Q4 2020 MGM Resorts International Earnings Call
Good afternoon, and welcome to the MGM resorts International fourth quarter and full year 2020 earnings conference call.
Joining the call from the company today are Bill Hornbuckle, Chief Executive Officer, and President Corey Sanders, Chief Operating Officer, Jonathan <unk>, Chief Financial Officer, Adam Green Black Chief Executive Officer, Beth M. G M Cubed, Wang President and C O O M G M.
Ana and Jim Freeman SVP of capital markets and strategy.
Participants are in a listen only mode. After the company's remarks, there will be a question and answer session.
Fairness to all participants please limit yourself to one question and one follow up.
Please note this conference is being recorded.
Now I would like to turn the call over to Jim premium. Please go ahead.
This call is being broadcast live on the Internet at investors that MGM resorts Dot com and we have furnished our press release on form 8-K 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.
Nation concerning factors that could cause actual results to differ from these forward looking statements is contained in today's press release and in our periodic filings with the SEC.
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 the reconciliation to GAAP financial statements in our press release, and our Investor presentation, which are available on our website. Finally this presentation is being recorded and I'll now turn it over to Bill Hornbuckle. Thank you Jim and thank you all for joining us today.
I Hope you and your families continue to be safe and well.
Before we get to the details of our performance in the fourth quarter I want to take a moment and thank the thousands of MGM resorts colleagues around the world who've helped worked so hard over the past several months I along with the other members of the senior management team and eternally grateful for the resilience and commitment that our employees have shown throughout this crisis.
I continue to be amazed by what we've accomplished together, we have adopted seamlessly to a rapidly changing environment always putting the safety and enjoyment of our guests and our employees first and foremost more than anything else that gives me confidence in our company's future success.
I'd also like to welcome the newest member of our executive team our CFO Jonathan Hough here. Many of you know Jonathan from his tenure as CFO of seizures and most recently as the Chief Executive Officer of extended stay America.
Over the past 20 years, Jonathan has built a welder and reputation for integrity.
Helping people driving strategy and delivering results for shareholders.
I'm excited to have him here at MGM and even though it's only been a short time I can assure you. He is already having an impact welcome Jonathan.
MGM, our long term vision is clear and differentiated.
Our goal is simple to be the premier Omnichannel gaming hospitality and entertainment company in the World. We will achieve this vision by investing in the development of our people, providing fun and inspiring entertainment experiences for our guests delivering operational excellence at every level and allocating our capital to drive the highest returns for our.
During the quarter, we made progress on each of these fronts.
As the pandemic unfolded over the past year, we had to take the unfortunate steps of Furloughing many of our employees to match business levels as.
As the business begins to recover and operating restrictions abate, we expect to continue to be mobilizing our fantastic teams rehiring and training them in order to serve our guests.
Over the course of this year, we will do the same with our industry, leading entertainers across all of our properties are.
Our bet MGM sports betting and I gaming venture is growing at a historic rate enabled by what I believe is digital gaming's, most talented management and technology development teams I believe our people are truly the best in this new industry.
Shall excellence is our mantra here beginning in late 2019, we refined our operating model increasing spans of control and simplifying organizational layers to accelerate decision, making bringing us all closer to our guests and to reducing costs. These moves are already paying off our program of 40 to 50.
And domestic cost savings helped drive margin improvement, especially in our regional properties in the fourth quarter and we should achieve the full target when business demands return to our 2019 levels.
And finally, we're focused on being disciplined allocators of capital always driven by the goal of creating value for our shareholders in the first and second quarter of 2020 in the early days of the pandemic. It was critical to create and sustain the liquidity cushion for the company with the top line is still under pressure in the travel climate a bit uncertain our fortified balance.
It is essential to protect the equity value, while enabling MGM to be aggressive when identifying opportunities to invest for growth and.
And invest for growth, we have even as we've been managing through the crisis before us we have kept an unwavering focus on the future and particularly on several attractive ROI growth opportunities that align to our long term vision.
Along with our partners in pain, we have invested in bet MGM and we have seen it emerge as a leader in the U S sports betting and I gaming business. We've launched an extensive room remodel program here at Bellagio slated to be done this summer and we're taking steps to expand the company's digital capacities and strengthen our omni channel strategy globally, and we and we had been.
The groundwork for growing our presence in Asia through the Japan, I, our opportunity and additional investments in Macao.
With that let's focus on obviously the fourth quarter's results our consolidated fourth quarter 'twenty 'twenty revenues were 1.5 billion incrementally better than our third quarter by $1 1 billion, our fourth quarter. Adjusted EBITDAR has improved sequentially to a positive 97 million this quarter of.
Our full year 'twenty 'twenty revenues were 5.2 Bay and about 40% of 2019 levels and our full year 2020, adjusted EBITDA loss was approximately 148 million.
The operating dynamics in Las Vegas, and our regional properties were however, quite different in the fourth quarter, let's start with Las Vegas, our fourth quarter Las Vegas strip revenues were 480 million about flat from the third quarter. However, our strips property EBITDAR was 54 million up from 15 in the third quarter driven almost entirely by <unk>.
Tober in the first half of November the.
The fourth quarter started relatively strong here in Las Vegas with hotel occupancy of about 46% during October and in fact October was our strongest month since the beginning of the pandemic, but public health concerns dampen visitation over the course of the quarter and this is obviously continued at least till now through February.
Our fourth quarter hotel occupancy finished at 38% with weekends running at 52 and midweek at 31.
Our M life loyalty members continue to drive visitation with our casino segment contributing to total room nights, improving by about 13 points over the last year and our casino customers and new M. Life members sign ups also continued to skews towards higher worth and younger customers during this quarter.
It's our belief these headwinds will continue into the near term with current Nevada gathering guidelines in effect and public health sentiment, where it is we expect midweek business will be challenged throughout the first quarter and.
In this demand environment, we remain flexible to minimize our cash usage and ultimately maximize maximize our portfolio wide profitability.
In the fourth quarter, we close or a hotel towers at Mandalay Bay and park MGM during the midweek and in early January we also announced the full closure of Mirage during the midweek, we remain diligent and closely aligning labor needs to demand. The good news is they approved vaccines appear highly effective for vulnerable populations.
And we're monitoring their rollout closely as the burden of our health care system eases gathering travel restrictions are being lifted assuming that most of the population is willing to resume normal activity, which we certainly saw glimpses of last summer and then we believe the demand for travel and visitation to Las Vegas could be robust later in the year in <unk>.
Fact, our gross bookings in January was the strongest since the start of the pandemic and guests are increasingly booking 90, plus days out I'm also looking forward to the coming pool season with much optimism.
While the return of the larger groups will ultimately depend on the easing of gathering guidelines and other factors. We remain bullish on the long term demand, we still have significant rooms on the books for the third quarter and have more on the fourth quarter than we had at this time last year, both 'twenty and 'twenty, two and 'twenty 'twenty three or approximately one on pace compared with prior.
Years, and it's interesting the obviously be a recently conducted a survey, which indicated that 91% of those surveys missed the face to face nature of meetings and the majority were also just simply burnt out from virtual meetings. The survey also indicated the business travelers believe Las Vegas is more prepared than other leading business destination.
To safely host in person events.
Data points like these tell me that the fundamental drivers of Las Vegas, as a tourism and meeting destination remain firmly intact, we remain bullish and its proven ability to drive demand and believe the markets will return to pre pandemic levels overtime now, let's move on to our regional performance.
Okay.
Our regional operations performed exceptionally well in the fourth quarter, despite being subject to a series of operating restrictions are fourth quarter regional operations revenues were $595 million up 7% sequentially versus the third quarter and adjusted property EBITDA was up 9% sequentially from the third quarter to 159.
Yeah.
As in Las Vegas, we are highly encouraged that our performance was led by a higher level of casino spend by a younger demographic.
Gaming volumes were approximately 70% of last year's fourth quarter, but our regional properties delivered 129 basis points year over year EBITDA margin growth to 27%. We achieved this despite the statewide restrictions, including the full closure of Detroit for a month as well as the week long exposure in extended hurricane repairs.
At the Bowl revives.
Adjusting for these headwinds and other state by state restrictions, we expect our margins for the quarter would have been up 580 basis points year over year. These continued cost improvements predominantly in labor and marketing efficiency are largely sustainable.
I expect continued strong regional margins as revenues returned towards our 2019 levels.
Finally, I know, we're all encouraged by the states lifting operating mandates over the past couple of weeks no doubt this will enable our properties to serve greater numbers of guests and expect these guests will lead the recovery in our system.
Now I'd like to spend a few minutes on bet MGM.
The sports betting and I gaming market is one of the largest and most exciting growth opportunities in the USA today and that MGM is emerging as a long term leader.
But MGM began 2020 and just three markets and has ended the year with 10.
It is now currently live in 12 states and we expect to be in 20 states by the end of 'twenty 'twenty, one with access to approximately 40% of the U S adult population.
As each state rules out that MGM is securing a leading market share position in the fourth quarter, but M. James market share was 17% and its retail and online markets and 19%. If you exclude Pennsylvania, which were only open for part of December.
This is a testament to bet MGM successful execution and strong management teams as it continues to enter new states on a day one.
On day, one and gained share in its existing markets.
Consider the ventures entry into Michigan, just a couple of weeks ago.
We had a fully operational I gaming and online sports betting offering on day, one and prelaunch registration efforts to build momentum into go live day.
Between December and January that MGM registered a 138000, new customers in the first 10 days of launch that MGM generated $13 million in G. G. R. That's especially impressive is that our I gaming G. G. R per day in January was higher than in New Jersey, where bet MGM is the number one opera.
Later.
Michigan is a market, where we knew we had the right for him to win we have an MGM branded retail presence with a loyal customer base. The ability to go live on day, one with both I gaming and sports betting a compelling product and attractive target and an attractive target demographic. While it's still very early we're extremely pleased with these results.
Thus far.
Leadership positions have proven sustainable that MGM was the number one I gaming operate in the U S. In the fourth quarter and we expect to continue growing our market share.
On the sports Wagering side bet MGM delivered impressive online sports betting results in too, but its newest markets, Colorado in Tennessee in the fourth quarter bet MGM had market shares of 31 and 34% respectively.
These share gains led to a 178 million of net gaming revenues associated with bet MGM in 'twenty 'twenty, well above its target of $150 million and in fact in the fourth quarter Beth M. G. EMS net revenues doubled the previous quarter.
The convergence between bet MGM in M life has been monumental in the fourth quarter, 17% of bet MGM sign ups have come from MGM and 39% of the new M life sign ups have come from bet MGM.
That mgm's key competitive advantage is its ability to lever mgm's destinations are broad based experiential offerings and our M life loyalty program as efficient and effective customer acquisition tools. Once engaged we know that omni channel customers have vastly greater value to our company than single channel customers and again, while we're still in there.
In the early days in Michigan, we are already proving this out we're currently seeing customer acquisition costs below the $200 range.
In 2021, we and our partners in chain expect new revenue associated with that MGM to grow well over 100%.
In fact preliminary estimates of January it's net gaming revenues.
Associated with that MGM operations was $44 million on.
On Super Bowl Sunday, the number of online bets placed with bet MGM was 11 times last year's online bets and the online handle with 17 times last year's handle that's why we remain aligned on investing aggressively to fund the growth of this business and we expect to continue doing so this year in pursuit of this market opportunity.
<unk>.
Let me conclude now with our performance in Macao.
This market continues to steadily improve sequentially with fourth quarter market wide D. G are declining 70% year over year, compared with 93% year over year decline in the third quarter.
MGM China's fourth quarter revenues were $305 million up sequentially from the third quarter was $47 million and adjusted property. EBITDAR was also up sequentially from a 96 million loss in the third quarter to $41 million in the fourth quarter. This included a 23 million bonus accrual reversal during the quarter.
We're pleased to finally see that MGM, China is back in the black driven by strong market share gains as well as continued cost mitigation efforts better yet we think the evolving market structure of Macau gaming squarely meets our strength in the market MGM, China has always been geared to the premium mass segment.
Between our branch office infrastructure, our product design and marketing capabilities. We've always had an advantage in this segment and our growing market share as evidence of this evolution.
There is no question that we recently, we emerged with a recently reemerge Covid cases, and government warning and limited travel during the Chinese new year holiday seasons have impacted demand in the near term, but we expect a broader rate of recovery will continue to be gradual and driven by the premier market a mass market.
I like our opportunities for accretive investment in Macau currently construction of the additional suites and the South tower of MGM Cotai is underway and will be ready in mid 'twenty 'twenty. One we've also begun remodeling our MGM Macau village in the gaming space on level 35.
Both properties were adding F&B options focused on the gaming floors.
And no long and a longer terms. We have also had the ability to build out or another hotel tower at MGM Cotai, along with meaningful entertainment assets to diversify our offerings.
For the past 13 years MGM, China has been committed to supporting Macao is a world tourism destination.
We again look forward to working with the government to the licensing renewal process and hopes to further our support for many more years to come.
Switching on to our liquidity. It remains extremely strong and has served as a strong foundation from which to navigate the crisis with an eye towards our longer term goals.
As of December 31st MGM had $8 8 billion of consolidated liquidity, which included two bay and at the M. G. P operating partnerships and 1.2 band at the MGM China.
Leaving our domestic operations liquidity at over $5 6 billion.
Before I turn this over to Q&A I'd like to close just with a few final thoughts.
We remain diligent in navigating the near term operating environment aggressively managed our operating model and our cost structure.
I am optimistic about the long term recovery of all of our markets and believe that MGM is well positioned to gain share.
I'm also excited by bet MGM position in the rapidly growing U S sports and I bet I, gaining bedding market and we are confident that despite near term headwinds our balance sheet delivers a strong foundation upon which to build the future of our company with that I'll be happy to open this up to any of your questions. Thank you.
Thank you we will now begin the question and answer session to ask a question you May Press Star then one on your telephone keypad, if youre using a speakerphone. Please pick up your handset before pressing the keys to withdraw your question. Please press Star then two.
As a reminder, in all fairness, please limit yourself to one question and one follow up.
And our first question will be from Joe Greff with JP Morgan. Please go ahead.
Good afternoon everybody.
Thank you for taking my question.
Bill either based on conversations with.
Nevada health officials and governments to collapse office.
When would you anticipate a rollback in the more recent capacity restriction, Nevada and does.
Marc seem likely seasonality ideally it would make sense.
You know how do you then think about some of the midweek room closures and reopening some of that hotel capacity.
Look obviously, we're in constant dialogue with the Governor's office and in the health officials.
We're hopeful that there'll be a march rolled back probably till October levels would be ideal there are no promises the governor has slated a call for later this week I would suspect we will see something.
Targeted towards March I think March may hopefully begin to feel like October if we're lucky and by the way. This is my presumption not my knowledge.
And I am hoping by end of spring as we go into June we'll see yet another significant roll back as we get ready for our events. There are several large conference conventions that want to come both citywide in here at the property.
And then as you know March Madness, and followed by really spring break pool season around here is substantive and meaningful and so I think we'll see occupancies are hopefully go back to October and then beyond.
I know Corey is planning on maybe to speak to course quickly some openings here in sometime in March yes, Joe or our focus on openings will be if we could burn less cash being opened and what we're seeing on our booking pace that that will definitely occur at the beginning of March. So we would expect to open those three properties.
Seven days a week beginning in March.
And when you look at sort of the net group convention booking activity, what's sort of the period or a month, where you see.
Call it the slippage from.
Cancelling and Rebooking at a future day seasons that September October and then when you look at 'twenty two bookings I know you were generally pretty positive on that if you look at the number of conventions versus the number of anticipated attendees associated with the convention.
Is there much of a difference there so.
At some point, we have to be concerned with attendees, not just sort of whether or not the event will take place when we think about next year.
Yeah. Joe This is Corey I I do think especially the ones that will tend to share and we have a we have some association groups some pretty big sized ones scheduled even beginning in June we do expect the attendees to be a little bit less initially, but I think as vaccines rollout and as people feel more car.
Comparable traveling on the amount of people coming.
May not approach what it was at peak, but we hope to see that return in the beginning of 2022.
The big.
First big citywide event. It has actually been scheduled and has been talked about that's the world of concrete at the new conventions.
Center edition, which I walked yesterday, and it's quite spectacular will be really great for the city and I think it will give the city of competitive advantage and then literally two weeks later they have Barrett Jackson.
So we we are optimistic what we see on our books in the third and fourth quarter, we still have a quite amount of rooms on there and where are the fourth quarter, we actually have more rooms on the books than we did same time last year as we look a year out.
And so we're pretty optimistic on what we see in the future.
Their data point that we're starting to see is people are starting to look to book and we have over 120000 rooms under contract for 'twenty 'twenty one out there right now that I think people are just getting looking for one more sign to say things are going to be on the clearer side and and then Joe maybe a little color to.
Put things in perspective, I was finished never interesting we collect a lot of advanced deposits for entertainment mind, you. We Havent had entertainment now for better part of a year.
We're still holding 82% of those advanced deposits for things like Lady Gaga and other shows that some of them have already been re booked yet and I think what it simply says is that when available people want to come back and the idea there being yes. Some of the groups may be light in participation, but I think the overall leisure travel and the notion of us.
With this massive amount of pent up demand for people to get out I think we will offset it and occupancy for us some of it is gonna be about revpar over over the short term not the long term.
But I'm pretty excited by the trends in the way people have reacted to date, we just had a great Super Bowl weekend in terms of participation. So I think people will respond as we come out of this.
Great. Thanks, so much for the thoughts guys.
Our next question will be from Chad Beynon with Macquarie. Please go ahead.
Hi, Good afternoon. Thanks for taking my question I wanted to touch on the press.
Yes releases that were out during the quarter just on the <unk> situation.
You were very clear in terms of everything you've been able to accomplish recently with with better I'm, Jim but just wondering if you could elaborate a little bit more in terms of you know what what was announced the process and then if you would expand beyond the United States. Given your success here if that was part of the thinking with your original proposal.
Well Chad look I mean, the thinking is we see a great deal of opportunity in digital gaming sports, our I gaming and other potential channels actually where entertainment and gaming could converge that being said, it's a big world. Obviously, we have a very good partner and in pain, we have our JV.
With bet MGM that Jim.
Articulated well, how well we think it's doing there's a lot I can't say the UK takeover rules. So there's a whole lot I can't say about our thoughts around that.
Obviously, we had an interest we're now in a quiet period, we'll have to see what happens.
But I will say this it is mgm's intent to play in this space on a substantive us and significant level on a global basis and so whether this is the average with a route to do it or not I think time will tell.
But we do want to diversify our revenues. We think this is where the industry is that it's already starting to prove itself. This is where the industry is going and we want to be a larger part of it.
Thanks, Bill appreciate it and then one thing you haven't touched on yet is Japan, there were some announcements out there on another market not the market that you're focusing on could you just give us an update in terms of what's the latest in terms of timing provincially and then with the federal government over there. Thanks sure the federal government announced the nine month.
<unk> delay.
Osaka has not given us the requirements of what that will mean to them and our submissions.
I think that'll be coming out within the next several weeks I think you'll see a requirement of us to submit an RFP with our partner Orix sometime this summer.
Yet to be ultimately determined and we're ready to go I mean, we've been in that marketplace. A long time, we are believer in Asia, where believer in Japan.
We've spent a lot of time and energy becoming the sole.
One standing at the gate, if you will in Osaka.
And so how long. This all takes you know obviously COVID-19 has hit there is equally as hard and Theres a great deal of sensitivities around it and net market. We haven't had our people on the ground there for better part of nine months. So it's going to take some time to rebound, but we have the intent and as well I believe that the government still has the same intensive moving.
Our word.
Thank you very much.
Okay.
The next question will be from Shaun Kelly with Bank of America. Please go ahead.
Hi, good afternoon.
Thank you for taking my question and Jonathan welcome.
I just wanted to start Bill you gave some really interesting disclosures on.
What youre up to <unk> and.
Sports betting and gaming front and specifically some some great data around Michigan and I just wanted to get maybe a sense in particular, the I gaming numbers look.
Really stellar to launch off I mean already being at a pace ahead of New Jersey is.
It's pretty significant given I think the population is about the same size. So could you maybe unpack that for us a little bit what do you think is driving the depth of that market.
What do you think is driving Mgm's success, there as it relates to maybe some of your cross sell opportunities and customer acquisition.
I'll kick it off I'd love you to hear from Adam here, because he's obviously doing this every day up there but.
No. We got going early we were ready for it we pre registered folks we had a campaign.
We've got huge brand presence there we have a deep and rich database, there and ultimately I think with our product it resonated, but Adam why don't you.
Provide some color.
Yeah, absolutely. Thanks.
Thanks, John for the question.
Well, firstly I'm delighted to be here.
And it's a testament to the work of the bet MGM team. The success, we're seeing in Michigan is a great example of.
Our strategy bet MGM strategy coming to life.
<unk> already touched on the power of the brand.
And Jim Detroit branded with MGM MGM.
MGM Grand Detroit Brendan.
The power of Omnichannel, we've got both sports and gaming.
And that really plays into our hand.
The technology that three years from maintained was built in a way that gives us tremendous amount of flexibility in driving constant product play and we're really seeing this come to life in Michigan and I think the key steps that perhaps when youre looking for.
Multi product play.
Jim.
Recognizing that we're in the early days of the market, we are seeing well over 30% of our customers playing both casino and.
And so we're really excited about it.
There's so much potential.
<unk> has started its more strongly than the than our sports business.
The Super Bowl was very good for our sports business. So the future of that of that stayed very very encouraging.
Thank you Adam and then maybe as my follow up you guys did you guys did allude to your customer acquisition costs being.
Lower than some of the market standards.
What we've seen in other markets I'm kind of curious on your thought of.
Is that type of rate sustainable when you. When you have this type of presence in kind of first day of launch or do you expect to begin to reinvest some of that that lower customer acquisition costs.
Both as the market matures and also maybe to possibly further boost your market share presence.
Adam again, why don't you.
Yes for sure.
Bill already touched on our ability to get live on day, one of the market and your question is relevant to that.
What we are seeing.
Having launched five states and 87 days are very very busy first quarter and beginning of 2021.
What we've seen is that in the first few days near the early weeks of our market CPA is a very low.
Then we see as competition other operators join us in those markets we see.
CPA rates rise. We expect then the guidance that you've had from from us and others to sustained for a period.
We do expect though is that as the market rationalize is as the market matures.
The leaders cement their position in those leadership positions.
That we will see those CPA is coming down in due course.
That's the kind of the profile.
Great. Thank you very much.
The next question will be from Thomas Allen with Morgan Stanley. Please go ahead.
Like I'm, just some more but I'm hearing requests and.
Key message is that you're you've gotten really strong share to date and you see room to continue to ramp I'm looking at your disclosures quarter over quarter. It seemed like you ramp New Jersey is gaining share from 20% to 25% in Colorado online sports betting share from 12% to 31%. Despite I believe you launched it in May.
First in Colorado, along with the rest of the market so what's driving.
This really strong DRAM.
And what gives you confidence.
Continuing to go thank you.
Go ahead, Adam and you can't say brilliant management, but go ahead [laughter] well, that's obviously, that's where I was going to China.
No.
<unk> is a detailed business.
Our business is.
Is the orchestration of.
All of the tools from the top of the acquisition funnel to how we look after play as to how they experience our products to all real time CRM tools.
Sure.
The brand to the work that we're doing with MGM resorts to really bring to life that M life database.
To the affected our players that bet MGM players earn loyalty points that are redeemable for real life experiences with within properties. All of these factors play a part into differentiating work better MGM represents to our customers.
Hum.
So just to pull out one or other.
Elements of that I think doesn't really reflect.
How important it is to line up all of those factors.
In order for the whole thing to come together and net I believe is what is driving.
The momentum that we're seeing in our business and it is sustainable because of it.
It's difficult to do in.
The business is.
And then Jim business is now really hitting stride.
Got the right team.
The tools are working and we're seeing the fruits of that in the numbers.
Yeah.
Adam I guess as a follow up you know you you hit number one share in Tennessee.
There are fewer competitors in that market, but you still have the main competitors in that market.
What do you think is driving your leading position there and then you also highlighted in the slide deck $13 million of deposits. In January can you just talk a little bit about why why why why that's relevant thank you.
Yeah.
I'm personally delighted about Tennessee, because maybe some have suggested that we would accelerate gaming, but perhaps not be as strong in sports and for me Tennessee.
Poster child of our ability to compete.
Against the.
But.
The early leaders.
In our sports market only.
Why are we seeing such success, we were there on day, one all of the components of our operating model. We're in place right from the start we have the right partners.
We are partners with the Titans.
So.
Put all those things together, obviously combined with with product CRM, all the acquisition machine working.
And we're demonstrating that we can we can fight and win.
Turning to tell with the best.
In relation to your second question, which was around deposits that's important because that's that's the few.
No deposits no ability to wager my ability to play and that.
The other point is what.
It is important.
Refresh.
The moment of truth is our players actually pushing hard earned money into an accounts to play with us rather than it being purely <unk>.
Bonus money incentive money.
And so the importance of that 13 million, it's demonstrates the scale.
Well a few to drive NGO.
I hope that's helpful.
No that's very helpful. Thank you.
Okay.
Yeah.
And the next question will be from Carlo Santarelli with Deutsche Bank. Please go ahead.
Good afternoon.
Uh huh.
Could just as you guys think about the book of business for on the group side for 'twenty, two and 'twenty three.
And you kind of look at where occupancy levels were and where rates were in 2019, obviously the group side, it's pretty encouraging. So when you think about you know the.
The ability to backfill and drive prices and stuff.
The you know the base case scenario vaccinations everything plays out we flip the calendar next year and all of this is behind us.
I kind of think about a return from a from a hotel revenue revpar profitability perspective over the 'twenty to 'twenty three period look at Ford, Australia, Yeah, I would hope by the fourth quarter of 'twenty two.
We're at about a 90% pace of where we were in 2019.
I think the question really becomes what are the first and second quarters look like and that's obviously dependent on the balance of this year and how quickly that ramps, but I you know I hope to be every bit of the way there and maybe even the third quarter.
It just again depends how quickly it comes back it depends on how much rebound.
Enthusiasm, we have from customers just want to get out of the house. So yeah, well I think again the group business may be slower we certainly have the business on the books I think theres going to be massive pent up demand in terms of leisure business wanting to come in.
And then we really haven't thought about or talked about the funnel for international I mean, I think you all know this historically that bellagio summer. So we get into summer of next year with a clean slate internationally as you know.
40% of our guests are truly internet gaming I mean, our guests are international and so we have a large segment of that business I think that will play into this if it's allowed to come back the way, we hope and believe it will and so you know that's my my thinking or sentiment quite a few and I completely agree Bill Bill the only other dependent is really air traffic.
And how much how fast they can build their capacity back because I think the demand for our business will be there.
Hey, Carlo.
Yeah go ahead, yeah, carloads, Jonathan and the only thing I would add is that I think this could be.
Would be particularly interesting with these revenue gains against the against a cost structure. That's been resized as a result of a number of initiatives as companies taken on over the past 18 months.
And is now being tested in certain pockets of growth that we've seen whether it be weekends around the regions and has really resulted in margin expansion in those periods. So I think that you know the top line certainly is an important part of the question, but the way in which we flow that through down to EBITDA.
EBITDAR is going to be probably even more a more exciting.
And we had in the fourth quarter here I think the point that the occupancy in the fourth quarter Blush, Corey was 34% something like that if they were a little higher a little higher but the margins were.
You know up into the forties. So I mean, we had we had so it's not even in that small enough a amount of volume that we can see the margin. We can clearly see them in the regional businesses, but as Las Vegas returns.
We'll see that I think here first and foremost in our you hopefully.
And then it will flow through the balance of the business.
And Bill just to clarify I think you said <unk> 22 did you mean, <unk> 21 with that 90% number.
No I meant.
John You asked a question on 'twenty, two I I I I, that's what I said.
I'm sticking by day Okay.
I was just wanted make sure okay. Thank you and then just one follow up.
Obviously, you guys talked a lot about the sports piece in and after that it's been off to the races, and a really strong.
Think about it.
And I know this is going to be kind of a moving target because unfortunately, it states come online clearly youre going to be spending and investing in those states and thats going to take kind of the profitability window longer which ultimately obviously a good thing, but if you think about the states where your lives now with what you're seeing the Baldwin churches, Daniel Thank you will be able to.
Subsequently achieved when would you say kind of breakeven from an EBITDA perspective on the sports side.
We were to just assume status quo state launches.
Look Adam I don't know if we've broken it out exactly that way I think we are in the second half of 'twenty, three and beyond before we start to.
Come down if you will off of peak investments.
It depends on how states rollout and when obviously by 'twenty four 'twenty five we have models that are throwing off substantive EBITDA Adam I know, if you want to add to that.
Yeah, that's absolutely right Bill.
On a state basis, we've we've indicated that our expectation is that it takes about three years to get to breakeven. So the critical piece here is the timing of state rollout.
Particularly the big States.
Great. Thank you guys very much.
Sure.
Yeah.
And the next question will come from John Decree with Union Gaming. Please go ahead.
Good afternoon, everyone. Thanks for taking my question.
Just one for me to continue the discussion on bet MGM.
And one of the statistics, you've provided was about 17% of that.
Bet MGM sign ups have come from M life, and I'm not sure if you have.
Any real data, but I'm curious if you could talk about where some of the other customers are coming from me Scott you know a number of partnerships that you've put together Yahoo, and sports teams and such and I'm curious if you have a sense of where the other 80% or so of customers are coming from and if that's not really are available.
Kind of where are you spending your efforts and customer acquisition away from M life direct marketing anything like that that you could kind of give us a little bit of color on how youre acquiring those other customers right now.
Mhm, Adam how are you.
Yes, absolutely.
But by far.
MGM is number one.
M life and <unk>.
Emily and Jim is number one we've said that that remains the case and frankly I think that's only going to get bigger clearly we're at limited or not.
Reduced occupancy in.
In the properties and.
And we're seeing great conversion rates and the properties both conversion rates and also yes.
So very excited about.
A post Covid world.
After that.
Ricky referenced Yahoo, Yahoo is our next largest.
Partner source of traffic.
They've just actually been licensed in Michigan, and we've already seen the positive impacts.
On player recruitment from that.
Behind that there is.
A range of Ah.
There's a range of sources.
We're investing in brand we are investing in outdoor T V digital.
So.
The biggest single source rather than being attributed to one partner.
Our biggest source of traffic is organic sales.
It's the combination of all the work we're doing on brand on TV and outdoor so people actually typing into their browser bet MGM. That's the next biggest one but otherwise its a range of origins.
And then John frankly for us in the brick and mortar side.
It's the inverse.
Because that number is almost double in terms of people that we've been able to reactivate to the brand bring and I think I mentioned on the last call. Some of the success, we had at Borgata, bringing back a 165000 and folk.
Recognizing 165000 folks from M life, who hadn't been in in a while and so you know this is a two way street.
Obviously for acquisition for Adam's team misses the cheapest for us, it's the opportunity to reactivate and Reengage and frankly stay engaged $3 65.
Vegas, they come one and a half times a year, if we're lucky regionals or more but the idea that we could have connectivity for that extended period of time is pretty exciting.
Thanks, Bill I agree I'll, let you get a couple more quarters of casinos reopening and then I'll ask you for some for some stats on how those new bet MGM customers into M. Life are doing at the casino looking forward to that okay. Thanks, a lot everyone and congratulations on the solid results.
Yeah.
Thanks, John.
The next question will be from David Katz with Jefferies. Please go ahead.
Okay.
Afternoon, everyone.
Two questions and if we can.
Maybe a chance to get Jonathan in the game.
As we look at the recovery specifically in Vegas.
We've all talked about how the regionals expect to retain a healthy amount of you know the margin increases, but I'm wondering how complex it is.
Turning large scale integrated resorts and the degree to which you can sort of hang on to margins I'm wondering what comment you can make about profitability levels.
You know as we roll out to a more normalized level.
You know whenever that is 'twenty, two 'twenty, three and how that margin percentage compares to 19.
Yeah.
Thanks for getting me in the game.
I'll offer a couple of thoughts.
You know.
There is as I've done some forensics on the performance of the business last year and in 2019 looked at the projects, which Corey has led through operations to really reconsider the operating model and not just in the past 12 months, but even before.
The company entered 2020.
Jim I'm convinced that this business with the return of the volumes as complex as it as it is as you noted.
We can secure the gains in the cost structure that they that they have seen so far you know it was a long time ago. It feels like a long time ago, but it is important to note that this time last year in January and February of 2020.
Mgm's property level margins had increased almost 500 basis points over the prior year and that was a benefit of the cost moves some restructurings that occurred during 2019, and we were already seeing in the numbers a year ago and that that program that those series of programs were augmented.
Further of course during 2020.
And beyond that.
And this has been a bit of a surprise for me coming to MGM for sure that the company really has a very effective operating model with centers of excellence in the areas you would expect hospitality gaming finance entertainment that cut across the entire enterprise.
Our effective and efficient delivering I think a better outcome at lower cost and that kind of organization is absolutely critical when we talk about things like the reopening of the of these properties. So I certainly anticipate EBITDAR.
EBITDAR margins solidly above 30% across the enterprise as we as we recover.
We would have seen that in the regions in the fourth quarter of 2020 had we not had the closures and I am confident that we can get there in Las Vegas as well as we reopen.
David I just might add a thought look we are open we open and close some of them every week and that's a complex process.
But and so we've proven to ourselves that the restructure of our ability to spread management across multiple properties in terms of the senior leadership not only is going to work has worked and so it's not overly complicated I think the trick for us will be make sure that we're tight and we're disciplined on yielding volumes and making sure that.
We do labor the way we've forecasted it in a way we presumed that we've done historically in the last couple of months as Johnson mentioned before the pandemic.
That'll be our test if you will it's not overly complicated at this point.
Matter of fact kind of being here in the middle of the ship is probably the most complicated.
Understood.
And thank you for that my follow up is probably not for Jonathan I wanted to ask about the digital gaming.
The degree to which and the importance of which.
Owning your own technologies and owning your own capabilities becomes increasingly important as you scale candidly. It was one of the first thoughts I had.
Around the just before the Super Bowl when Theyre starting to be some news about volumes, becoming an issue. If you could just talk about that importance.
Going forward that would be helpful economically and strategically yeah look I will kick it off and then I think Adam can speak to the Super Bowl I'll be happy to handle that one.
The good thing with our partnership is it's that we gave a retail business. They gave their technology and so by not owning our technology in most circumstances. There's a you know there's a percentage that comes with that we're not burdened with that if you will we're not paying a percentage of G. G. R. N G. R O.
G R on.
Someone else's technology. So that's the first affirmative thing when it comes to this initiative within pain. Obviously America is the biggest thing in the world right now and so we're all highly focused on it and so our ability if and as you know it was rough out of the gate, but our ability over the last year, particularly led by Adam now to get the teams engaged.
The technology to get the development effort to get the product that we need and want for America of note because obviously it was designed to speak to you now.
Premier League and other things.
<unk> has been meaningful I'm sure ultimate at some point it could come into play but for today, we don't pay the premium that others do as it relates to Super Bowl It wasn't necessarily a volume thing, but Adam why don't you just comment on it for a moment.
Yes of course.
But if you'll indulge me just before I get onto that just too David.
Build on what.
What Bill has said.
Earning the owned technology piece is important for us.
Full.
Okay.
Four pillars. The first obviously is the cost we're not putting away to a third party or the cost of it but.
But importantly by owning a product we can get to market quickly. We can be there on day, one as we've demonstrated five times over in 97 days I don't think anybody else has done.
Net so speed to market. So that we can capitalize on net pent up demand that low CPA period that.
Is vital and valuable.
We can also staying with product. We can also respond quickly and I believe more quickly than anybody else to what customers are telling us and we have a research group now.
Research process, so that the process of ongoing improvements to product can be translated into what customers experience as quickly as possible so that as it further.
<unk> content is the other.
We have in house with a in a partnership with <unk>, we have an in house studios, which allow us to bring unique content to market, which is both cheaper than bonds. Obviously, we're not paying away a rev share, but it's the only place in town that you can play certain games.
Popular gaming product in New Jersey, and now in Michigan is our in house developed game.
So.
Playing that forward why is that relevant because we think that we can continue to develop innovate and differentiate.
And the last is the tools that all that are unique to our platform. The player management tools the customer communication tools all.
All of those come together in a way that we think is strategically valuable.
Now getting on to the that's all the good stuff.
As regards the Super Bowl.
But as already mentioned.
The Super Bowl was a record breaking day for pet and Jim online better 11 X last year online handled 17 X last year and our digital performance was robust throughout the U S, which as you probably read wasn't the case for all operators and actually enhanced our competitive position.
But nevada was different but any Nevada early we did have an outage, which resulted in the system being down during the game, but the system was restored shortly after and has been working as normal ever since.
Paul This is an important part of the issue that caused the outage was specific.
And was the unfortunate result of human error and has been addressed we.
We know that the software works, which makes the downtime on Sunday older more disappointing, particularly given all of the tremendous work that was done by our MGM colleagues in preparation for the event, which was just enormous.
And it goes without saying that we sincerely apologize for the inconvenience caused to our customers. So I hope I'm looking forward to March madness as much is real.
Give it back to you Bill.
Thank you very much.
And our next question will come from Robin Farley with UBS. Please go ahead.
Great. Thank you all of my bet MGM questions.
Questions have been answered already but just one on Macau.
Obviously, when you were cash flow positive in the fourth quarter, but I know from your comments and comments that others have made it sounds like a lot of that was really in the month of October. So just wondering with the sort of dampened levels that you've talked about.
He has a property cash flow positive now here in Q1, so far.
You bet you've stayed up all night for this this is all yours.
No.
Thank you. Thank you Robert I'll make my early rise in Macau worthwhile.
Actually.
Actually I think I want to correct. One thing you stated in Macau actually the cash flow has been one positive each month.
Yeah.
The month in the fourth quarter actually December.
December had the best financial results and also in terms of business recovery.
December was the strongest and of course, you know going into first quarter.
We saw some of the momentum carried over in the first week of January but after that because of the Covid cases in China.
Increased so theyre all some travel advisory put in place by the Chinese authorities at all different levels.
To anticipate that.
Hotel occupancy will reach a level similar to October Golden week last year for Chinese new year period, and this will be a pivot for us that too.
To remain positive for masters, two quota for quarter to date period.
And Oh.
Visitation to Macao is a function of Covid cases in in Macau Covid cases in China and also the availability of vaccination I think when you look at these variables.
There is no reason to believe that the channel.
Pfizer will stay in place for a long period of time, because I think Macau has been almost 258 days without any local cases in China.
The first that we saw in day in December or early January has quickly diminished to about <unk>.
Double digits in the teens and vaccination in Macau and also in China has been pushed out to more and more people. So I do believe that.
We have reason to be optimistic in the first quarter.
Back to you Bill.
That's great. Thank you.
Great that's very much.
Well I guess the last question please chat.
Our next question will come from Stephen Grambling with Goldman Sachs. Please go ahead.
Thanks for sneaking me in changing gears, a little bit what what are your latest thoughts and the different paths to think through M. G P and potentially de consolidating that asset.
Look I'll kick it off and I will let Jonathan and since.
Way too much here.
Okay.
Obviously, we have an opportunity with some more high basis units that we can go after it.
It is still our long term intent.
To potentially sell some of this down if not over time all of it.
So we're an asset more asset light company, but there's a lot involved between now and then and so Jonathan pick it up from there I mean, I would only offer a couple of thoughts Stephen as is.
Bill said it certainly is our goal over time to reduce.
Our ownership stake in M. G. P. It would I think it would help in some ways simplify our story and our corporate structure.
We do have some opportunities to do a tax efficient sales of Oh P units, but it is also.
Uh huh.
High yield on the investment that we have in.
<unk> right now so relatively high yield so we certainly need to balance our moves with that which is right now an appealing return on that investment, but the direction is certainly over time to reduce that.
Yeah.
Makes sense and then if I can sneak a follow up in on on bet, MGM and I gaming or the customer acquisition cost for all I gaming and sports betting players, including the M life customers every day.
Is what do you think the customer acquisition cost chocolate non M life customers, perhaps another way of coming at it can you identify how many of the M life sign ups of that 39%.
There were attributed to bet MGM, what does that equate to in terms of just number of people.
Stephen can we.
Can we help you and connect you with Adam for some of that offline.
That sounds good that's it that we can go on for a while a while on that one.
We've we've obviously you suggested that M life customers in a whole lot less expensive to get there's obviously more expense tied to brand new customers that over time, you know what.
We think will become profitable for all of us I gaming actually cost a little bit more but they're much bigger wallet and they last a lot longer which is the value set there really.
And sports betting is so new we don't know what three years in the sports fan it looks like Theres no one's ever done it before and so but I'd love you to spend some time with Adam and if I could offer you up at him that'd be great.
Cool cool.
I love talking about our business.
Yes.
That's great well that's helpful color to start it off and I look forward to following up. Thank you. Thank you Steve.
Ladies and gentlemen, this concludes our question and answer session I would like to turn the conference back over to Bill Hornbuckle for any closing remarks.
Thank you operator, and thank you all for joining US today, obviously, we're excited.
Excited about our sports betting business, you can tell and I can sense everyones excitement, it's obviously the conversation and the value driver of present, and we think ultimately in the long term for long term for the company you've heard us talk about diversification.
We are hell bent on that whether it's into this space or other areas, our brick and mortar and otherwise in Asia. That's something we're going to continue to be keenly focused on we're going to have a very disciplined approach coming out of this emergence. If you will to make sure that the expenses that we've put in play and we've all worked so hard for.
Over the last 18 months and frankly two years has started a long time ago and then we doubled down during COVID-19 when we restructured once again at the parent company level, you've heard from Jonathan his view on the outside our Coa and our environment. Our operating model is working so not only as a cost effective but we think it's effective in general and it works and ultimately we're in it.
Extremely customer centric.
We want to value up our customers, we want to push them up our chain our food chain. If you will we think theres a lot of retail money still to be had at ARIA and at Bellagio and we're excited to get going with platforms here around digital marketing and some of the things. We've just put in play with the digital check in that gives us access to customers like we've never had before.
For that we're excited ultimately to deploy so a lot more to come obviously, we've got probably three or four months of angst and we'll see as these states continue to rollout and most notably here in southern Nevada, What happens I think starting this week, we'll hear from the Governor and then over the next couple of weeks and months it'll be important.
To stay in touch and obviously any or all of US are available right. After the call Orange. It tomorrow morning, So I. Thank you all.
And thank you Sir the conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Yeah.
[music].
Okay.