Q2 2020 MGM Resorts International Earnings Call
Good afternoon, and welcome to the MGM Resorts International second quarter 2020 earnings Conference call.
Joining the call company today, our Bill Hornbuckle, Chief Executive Officer, and President Corey Sanders, Treasurer, and Chief Financial Officer.
<unk> Wang President of hospitality, and CFO of MGM, China Holdings limited and Jim Freeman SVP of capital markets Your strategy.
Participants are in listen only mode. After the company's remarks, there won't be a question and answer session.
In fairness to all participants please limit yourself to one question and one follow up.
Please also note this conference is being recorded.
No I would like to turn the conference over to Jim pretty much Sir.
Thank you that's called being broadcast live on the Internet and investors that MGM resorts Dotcom and we've also furnished our press release on form 8-K to the FCC.
Lets 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 any statements.
Additional information concerning factors that could cause actual results to differ from these forward looking statement is contained in today's press release and in our periodic filings with the FCC.
Except as required by law, we undertake no obligation to update these statements as a result of new information or otherwise.
During the call. We will also discuss non-GAAP financial measures in talking about our performance.
You can find a reconciliation to GAAP financial measures in our press release and Investor presentation, which are available on our website.
Finally, the presentation is being recorded and I'll now turn it over to Bill Hornbuckle. Thanks, Jim.
Thank you all for joining us today, I hope you and your families are safe and well.
On the heels of our announcement yesterday, I am pleased and honored to be dressing U.S., the CEO and president of MGM resorts I, particularly like to thank Paul Salem, Our chairman and the entire board of directors, replacing their confidence in May and in our entire management team. This is a vote for them for not only them, but also myself they have so.
Popped up during an incredibly challenging time.
Our ability to reopen remain operational and provide world class experience is a tribute to our dedicated workforce and engage and supportive board of directors civic leaders across the nation and its sincere commitment to health and safety by all of us at MGM resorts and the broader gaming industry.
Well, we are proud of the role we play in helping to restore.
Economic stability to the people in communities that depend on US we know the public health crisis is far from over therefore, we continue to evolve our seven points safety plan and our overall response to varying infection rates, including mandating masks and all of our domestic properties and continuing to manage hotel occupancy and facility capacity.
We are committed to learning from each new opening and from each new operational challenge we face.
We are focused on implementing both our MGM 2020 plan as we.
As our revised operating model and remain diligent in affecting and managing costs.
We are proactively engaged for local governments regulators in public health experts acting as an informed and sought after voice in conversations about public health and safety trends restrictions in protocols as they continue to change and evolve.
And we remain focused on ensuring we maintain our strong balance sheet and an operating strategy designed to maximize cash flow. Despite these very difficult times.
Necessarily our focus is on operating with diligence and restoring stability in the short term, but for many of the reasons I just noted and more detailed we'll get into in a moment I accepted the role as CEO, believing our long term outlook remains positive and that our future is strong our strategy remains unchanged with a discipline folks.
Just on operations and execution of targeted growth opportunities with that let's talk about the quarter and the state of the business.
The second quarter, we opened nine domestic properties and we have separately oak reopened five more today, we have a total of 14 properties from our 18, if you count radar to start at the start of the pandemic domestic properties had opened in the second quarter generate positive EBITDA, our faster than expected and we saw significant growth in our domestic margins driven by.
Optimizing our business to sort of higher quality customers given the pent up demand primarily in our casino market side, leveraging our MGM 2020 plan and operating model work to manage costs and discipline.
And we remain selective in keeping lower margin amenities closed.
In Las Vegas revenues.
At reopen properties declined 50% year over year adjusted property EBITDA declined 44, and I'm margins increased roughly 450 basis points over the same period.
Despite the lack of conventions shows concerts in sporting events, we leveraged our M life database to drive better than expected demand and quality casino customers. We also had a higher than normal table games hold which positively impacted our strip adjusted property EBITDA by approximately 8 million in the quarter.
Transient and wholesale leisure business also performed better than expected as we entered this summer pool season, and as expected driving traffic levels are recovering faster than flying.
Looking at the regional operations second quarter revenues at reopen properties declined 31% year over year and during that period. There. They were open adjusted property EBITDA was down 14, but margins increased approximately 880 basis points during that same period.
A regional operations include larger integrated resort properties like those in Las Vegas, which rely on air travel in larger is lodgers excuse me like Bull revising borgata and to drive markets, which are naturally performing better.
During the period they were open our drive to regional markets grew EBITDA by 18% with margin improvement by over 1400 basis points.
We have been encouraged by the dedication of our teams to create high quality experiences for our guests that they can enjoy and believe in messaging is that our messaging is resonating well in all of our marketplaces.
We are diligently focused on managing costs, while continuing to do everything necessary to ensure the health and well being of our guests and our employees during closures, we reduced 85% of our operating expenses and as we reopened we're managing variable labor to closely matched demand. We also identified certain expenses and amenities that we believe we can it.
Eliminate as they are not essential the guest satisfaction or demand and as such we believe we can reduce our overall domestic operating and corporate costs by approximately $450 million compared with the 2019 levels.
These savings are a combination of one mgms 2020 initiatives that were put in place at the end up to 2019 and as you heard and remember yielded tangible results in January and February before the nationwide shutdown as.
As well new initiatives that were adopted in a post kobin world as part of our revised operating model. Therefore, we believe when demand returns will be in a much stronger company.
In the near term somebody is cost savings, we partially offset by approximately 100 man of annual health and safety expenses for a period of time.
Further as we mentioned last quarter, we remain disciplined on capital spend and have deferred or permanently reduced our domestic capex by 50% this year to approximately $200 million.
Liquidity is of utmost importance, especially in current times and we continue to step taken steps to further bolstered our already strong liquidity position during the second quarter MGM resorts, MGM, China, and MGP collectively raised 2.45 billion and the debt capital markets as of June.
30, MGM head over 8 billion of consolidated liquidity and 4.8 billion at our domestic operations, excluding MGM, China and MGP.
Our current stake in Mg P is 57% and in addition to our strong liquidity. We also have the right to have MGP, we deem an additional 700 million of old P units under our current agreement for cash and finally, we anticipated about 270 may end up monthly cash overflow smaller properties were closed we did a little better than that.
Matt and April and May well their properties beginning to reopen in June we significantly reduced the cash burn rate, although it remains negative.
Turning to our longer term domestic outlook all of our Las Vegas properties are open with the exception of Mirage and park MGM Nomad and six of the eight regional properties have opened we just announced that MGM Grand Detroit will open to the public on August 7th with VIP guests coming in a couple of days before an Empire city as you, presumably no will be last.
The open out of our regionals.
Currently in Las Vegas, Kobin related headlines continue to have a meaningful impact on booking trends and cancellations and candidly our visibility is limited to booking windows that are currently less than a week, we're seeing slower occupancy is on the weekdays and we're offsetting this on the weekends with demand where the demand is far more robust all.
All of our reopened Las Vegas properties are burning less cash with the exception of Mandalay Bay are currently EBITDAR positive. However, we continue to believe that material recovery will be dependent on the return of conventions entertainment and significant air travel.
We continue to see results in July it all of our regional property, we see strong results in July and all of our regional properties and our drive to properties continue to show EBITDAR growth and margin improvement and our integrated resort properties are simply just now ramping up we're encouraged by the relative stability in demand that we have seen thus far.
The current situation. However is fluid further openings over Las Vegas resorts as well as amenities across our domestic properties will continue to be based on expectations for demand and maximizing cash flow, while balancing the needs of our guests our employees local regulator and other significant stakeholders. Despite the current challenges there were.
Two important assurances.
First we absolutely believe the fundamentals of our business industry have not changed ultimately recover and second our cost saving efforts are yielding tangible and see seeable results taken together. This means we are poised to emerge from the crisis, a stronger more efficient and subset sustainable company.
Moving on to bed MGM, we're focused on targeting growth opportunities. We're excited to announce it just a few weeks ago that MGM and GBC of committed to an additional 250 million of capital in support of our sports betting vertical bet MGM. This brings our total commitment of capital to 450 million and demonstrates our continued commitment.
Positioning that MGM as a leader in sports betting and I gaming.
That MGM as a business that was created from scratch and is now showing strong momentum evidence of this can be seen what we've been able to achieve in new Jersey were but that MGM has gained market share and significant growth in the I gaming revenues driven by this success that MGM is now on track to generate over 130 million of net revenues this year.
Sure.
We have secured access to 19 states are live in seven states and expected to be live and 11 by year end.
We also feel that our omnichannel experience is unmatched and a significant competitive advantage in this space, but MGM offers a consistent experience through its web mobile and desktop platforms as well and all of our US a land based resorts a clear differentiating factor to nobody else can claim the new bet MGM.
GAAP officially started to roll out last fall and New Jersey and launched in Las Vegas in Michigan right before the shutdown in March.
Equally as important as that we believe but MGM allow us to more frequently engage with our guests and drive deeper loyalty to the MGM brand to that end, but MGM achieved a major milestone last week, we integrated or M life customer loyalty program.
With that MGM platform players will now be able to view their M life tier status and tier credits overtime and ultimately redeem credits for MGM experience beyond sports betting and I gaming.
In addition to our 34 main M life database. We also believe we have the right partners to drive efficient customer acquisition fares professional sports leagues and T. partnerships as well as an exclusive deals with Buffalo Wild wings and Yahoo Sports. In fact, we just launched to Yahoos 64 million monthly active users last week, we may.
A lot of progress, but there's a lot more to be done and since launching weve begun can we have become convinced that the market opportunity is larger and will develop more rapidly in the U.S.. We believe that we have the assets to be a long term winner in this space and we're focused on execution to unlock true value. We continue to believe strongly that this is the largest growth.
Opportunity in U.S. gaming.
Having covered the U.S., let's spend a few moments on Macau.
Well MGM, China properties were opened in the second quarter.
Macau market continue experienced significant year over year declines driven by border in travel restrictions driving second quarter market, why GDR down, 96% and visitation nearly down 100.
A couple of weeks ago, the 14 day mandatory quarantine between Guangdong and Macau was lifted to certain major cities will in Guangdong and yesterday. It was extended to the entire province today, we heard that mainland China was resuming the issuance of visits with exception of tourists visas starting on August 12.
These are initial step to encouraging direction. However, Hong Kong borders remains shot and the IB aesynt toward visa programs have not yet we started which we believe is necessary for a meaningful recovery.
MGM China's monthly cash outflow are currently about 65 million a month and 1.5 basis with 1.5 billion of liquidity. They have over 22 months of buffer in the near revenue scenario.
We continue to believe that this market can recover quickly once the current restrictions are lifted and we haven't experienced leadership team was ready when that time comps speaking of leadership, we recently announced a departure of grant Bowie CEO of MGM, China Grant with a with the company for over 12 years and the industry for longer and the a deep experience and knowledge and to me.
Marketplace, while there is no longer involved in the day to day is on retainer to help us with key strategic opportunities over the next couple of years.
We've had a seamless transition with joint presence, both Hubert Wang and Kenneth Fang, taking on new leadership roles last year as COO and CFO, respectively. In preparation for this development. The MGM China team is in great hands Pansy as co chair and eyes Chair will continue to be deeply involved providing additional continuity and strategic leadership.
In closing our long term outlook remains fundamentally unchanged on a drug confidence from five key advantages.
One strong MGM 2020 plan implemented even before coded and our revised operating model work is created 450 main in permanent cost savings to our business, meaning when we recover from this crisis, we will be a stronger company to our proven ability to learn quickly and adapt swiftly our skill.
Sophisticated and experienced operators has been affirmed by this crisis.
Three the high quality of our assets in our market leadership across the us where we have a significant presence for and maybe most notably our people who despite extraordinary stressing hardship have shown up to deliver safe welcoming and entertain experience for our guests and finally and amazingly strong balance sheet that will help us whether.
The storm. Furthermore, while we are currently focused on day to day operations, we continue to make progress in our key growth opportunities developing that MGM as a leader in youth sports betting and I gaming expanding our footprint in Macau, and our re licensure and developing a world class integrated resort and Osaka with our partner or.
Yes, which we remain excited about and committed to for these reasons and many more I was proud to lead MGM resorts through this period of uncertainty. So it's a more promising future with that we'll be happy to take your questions. Thank you.
Thank you we will now begin the question and answer session.
Good question you May Press Star then one of your telephone keypad, if you're using a speakerphone. Please pick up your handset pressing the keys to withdraw your question. Please press Star then too.
As a reminder, in all fairness, please limit yourself to one question and one follow up.
Pause momentarily to assemble them roster.
And our first question will come from Jon Graf with JP Morgan. Please go ahead.
Good afternoon, everybody Bill congratulations thank you gerry than on surprising.
Thank you also unsurprising maybe is that my my first question my follow up questions relate to Las Vegas.
I'm estimating that the flat reopen Las Vegas strip properties in June.
Generated about 50 million EBITDAR was margins at about 33%.
This slide properties ramping run rate EBITDAR higher or lower in July and have the three new newly opened properties and they had any kind of cannibalized impact and really generating positive EBITDAR. If I heard your comment about Mandalay Bay that I've a follow up let me started off and then obviously quake and pick up.
With some some some limited detail what Joe obviously, there was a great deal of pent up demand leading into June and so we saw that and I think you all saw unheard clearly clearly you did the national news that impacted the southwest in Las Vegas, and so we were off to a strong start our casino segment responded well about a third of our market mix with because.
CNO are there was pent up demand there and so we got off to a really good start clearly here in Las Vegas, and regionally as well leased on those properties we've had open.
July stabilized for lack of a better word.
We have not seen nor would we have opened because we took into consideration as we opened each property what the cannibalization would be and so we believed as we opened each property that we'd be net benefit cash we get more people back to work and that ultimately in the long when that would serve us well I'm curious if you want to answer any of the specifics but.
Yeah, just going into little bit in July Joe as a reminder, we held pretty well in June which would help not only to EBIT in the margin.
As as Bill mentioned the color is you know on the week days, where eking out some profit in some places and others were burning less cash in the weekends continued to perform the way that they performed in June.
So all in all I think Las Vegas is challenging, but the trend and the trends in July or a little bit less than they weren't Jim because of the halt but I think we're seeing some pretty strong demand in our limited capacity on the weekends.
Yes.
Just just on the pace or the rate of strip property reopening.
I'll be happy to see them open but that the PC end.
Let's see how are you the right word but at an accelerated level.
We have surprised us.
Why is why wasn't there are more measured staggering our spread out Robbie openings and and maybe I'll help you answer that question. What is the difference between keeping eight core strip property closed and and an opening it with limited demand in terms of daily Opex run rate level.
Well I guess at 40000 feet sticking to what we said earlier the only place is not making cash flow positive as Mandalay. So collectively we've made the right decisions.
Remembering there are a series of protocols throughout all of our properties regional and most notably Las Vegas, the tie us to between social distancing. So many people in the gaming position are beginning table. The pool of note has been a big restricted in terms of in the many that people want and Frank not need but need in the summertime environment Summertime reserve.
Yeah.
And so we were answering to demand.
We're running roughly thirtys midweek fiftys weekends.
And we believe we can over and we've proven it to date continued to make a profit at that but but remembering there's a lot of protocols put on us.
If you go into a restaurant, it's at 50% capacity at best case, and so it is about you can only get so much in so far with issued restrictions we have on us and frankly, we thought it was important to keep the brands alive and can keep people motivated and excited to come to Las Vegas, and Joe What I would add is as we approach this because.
The way, we approached it I'm getting all the cost out of the organization right away, we've been able to staff based on demand and to Bill's point, we are able to burn less cash even at low occupancy is on the week days, so from a MGM perspective.
We but we think we're increasing our EBITDA by having these properties open even though we may not be making a ton of profit on the weakness.
Great. Thank you very much guys. Thanks you.
Our next question will come from Thomas Allen with Morgan Stanley. Please go ahead.
Oh good afternoon.
Focusing on sports betting and I gave me about you highlighted your.
Sure.
And I gaming and on our numbers that some of them taking shown sports but in Q.
You talked about on initiatives. The drove the hires you mentioned you launch M life, but that was relatively recent okay does start to more and you've been doing thank you.
Okay like any large scale organizations, we were large scale GBC, just getting the business up and operating with its first hurdle.
Then getting it orientated, particularly on the sports side to us customers us betting behaviors was an education and then candidly understanding what it was going to take to when the market and when the day was just that more marketing more dollars more commitment to it and so we got aggressive and frankly, we're going to continue to be aggressive we think theres.
Three or four keep winners in this space and we intend to be one of them. That's a hence the reason for the doubling down if you will with the additional investment both from GBC and ourselves.
And you know it's hard to catch up when you are behind in the market like New Jersey, we have viable and significant competitors, but you know our brands do stand for something in the fact that people can come on to a loyalty experience and ultimately translate into brick and mortar real experience is a key differentiator that I think long term is going to pay dividends and so.
So weve simply trended up and gotten aggressive and particularly because of Covance igaming gets paid off and we are gaining share in sports I think we're up I mean to count Pingpong exports.
We're up to 7% and.
And we have high hopes are Michigan and some other states, where we've just launched in.
Helpful color, along just on the brick and mortar side and on maybe specifically around Vegas, well I'm, what I'm seeing in terms of customers coming back you know I respect your other poppy opening up much but that's going to fundamentally change for the time being are you still seeing people come back anything right.
Well when you say the same rate I mean look the average custom Trimble Las Vegas sounds like 1.2 times a year our average M life customer comes between three and five so the cycles been too it's too early to tell we've seen some repeat but again remember my comment earlier, the booking cycle is literally five or six days.
And so some are motivated by you know promotion optically the casino marketing those that near and Dear to their heart and some are motivated by news or not is the case maybe.
And so frankly, it Tom still too early to tell I think.
Okay. Thank you.
Thanks.
Our next question will be from Stephen Grambling with Goldman Sachs. Please go ahead.
Thanks to two follow ups first on sports and I gaming as you look at the growth in New Jersey, both before and after covert how would you characterize the customer demographic of Igaming and how much is incremental versus your existing brick and mortar customer and does that igaming customer differ from sports betting.
Customers.
I'll take your first shot if it look there is clearly some overlap between our customer database and what the I gaming market was I. Just told you. We just integrated M life. So it wasn't like it was an extensive M life integration.
So those were self defined customers that were motivated by the promotion any activity case around the market, we can and will do I think a much better job gaining them.
There is overlap.
20% to 30% I think of ISI gamers are sports betters, and vice versa give or take.
And so I think you'll see a lot of that convergence as we go forward and the ability to the equally promote and give reward against both activity cases, I think will grow that and grow the the scale of convergence back and forth.
It's only obviously, we've only had borgata opened a couple of weeks, but I will tell you two weeks ago was our best Igaming week. After Borgata opened in our history I can tell you that as a point.
Great and.
Changing gears as a follow up on Las Vegas, perhaps I missed this but can you just talk a little bit more about what you're seeing on the group side and maybe even what would normally be the group percentage at this point of year in June and July versus as we're looking at Threeq to Fourq you.
Let me give you the macro an inquiry can can get into the specifics look we've lost just over 2 million group room nights.
83% give or take have been in 2020, and as you probably heard CES trickled into the first quarter and so we're losing some activity.
In the first quarter flip side of that and why I am fundamentally solid on our businesses that we've only lost two groups of substance beyond the first quarter of next year and so were groups are saying and what they're doing us are hanging and as long as they possibly can fundamentally they want to come back. They understand this experience they want and need it and I think were I'd.
Really position given our scale, we've got like 3.7 mask million square feet, a space here to spread groups out making meaningful opportunity for them as they think about coming back, but the short term, it's going to be challenging Corey the numbers yet in this second quarter in third quarter. This is an area where Las Vegas has done a really good job over the last few years.
And we were able to get our mix up in the high teens.
Pre three four years ago that used to be a low high single digit low double digit occupancy percentage. So.
On the summer is usually not as much on the convention side as we would expect to see in the fourth quarter.
Got it helpful Best of luck in the back half thanks much.
[noise] and our next question will be from Shaun Kelley of Bank of America. Please go ahead.
Hi, good afternoon, everyone and congratulations.
I just wanted to ask.
About the Vegas margin piece, a little bit more so.
Specifically.
It sounds like there's clearly some hold benefit in the quarters. When we look at the 450 basis points of improvement that you saw could you help us split out just for the operating piece that was open what maybe to hold impact on that was and then probably much more importantly can we just talk a little bit about kind of your thoughts on on perhaps when things do north.
Analyze and stabilize out probably several years from here.
That 450 basis points sustainable for Vegas, or how much of that do you kind of think sticks. When you think through some of the initiatives that you've made the complex thing of the property presidents. It you know et cetera.
So let me take the second one first I'll turn the first going back over to Corey.
Look we think the 450 may and we talked about earlier in my prepared comments is is sustainable and we think it's real it's a combination of about half of it comes little less than half carryover from 2020.
Part of it is the restructuring of the organization that we did during co bid.
And part of its just other margin increased programs in terms of amenities and things. We've consciously made a decision to candidly never go back to.
And just a keen focus on the broader pieces of our business. So the fourfifty is sustainable.
You may recall, we had spoken about margins that you know.
We're over 30 historically.
And so meaning in terms of how we looked at 2020 initially before this all hit.
And so I'd like to think we can improve on that with the 450, but I think teeter comment we had a long way to go before we get back to 19 levels. So Cory yet so.
Yes, the of the of the 450, we would be up about 100 basis points on hold just as a reminder.
Our biggest impact is on the hotel side and that is very high margin business that will always impact our hold but as we look forward in the future as Bill mentioned with the 450 savings in there that that should be equal to the 4.5% of basis points.
Put that to where we were an arm in the past 19, and I think we you'll see margins that are exceeding that we have what we had even before 2019.
Great Korean and that sort of built on it gets to follow up which is really.
Portion of the 2020 plan was obviously in process throughout 2019. Thanks, some significant run rates had been hit by the third and fourth quarters. If I recall correctly. So obviously has changed over the last six months, but so it's a portion of the 160 sort of like already in the base. If you will or is can we look at that.
Were 50 450 million I'm sticking to.
Basically entirely incremental to where we started 2020.
It's.
All incremental though well the run rate did not include this 160, a lot of these initiatives were implemented in the third or fourth quarter last year, including some of the things we talked about robo bars cashier Anx a lot of the components that we started really seen the benefits in January and February.
Bill mentioned the remaining amount the corporate expense the are flattening out the properties. The operational processes. All of that was done all that work was done really well we are closed and working with our portfolio precedence in our properties in our Sealys how fast they were.
We are able to move and how quick we were able to identify those areas, we feel really comfortable about the number and Sean maybe a little more color.
Covance question is quickly into the digital World frankly, fast and we probably would have otherwise gotten there. So today, 25% to 30% of our market mix has changed our customers are checking in digitally or they never combined the front desk. There. Their iPhone is basically their room key and that is before business and corporate America shows up and so.
Obviously, there's a greater we believe are greater likelihood they'll even use that is that.
He has experience it's it seamless you'd have to wait in line.
It's effective it's working we're now launching literally this week the same thing for menus and ordering food.
All digitizing off to make a phone call and so this is helping us get really efficient and effective in many of the operating things that we've done.
And so.
Our basis will improve that Fourfifty, we think is very very real.
Thank you everyone.
And the next question comes from Felicia Hendrix with Barclays. Please go ahead.
Hi, Thank you so much I will add to the listening folks who are congratulating you bill. Thanks.
Sure.
Okay.
Looking at that 450 basis point improvement that you saw on the strength and he and the regional.
Quite just wondering if that have good natural to use as we're trying to figure out what your monthly Opex is today and in both of those areas.
I think to look at it from that Theres, So many variables and obviously the high quality of customers the pent up demand.
The revenue side I think is something obviously, we can't control as much as the costs were really comfortable where are our labor components are.
We have brought back less than 50% of our employees based on what were allowed to do.
And I'm not sure we'll see a change in that anytime in the near future. So just as a reminder, and Bill said this in his opening.
Remarks, we took out 85% of our cost we're running about 20 million a day and payroll and in total cost. We're actually when we were close we're running about 3 million today.
Payrolls, our biggest expanse being under 50% I think you guys could probably do some work there and get to number.
Okay.
Thank you and then just and Hubert Oh acute going.
Hello, how are you.
So there was a national today, you know that China I'm trying to that.
They're going to achieve Guangdong resin extra business travel and family that's for it and so just wondering how you're viewing that announcement on and do you think it's a good leading indicator for that I'd ask and and also is it fair to assume that people who have it didnt, even though it could be neither casinos.
Yes, so let's let's go back a little bit just to see what has happened seeing some bit of.
July this year, so first of all in July.
On July 15, nine cities in Guangdong Province, Corn team was lifted for these cities and then.
Oh 29.
And she was lifted flip in Taiwan Province.
Oh and the news came out also that.
No tours visa.
I'll be a.
Issue.
On August 12.
Yes, hi, arent that every two weeks there are some new develop and losing ASCII up all the restrictions. These are measured steps I believe towards the I've, yes resumption, Indiana.
And that was believed that this will happen.
Sometime in mid September well could be even a little bit earlier as you go by the two weeks intervals, maybe study with the Guangdong Province So.
In terms of business impact those people with.
[noise] business visa before cobot, not cheap or when they seem to business visa, yes, there will be able to travel to Macau and when they returns there won't be subjects horenstein. This will be helpful. It's all business.
Okay. That's very helpful. Orthoview appreciate it.
Next question will come from Carlo Santarelli with Deutsche Bank. Please go ahead.
Hey, guys. Thank you and bill Congratulations Thanks, guys. Just just a quick housekeeping, one and I'm not sure Cory this information but.
For your your Las Vegas operations could you quantify what the negative EBITDAR was for the period of April may prior to the opening.
You know what Carl I will come back to you on I'll yield gift Kathee and Jim a call I think we'll be able to get to those numbers.
Got it thank you.
That just.
Holistically with respect to kind of the invited guests and things like that that you started when it's kind of openings with broader subset. If you guys to tied to just talk about what you're seeing kind of post that early on.
Kind of focused on on your better wrap my customers, what <unk> 18, and what Youre seeing maybe more recently is as we booked into July four weeks from specific property opening and whether or not there is equal bifurcation of the trend that you are saying regional assets versus your Las Vegas assets.
So let me kick it off co say the regional assets remained strong the biggest restrict your now use National Harbor is the example.
Where we are doing exceptionally well since opening is the number gaming positions. It's flat you know it is the the restrictions around.
With the government has placed on us in terms of gaming positions things that you can do et cetera number of units that are actually open on the floor.
The Rev. Pours, if you will know more applicable I think here and in Las Vegas.
In Europe like 25% the back to the regionals it remains strong and consistent particularly in places like Tunica, Ohio, a national Harbor, whether it's real drive in places like the boat and Atlantic City is too early to tell in in Atlantic City as you know has.
Very difficult restrictions, where you have to literally eat outside and by the way. The first three days were opened the rain. So that was the pleasurable experience.
But even if the ball, we're just now getting back into our summer Air program areas critical to feed that market in that property.
But the pure drive and properties are doing exceptionally well here it's been consistent.
Yes, the you know the tampering a couple of weeks ago of news around increasing coded cases, and the whole south west going read if you will every time you turned on CNN has been a challenge, but not really in that segment.
And so it's more about leisure, it's more about leisure coming and going.
You know and again like I said to short term window, even for casino customers.
But we've seen a lot of high end action I mean, you heard the number.
For even for June.
And we continue to see that mostly to the weekends.
Understood. Thank you very much guys.
Thanks.
Our next question is from Chad Beynon with Macquarie. Please go ahead.
Thanks for taking my question and congratulations Bill Thank you.
Sticking on Las Vegas.
You touched on the convention market in 2020 actually holding in quite strong or 2021 went on.
That's one is one attentions, yes, [laughter], how should we think about the entertainment the residencies or those types of events. How quickly can these be reprogram once we get a vaccine and air lift is sufficient yes.
Once we get to an environment, where we can fill a better part a 50% of those venues and thats really up to the government with than anything.
We have an opportunity and so using Oh is the most significant example, we've been looking at how long would it take to geared up and it's between three and four weeks.
The Great news is the vast majority of those performance still reside in southern Nevada, they've not left the community because candidly there is not a lot of places for them to coke in this world.
And so everyone's hanging in there waiting obviously inserts case are going through bankruptcy, but in every case, everyone. We've talked to who are stake.
We are seeking.
Control that company, recognizing and understands that Las Vegas is basically the foundation of that company and so we have high hopes for circ frankly, some of our smaller shows are easier in the comedians could be back in a week or so.
And then some of the larger events of course, whether its sporting T mobile et cetera.
You can't necessarily do around 50% and so we're going to have to wait I think in unless the artist themselves. The prepared to do different economics and to date. They have not I think you're gonna have to wait to see a full recovery for T mobile to host 20000 for.
Pick your favorite artists.
Okay. Thank you and then on yes medium term regional gaming margin expectations, a lot of your competitors are massively reducing.
Labour and marketing starting from a fresh sheet of paper.
Thank you guys were right around 27, 28% pre Cove Ed. It do you have a an updated view on kind of where this could go if revenues are close to normal just a different level of expense expectations.
Yeah, I think a this corey.
Obviously, we have observed the same type of trends and we would we wouldn't expect some of these costs not to come back and they are part of the numbers that we haven't given you as the cost savings I think the bigger the cost structure I think is pretty predictable I think it's the revenue structure and the topic.
Wine on how strong that could remain given you know the cares act is gonna RM been not the unemployment is actually going to go away I think you had a pent up demand where some of your players who.
Used to come weekly had had a big wallet and so to see how that fulfills and how how long that last that's going to be the important thing.
To determine what the margins are going to be at those properties.
Thank you.
Next question is from John to create with Union gaming.
Hi, everyone and of joining congratulations bill.
Thank you.
Well, that's maybe don't get Youre, a little bit more update if any on Japan.
Kind of near term medium term milestones, obviously a lot has gotten.
Maybe brushed aside a little bit as as we all deal to pandemic, but wondering if you could give us a little bit more information on kind of wonder looking forward over the next couple of months as it relates to moving forward as socket.
Sure I think as everybody knows on the phone we have a really great partnership we formed after a lot of hard work for many years with orix.
At the end of the day, we'll have between 40 and 45% stake in that operation. So it's relative to.
The overall investment in the risk reward if you will.
We see over the next couple of months. We've we were prepared by end of July which was the latest deadline to submit an RFP that process has been stopped.
We don't have an extension date, yet, but we do believe it will be delayed.
Presumably to the first part of next year, but officially we don't know that yet, but thats the presumption.
We are ready to submit either way.
As you know there's a great deal of things to be worked out there I will only make this investment if we think it's going to be prudent. If we think it's going to pay the kind of returns that it needs to pay and to meet our expectation. So there's a long way to go we love, where we're sitting we love the opportunity in Osaka, We love our partner in Orix, we likely.
We're not fully all in on this investment.
And and we like the up we like the fact that there's probably going to be a delay and the reopening of some of the conversations that hopefully make this a better investment for anybody interested in it most notably us.
Thanks, Bill it that's helpful.
And if I could bring one back to to Las Vegas.
Maybe a little bit abstract, but I'll take a shot at it and when you talk will correlate to group in meeting planners and they look ahead is indicated that particularly outside of Oneceos next year.
Demand is holding up and attrition has been limited.
What what do they need to see what are they telling you level of comfort I mean, what are they looking forward.
To to get going again, and maybe to the direct question is beyond this.
Cancellations are you still seeing people book longer out.
Yeah, a year two years out for for large claims has that is this kind of continuing together I mean planners kind of really looking forward to get back to where I guess what are they telling you kind of what are they thinking about as they think about planning the next.
Couple of meetings ahead, as or kind of any insight you could offer into kind of that the customer behavior on event planning side would be helpful.
Yes, I can tell you this definitive lake over half of the groups of rebooked for future dates. So of the two main I'd room nights I mentioned to me of them have asked to rebook and so the ultimate desire to want to come back is in fact in play whether it's an extension in 24, whether it's let's go earlier next year versus.
As you know earlier later this year.
And so there's there's an appetite to do that.
They have become very comfortable generally speaking with the safety protocols at Las Vegas is put in play our team is extensively been involved with a national organizations around with meeting planners, MPS I and others around what's what's required what's needed whats necessary what are people thinking about what the company's thinking about to make sure the.
Experiences safe.
Obviously, a lot of it has to do with.
Just the incidence of cobot cases, getting that back under control opening up the airline inventory and not as much about will it be ultimately safe when I get there in the environment that we've created I think we've managed to convince customers. It once you get here it will be.
It's frankly, our ability to get them here and our ability to host them at scale right now were restricted to no more than 50 people.
But.
Again it.
I think the predominant reason I have long term fundamental belief, we're going to be fine.
That group, which is really the only when do we have into the future. If you think about it has been very promising and very deliberate about wanting to stay engaged anybody who sells product most notably in it happens often in Las Vegas, whether its CES, our corporate America that comes here.
He got to get in front of people to sell product and so feeling about the tech companies. We host you think about the trade shows that come to Las Vegas, and our company at Mandalay.
It's all not all a vast majority of is about sales and selling something and so you've got to do that one on one and so they're anxious to return to that to grow their own revenues and the other thing I'd add John I look I think its individually. These groups are trying to figure out how to do this on just this week you heard Ccs cancel but.
On the same day seem a who is supposed to be inherent November is saying they want to be here. They are hoping to be here and it will all be about the kobin test number so.
I think not that we think it's going to be great over the next few quarters, there are opportunities where you'll see some groups are meeting we actually had our first group although be it small at Luxor today, but I I think people are dying to get back and medium, but they want to do it in a safe and a and then the right environment.
And just to set the stage and liquid.
We think the first half of the air is going to be hampered obviously the first quarter is then you run into summer.
It's going to take.
Probably a full year from now before we get back into a real mode and then group business takes a time as if it hadn't pre booked it takes time to rebook such that we don't we're optimistic but we want to be realistic with you all.
Got it go Corey Fantastic articulate my question that while certainly answered it. Thank you. Thank you [laughter].
Next question as from Barry Jonas with Suntrust.
Hey.
First off congrats Bill I guess I'd start with you in your new prominent role are there any new maybe longer term philosophical or strategic changes you evaluate <unk>, maybe it could be the composition of the property portfolio portfolio or anything else worth highlighting.
Well I take some of the operating principles and some how we're thinking about both short mid and longer term.
First and foremost its ensuring that we're extremely disciplined.
We've got a little less than frankly at times, we saw ourselves and things that maybe didnt matter as much the ultimate bottom line, which took time energy.
And manpower and so being disciplined is incredibly important being laser focused on our expenses.
We have heard you loud and clear although I haven't been on this seeker as much sat in this room for the last couple of years and heard you loud and clear on margins and so being laser focused on that and being transparent about where we are I think those are some operating disciplines that hopefully we can deliver to all of you.
In terms of longer term you heard us say it sports betting is a push now it's not even mid term.
The board call today for several hours about where we go into what do we do and how we reinvesting our aggressive are we going to be in where are we going to do it and what's the governmental affairs and.
Push if you will the open up additional marketplaces, where we see optimism in the long trend the short end a long term actually.
And then my other bigger push the other bigger thing and that's why I'm, So focused on Japan, and ultimately Macau its growth in the three licensing is to put this company in a place where it's extremely well balanced where half of our revenues give or take are coming from Asia.
Were 30, 35% are coming from Las Vegas, and the balance or regional where irrespective of what's happening in the world. We probably have an hopefully have the most balanced portfolio there is.
We're not really in the M&A mode right now.
We're still asset light, we believe in that original strategy.
The World has changed of course, we will look at that and and all things that are tied to that over the long over that.
Next in pending year give or take but I think longer term Asia is a big push now it's about sports betting and really the key thing for us to do is to not only survive. This this year, but to learn from it infrastructure and organization. That's really prepared to take advantage of what has created over so many years of hard work.
Great. That's really helpful. And then maybe just diving deeper into the margin it's impossible to give some examples of those lower value amenities that might not come back I know non gaming such a big part of your business. So you know and competitors have talked about stuff like buffet, but I guess, that's more in the regional markets.
For the mix is different so so any any examples I I think might be helpful. Well look I think buffets not only in the regions, but I think in Las Vegas Yum does every property have to have a buffet.
Every property have to have full room service I think we will look to see do we have too many slot machines, where are the floors to big based on the fact that they were bill a long time ago Theres, a lot of opportunities and and all of these areas that we think now.
The time to really zone in on it now so the time to experiment and try thinks about the risk of bomb failing is.
What are the net outweighed by the benefits of what we can learn and we look for some more opportunities that hopefully we'll be able to talk to you about in the future quarters.
Great. Thank you so much.
The next question will come from Robin Farley with CBS. Please go ahead.
Great. Thanks, I know that you talked a bit about group already but can you talk a little bit about you said.
[noise] living it cancellations. After Q1 does that mean Q1 group is itself, mostly cancelled and then second question is.
With a lot of your properties open for going on two month. When do you expect that you know that 50% limit you know might be revisited. Thanks.
Now let me, let me work backwards and the Governor has gone from a three phase approach, where we were opened in the second phase meeting here in Nevada enough regions.
The third phase was going to be to lift among many things the.
50 cap per per gathering.
He is now broken that down and he is going to take it day by day, you've probably heard.
If you go back a couple of weeks ago, we're in the high teens to 20% testing ratio of co bid to positive cases.
That number has come down dramatically over the last 10 days Thankfully answer now were down at an average down to about 35% seven day positivity rate about 8.5%.
He will look closely at that he'll look closely at frankly deaths and more importantly, he will look at I see you beds and what's going on in the hospitals and the good news in both those cases, they've been relatively stable because it's got to make sure. The environment here is capable of handling what comes it's way in terms of Covidien and people, who need of ventilators et cetera.
That's what's on his mind he pointed off until September. So you won't I don't think you'll say anything in August in terms of gatherings is my general view of and frankly, I definitely talk to them often these very transparent.
And I think post that will begin to hopefully get somewhere we had originally talked about 50% or up to 750 people is the next step.
If we can get our prevalence rate back down to single low single digits, maybe we can get back on that conversation.
But interim I think were six weeks four to six weeks away from a real conversation there and with some real success, if you will and driving down these rates.
So that's the I think the immediate thinking here as it relates to the first quarter. The cancellations have begun to see penta. There for sure again. The benchmark is now see he asked which will be a meaningful miss.
And.
Every week that goes by a meeting planner have to ask themselves is the time energy and money I'm going to spend in advance of something that may or may not happen worth it not that do I want to go or not and so to the extent, we can get some rulings and next for six weeks it will help slow that conversation.
And right now we're in the middle of that quarter. If it goes on another month. It may go to the end of that quarter and so the story goes.
Okay, great. Thanks, very much thanks.
Well take the last question.
Sure I question will be from David Katz with Jefferies. Please go ahead.
Hi, good afternoon, everyone. Congrats Phil I'm very much enjoyed your tongue and you know you're sharing your time retention.
And look forward to a continuing I just want to target given our quite a bit of information I just wanted to.
Here you contemplate the notion.
Certain properties that that May remain close could we be in a situation where you know the portfolio is partially opened for you know an extended period of time on how have you thought about the range of contingencies that are out there and are given.
Just how fluid this whole situation has better.
Look.
With any intent we have no intent of retreading, unless it's got to be run into problems, let's start with that basic assumption.
After Michigan opens in on the fifth or the seven for the public I will be down to Empire and I think you guys particular, most of you know the New York story, both with an eye.
So the governor's very cautious, but I have to think in believe post labor day, we'll have it a very earnest if not before conversation around that.
Obviously, that's a huge taxpayer given the way that structured for the state and we all know I understand the state coffers in this challenging environment as it relates to Las Vegas, remembering we're down to two.
Mirage is important to us, it's an amazing brand Polish Molly I opened it back in 1989.
God forbid, but the reality is particularly midweek unless we see an increase in demand I'm not worried about labor day, because the numbers are looking at did quite well for their because as of today, we're taking reservations.
Well, we were taking reservations through August we've moved it now to August 27.
And Thats Park, MGM Nomad and Mirage.
We'll see in a couple of weeks that we feel about that again, we know labor day, we'll be fine, but I do want to understand how people are thinking about school. No school is this summer travel going to extend itself into through September by the way September is probably the previous month of the year here, particularly for the pool and resort experience. So if kids aren't back in school.
Just being extended summer, we just don't know yet.
And so it's not our intent, though to keep them close forever, Obviously park MGM was a building brand and a new brand.
We might take a look at Nomad first and then maybe the balance of the property, but we just don't know, but I can't imagine how the could be so be careful when I say or an environment, where they are close for the balance of the year that I will say.
And hopefully we can get there sooner and I think a lot of its going to me based on coping numbers because our bookings were seen in Las Vegas. The gross bookings are are fairly consistent and they've been pretty decent to point, it's when when we see the demand starts suffering is when then coping number spike up then we start seeing some cancellations.
When those numbers are down the cancellations to reduce and we start seeing some additional rooms put picking up so if we can keep the kobin numbers down.
Things started flowing in a positive layer hopefully we could get these properties open we want to get employees back to work in and get the strip going to where it needs to be going.
Right and if I can ask one very short follow up on that Bill in response to your thoughtful vision of balancing the company just a bit more could that potentially include divesting some domestic assets entirely.
Look at everything is on the table Everything's often there is no discussion around that at this point.
We want to get through this immediate crisis, we'll take a broader perspective on what's best for.
Where we are with liquidity to balance sheet at that time, where the industry is going or has gone and so first we're not going to rule anything out, but it's certainly not an expectation that we would offer up a property or properties today.
Understood. Thanks, very much and good luck okay. Thank you all.
Ladies and gentlemen. This concludes today's question and answer session and thus concludes todays call. Thank you for joining MGM resorts International second quarter 2020 Conference call. You May now disconnect your lines.
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