MGM Resorts International

Good afternoon, and welcome to the MGM Resorts International second quarter 2023 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 and Treasurer, Hubert Wang, President and Chief Operating Officer of MGM China, and Andrew Chapman, Director of Investor Relations. Participants are currently in a listen-only mode. And after the company's prepared remarks, there will be a question and answer session. In fairness to all participants, please limit yourself to one question and one follow-up on today's call. Please also note that this event is being recorded. I would now like to turn the call over to Andrew Chapman.

Good afternoon and welcome to the MGM Resource International second quarter 2023 earnings call. This call is being broadcast live on the internet at investors.mgmresource.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 in our periodic filings with the SEC. Since it's 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 this afternoon. I'm happy to share that MGM Resorts posted an all-time record for consolidated net revenues in the second quarter. We achieved strong earnings across our domestic portfolio with near record second quarter adjusted property EBITDA results at MGM China and the first quarter of positive EBITDA at BetMGM. At a high level, we're seeing strong demand trends in Las Vegas, casino drop and handle up year over year alongside increasing hotel revenues with our fourth quarter hotel revenues forecasted to be the highest of all time. In our regional operations, we achieved year over year top line growth on a same store basis, taking into consideration the sale of the Gold Strike Tunica with profit margins in the range of prior quarters. We're continuing to evaluate our business and evolve our products to ensure that we're maximizing profit while maintaining great customer service levels. Our second quarter results are continued testament to our 75,000 plus employees and their commitment to offering world-class service and memories for our guests. Simply stated, our employees are the best in the business and I want to thank them for helping us deliver another outstanding quarter in Las Vegas in our regional locations, and ultimately in Macau. While we're certainly pleased with the results we've achieved in the first half of this year, we frankly are even more excited by what's to come on the back half, starting with the historic long-term agreement with Marriott International that we announced last month. As part of this agreement, we've created a new MGM collection with Marriott Bonvoy, allowing its more than 180 million members to book rooms and earn and redeem Marriott Bonvoy points at 17 MGM Resorts domestic properties. This agreement will enhance our profitability by driving lower customer acquisition costs and with a better mix in higher ADRs and on property spend. By 2025, our expectation is that the Marriott customer base will represent a meaningful segment of our hotel mix at premium rates. Jonathan will expand further on this business case in his section. I'd like to personally thank Tony Capuano and his team for their partnership and collaboration throughout this effort, and we can't wait to get started in the fall. Looking into the third quarter, we have great programming, including Black Cat at Mandalay Bay, Magic at the Convention Center, and Beyonce at Allegiant. Bookings are strengthening for the remainder of the year, and as we get close to the Formula One in November. We've also got a great fall home schedule for the Raiders, which will have fans flocking into Vegas and Green Bay, Pittsburgh, Kansas City, and New England, among other cities that all travel well. For Formula One, while still early, we already have twice the occupancy on the books and at four times the average rate compared to last year, and with more than 70% of our ticket inventory already committed. A portion of these tickets will go to our gaming customers, and early front money and credit data suggested Formula One is shaping up to be an all-time record casino event for the company. Our pace into the second quarter of 2024 is also setting up quite well, excuse me, the first quarter, highlighted by the Super Bowl at Allegiant Stadium in February. We're already seeing stronger rates in a typical Super Bowl weekend with exceptional early business from sponsors and media that has led to three to four times higher room rates on the books. Looking longer term, we're excited by the possibilities of welcoming the A's to Las Vegas, literally in our front yard at the current Tropicana site. The A's proposing a 30,000-seat stadium, representing an additional 2.4 million seats every year during the regular season. That should drive over 400,000 new tourists who are in the focus on midweek business. The Raiders and the Stanley Cup champion Golden Knights have shown that Las Vegas is the go-to destination for away fans seeking a fun and entertaining getaway to see their favorite teams play, and we think the A's will be no different. The A Stadium, Allegiant, and T-Mobile represent 100,000 seats holding three professional sports teams that are directly adjacent to one or more of our properties with a possibility for multiple events on the same day. It's clear that Las Vegas has become the world's premier sports and entertainment destination. Turning to Macau, we posted another outstanding quarter of performance at adjusted property EBITDA surpassing the second quarter of 2019. Margins were in the high 20s, a great story that we feel confident can be sustained for the long term. Our outsized performance in Macau was a result of exceptional execution by the team at MGM China, who has done an incredible job positioning our properties to main share in the mid-teens, and the market has seen significant increase in hotel supply during the quarter. Just a few weeks ago, we reconfigured and enhanced Pit 7 at MGM Macau. and the Lotus Room at MGM Cotai and expect to complete the deployment optimization in Q3 of our tables. In Macau, we are focused on four key priority, activating our incremental 200 tables, making optimistic changes to our casino floor to maximize yield, taking care of our premium mass customers, and driving international customers to our property through our global branch office network. We're committed to helping shape the future of Macau as a global tourism destination through our concession commitments with investments beginning this year. The Income Macau Capital will cover a wide range of opportunities, including investments in art and culture, entertainment, and the expansion of our international customer base. I'd like to thank the Macau SR government for their continued support. Turning now to BetMGM, as the team announced last week, we are on track for second half 2023 profitability, and we're pleased with the meaningful progress we've made towards single account, single wallet. In fact, this week we expect to be live with this feature in 14 markets, which cover more than 50% of our database. Our partners announced acquisition of Angstrom is also a positive step towards improving BetMGM's product and refining our pricing tools, both of which we expect to drive customer satisfaction and ultimately margins. One of the meaningful benefits that MGM Resorts brings to BetMGM is the 37,000 rooms in Las Vegas that import new customers nightly. All of our resort guests are exposed to BetMGM marketing throughout their stay, and on average, BetMGM acquires 30,000 customers monthly who have originated or had a prior relationship with MGM Resorts, with half of those coming from Nevada. Excuse me. As we roll out single account, single wallet across the country, BetMGM will be able to truly activate our unparalleled footprint in Las Vegas as part of our omni-channel strategy. We expect acquisition and engagement metrics to grow as players get to enjoy a seamless experience using the BetMGM app across state borders. We're also focused on growing our international digital business through Leo Vegas. And last quarter announced an acquisition of Push Gaming, a gaming content studio. That acquisition is scheduled to close later this fall. We developed our digital presence internationally through improved content, technology, and distribution. Now, lastly, on the development front, In New York, we hope to receive a license in the first half of 2024. In Japan, Next Step is entering into an implementation agreement with the central government, which we also expect in the fall. In closing, our agreement with Marriott, ongoing investments into our operations, and a fantastic sports and entertainment backdrop in Las Vegas position us well to create operating leverage by growing our EBITDA against our fixed rent escalators. The stability of our domestic business will be supplemented by outsized earnings opportunities in Macau as that business ramps in the beginning of profitability in BetMGM. We also have longer tail opportunities with our developments in Japan and New York and with our international digital strategy with Leo Vegas. When you connect each of these opportunities for cash flow generation together, add to it the strength of our balance sheet and with more cash than debt than excluding MGM China, then consider the fact that we reduced our share count by approximately 30% Since the beginning of 2021, we believe the company is tremendously positioned for growth as we accelerate our free cash flow yield. With that, I'll turn this over to Jonathan for more detail on the quarter. Jonathan?

Thanks very much, Bill. And I, too, want to start my remarks by thanking our employees for all their hard work in delivering another robust quarter of results. Bill said our employees are the best in the business, and I couldn't agree more. In the second quarter, we achieved strong earnings across our domestic portfolio, and near second quarter all-time record adjusted property EBITDA results at MGM China. Before I get into the results, let me begin with the financial benefits we believe the Marriott Agreement brings to MGM. In Las Vegas, MGM Resorts fills roughly 12 million room nights a year. Based on data from the Cosmopolitan as well as Marriott, We believe we can replace approximately 5% to 7% of our lowest yielding rooms with Marriott direct bookings representing 600,000 to 800,000 rooms per year. Upgrading these lower yielding room nights with Marriott brings a lower customer acquisition cost, higher ADR, and a higher yielding customer with more on property spend. Based on our research and our prior experience with Cosmopolitan, we expect increased profit per room by approximately $100 per night, driving $60 to $75 million in annual profit once stabilized. This estimate doesn't include any further upside from our regional operations, group, or occupancy lift. All in all, we're excited about this agreement with Marriott and look forward to kicking things off in October. Now turning to our results. Our consolidated businesses generated all-time record revenues of $3.9 billion, up 21 percent from last year, and adjusted EBITDA of $1.1 billion. During the quarter, net cash from operating activities was $577 million. Less capital expenditures, free cash flow was $323 million. It's important to note that $166 million in cash flow from operating activities and $14 million in CapEx-related MGM China were included in the quarter. Here in Las Vegas, revenues of $2.1 billion were steady compared to prior year, and adjusted property EBITDA was down 6% to $777 million. That's a good number for Las Vegas. On a same-store basis, excluding the Mirage and the Cosmopolitan, revenues were level, and adjusted property EBITDA decreased 8%. Margins of 36% were well above 2019 levels. Second quarter occupancy was 96% and ADR was $234, an increase of 4% year-over-year. Looking forward, our pace, which reflects on the books rooms, is up year-over-year for every month beginning in 2023 or remaining in 2023. In terms of where we're seeing strength in Las Vegas, it's clear that it's coming from the luxury segments. which for this purpose we define as our properties which have a higher ADR than the strip average of $185. And that's our business. This segment represents approximately 65% of our rooms and over 80% of our EBITDA in the second quarter. In the regions, revenues of $926 million were down 3% compared to prior year, and adjusted property EBITDA was down 14% to $294 million. Of course, this quarter we did not have the results of the gold strike, so same-store revenues, excluding the gold strike, grew 2%, with adjusted property EBITDA decreasing 7%. We continue to see stable trends in our regional operations. While EBITDA was down year-over-year on a same-store basis, most of that decline is attributable to two properties, the Borgata and MGM Grand Detroit, both of which lead their highly competitive markets. Regional adjusted EBITDA margins were 32% in the quarter. As you will recall, in the third quarter of 2022, we brought back our normal service and amenity levels to our regional properties, which has led to consistent margins in the 32% to 33% range since. Turning to Macau, our adjusted property EBITDA of $209 million was an increase of 21% versus the second quarter of 2019 with a 28% margin. Gross gaming revenues exceeded second quarter 2019 levels led by our main floor win, which was 37% higher than 2019. The flow through created from net revenues to adjusted property EBITDA was over 100% when compared to 2019. We made progress in improving MGM China's credit profile with the July announcement of the amendment and extension of our two revolving credit facilities with a new maturity date in 2026. And this was an important step in securing and extending our access to liquidity. In the first half of 2023, FedMGM generated net revenues associated with operations of $944 million, which is an improvement of 55% compared to the first half last year. FedMGM is well on track to achieve our forecast of $1.8 to $2 billion in net revenues from operations for the year. Our 50% of BetMGM's operating losses in the second quarter were $22 million. As you recall, MGM reports BetMGM one month in arrears. So our second quarter reporting reflects March through May, and that explains the variance to BetMGM's positive EBITDA in the calendar quarter. Let me close on capital allocation and valuation. As we just lapped the one-year mark at the Cosmopolitan, and with the Mirage and Gold Stripe transactions behind us, it's a good time to reflect on the impact of these portfolio moves on our financial picture. We committed a net $460 million of capital to our domestic opcos with the acquisition of the Cosmopolitan and the subsequent dispositions of the Mirage and the Gold Stripe. On a trailing 12-month basis, the incremental adjusted property EBITDA generated from the Cosmopolitan, less the amount lost with the dispositions, was $258 million. Backing out the change to cash rent with these transactions results in a net increase of $188 million on $460 million of capital. This implies a creation multiple of 2.4 times or said another way, a return on investment of 41% for a property, the Cosmopolitan of Las Vegas, that is now the youngest in our Las Vegas portfolio with the attending low CapEx requirement. We take capital allocation seriously here and we're proud of these moves and the execution of the Cosmopolitan which made it all possible. This year through today, we also returned capital to shareholders by purchasing over 28 million shares for $1.2 billion. We're currently trading at 30% higher than our average weighted cost of shares since the program resumed in early 2021, yet our valuation still remains very attractive. In our earnings presentation posted this afternoon, I revisit our adjusted EBITDA multiple at current trading levels. Using consensus valuation estimates for our share of BED MGM and the current market value of MGM China, We're trading at five times trailing adjusted EBITDA. Bill, back to you.

Thanks, Jonathan. Hopefully, you've heard the business case come through loud and clear. MGM Resorts offers consistent earnings through our Las Vegas and regional properties with near-term growth and diversification through BetMGM's shift to profitability and MGM China's rapid inflection, as well as long-term growth opportunities in international, digital, and to our expansion efforts in New York and Japan. Plus, a fortified balance sheet allows us the ability to make optimistic investments and acquisitions as well as return capital to shareholders through share repurchases. As Jonathan mentioned, we believe our shares will still be priced at an attractive level. And as we stand today, I am certainly encouraged by our ability to grow free cash flow significantly and believe, as a sum of the parts evaluation we included in the deck suggests, our core business is trading at multiples well below our competitors providing them for future growth and value to our shareholders. With that, operator, we'll take questions.

We will now begin the question and answer session. To ask a question, you may press star, then one on your touchtone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. And to withdraw a question, please press star, then two. Again, as a reminder, please limit yourself to one question and one follow-up. And our first question today will come from Joe Greff with JP Morgan. Please go ahead.

Afternoon, Bill. Afternoon, Jonathan. Hi, Joe. You did a fairly thorough job talking about your current operations and the trend lines in Las Vegas and the regional Macau, as well as about MGM. So I have a couple of sort of big picture questions or one big picture question and then sort of one thought on New York. But My first question is if you could just give us an update on any digital or any M&A aspirations in digital. How much of a strategic priority is that for you, both in international markets and in North America? And then maybe for each, how big is too big? Is there a size constraint? And then my follow-up question relates to the three downstate licenses here in New York or New York where I'm at. Could the two existing facilities get licenses if there's contention or uncertainty around the third license? And what's your expectation in terms of communications regarding the next steps in New York? I think, Bill, you may have been in New York fairly recently, so I'm sure you're current. That's all for me. Thanks.

Thanks, Joe. Let me take those. As it relates to digital, we're focused on working alongside our partners with a collective goal to maximize the growth and profitability of MGM and Leo Vegas. I think we're making good progress on both those fronts. And that's really all we're going to say. I think on the second one, it has been interesting. I'm hopeful in the next month or so that we're going to hear something from the commission and ultimately get the process rolling. As you know, we've submitted questions. I think we submitted like 84, 85 questions about the actual bill and the process. The moment they begin to return those questions to us, the 90-day starts. We've not got any specific indication, but we do believe it will happen shortly and are hopeful to that. So, you know, that remains on track, I think, for sometime in 24, getting licensed and then pushing on from there would be our goal and our hope. But nothing definitive there either.

Thanks, guys.

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

Hi, good afternoon, everyone. Thanks for taking my questions. So I just want to dig into sort of the Las Vegas outlook a little bit, but probably a little bit more through a margin or cost lens. So I think across the quarter and certainly across lots of other you know, leisure-oriented businesses. We're starting to see, you know, the top line just normalize a little bit, and it's pretty understandable after, you know, such a good year last year. Just, you know, could you help us think a little bit about, you know, what kind of revenue growth MGM needs in the back half or kind of moving forward, you know, to get a bit of cost leverage, to either hold margin or get a bit of cost leverage, you know, from a bit of a more normalized level? I think in the back half, you know, X Formula One, you know, things are going to start to look a little bit more normal. So just Help us think about what are you experiencing on the inflation front? What would you need? Could you lever a 2% or 3% growth rate? Would you need a little bit more than that, just given the existing inflationary environment? How do you kind of think about those puts and takes?

I'll kick it off and turn it over to my colleagues. Look, obviously Formula One is a unique opportunity, and it sounds like one that's going to repeat itself for us often. And the economics around that are substantial. That being said... we've re-looked at our forecast for the second half of the year, and particularly on top line, driven by rooms and driven by luxury, feel really good about it, both individually by property, and particularly as you go up the luxury spectrum, and then ultimately overall. I think the big thing that's going to impact us is going to be ultimately wage. You all know the culinary and the company, all of Las Vegas companies are now out in the negotiating process, which is going well. We have decades of history with them on doing this. This town hasn't seen a strike since the 80s. And so I think we'll come to a reasonable resolve. There are issues there around housekeeping of note in their core contingency of people that we're going to need to address. But labor, I think, is the biggest thing that sits out there. But, again, the top line has been holding up exceptionally well. So, Corey, I'm going to turn it over to you.

Yeah, I'll, Jonathan, Sean, I'll add a couple of comments. You know, year on year, we're experiencing some increases in Las Vegas and the regional markets in our FTE counts, not severe, low single-digit increases. And that's because of the dynamics we described during our prepared remarks. mostly around full staffing in the regions around actually a fairly dramatic increase in non-gaming revenues in our regional properties. But as you look sequentially as we go forward into the third, fourth quarter, first quarter of next year, I think we'll just need a few percentage points of growth in order to maintain margins in and around these current levels. And interestingly, in Las Vegas, the fourth quarter, has become a seasonal higher quarter for us with, of course, F1, the event schedule around the Raiders and other things that we're doing. So that tends to help margins as well. Corey? I think he covered it, Sean.

And, Sean, I would just, for reaffirmation on margins, you know, we've now landed, I think, where we said we would land. I think that's pretty, history would say that. And we intend to stay there. And so, you know, we'll continue to adjust the business accordingly. But we understand the importance of the margins and where we are and where we need and want to be, and I think we're just about there.

That's super helpful, Culler. Thank you. As my follow-up, a small one, but Jonathan, thanks for the sort of extra detail on the Marriott Agreement. Just sort of one specific one on that, but the $60 to $75 million in annual profit you outlined – Is a number like that net or gross, meaning is that after the incremental costs to Marriott for that? So would that just be pure savings to MGM, or do we have to net out whatever the costs are, the fees to Marriott as a part of that?

No, we see that as net benefit to the company and also doesn't include benefits in the regional markets and in occupancy, recognizing we already operate at very high occupancies, but that's a net number.

Really encouraging.

Thank you, everyone.

And our next question will come from David Katz with Jefferies. Please go ahead.

Hi, afternoon, everyone. Thanks for taking my question. I wanted to talk about the regional business just a bit. We've seen a number of regional operators report so far, and there's been just some pressure on the top and the bottom. Can you just give us your current state of the state of the regional business? Is this kind of a momentary pressure? Is it economically driven? You know, what is your outlook for that business competitively, et cetera?

Yeah, David, it's Corey. I think the business is fairly stable as we look across all of our lines of business. The one area we're seeing a little bit of a decline in is our table games at a few of the properties that Jonathan mentioned earlier about the decline in our business. The non-gaming amenities are holding up extremely well and have been very strong this summer. On the labor front, I think we're pretty well dialed in there. We're still down significantly from our peak FTEs and have a good understanding of our costs. So that business maintaining I see is most likely happening in the future quarters. Got it.

Please. I was just going to add a couple of comments, which is that ours is a unique regional portfolio in that not only are virtually all the properties have commanding market positions, but now with the conclusion of the room renovation at the Water Club as well as the Beau Ravage, these are properties which are, as a group, going to be extremely strong free cash flow generators for the enterprise. over the next several years with a lot of the major CapEx behind us. So they play a very important part for the portfolio because of that.

Understood. And one of the topics we haven't talked about in a while, Jonathan, is focusing on digital investment and investment in the loyalty program and MGM's loyalty program. Can you update us on what's going on there and what benefits you may be seeing or any ways to measure?

Sure. Most of our investments in the loyalty program have been around technology enablement for our MGM Rewards members so that they can make their reservations online, they can check in through mobile check-in, et cetera, and also introducing benefits to the program whereby they can redeem their MGM Reward points for members non-gaming as well as other amenities and earn the points on non-gaming amenities. All of these are seeing steady progress as we go through quarter to quarter. And, you know, it's an increasingly important part of the business. The capital investment requirement is fairly modest. It's more around operational standards and just increasing the awareness of our MGM Rewards customers and benefits associated with the program.

And just a few other points, Jonathan. We just have changed our platforms, which will allow us to do gamification, which we think from a loyalty perspective will help increase wallet share. And then we just announced that the Cosmopolitan of Las Vegas in February will shift to our loyalty program. So we're looking forward to the opportunities there also.

And maybe last comment. You know, our casino segmentation is up almost 10 points as a percentage of our mix generally. The program and all of its attributes have been a key driver in that. And so we've seen a good deal of pickup throughout the course of the last year. Even if I take out BetMGM, which is, as I said in my prepared comments, a huge driver of new signups. If you take that up, I want to, and I'll be off on the number here, but I think we have like 12 or 13% growth in that program. And so, and ultimately awareness, obviously going from MLife to MGM Rewards is the awareness of the program and what it means across the portfolio has been beneficial.

Thank you, everyone.

And our next question will come from Barry Jonas with Truist Securities. Please go ahead.

Hey, good afternoon. I appreciate the commentary on margins. You've previously talked about 400 to 600 basis points as margin improvement on 2019 for the domestic property's I believe you've been exceeding that. Just curious if that's still the right range, that 200 basis point range, or if you think it's a little tighter now.

No, I'm still comfortable with that range. And I appreciate the observation. We look at it very closely. We get very specific in terms of where that margin improvement is coming from. But then again, you know, 2019 was a long time ago. We're focusing on the business as it is now, but we're still comfortable with that as a benchmark.

Okay, understood. And then just as a follow-up, you know, you've given a lot of great color on the Marriott deal. Maybe just can you talk a little bit more about any integrations with that MGM and how you could see upside there?

Ultimately, it's our ability to market to their customers and then their customers, you you know, having an opportunity to do BetMGM in its context. We have a program, I think, that's going to motivate, you know, Bonvoy points for those folks. Ultimately, it sits independent with BetMGM today, but I think it'll be a key driver. And when you have 180 million people aware of a product, we think it's pretty significant and interesting, and they can get rewarded in Bonvoy points and ultimately do things both inside that organization and ultimately back within our own. So, It's a pretty straightforward deal. There's a fee for acquisitions for us, and then they open up the benefits programming to all of their members and our members to each other.

Perfect. Thank you so much.

And our next question will come from Carlo Santorelli with Deutsche Bank. Please go ahead.

Hey guys, I was just hoping maybe if we could kind of look at the same store results in Las Vegas and maybe you guys can kind of help me better understand some of the ins and outs. But I thought if you look at, you know, the margins on the same store portfolio down 350 basis points, but still kind of within a range of what you guys talked about relative to 2019 for starters, what, There was no reference to hold or anything, so I wanted to ask if that was normal. And secondly, I wanted to ask, with the union contracts upcoming, is there any kind of booking of potential incremental labor increases that took place in the quarter and might take place in the third quarter as well, given the contracts ended at the end of May?

In terms of the margin performance year-on-year, again, it was fairly consistent with what we experienced in the second quarter in terms of margin performance in Las Vegas. But as we look year-on-year, a lot of the difference is coming from labor. You know, as we came into the second quarter in 2022... We weren't yet fully staffed, and so we were comping against a lighter labor load in the second quarter of 2022. And then it was a mixed bag of a number of small items, none of which are, you know, I think are worth going into. Hold was not a significant factor, and those all contributed to it. But like you noted in the premise of your question, we're we're kind of in that margin zone that we anticipated getting to and have been now for a couple of quarters.

Okay. Thanks. And then just getting back to, to the, the accounting for bed MGM and obviously the EBITDA loss in the quarter, given the different calendar accounting, um, you know, clearly June was a positive month based on that July and August tend to be seasonally softer months, I would say with it within the sports calendar, et cetera. Um, Is it possible that that kind of 3Q, which is generally a weaker quarter in general from the EBITDA perspective, could actually be breakeven to slightly positive prior to, obviously, what would be expected to be a stronger 4Q?

I mean, I prefer not to parse the quarters. I think you're directionally correct in terms of the relative strength of the different quarters. I think the second quarter calendar result was was terrific, and we stand by that second half profitability comment.

Okay, and sorry, just so I'm clear, that's obviously you guys are thinking aggregate second half as reported positive, but not necessarily each quarter positive. Is that the right way to interpret that? Yes.

You've got football obviously kicking up in the third quarter, so the answer is yes.

Yep. All right. Thank you, guys.

And our next question will come from Stephen Grambling with Morgan Stanley. Please go ahead.

Hey, thanks. Maybe one more on BetMGM. I know you didn't disclose or BetMGM didn't disclose the EBITDA exactly, but from what we can tell, it looks like the margin there may be a little bit lower than one of your closest peers. But I know there's some puts and takes to try to compare these things. Anything that you can call out to help investors as they try to compare and benchmark?

Yeah, look, I think, and we've said this on a prior call, and I think the great news is we finally got single wallet in motion. I think the opportunity with Angstrom will drive more product, more parlay, more frequency and recency around bets in-game and otherwise. And those are big margin businesses. And so if you look at, you know, I think gross, we're a little over 9%. I know there's a goal to break through 10 once we get Angstrom fully deployed, which will probably come in a couple phases. through football and then post-football. And so I think if you look at the businesses, that's the biggest delta between the two is the product offering and, more importantly, the type of products that potentially someone like a FanDuel or DraftKings will offer versus the velocity of things that we offer. We're simply going to have more high-margin bets available for customers as we deploy Angstrom.

And if, Stephen, if Jonathan, if you look at our second quarter, some of the KPIs that we called out in the earnings presentation, I mean, as leading indicators, We're very excited about them for the profitability of the business, lower customer acquisition costs, higher margin on online sports betting, increased play by our loyal known customers, and then all of our pre-2023 markets now contribution positive. I mean, all those things bode very well for improving profitability in the future.

That's super helpful. And one follow-up just on... kind of bet MGM but also the the regional properties it looks like the properties that were in the states with legalized iGaming had a little bit weaker gross gaming revenue than those without. Any color on how to assess cannibalization from iGaming or bet MGM specifically?

I think in macro it's beginning to be a slight factor but I think you know if you look at it in aggregate obviously what's happened in a place like Michigan where it's gone almost 100% more than brick and mortar. It's meaningful to the business and meaningful collectively. We continue to hold our market share. I don't know, Corey, recently what it is, 48% or whatever it is. So in totality, we think it's to our betterment, and we're excited by it long term. And again, I think once we get more of this omni-channel in play, we can begin to motivate back into the property level with tournaments and other activity cases that will drive people back into brick and mortar. Makes sense, and ultimately free cash flow margin accretive.

Yes, clearly. Thank you.

And our next question will come from Dan Pulitzer with Wells Fargo. Please go ahead.

Hey, good afternoon, everyone. I guess a high level one on Vegas is, you know, you've done a good job kind of laying out the near-term and medium-term outlook, but I guess as we look past the Super Bowl into 2024, can you maybe highlight some of the key events that you have on the calendar or, you know, I guess where you are in terms of the group and convention pacing versus where you typically are? Yeah, just any color as we kind of look further out into the demand picture would be great. Thanks.

Yeah, so 2024 from a convention booking perspective looks really positive for our company. We'll be up about 6% in room nights. Just as a reminder, Mandalay Bay has been under remodel. So that's impacted the number of convention room nights we've had in the second and third quarter here. So we have been a little bit down on the convention side, which puts some pressure on the legacy properties in the midweek. But as we look at 24 in the pace that we're seeing and where those rooms are being booked, it should make up the difference that we saw in the last few quarters.

And then, you know, if you think just more macro in terms of events, event activity, the great news is we're still the net beneficiary where carriers like to bring their aircraft. I think we're sitting at 115 or 116% of inventory seats over where we were pre-pandemic. So that's been great news. Conventions, as Corey mentioned, will pick pace. We have yet to see the full return of international business to Las Vegas, particularly from Asia. I think that'll take some pace. We're excited by what we think Marriott can do from a if not a displacement, but probably a little bit of both, you know, a higher value customer against an occupancy creep up because we've seen what's happened to cosmopolitan. If we stretch it across the portfolio, we think that's meaningful. Um, we have several bids in for several NCAA tournaments, the college football championship game, uh, the final four, uh, frozen fear, not frozen, whatever they call their final four for hockey. I think it's called frozen fury. Um, And so, and the programming, you know, Legion and the opportunity it provides has proven to be highly successful for whether it's a Beyonce that's coming in later this month or others. You know, selling out in Las Vegas is almost a given, given the nature of the activity. It's not a three-hour event. It's a three-day event. And so we keep getting more than our fair share of looks at all of those things as a community. and we as individual properties, obviously, with T-Mobile in our portfolio, et cetera.

So, you know, overall, pretty excited by all of it. And then you have the Spear with you, too, which, you know, at 20,000 people a night has to help the entire city. And, you know, I think boxing is definitely coming back. We just hosted a fight last week, and that was spectacular for us.

Got it. Thanks for all the color. And then just pivoting to digital and BetMGM, Obviously, if we look through your slides and we see the data, you know, share has kind of edged downwards a bit. So maybe can you talk about the priorities at the JV level as it relates to growth and market share versus profitability, which obviously inflected here in the calendar 2Q?

It's two things. You kind of touched on both of them. You know, a drive to profitability, you know, we see cohorts maturing in 24 to 36 months, particularly in sports markets. hopefully a little sooner in iGaming. Well, not hopefully, they are maturing a little sooner in iGaming. We've seen our CPAs come down from 400s down below 300s. And so there's active maturity there in the context of how we're marketing and to whom. And we're more disciplined about all of that. And candidly, it's back what I said earlier. Our product is not where we want it to be. I think the moves that we're now making, though, with Entain, our partner, with the moves we're going to make with Angstrom as a partner, onboarded partner for BetMGM will get us to a place where we'll be back in that game in a meaningful way and hopefully begin to gain some share back. On the casino side, it's simply sports bettors, about 30% of them migrate over to the casino. If you take that out of the equation, if you leave that in the equation, it's part of the reason iGaming has come down a couple points. But we continue to dominate. We're not naive that they're not coming after us in that forum. But we continue to innovate. We've got new games going on the floor. Go back to the question we just had around, you know, is it hurting brick and mortar that have jackpots that extend from digital over to brick and mortar and vice versa. And so we're continuing to figure out ways to tie both products together to promote both ends of the spectrum.

Got it. Really helpful. Thanks for the call, Eric.

And our next question will come from Brand Montour with Barclays. Please go ahead.

Good evening, everybody. Thanks for the question. I was wondering if in the regionals, if you were able to give us a little more color on what happened at the Borgata and in Detroit this quarter, and if it's fair to assume that if you adjusted for that, you would have ended up comfortably in that 32% to 33% margin range that you talked about, Jonathan.

Sure. Yeah. At the Borgata, it was a matter of a couple of pretty significant table game events moving from June into July. And MGM Detroit, it was some issues around hold for the property in the quarter. But again, going forward, we're comfortable being in that range. Borgata was the big tracker of the margin.

Okay, great. That's helpful. And then over in Macau, as you look at the market's recovery and where you guys think the recovery is coming from here and looking at your own capacity and your own sort of expertise, can you tell us what gives you confidence that you'll be able to hold the market share gains that you've gotten and and how you sort of think that can trend from here?

Well, I'll kick it off and turn it over to Hubert, who obviously lives this every day. Look, we are uniquely positioned in the way we've historically shaped for decades our marketing organization around knowing our own customers and delivering them to our properties. And obviously now with the demise of Junkets, we've seen that network go to work. And frankly, we're expanding on that network. We've opened a couple more offices recently. And so that's been meaningful and helpful. And then I think it is interesting to us that the moves that we made on the casino floor itself and the reconfigurations and the velocity and the way we offer up games and the proximity to each other, others have now begun to replicate. And so, you know, that's real and it may or may not take its course, but here we are, July was yet a record month. Here we are seven months into this and we continue to hold share of where I think you've seen almost 10,000 hotel rooms open up in the marketplace. And so, look, there's always tomorrow. We're not overly cocky about it. But we do think we've done a good job deploying the 200 tables we got. There's about 150 in play with 50 more to go. And I think that'll help our share story as we get to the second half of the year. Hubert, anything to add?

Yeah, thank you, Bill. Other than the table and floor optimization you talked about, I think that we're also looking at sales team expansion. Obviously, I think that this is going to be very important for our customer acquisition. Another thing is that we're going to leverage our network that MGM Resort has internationally to push the overseas market. I think that we have already made a lot of progress, and we're going to open more offices and double our headcount sales and marketing people in these areas. Other than that, I think capital projects and enhancement remain a very important element to improve our customers' experience, particularly at the premium math side. So we are looking at, for example, at MGM McAllister, we're going to do villa renovation in the coming month and the quarters. And there are also a lot of non-gaming programs and products that we're going to either renovate or build under the re-tendering concession commitment. So there are a lot of things that we are doing and focusing on to defend our market share. Just to give you some color on the recovery, I think our July results are very strong, robust, and it's showing continuous improvement on a lot of fronts and a lot of KPIs vis-a-vis second quarter. So whether it's daily GGR or mass GGR recovery rates, and even if it does recover rate. So we're looking at higher numbers than the second quarter. So I'm very optimistic on the balance of the year in terms of recovery and the financial results. Thank you.

Great. Thanks, everyone, for the color.

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

Great, thanks. I just wanted to follow up on the Marriott agreement. It seems like a great distribution agreement. They describe it as a franchise agreement, which would suggest that you're paying a share of rooms revenue from, you know, you mentioned you expect them to fill maybe 5% to 7% of the lowest rooms. Are you paying a share of room revenues from the other 90-plus percent of rooms in the agreement? Thanks.

Robin, the whole agreement is basically a hybrid, given the nature of Las Vegas, given our occupancies. And so, yes, we're paying fees on some rooms, not all. And so, look, I think you long understand the nature of the story here and what we've been able to do. Ohio was more of just a loyalty program. This goes a little deeper and longer. which we're excited by, but it is rewarded on performance. So the more room nights they drive and the more room nights they bring us, the better they do and ultimately I think the better we will do. But it's a hybrid deal. It wouldn't be in the general context of how you think about a franchise agreement.

So not a share of revenues on the rooms that you already fill yourself. Is that the way to think about it?

Yeah, we're not going to go into the details of the agreement. We actually, you know, feel like we've been pretty transparent in terms of what we think they'll deliver, what they think they'll deliver in terms of rooms and the incremental value associated with those rooms on a net basis. So that's as far as we're going to go in terms of describing the transaction.

Okay. Thank you. Thanks for the color.

Our next question will come from John Decree with CBRE. Please go ahead.

Good afternoon, everyone. Thanks for taking my questions. In your prepared remarks, you've mentioned about the A's in the backyard for you guys. So maybe a little bit further looking, but are there potential reinvestment opportunities on the south end of the strip for your properties that might make ROI sense now that maybe didn't previously? Is there things that you're starting to consider and that you might be able to do with that potential anchor down there in your backyard?

John, thanks for the question. I think the answer is yes to a degree. I mean, we're going to keep the velocity of capital we spend in Las Vegas when we're sitting here, particularly on that corner when we own all three properties in measure. Having said that, it's a billion-and-a-half-dollar stadium that's going to deliver hundreds of thousands of new folks. MGM is 30 years old and needs some love anyways. We're not crazy about the way it all connects right now, so we'd like to work on connectivity on that corner. We'd like to work on particularly the front end of MGM. We think, frankly, the further you get away from the elevators, the worse the property gets, not the better. And we'd like to think our front door could be enhanced, and I know it can't. And this will be a catalyst to that dialogue, where we go and how much time to tell. But yeah, we do think there's an opportunity there.

Thanks, Bill. Maybe one more also circling back to the prepared remarks. If you could provide a little bit of color. There's obviously been strength on the strip at the luxury properties that you gave us some color on. But the smaller piece of the business, perhaps the non-luxury properties, if you could give us a little color as to what you're seeing there. in terms of just differential from luxury properties, if you'd call it softness and what opportunities are there? Is it economic? Is it still just that midweek occupancy that needs to come back as conventions roll in and citywide fill-ups? How are you thinking about those other properties that could maybe see some opportunities?

John, I'll kick it off and turn it to Corey because he knows this more intimately, but I would say this. Park is enjoying its best year ever by far. And so it sits in the epicenter with T-Mobile of activity. And we see bleed over from Luxor when conventions are there. Obviously, we'll see bleed over Luxor Excalibur when football kicks back up. New York is enjoying a decent year. It's a little bit of a mixed bag, but generally, Corey?

Yeah, I think in general that there's plenty of demand to fill the properties. It just comes to the rate on midweeks. And in particular, when you look at Luxor and Excalibur, they've been impacted by Mandalay's construction going on over there. So they haven't had the flow over from those convention room nights. When there are conventions in town, we have pricing power even at those properties. But the summer's been a little bit low on the convention business, not just for us, but from what we've heard from some of our competitors. But we're still happy with the occupancy we're seeing in there.

Great. Thanks so much, guys.

And our next question will come from Chad Bannon with McQuarrie. Please go ahead.

Afternoon. Thanks for taking my questions. First wanted to ask about your share repurchases, $15 million in the quarter. That was the highest in four quarters. Just wondering how you're thinking about the pace of repurchases as we get through the back half of the year and then beyond. Thanks.

Yeah, thanks for the question. This is an important part of our capital allocation program. It has been now for over two years. We, you know, we try to be consistent but also opportunistic depending upon where we see the shares as compared to our own estimated value of the company. And, you know, this quarter was aggressive, although not terribly, more so than the first quarter. This will continue to be a part of our capital allocation approach, and the pace will be dictated by the market as well as some of the other opportunities that we have before us. But we do have close to $2 billion still of excess cash on the balance sheet. And one of the best, we think at our valuation right now, one of the best homes for that capital is repurchasing our own shares.

Great. Thanks. And then wanted to go back to Macau, to Hubert. Nice to hear about the quarter and that July is trending in the right direction. We've seen that the State Council recently published a 20-point measure to potentially expand consumption in China. I think we've all been waiting for a resumption of that farther out traveler or visitor, non-Guangdong, to come back to the market. So two-part question on that. First off, Do you think this could be the catalyst that gets them going and what would be? And then secondly, do you need that customer to come back or given your results that you're showing right now, are you pretty happy with the current customers that you have in your properties? Thanks.

Yeah, I think that's a great question. I think the stimulation package that the government institutes in China, I think it's going to be another push for the mass segment, and particularly at the mid to lower end of mass. This market, frankly, I think that it's so far driven by the premium mass segment, but I think the longer term recovery or growth will be a broad spectrum, much broad spectrum than just that, particularly with all the non-gaming programs that all the concessionaires are implementing. I think that the demand will come from a lot of that will come from the lower to mid end of the mass. So I think that, again, bodes well for everybody in the market. For MGM, actually, we talk about recovery, but for us, I think we are already moving beyond recovery. We are talking about growth. So we are focusing on all segments. Of course, premium masks, given the profit footprint, et cetera, I think we focus on that. But a lot of programs will be supported by every segment of the mask. So I think that bodes well for us as well in the coming months and quarters for the business growth.

Thank you very much. Appreciate it.

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

Thank you, operator. Just quickly before you all go, look, I think you've heard we continue to have a really strong top-line story in Las Vegas. It's led by event activity. It's led by luxury, which we, you know, again, to Jonathan's comment, 80% of our earnings are coming from a luxury segment and sector. You heard us talk about Marriott. Think about what we just did. We've just partnered with the world's largest hospitality organization with 180 million members directly tied to our programs and ultimately to our properties. You know, BetMGM is now an inflection point. You heard us talk about margin retention and margin stabilization going forward. I think we're at the numbers we should and want to be both in Las Vegas and regional, and we'll continue to work towards that end. You heard about our balance sheet being in great shape, and the value that it presents to shareholders, particularly given the trading multiple that we're at, remains very opportunistic in our view, but it sits there loud and clear. So for that, I thank you for all your support and your ear, and have a great evening.

The conference has now concluded. Thank you very much for attending today's presentation. You may now disconnect your lines.