two-part question. The 16% share you guys called out, to what extent do you think that's sustainable? And if you can maybe parse that out, how much that step up has been driven from, you know, growth in mass or pre-mass or direct VIP versus pre-COVID. And then that quarter to date comment about the MGM China properties, the highest earning business in the company. I mean, should I, if I kind of go back and piece together some maps, should I interpret that that they're pacing well over a hundred million of EBITDA for the first quarter?

No, no, for the month, for the month, not the quarter. for the month. So you could think about it in those. If we put them together, it'd be the highest EBITDA property we had for the month in our system. Way to think about it. Okay. And so, you know, you can kick in here. Obviously, you're living this every day on the continuity of going forward.

Yeah. Dan, in terms of the market share question you asked, it's too early, but to give you a definitive answer, whether it's sustainable or not, but there are good things that, you know, ahead of us. Because, as you know, we have additional tables, almost 200 additional tables, and we haven't fully deployed all these tables yet. We're in the process of doing that, along with some casino floor reconfiguration. So we plan to deploy all these tables by the end of first quarter. And I think that that's number one. Number two is that in the retendering commitment in terms of investment, we also have a lot of, I think, earning of creative projects. And I think that these are things that will drive additional traffic. I mean, just to give you some color on the non-gaming side for Chinese New Year, I mean, our room occupancy approached 100%, and our restaurant coverage actually exceeded 2019 Chinese New Year level. And a lot of that was because of all the non-gaming events and concerts that drew a lot of incremental visitors to us. And we're also seeing a longer stay by our hotel customers. I think that as we invest more in these non-gaming amenities, we'll... That will help with our market share growth down the road or something at that level.

And then just for my follow-up, this is for John. On the pace of buybacks, obviously you have the new $2 billion authorization. I mean, it sounds like trends are very stable. It's not outright encouraging. I mean, to what extent would you feel more comfortable giving kind of a quarterly pace of buybacks And then also, I think it was last quarter or maybe a couple of quarters ago, you mentioned kind of a decelerating pace of buyback. So given the outlook on Vegas, is there kind of a run rate we can think about here?

You know, I don't want to give a quarterly pace. I do think. You can look at our pace over the preceding four quarters. I think we actually did a bit more in the fourth quarter than we did in the third quarter. And so all I would say is that we have a healthy authorization from our board. I hope I was able to communicate during the prepared remarks the value we see in the shares. And despite all of the opportunities we have before us, the liquidity position the company has is going to allow us to continue to be an active share repurchaser. Beyond that, Dan, I just don't want to give any more specific outlook.

Got it. Thank you.

And our final question will be from Jordan Bender from JMP Securities. Please go ahead.

Great. Thanks for taking my question. Can you just talk about the contribution from Far East Play during the quarter in Las Vegas? And then what do bookings look like from Far East Play for this point or for this year at this point?

You're referring to the fourth quarter or Chinese New Year?

Fourth quarter and then I guess quarter to date as well.

I know the Chinese New Year number fairly well. Corey, I'll lean on you for the fourth quarter. Last year, Chinese New Year, we had about 35 million in CEO. This year, that number was just under 100. And so, you know, the opportunity and what that opportunity provided us this year was 3x what it was last year. And so while not back at the 19 levels or 18 levels, it was meaningful.

And in the Far East play during the fourth quarter, it was up about at least a third over... the fourth quarter of 2021 and constituted pretty much all of the growth in our international play during the fourth quarter. So very encouraging.

Great. Thank you.

Ladies and gentlemen, this concludes our question and answer session. I would like to turn the conference back over to Bill Hornbuckle for any closing remarks.

Thank you, Operator. And I just want to thank everyone for joining us today. I know it gets late back on the East Coast. Just a couple thoughts. Obviously, we continue to show organic growth here in Las Vegas, particularly at our premium product, our luxury brands. If you think about Aria and Bellagio last year, that made over $1.2 billion in cash flow, and we see hopefully that's sustaining. You think about now Macau and the returning, and I think our 200 extra tables will make a difference throughout the course of this year. You think about our development pipeline. You think about both brick-and-mortar digital products. I would say without any disparaging comments to our competitors that we think about the balance of regional location, domestic location, Las Vegas, international, digital. We are the most well-balanced and prepared for growth. We have no net debt. We're sitting at about $5.3 billion in cash liquidity. And since Jonathan and I have joined the senior roles, the company's bought back over 25% of its shares today. and all of it on the back of an amazing team that we've put together here that's got extensive experience over many decades in many different jurisdictions. And so, you know, to say I'm excited by our future would be an understatement. I thank you all for your attention and, most importantly, your support. So thank you.

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