MGM Resorts International

Good afternoon, everyone, and welcome to the MGM Resorts International Second Quarter 2024 Earnings Conference Call. Joining the call from the company today are Bill Hornbuckle, Chief Executive Officer and President, Corey Sanders, Chief Operating Officer, Jonathan Halkier, Chief Financial Officer and Treasurer, Gary Fritz, President of MGM Interactive, Kenneth Tsang, Executive Director and President of MGM China Holdings, Hubert Lang, COO and President of MGM China Holdings, 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, we do ask that you please limit yourselves to one question and one follow-up. Please also note today's conference is being recorded. At this time, I'd like to turn the floor over to Andrew Chapman.

Good afternoon and welcome to the MGM Resorts International second quarter 2024 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 four looking statements is contained in today's press release and in our periodic filings with the SEC. Except as recorded 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 when talking about our performance. You can find the reconciliation to GAAP financial measures in our press release and investor presentation, which are available on our website. Finally, this presentation is being recorded. I'll turn it over to Jonathan Hall here.

Thanks, Andrew, and good afternoon, everyone. Before I get into our quarterly results, I would like to congratulate and thank all of our employees for another great quarter across all of our businesses. Their high level of execution is clearly evident in our results, and I couldn't be more proud of the team for our performance this quarter. Turning to our second quarter results, In Las Vegas, we achieved both top and bottom line growth year over year against a strong comparison. Net revenues grew 3%, driven by both higher rate and occupancy. Our strategic relationship with Marriott contributed to our performance this quarter, now with over 410,000 rooms room nights booked. The future for hotel bookings in Las Vegas is bright. Looking ahead at our pace, room rates on the books in Las Vegas are up year over year for every month in the third quarter, and group rooms on the books are pacing up mid-single digits for the rest of 2024 and 2025. Our success in the quarter was underpinned by our luxury resorts, which are responsible for the vast majority of our top-line growth in Las Vegas. We invest meaningfully in our stripped luxury offerings, as this is where we see the most opportunity for profitable growth. In fact, 75% of our 2024 domestic property capital budget will be focused on these properties. This includes room remodels, which are underway now at the MGM Grand, and suite updates across our Las Vegas portfolio. On the technology side, we've now completed the integration of the Cosmopolitan of Las Vegas into our MGM Rewards program, which will now allow our MGM Rewards members to enjoy full benefits of the Cosmopolitan and vice versa. In the regions, net revenues remain stable, driven by relatively flat year-over-year handle with our market share holding steady across each of our markets. We also have seen a full recovery at MGM Detroit, which we all know had faced headwinds since midway through last year. Margins were within our targeted range of the low 30s as we remain vigilant on improving our variable labor effectiveness and executing on revenue initiatives such as our expanded air charter program, just one of many examples. In Macau, MGM China net revenues grew 37% year over year, achieving a market share of 16%. Adjusted property EBITDA reached $294 million for the quarter, marking a 40% increase with margins at 29%. During the quarter, we strengthened MGM China's balance sheet by extending our maturity profile with the issuance of a new $500 million 7 and 8 notes due 2031. The proceeds of this offering were used to pay down outstanding borrowings under the revolving credit facility. I'll conclude my remarks with some thoughts on the free cash flow algorithm we introduced last quarter. An algorithm that enables us to achieve a mid-teens free cash flow per share compound annual growth rate through 2028. Simply put, we expect to grow our EBITDA at a faster pace than our rent escalators, interest payments, maintenance capital, and taxes while investing for growth and reducing our share count. First, we'll generate recurring free cash flow from our resort operations by optimizing the operating model to achieve incremental revenue growth and realize cost savings. We'll grow our market share in Las Vegas through reinvestment into our properties with a focus on luxury. We'll maintain our market-leading positions in the regional markets, including an expansion in New York, and generating a growing dividend from MGM China. Next, we anticipate generating free cash flow from our digital businesses in the coming years as BetMGM reaches an inflection point and Leo Vegas delivers on its numerous market entries. We'll also be investing for long-term growth in Japan and other markets where our development expertise and brand awareness provide a distinct advantage. Finally, we'll repurchase our own shares. Through our strategy of using excess cash for share repurchases, our share count has decreased to around 300 million shares from close to 500 million, an approximately 40% reduction in our float in just three years. Taken together, the increase in free cash flow and reduction in share count would result in a mid-teens free cash for share compound annual growth rate by 2028, even without a contribution from MGM Japan. Bill, over to you.

Thanks, Jonathan, and good afternoon, everybody. I'd like to start by doubling down on Jonathan's comments on congratulating all of our employees. Their continued attention to detail and guest service has been amazing, and it continues to show through in our MPS scores. And also just take a second to identify and thank our management teams into a challenging wage inflation environment. I think you've seen through our margins, they've all done a great job managing their way through the first part of 2024. And I will remind everybody that most of those increases now lapse as we go into the second half of this year. Turning to the quarter, we had excellent results against a strong 23 comparison. We see continued strength, as Jonathan mentioned, in Las Vegas. driven by transient group demand. The merit integration is going exceptionally well. And Mandalay Bay is fully leveraging on its updated space. MGM China continues to hold its market share and margins against a very competitive and evolving market. And our regions continue to hold top line and operating efficiency. And it's great seeing Detroit finally return to its earlier prowess in that marketplace post-strike and post-cyber last year. In Las Vegas, We believe Las Vegas growth can continue its top line and maintain margins in the mid-30s. Group pace, as mentioned, is up in 24 and 25, anchored again by the refreshed space at Mandalay. Benefits from the Marriott program will only continue to increase, particularly on the group side, unique to MGM. We have a favorable supply dynamic with the closing of the Mirage in Tropicana, taking approximately 1.5 million room nights off of the circuit. Again, we'll see lower years two through five labor contract increases, and organic same-store growth driven by further database optimization is just stepping in, particularly now with the integration of the Cosmopolitan, which we finally got on yesterday, so we're very excited by that. Noting in the third quarter, I think all of you know this, but remembering back, we had the cyber attack last year in the third quarter, and that should prove to be successful for us. However, in the fourth quarter, and I think many of you see this through our room rates, Formula One is showing some softness. We are hoping and believing that this race will continue to pace up, but I think you can see that. And so we're a little focused on trying to make that the best event that it can be. But that presents a potential headwind in the fourth quarter. Overall, though, given where we are, to think about records into the second quarter of Las Vegas at this point is pretty compelling and pretty exciting for all of us. To the regions, business remains stable with margins holding at 30% plus against an established and consistent promotional environment. And we continue to have best-in-class properties with leading market share, providing a real steady free cash flow generation. Macau, the story continues. We're outstanding performance, and the drivers have strengthened that market, starting, I believe, with our leadership team. We have Kenny and Hubert on the phone. Pansy has clearly leaned in on many things that impact the property and our market. and ultimately our market share. And so we're thankful for that. And there are many tactics that they deploy. I think the thing that's most compelling is they truly understand our customer, our customer base and their wants and needs. And without any real capital enhancements from where we left this market in 2019, we were obviously outperforming. MGM Macau is now the top producer on the Peninsula side, something we're proud of and a position we'd like to keep. And so we're gonna continue to invest into that property. And ultimately and overall, remembering the market has only returned to 80% recovery, while MGM is well above that, we still see opportunity not only for growth in the market, but ultimately for us to steal additional share. Before I turn this over to Gary Fritz, who you've not yet met, to talk more about MGM Interactive, I'd like to comment on Entain's recent announcements and bet MGM's domestic business. First, I'm excited by the relationship that we've created with Stella David, as the interim CEO and now the chair. I'm equally excited by the progress that's been made by the team in BetMGM's product enhancements with a key focus by the Entain Group. And now the recent addition of Gavin Isaacs as CEO is comforting. Someone MGM and I have not loaned for a long time, have a great relationship, and think he'll do wonders for that business and ultimately the market. I'd also like to make a general comment on BetMGM's Monday release and some promising green shoots reported by competitors in the space. We have stated that 2024 would be an investment year. Recognizing that we've lost shares in sports and that it was impacting our leading market position in iGaming, we righteously decided to invest heavy into our sports product and continue to invest in customer acquisitions for iGaming so long as we saw both market growth and overall market share growth. For the record, BetMGM was also profitable in the second quarter of 24, driven by our iGaming business, which annually contributes about $400 million to the overall business. The second piece is improving our sports product. We've made substantial steps with Angstrom and will deploy a whole variety of new products into the football season, as well as single account, single wallet in Nevada, establishing customers to carry a wallet with funds back to their home state. We think it's a big deal for the business and for our omni-channel efforts. And so we'll obviously invest into the fall with these new product offerings, trying to win back customers on sports. In the big picture, we love what BetMGM has done for our brand. We love the long-term prospects, and we enjoy having a partner during this development stage that is equally focused on the business. We are patient and have a strong belief in the growth of this business now and long into the future. I want to turn it over to Gary. Gary's going to talk a little bit about BetMGM, but really focus on MGM's other interactive activities in the rest of the world. Gary?

Thanks, Bill. Beginning a couple of years ago, we embarked on a journey with the vision of creating our own proprietary iGaming and sports betting platforms. The goal was to develop a differentiated product capable of capturing market share in both established and emerging markets. The crux of this strategy is based on four pillars. and I'll walk through them. The first pillar was for MGM to own its tech ecosystem so that we were not reliant on third parties, a tech ecosystem that is scalable and cloud-based. We achieved this in 2022 through our acquisition of LeoVegas. Not only did we buy the technology, but we acquired an exceptional management team with an aggressive strategic plan that we have been executing. We also recognize the importance of having an owned sports betting platform to further highlight our brands and generate more cross-sell opportunities. We took a large step forward to achieving technical independence with the purchase of Tipico's U.S. sports betting platform, which will close soon and drive important synergies. The second pillar of our strategy was to own our proprietary iGaming content with unique intellectual property. We found this through our acquisition of Push Gaming in 2023. Our strategy with Push is to develop games that are not only exclusive to our owned and operated platforms, but also to create titles that can be marketed to other operators. Since our acquisition, MGM Resort branded games have been our highest performing titles in the Push ecosystem. The third pillar of our strategy is to target organic growth in attractive regulated markets with the BetMGM brand. Just a reminder, we own the BetMGM brand and can use it anywhere in the world outside of the territories that the JV operates in. We do this using our Leo Vegas proprietary tech stack. We've already launched the brand in the United Kingdom and the Netherlands with great early results, and we plan soon to enter Latin America. The final component of our strategy is our live dealer product, enabled by our recently announced strategic relationship with Playtech, making us the only U.S. operator to offer live casino content for international markets directly from the Las Vegas Strip. We have already launched at Bellagio and MGM Grand and are thrilled with the positive response both from our live and online customers. The next phase involves constructing a dedicated space at MGM Grand featuring table games and, in the future, game shows from well-known third-party brands. We believe the synergy among all of these pillars will yield significant long-term returns, starting with a double-digit stabilized return by 2027. In the near term, after two years of investment, we see the core businesses at Leo Vegas and Push Gaming beginning to show positive momentum. Over the next few years, we will focus on expanding our sports platform and making further investments in our new owned and operated, fully owned and operated, BetMGM markets. Back to you, Bill.

Thanks, Gary. And obviously excited by all the progress and we look to scaling this business, particularly the live dealer piece here in Nevada, I think is interesting and unique to us and an exciting format. Before I turn this open to Q&A, just a couple of overviews. Again, I think we enjoy a magnificent position in Las Vegas. We have made significant capital investment in our luxury. We've put over a billion dollars into our properties in the last three years, principally focused on the building we're in, Bellagio. All of our rooms and suites now have been redone, amongst many other new amenities. We're also continuing to explore ways to further connect the heart of Las Vegas Strip, meeting Bellagio, Aria, and the Cosmopolitan together, Some of you may have seen over the last couple weeks a set of plans that were submitted to the county here. We are in the midst of trying to create something that we believe will be unique and special to Bellagio, something deserving, something that will have an experiential component, entertainment component, must see, as well as retail and ultimately nightlife components that begin to marry itself up with some of the other things we have here that bring nightlife back to Bellagio in the long run. So we're excited by that. We'll have more of those plans for the next quarter to announce in terms of content and pricing, but we're excited by launching that product hopefully over the next several months here. As I think about our regional properties again, I want to reiterate they are stable and they're free cash flow generating, and we're excited to have the properties that we do within our portfolio. Many of them, as you know, are market leading. We have shown and demonstrated now I think in Macau, our growing EBITDA prowess, and our ability to have set a whole new plateau of economic performance. We are excited, and I am, by the idea of Omnichannel for the football this coming season for BetMGM. I think it finally unlocks our database and enables people to take their wallets and go home to places like Colorado and still have funds that they can share. I am equally excited by the overall digital strategy that Gary has laid out. I just recently returned from Japan, and now it's moving along nicely. We are in the ground as we speak, and we hope to start pylons by May or June of next year, with the target state still of middle of 2030 for opening. I think we are, if I think about expansion, I think about the UAE and New York. I think in our project in Dubai of note, where I am daily situated in UAE, and there has finally been some progress in New York, where at least by the end of 2025, We all have to make our submissions and move that along. And I love our position in Yonkers and what we've been able to accomplish with the local community there. I think and I know we're in good standing as of this date. So I look forward to that and ultimately look forward to additional markets. Next month, myself and Pansy Ho will be in Thailand looking at that opportunity. That is a venture that we're interested in. And if we do do that, we'll do it through MGM China Holdings. And then finally, I'm excited by some of the news, not news, but some of the information Jonathan consistently provides. I think we have an amazing balance sheet. We have low net debt. We have excess cash still able to deploy, whether it's into things here or against some of Gary's propositions. And I think we ultimately have a pipeline of short, middle, and long-term value creators. With that operator, I will turn this over to questions.

Ladies and gentlemen, we'll now begin the question and answer session. As a reminder, in all fairness, please limit yourselves to one question and one follow-up. Our first question today comes from Joe Graff from J.P. Morgan. Please go ahead with your question.

Good afternoon, everyone. Bill, Jonathan, and Bill, I'd like to start off in Las Vegas. I realize the marriage strategic partnership is beyond Las Vegas. It also relates to the region's I was hoping maybe you can give us a little bit more meat on the bone with respect to the contribution from the Marriott connectivity. I think, Jonathan, you mentioned at the outset in the quarter, 410,000 room nights were booked. I want to make sure that was for the quarter or is that sort of since the inception of the property? But I guess where I'm trying to go to this, I know you kept the contribution on a steady state basis at an annual EBITDA level of $65 to $75 million in the slide deck. Does that timeline in which you think you could hit that, has that changed given that you've had a number of months of experience? And then as a follow-up, Bill, you mentioned that Formula One has some softness. When we think about the year-over-year delta related to the Formula One softness, shouldn't that be more than offset by the benefits of the Marriott connectivity? And that's all for me.

Great question, Joe.

Go ahead.

You go first.

So first of all, just to clarify a few of the facts regarding the production we're seeing out of Marriott, that 410,000 booked room nights number is for the year to date as of a couple of days ago. And of that, maybe 60% or so have stayed here. The remainder are reservations for nights over the next few months. But we measure it by production. And so that's the production level. It is, in terms of the incremental benefit, it comes from two places. One, the rate at which Marriott customers are paying as compared to those room nights that we're displacing. You know, we're already operating at 96% occupancy. This was not about growing occupancy. It was about growing yield. The second is the increased spend by those customers while on property. Roughly $100 of the benefit per room night comes from the rate premium. And about $50 comes from the increased daily spend that we measure through charges to the folio. So it's not a perfect measure, but it's pretty good proxy. And together, those are the incremental benefit from Marriott Rooms. In terms of the timeline, you know, we got started a little bit later on this because of the cyber incident. We didn't start until February for most of our properties when we originally anticipated starting the end of 2023. So, you know, I think it's still a good estimate for the benefit for calendar 2024, even though we started a bit late.

And then, Joe, as it relates to F1, I get the principled point, although we could argue that that revenue goes against labor increases or insurance, you know, a bunch of other things. I think the real issue with Formula One is it's off to a soft start as compared to last year where we had a lot of advanced pre-bookings. I think you can see some of our ADRs are down. If you look at what we're charging, 50 percent, give or take. I think the good news is we have an NFL game, so the south end of the strip that only ran in the 60s last year, I think we anticipate filling that up. But the actual event itself feels soft. It doesn't feel soft in gaming, which is the most important piece, well, one of the more important pieces. It just doesn't room rates at the big three, meaning in this case, Aria, Cosmo, and Bellagio. So the overall impact we'll see. I'm hoping it fills later and we can yield back up again. I'm sure it will. But I think it's worthy enough and we're concerned enough to make a point of distinction between this year versus last.

Great. Thank you.

Our next question comes from Sean Kelly from Bank of America. Please go ahead with your question.

Hi. Good afternoon, everyone. Thank you for taking my questions. Bill, I also wanted to ask a little bit about Las Vegas and then maybe follow up on digital. But the question on Las Vegas would be, I think this is kind of the second quarter in a row where we've seen some of the kind of core gaming metrics down a little bit, but obviously the non-room revenue side continues to kind of drive the story and the narrative, as you just talked about with Marriott. So could you just give us an update on kind of what you're seeing out of the core gaming customer at this point and what some of the pros, cons might be about where you're kind of targeting your focus around the strip at the moment in terms of to drive that gaming customer moving forward? Thanks.

Yeah. Tori, you want to take this? Sure. Sean, the core gaming customer is still pretty solid. Probably the change in the revenue on the slot side in particular is midweek and tied to the shift in the convention mix. But we continue to see our high-end perform extremely well, our database perform extremely well, and our focus continues to be on maximizing the right customer in the room. especially during the weekends where we think there's opportunities to yield up to the better customer.

Great. Thank you. And then maybe to follow up on digital for whoever's appropriate or Gary, if he wants to take it, would be thank you for kind of the overview on sort of where you're taking the strategy. Where I was kind of curious was if we think about net investment, so let's exclude some of the acquisition dollars that you spent, but as we kind of think about these ventures in total, Excluding what's going on at BenMGM where we have sort of a core KPI, is the rest of the digital venture here largely self-funding, meaning you're cash positive in some areas, you're able to reinvest? Is there any kind of need to further invest or push, especially when we think about new market launches, maybe like Brazil? Thanks.

Sure. Thanks for the question. I would say we definitely have portions of the portfolio, especially the core businesses at Leo Vegas and Push Gaming, which are definitely profitable. I would say it's a modest level of investment is what we have to make around individual market launches, but sort of nothing at the scale of what we've done here at BetMGM in the U.S.

Thank you very much.

Our next question comes from Carlo Santorelli from Deutsche Bank. Please go ahead with your question.

Hey, guys. Thanks. Good afternoon. Jonathan, previously you talked about EBITDA growth in 2024. 3Q obviously sets up favorably your commentary around the bookings for each of the months, obviously resonates favorably, coupled with some of the commentary around Formula One. I wanted to revisit that statement and kind of see how you feel is the dynamic between 3Q and 4Q as we kind of look ahead for the back half of the year.

Sure. You know, the two quarters are quite different from one another in terms of really the comparables. The most important distinction. Third quarter, as I noted, you know, Our outlook on the room revenues is pretty strong, and everybody knows what we experienced last year in the third quarter. The fourth quarter, you know, it depends greatly on ultimately our performance during F1. It's not the only thing going on. There's a lot of things driving the business in the fourth quarter, but that was an important driver of our performance last year. And so I would say kind of carving out that risk For the moment, we feel very good about the third and the fourth quarter and their ability to grow. But just realistically, the fourth quarter does depend upon the performance of the F1 event.

Okay, great. And then just if I could circle back on that MGM. When you guys think about kind of the balance of this year into next year, I know that in the release that was out earlier in the week kind of talked about debt funding, some of the development and the investments and whatnot. Is there anything else that we should be mindful of looking forward in terms of contributions to the entity?

No. Carla, no, I don't think so. I think what was put out in that release is, frankly, more than sufficient. And whether we pay it with debt or we do something else, you know, time to tell. What's important for us, we need to continue to be mindful of expenses, but what's important to us is we don't lose iGaming share because it is precious and that we properly relaunch the products we were talking about earlier and we spend effectively and appropriately into it. Now, that's an estimate. Let's see how it plays itself out. But the bigger question of are we going to invest even more money into that, I think what we've identified is plenty of money, and I do not anticipate that.

Understood. Thank you very much, guys. Appreciate it.

Our next question comes from David Katz from Jefferies. Please go ahead with your question.

Hi, afternoon. Thanks for taking my question. I wanted to just understand better or hear you talk more about the digital strategy from a holistic perspective. You know, BetMGM is sort of on its own path right, with its own issue set, while, you know, the rest of the world is, you know, to some degree doing its own thing, you know, some of which have the same brand. How do they, you know, converge one day, right? Or is that even a possibility? And, you know, to that end, you know, capturing the most value in your stock for all of it, right? Does that necessarily... require, you know, having them converge one day.

David, obviously that kind of leads into the conversation of what's the relationship and what to do with Entain. And, you know, we're just not going to comment on that in broad stroke. We enjoy where we are with them. We are very hopeful for what will come this fall. And frankly, it's pivotal to the business and to our ability to regain share. That said, we understand the exercise. We You know, Gary and his team have worked diligently in markets. We think the guys at Leo Vegas was an exceptional find. They're a very strong team. We've launched Netherlands with great success. We've launched UK. Obviously, we have our eyes on South America and Brazil. And so there's real upshoots there and real money to be made in an organization that's already making money. So excited by that. And I'm excited by the opportunity to play here with the notion of live dealer. You know, 15% of all of the bets on BetMGM are live dealer. And to the extent we could make it real from emanating from these places, we think is compelling long term. And we think we can actually have some real fun with that down the road with tying celebrity to it. But I get the longer term question. I'm just not in a position to want to answer it right now. I think that's fair enough.

Thanks a lot.

Our next question comes from Steven Grambling from Morgan Stanley. Please go ahead with your question.

Hey, just a follow-up on the BetMGM investment commentary. I guess we get a lot of questions on how the cost structure here compares to some of your peers. So we'd love to get any color you have on the composition of the operating expenses there as we think about marketing and promos versus perhaps product, and then think about what the flow-through could look like longer term.

Go ahead.

Sure. So, look, I think that what we're looking for with the product deliveries towards the end of this year at BetMGM are certainly designed, especially with the extension of Angstrom and that product into more markets and more sports, is something that should have a positive impact on gross gaming margins. And certainly that then has a trickle-down impact on the rest of the P&L and the cost structure itself because you're having significantly higher hold at the top of the funnel against handle. So that is a huge portion of the rationale behind the product releases that we're going to see coming here at the beginning of football season.

Maybe one other quick follow-up just on the bank loan. Maybe I missed this, but I guess Where is that being financed out of? Is that being guaranteed by either parent?

That would be a, and again, this is kind of still underway, but it would be a facility at the BetMGM level and any amounts or nature of credit support from the parents is still under discussion. but it would be at the BetMGM level, their own credit facility.

Got it, thank you.

Our next question comes from Brant Montour from Barclays. Please go ahead with your question.

Hey, good evening and good afternoon, everybody, and thanks for taking my question. So the first question is on Las Vegas, Bill. You mentioned in your prepared remarks supply coming out of the strip across the two properties. that's well known. I'm curious if you could just walk us through, you know, where you're seeing it, you know, group versus leisure, proximity versus price point. What sort of got you excited enough to mention it?

Corey can follow up on this, but it's not as much group, particularly when you talk about the Tropicana. I think there it's a pure leisure play on that corner. It was clearly a value proposition. We also have several there with Luxor Excalibur and New York, New York. And so, you know, we think it's a pure leisure play there. There was some group activity at Mirage, but not extensive. I think we've seen maybe a couple pop up at MGM or one of the other facilities, I think MGM. But again, I think if you think about those leisure room nights, you think about other places to go in the interim. I think our MGM portfolio, MGM and Park MGM, you know, we have a lot of stuff in mid-market that lead into that. And I think we're ideally positioned, particularly given that we know those customers. Remember, we retain part of that database. And so, you know, leaning into them and being able to move them over, we think is meaningful. And just generally inventory, you know, as we understand, Hard Rock will probably be out for three years. Tropicana is completely undefined at this point. And so it's a substantive period of time. I know we've gone into the teeth of the inverse with fountain blue, but it's nice to go the other way for once.

That's helpful. Thanks for that. And then a question on MGM China. The market slowed down by many measures in the 2Q slightly, and even your unit production for mass took a slight step back, and yet you guys hit a high watermark for margins today. Just curious what you can call out there. I'm assuming your hotels are full and you were yield managing, but is there anything else to see through to that performance?

Annie or Hubert, you want to comment, please?

Yeah, I think when we talk about China with its economy scale and the population size, there are many dimensions to merit. We at MGM China are very focusing on what we should be doing. Basically, we are focusing on the innovative and customer-centric investments, both on CapEx and on OpEx. In July, we basically, our visitation to our property is consistently with the previous quarters. And our revenue share is still maintained at mid-teens, or if the margin is still in high twenties. I think that's where we are right now.

And Hubert, any color on the reason for the margins? I mean, I think I know, but go ahead.

On the margin, I think that, first of all, I think a very disciplined approach towards the reinvestment. And the mass component of the revenue mix also increased, and that helps with the margin increment as well.

Perfect. Thanks, everyone.

Thanks. Our next question comes from Dan Pulitzer from Wells Fargo. Please go ahead with your question.

Hey, good afternoon, everyone. On Vegas, the last couple quarters, we've seen room revenues, you know, growing high single, low double-digit percentages. Whereas the F&B, entertainment, you know, the group and other, that piece of the business has been growing more slowly. Can you maybe unpack that a bit? Are there any trends in ancillary spend that you're seeing kind of under the surface as it relates to the different growth in these buckets?

Look, I'll set it up and then, Corey, turn it over to you. You know, I think the conversation around Marriott and our ability to yield off of that is proven in driving our room rates. The return of our convention marketplace to former highs is driving those room rates. You know, other side of the coin is leisure is more prevalent over transient. And I think when you look at total spend, starting with entertainment and then some food and beverage, food and beverage all time high. But catering and banquets is driving it. When you look at the actual restaurant, four or five percent down on covers. No, 2%. Okay, yeah. And so, yeah, I think underlying it, look, it's never been the story. Las Vegas has always been the story, people will come. The story is when they come, what do they do and how much can you extract? And so I think it's fair to assume that when it comes to entertainment, food and beverage, single digit, but we've seen some softness. But for now, and I think into the perceivable future, based on what we've set up, room rates will overcome most of that, if not all of it. Yeah, Dan, what I would add, we're definitely feeding more mouse.

It's just where they're being fed, whether it's convention halls or in restaurants. So the food and beverage side is a little bit misleading from that perspective. The entertainment challenge is there is a lot of supply out there. And, you know, with the Spirit in their 18,000 seats and their three shows a day, it just puts a lot of pressure on a market that probably has a lot of supply. So we're really focused on making sure we have the right acts in our buildings and are able to attract the customers that are looking for those performances.

Got it. That's helpful. And then in terms of the buybacks, I think you have an excess cash balance of $800 million and about $1.3 billion remaining on the repo. I know you've been pretty prolific here in repurchasing shares, but as we kind of think about where we go over the next kind of year or two, and Jonathan laid out that free cash flow yield growing in the mid-teens, is there a scenario where you would be willing to add debt to finance the share repurchases, or should we kind of think about this kind of tapering down over time?

Well, I'll offer a couple of thoughts. First of all, at these values, we still believe our shares are a very attractive value. I mean, just looking at On the screen, probably our stake in MGM China is worth $10 or $11 per share. And so it's a very appealing free cash flow yield when you look at the value of just the operating businesses, not to mention BetMGM and our digital investments. That being said, you're right that we've called out about $800 million in excess cash right now, but that grows with the free cash flow generation. And when we put out things to the end of 25, like a, like a potential, um, license fee for a New York expansion, it does open up the, um, possibility for additional share repurchases. So I do think over time it, it tapers off a bit, but you know, these values were still, will still be aggressive purchasers. And finally, um, we would consider, uh, additional, um, financial leverage to fund these repurchases. Our lease coverage is growing nicely. And as Bill noted in the opening remarks, net debt is still close to zero. So we're well below our leverage limits and would consider doing that, but we don't have to right now.

Got it. Thanks so much. Our next question comes from Barry Jonas from Truist Securities.

Please go ahead with your question.

Hey, guys. Wanted to just follow up on F1. Given last year was so high-end focused and we've heard plans to hopefully make this year a little more balanced, do you see a chance for better performance at some of the non-luxury properties? Or are you just concerned that might not be enough to make up for the softness you're seeing today at the top three properties?

The answer is yes. I don't know if you heard my comment earlier. We've got the Raiders are in town with a game that weekend, and that'll tremendously support the south end of the Strip. And we've already seen that occurring once the schedule was announced. Last year, I think we did an amazing job scaring the hell out of people in terms of traffic. Obviously, during the actual event, it was fascinating. There was no traffic. And so the idea of bringing people back to town, focusing them on some of the values that are still here is critical. And I think particularly driven by the game, you'll see the south end of the strip come to life. I want to put it in quantum, too, in terms of what's at stake here. You know, I'm talking $30 million-ish plus or minus. So when we think about the comment and we think about what's at stake and you look at the overall aggregate of the company for the quarter, let's all keep it in perspective. But having said that, we're far from giving up. I'm signaling as it sits today that Ticket sales are soft, and therefore room sales are soft.

And what I would say is we've heard from other markets it's fairly consistent year one. There's a lot of hype for it. This will be a good weekend for us compared to an average normal weekend. Just in comparison to F1 last year, it was so substantial, especially on the rates at the luxury properties.

Got it. Got it. Just wanted to follow up for the regionals and kind of ask what you're seeing across the database segments and underrated play. You know, we continue to hear about some softness at the low end or underrated, but obviously your guys are more luxury focused. Thanks.

Yeah. You know, the regionals had an interesting start. April was a little bit more challenging. It had one less weekend day. And then we saw May and June come back pretty strongly. You know, the majority of the customers, the middle end to high end, are still pretty strong, still visiting quite a bit. The lower end of the database has seen a little bit of softening. And then on the what we would call the unrated play, that's down slightly also. But a lot of that was driven in April by that one extra weekend day.

Got it. Thanks so much. Our next question comes from John Decree from CBRE.

Please go ahead with your question.

Hi, everyone. Thanks for taking my questions. Maybe to shift the conversation to your development pipeline first on the UAE, we got some guidelines from the GCGRA recently about the licensing process. And so, you know, realizing there's probably not a lot of detail you can elaborate on, so a high-level question is there, Bill, anything that you've seen or learned over the last couple of weeks or months for new information that changed your level of enthusiasm one way or another for that perspective opportunity. And then the follow-up specifically would be there's quite a bit of discussion in those guidelines about online gaming. And so most of our conversation, you know, with you and others have been around potential IR opportunities. So, you know, curious with your international digital business, would online gaming in that market be interesting for MGM? Is that something that you're looking at and if that opportunity were to come up?

Thanks, John, for the question. With UAE, I think the great news is now that they've announced the lottery, which is something that they said they would do, I'm encouraged that the rest of this will roll out as defined. Now, timing is still unknown. It kind of keeps moving around. But I can't imagine by end of this quarter into early next, we won't know with some specificity around what it means for Abu Dhabi and then potentially what the umbrella language is as it relates to all of the other Emirates. We're excited by it. We're excited by, obviously, the position in Dubai. I think I've mentioned on several calls that we and our partner have an amazing facility property there under construction as we speak, by the way. We're driving pylons right now. And that facility has an accommodation for a large-scale casino. So You know, there's a lot of opportunities throughout the region. Probably the initial license is going to be spoken for, I believe, but I would suggest that each emirate will have its own opportunity to issue a license. And so I know Gary spent a couple minutes on that, and we'll continue to follow that closely, particularly for Dubai as a, you know, poor place to emanate from.

Thanks, Bill. That's helpful. I think I stuck two or three in there, so I'll hop into the back of the queue. Thank you.

Our next question comes from Robin Farley from UVS. Please go ahead with your question.

Great, thanks. Just wanted to circle back to some of the comments you're making about kind of middle, high, low-end different consumers. I know Vegas has a lot of puts and takes with the easy counts in Q3, tougher in Q4. But when you look at sort of gaming revenues declining in Q2 and then in the regional markets, some of the softness you've talked about, Is there, in your view, to put on your economist hat here, macro factors that you think could change that or may change that over time? Or do you think it's just getting back to some kind of pre-pandemic normalization before things would return to growth? What's the big picture when you look at the trends? Thanks.

Sure, Robin. It's Jonathan. I guess I would... Disagree a bit with the premise of the question, which is that we are seeing some strength out of the customers. I mean, to take a couple of examples, the second quarter was a record drop in table games in Las Vegas for us in the quarter. We were down a little bit in the slot handle, that's for sure. But much of that was due to just a shift in mix from casino customers to Those casino room nights were down a couple of points because group room nights were up about 10%. So, you know, that mix contributes a lot to it. On the regional side, you know, our rated Theo or Theo per rated day, so the customers we know best, our most loyal customers, was up 4% or 5% during the quarter. So, you know, we did see some consistency and strength there. For myself, I don't see any macro factors that would really, that could really kind of dislodge the growth that we're seeing in gaming. You know, our customers have seen a fair amount over the past 18 months in terms of increased interest rates and higher hotel rates and the rest, and yet have continued to show nice growth. So that's, I guess, the way I will answer your question.

You're good. Thank you.

Our next question comes from Chad Bannon from Macquarie. Please go ahead with your question.

Afternoon. Thanks for taking my question. You guys have laid out a number of different items in Las Vegas and the growth, particularly on the non-gaming side, food and beverage, room rates, et cetera, maybe offsetting some of the stability in the gaming business. So has anything changed in terms of how we should think about Las Vegas margins, I guess, in the near term or beyond as maybe that non-gaming piece grows? And then ask maybe separately, what are you seeing just in terms of the expense side of the business, particularly in labor? Is that now under kind of core inflation and manageable to kind of hold margins if non-gaming is growing? Thank you.

Thanks, Chad. Broadly speaking, we're comfortable with where margins are in our Las Vegas operations, where they've been the last couple of quarters, let's call it the mid-30s. We have experienced increases in unit labor costs over the past three or four quarters. Much of that due to our collective bargaining agreements. I think our team has done a fantastic job in managing labor expenses, particularly this last quarter, FTEs were down a couple of points in Las Vegas, a couple of points in the regional markets, and about 7% in the corporate office. So I think we've done a good job at offsetting those increases. Going forward, those increases in unit labor costs will be lower than they've been over the past few quarters. As Bill mentioned in his remarks, we're lapping now some of those increases that we incurred due to those new labor agreements, and not just in Las Vegas. So that's why, you know, we're comfortable that we can maintain margins in this area.

Okay. Thank you. And then in terms of the Vegas portfolio and kind of where it stands just from, A customer-facing standpoint with Blagio Complete, you mentioned Mandalay Bay. Are there any other projects that you're contemplating maybe in the next 12 to 18 months? Or given the current situation with some room capacity coming out of the market and you guys running in the mid-90s, does it make sense to maybe defer, Bill, outside of what you were talking about with Blagio? maybe defer some core renovations that you would otherwise think about doing at this time?

I think that, look, it's something we always look at. We challenge ourselves with our capital allocation and particularly our maintenance capital because it's just that. That said, because of, you know, and this goes back a ways, I think our average room remodel now is under 10 years finally. Um, but Aria has not been touched in a while. We're doing MGM as we spoke. So we, we own those goods. So that process starts next year, uh, in earnest, excuse me, later this year in earnest. Um, and so, you know, those are the two big ones to come. Um, I think as it relates to the rest of the inventory, I hear you and don't disagree. We're going to get creative with Excalibur. We're transferring furnishings out of the MGM there. And so continue creative things, but, um, one of the challenges that if you don't continue to renovate those rooms on proper cycle, you wake up one day and then you are where you are. Um, and so, uh, I wouldn't anticipate us coming much off of those levels. You know, I think it'll come down some, you know, six, 700 million a year going down the road in terms of true maintenance cap. But, um,

And I think our room remodels are spaced out enough where we minimize disruption and make sure that we're able to push some of the business into the right buildings that will also enhance those buildings.

Thanks. Appreciate the caller.

Our next question comes from Steve from . Please go ahead with your question.

Hey guys, good afternoon. So I want to stay on Vegas real quick. Jonathan, in your prepared remarks, you noted you guys expect to take market share in Vegas moving forward, given your continued investment in your properties, which you guys just talked about there. But I want to understand that comment a little bit better. And does that mean taking share as

mirage the trop come out of service or does that comment mean you think there's further share to take beyond um you know those assets essentially shutting down i'll make the headline comment i think there's further share to take um you know there's a high-end retail nightlife scene that i'd like to see us go after more aggressively um i think you know some of the the club scene has lost some of its uh luster and i don't mean just ours i mean in general And so I think there's things to do, particularly, again, in this building. I think there's things to do next door in Cosmopolitan and Aria of note as we think about ways to enhance the properties and just, you know, convince folks that the idea of staying within this compound is impressive and compelling with the amenities that do, you know, there's no reason to go anywhere. And so we're going to continue to drive on that. And I also believe As we continue to perfect and get better at personalization of data and all of the things that that program is beginning to yield, I think we can yield more out of what we've got by making sure we keep folks in our buildings.

I would add the investments we're making are really aimed at the luxury customer. And gaining a portion of that market share, I think, achieves the goal that Jonathan mentioned previously. So as we look at Bellagio and look what the competition is out there and If we can get an additional wallet or an additional trip, we'll be able to regain that market share we're talking about.

Okay, gotcha. And then second question, Bill, if we switch over to digital real quick, and I'll ask this in a way that I might get an answer out of you, and I'm not trying to be offensive here, but is there a point at some point in the future where if you aren't getting the results that you want out of the digital segment, you would make the tough decision to essentially pivot away from investing there and instead get more aggressive with the core business, which seems like to us that it's pretty undervalued at this point. I hope that makes sense.

Yeah, I understand the point. And look, yeah, at some point, of course, I would never say never. At some point, how hard do you chase sports versus letting iGaming flow? How much does iGaming grow unto itself? But I think, you know, look at both of those businesses. You know, we're past the major investment scale. I mean, relative scheme of things, you know, we've invested, call it 650-ish, give or take, in BetMGM at this point, something of that ilk. And Gary's, you know, so if we're a billion five all in between Leo Vegas and some of the other acquisitions, that would be a lot. And we're not anticipating any of that going forward. This is more about, you know, yielding off of what we've created. and hopefully doing that. But I understand the core question. I just, we're not giving up on digital by any stretch. We still believe it's a key component of growth, not only within our company, but within the industry. And I think it's been proven out in several different places. And so we just, we are going to be patient with it for a while.

Understood. Thanks for the color, Bill. Appreciate it.

And our next question comes from Jordan Bender from Citizens JMP. Please go ahead with your question.

Great, thank you. It was sort of touched on, but Jonathan, a big point when you came to the company several years back was the want to improve the cross-sell between your assets by sending players to other properties in Vegas. Can you maybe just frame that progress you've seen in recent years and just the future opportunities not in place today that you can help further drive that?

And if you're talking about... First of all, I appreciate the question. And if you're talking about the... I guess capturing in-market share of our customers' spend while they're here in Las Vegas. I've never been more optimistic about our ability to do that for both internal and external reasons. Internally, we've invested capital to connect our properties, particularly here in the Center Strip. Of course, our acquisition of the Cosmopolitan and disposition of the Mirage made much of that possible. Culturally, our casino marketing teams and our convention sales teams work as one, presenting the entire portfolio to our customers and encouraging them in many ways to stay within the portfolio. And there are many other things we've done internally to drive that. externally, just our positioning geographically in Las Vegas and the center and South Strip is where so much of the investment and activity is going on that whether it be NFL or T-Mobile or even F1, there's really no better place for the A's, no better place to be than within our portfolio. So for all of those reasons, and this comes back to my optimism about our ability to gain share over the coming years. I think we are in a great position to do that, and we've already been doing that. You can see that in our results.

Great. Thank you. And just for the follow-up for online, last quarter, you talked about the path forward with FedMGM and just some of the long-term targets and the confidence around hitting those targets. With the announcement the other day and just kind of the slight step back, just given the further investment, is there Is there anything to opine on in terms of what changed in that outlook from back in April to today, whether it's competitive from a competitive perspective or an integration perspective? Thank you.

I think what changed in the outlook to the extent it was understood is what it would take to get with the right product back in front of people and begin to gain back share for sports. And so those are estimates. And frankly, if it's not working, we're going to pull back. This is, you know, it's not a, just here's the bucket of money and go guys. And so, you know, we're going to watch that very closely and very diligently each and every day and make sure those investments are paying off. So I sense and I understand the concern. We all share it. And it's a key time for the business and for the company in the next six or seven months to see BetMGM begin to perform into that space.

Great. Thank you very much.

Ladies and gentlemen, with that, we'll be concluding today's question and answer session. I'd like to turn the floor back over to Bill Hornbuckle for any closing remarks.

Thank you, Aubrey, and thank you all for joining us today. I will kind of end where we started. It's still compelling, and I hope to all of you, to think about Las Vegas, to think about the company, and to think that several records continue to be broken. We're proud of the activity case. We're proud of what we're doing here. Like every business, we have some challenges in this environment, and I think we're meeting and maximizing on most of those. I'm excited by where Gary's going digitally and the longer term of all of that. And so, with that said, I thank you all and have a great evening.

Ladies and gentlemen, with that, we'll conclude today's conference call and presentation. We thank you for joining. You may now disconnect your lines.