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.