Q1 2021 MGM Resorts International Earnings Call
Good afternoon, and welcome to the MGM Resorts International first quarter 2021 earnings Conference call.
Joining the call from the company today are Bill Hornbuckle, Chief Executive Officer, and President Corey Sanders, Chief operating Officer John.
And health geared Chief Financial Officer, Hubert Wong, President and Chief operating Officer, MGM, China, and Jim Freeman Senior Vice President of capital markets and strategy.
It's been score and a listen only mode.
After the company's remarks, there'll be a question and answer session and <unk>.
Ernest to all participants please limit yourself to one question and one follow up please.
Please note this conference is being recorded.
Now I would like to turn the call over to Jim Freeman. Please go ahead.
Good afternoon, and welcome to the MGM resorts International first quarter 2021 and earnings call. This call is being broadcast live on the Internet at investors that MGM resorts dotcom and we have furnished our press release on form 8-K to the FCC.
And this call we will make forward looking statements under the safe Harbor provisions of the federal Securities laws actual results may differ materially from those contemplated in these statements.
Additional information concerning factors that could cause actual results to differ from these forward looking statements is contained in today's press release and and our periodic filings with the SEC.
Except as required by law, we undertake no obligation to update these statements as a result of new information or otherwise.
And during the call. We will also discuss non-GAAP financial measures and talking about our performance you can find the reconciliation to GAAP financial measures and our press release and Investor presentation, which are available on our website.
Finally, this presentation is being recorded and I will now turn it over to Bill Hornbuckle and thank you Jim and thank you all for joining us this afternoon.
We're excited to be speaking to you given the significant progress that we've observed and COVID-19 trends vaccination consumer sentiment and <unk>.
<unk> by state operating restrictions throughout the quarter.
And since we last spoke and mid February our domestic business has improved significantly and the work. We've done has allowed us to maximize the pace of our recovery, while positioning us for long term sustainable growth and.
As business trends improved we remain focused on our long term vision to be the Premier Gaming Entertainment company and the world our strategy for achieving this vision centers on four strategic focus areas first investing and our people and planet provide.
Providing fun and inspiring experiences for our guests and delivering operational excellence at every level and allocating our capital to drive the highest return for our shareholders.
I thought it might be helpful to provide and update on each of these focus areas before turning to the details of our first quarter performance and our outlook for the rest of the year.
Our people and planet strategy is part of everything this company does at.
And at the Pinnacle of this strategy is the investment and our amazing people, reflecting on the past year, just say theres been tough would simply be an understatement, but throughout the year. Our employees have been the one consistent bright spot across the organization I am humbled and and all of their dedication their hard work and resilience and the face of unprecedented uncertainty.
That is why I'm, so passionate about the investment in them, we got to this because of their consistent commitment to this company and ultimately our guests and.
We continue to bring employees back across the U S to meet heightened levels of demand we of course prioritize their health and safety.
And we have dedicated significant resources to getting our people vaccinated. We recently opened our onsite vaccination and clinics here in Las Vegas, as well as our regional properties for not only our employees, but also their families as well as our entertainers and partners who work at our properties.
And as the largest private employer and Nevada. These efforts are far reaching and the local community and I believe we are doing more than our part to help combat the virus with the ultimate goal of getting our city back opened 100% by June 1st.
I'm also proud to share what.
What our team has been able to accomplish to solidify MGM resorts as a leader and environmental sustainability and just a few short months, we will flip the switch and MGM resorts Mega solar array. There's 100 megawatt solar array at full production will provide up to 90% of total day time electricity needs for all of our Las Vegas strip properties.
Representing over 65 million square feet of buildings.
Our second focus area is all about providing fun and inspiring experiences for our guests to date. We've opened eight shows across our portfolio adhering to current health and safety restrictions. We continue to work with our local leaders to safely bring large scale events back both in Las Vegas, and our regional properties starting in early summer and.
July T mobile arena is set to host the Mcgregor fight.
Mcgregor UFC fight and you can't get tickets for this event, we sold 20000 tickets and 22 minutes.
Just one of the many examples of the clear demand for entertainment and we're excited to see a path to delivering these differentiating offerings to our customers.
It is important to note. However that we've not just focused on what experiences. We provide we've also focused and how we provide them delivering the highest quality guest service through a culture of yes. It's an attribute that remains deeply embedded in our values. We will continue to empower our employees to do what they do best providing world class service to all of our guests.
Turning to operational excellence, we refined our operating model and late 2019, increasing spans of control and simplifying organizational layers to accelerate decision, making bringing us closer to the guest and ultimately reducing costs driven in part by these efforts our first quarter domestic margins grew significantly over the fourth quarter.
And we are confident that these sustained changes will enable us to deliver our full target of 450 million of cost savings when business demands returned 2019 levels and.
And finally, we are disciplined allocators of capital always driven by the goal of creating value for our shareholders our targeted growth opportunities aligned with our long term vision, we along with our partners and team continue to invest and bet MGM as it grows its leadership position and U S sports betting and I gaming I Hope you all listen.
And on their Investor Day last week, we're also investing and our digital journey to drive deeper customer loyalty and engagement over time and with recent developments and New York, We look forward to working with the legislature on a potential path for a full scale casino license and Empire City.
With that I'll now provide some high level comments on our results and future business outlook and then let Jonathan and then Jonathan will discuss the first quarter and more detail.
In Las Vegas, and across our regional properties. Our initial recovery has been strong it's been great to see Las Vegas come alive again to the vibrant destination that we've all come to know and enjoy.
Our gross bookings in March were one of the best months and the company's history, clearly backed by pent up leisure and casino demand and our operating performance naturally followed the broader demand trend lines and adjusted property EBITDAR was heavily driven by the back half of the quarter.
Booking trends are bound to normalize over time as we continue to fill out the resorts in future periods, but good news is we built up a large enough base to start strategically yielding our business, especially now on the weekends.
As we look ahead, we expect robust leisure demand throughout the spring and summer months with hotel, Occupancies and and 90% range on the weekends weekdays will increasingly be driven by meetings and conventions and our group business remains solid and the back half of this year with more clarity around the various gathering guidelines were actively working to secure more in the.
Ear for the your business and to partially offset the anticipated levels of Washington attendance per group.
Our differentiated convene with confidence program designed to safely accommodate events large and small has received great feedback from our clients with the larger groups expected to returned at scale and 22, our business and 'twenty two and 'twenty three is on pace with pre COVID-19 levels.
While our high and international Casino business will still depend on travel restrictions, our domestic casino demand, which we've successfully leveraged through the crisis remains extremely healthy and we're also proactively engaging more with our fly and and 50 plus age demographic and we've seen increased receptivity to travel from that group and.
Regional properties delivered strong results and the first quarter. Despite some inclement weather aided by easing statewide restrictions, it's been encouraging to see again already at 50, plus and higher value players begin to return as well with the strength, particularly in slots and in March ready to C. O for a 60 or 50 to 64 age segment was supposed to.
And that if 2019 levels and we saw a noticeable improvement and our 65 plus age segment as well. These trends are also continuing now into April and Mike.
Especially pleased with our regional teams persist and ability to drive operational efficiencies, resulting in our first quarter regional adjusted property EBITDAR, surpassing that of 2019, despite lower revenues in fact, our regional EBITDAR and margins. This quarter were both all time first quarter Records and.
State wide restrictions ease further and other came and alternatives and begin to expand consumer options, we will monitor the broader topline environment, but assuming COVID-19 trends remained stable. We are confident through our cost discipline efforts and resulting structural margin gains we can sustain full EBITDA recovery this year.
I'd like to share some thoughts now on Macau.
While market wide G. G R and the first quarter improved sequentially compared to the fourth quarter Macau business buyers remain well below pre COVID-19 levels, MGM, China and once again outperformed the market pace of recovery our quarter G. G are recovered to approximately 40% of pre pandemic fourth quarter 2019 levels compared to the market's overall recovery.
Of 33%.
It is evident that our strength and premium mass is positioning us well as the market gradually turns the corner.
And the rate of my cash recovery, we believe will remain heavily depend on broader shouldn't sentiment as well as the pace of vaccination rollouts throughout the region, which will ultimately lead to the easing of travel restrictions and nucleic acid testing requirements and other bottlenecks currently impact this marketplace.
The opening and the Macau Hong Kong border is also another important variable and the couch recovery I.
I am however, confident and Macau is longer term growth prospects and believe our investment will ultimately bear much fruit, we expect construction of the additional suites and the south tower of MGM cotai to be complete and the third quarter of this year.
We're also remodeling, our MGM Macau villas, and the gaming space and level 35, and at both properties, we are adding food and beverage options focusing on our gaming floors. We're also organizing themed property attractions to drive visitation and over time, we have the ability to build out another hotel tower at MGM Cotai, along with meaningful entertainment assets to.
Help diversify our overall offerings and the destination.
And finally last week at the Investor Day bet MGM executive team provided extensive color on its business and we are incredibly excited about its trajectory and the sports betting and I gaming market.
Day, we see this space as a three horse race, where bet MGM offers unique and unparalleled online and offline experiences given the positive momentum to date that MGM now expects its revenues from operations to reach over 1 billion in 2020 two.
It also is now targeting its long term U S market share to be between 20, and 25% range and long term EBITDA margins and the 30% to 35% range.
And I bet MGM as key competitive advantages is its ability to lever mgm's destinations are broad based offerings and our M life loyalty program as efficient and effective customer acquisition and retention tools.
MGM also benefited from this relationship not only our new customers being introduced the M life, but through bet MGM. We're also reigniting relationships with customers that had gone dormant and the first quarter, 10% of bad M. James New players came from MGM and 44% of the new M life sign ups have come from bet MGM, putting this together.
See significant value and this opportunity over time and that's why both partners remain committed to ensuing and ensuring that MGM is leadership in this space with that I'll turn it over to Jonathan to discuss our first quarter and more detail John and thanks, a lot Bill, let's first discuss the first quarter results our consolidated first.
Quarter, 2021 revenues were $1.6 billion better than our fourth quarters 1.5 billion and our net loss attributable to MGM resorts was $332 million, our first quarter adjusted EBITDAR improved sequentially to 218 million heavily driven by our domestic.
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Our Las Vegas strip net revenues and the first quarter were 545 million, a 14% increase from the fourth quarter.
Adjusted property EBITDAR was $108 million double that of the fourth quarter and our margins sequentially improved 860 basis points to 20% driven by the significant pick up and leisure and cause you know demand coupled with cost control and the operating leverage inherent in our business hold had a fairly ins.
Significant impact this quarter.
Our first quarter strip occupancy was 46% compared to 38% and the fourth quarter with each month and improving through the quarter. We exited the first quarter with March occupancy at 62% weekends. We're at 85 and weekdays. We're at 52 due to the lack of group business mid week.
Occupancy has continued to grow in April our Las Vegas strip occupancy through last weekend was approximately 73%.
Our first quarter regional net revenues increased 19% sequentially to $711 million from the fourth quarter adjusted property EBITDAR increased 53% over the fourth quarter as well to 242 million, our first quarter regional margins grew sequentially by an impressive 700 and.
And 38 basis points to about 34%.
Our domestic margin growth is a testament to all the great work that our teams have put in to maximizing the effectiveness of our operating model and rethinking how we run our business. This ranges from marketing reinvestment to procurement from energy utilization to labor management and the breadth of our efforts gives me confidence that we'll deliver on.
$450 million of domestic cost savings, which we previously identified.
Our sports betting and I gaming venture bet MGM raises the bar every quarter.
At MGM delivered strong results and the first quarter, driven by market share gains and existing markets as well as successful entries into new ones, including Iowa, Michigan, and Virginia and.
In February that MGM is market share was 22% and it's active markets. It is the clear number one U S I gaming operator.
Its leadership and New Jersey strengthened last month as bet MGM had its best I gaming month ever and the garden state with over and over 30% market share.
And what it does also solidified its position as the top three operator and U S online sports betting we estimate based on February results. The bet MGM has overtaken the number two position and overall U S sports betting and gaming.
This growth led to a 163 million of net revenues associated with bet MGM operations and the first quarter. These are remarkable results considering the 178 million of net revenues from operations it delivered and all of 2020.
Given the strong momentum and the early stage of development and a number of their key markets. We expect that MGM to require $450 million of capital this year half of which would be funded by MGM resorts and the first quarter our share of bad Mgm's losses amounted to 59 million, which is reported as part of the.
Holidayed affiliates line of our adjusted EBITDA calculation.
MGM China's first quarter revenues were 296 million down 3% sequentially from the fourth quarter and.
Adjusted property EBITDAR of 5 million was also down sequentially from 41 million and the fourth quarter. Much of this decline was driven by the $23 million bonus accrual reversal last quarter, a benefit to earnings which we discussed during our call back in February. In addition, our first quarter mass table games hold was lower than that.
The fourth quarter, which had a negative impact on our margins.
Due to the largely exogenous reasons Bill described earlier and the call the demand environment remains challenging and Macau.
Our first quarter corporate expense, excluding share based compensation was 67 million, a 20, 26% decrease year over year, and a 14% decrease sequentially from the fourth quarter.
And we expect that our quarterly net corporate expense will run higher going forward as our business volumes continue to improve and we ramp our investments and I T. Our digital offerings and our IR efforts and Japan.
I'll conclude with a few thoughts on liquidity and capital allocation.
Throughout the last year, our liquidity position and served as a stable foundation from which to navigate the crisis.
March was a bit of an inflection point for our company as our domestic operations were roughly cash flow neutral during the month.
Now with and improving backdrop, and our core domestic business and a solid path to sustained positive free cash flow. We are progressively begun to shift our posture from capital preservation to capital allocation.
This quarter, we resumed our program of capital returns to shareholders and the first quarter MGM repurchased 3.15 million shares for $119 million and we've purchased an additional 1.41 million shares for $55 million and the second quarter through yesterday, we will.
A disciplined and programmatic approach to share repurchases for the balance of the year.
Bill described our vision to be the world's Premier gaming and Entertainment company, and we will allocate capital and further into that vision and ways that are remunerative to shareholders. This quarter. We caused M. G. P to redeem $37 1 million of our M. G. P. O P units for aggregate cash proceeds of approximately $1 2 billion.
Thus, reducing our ownership stake and M. G P to 42% and releasing capital for growth investments or return to shareholders. Our long term approach to allocating our capital will be as follows first we will maintain a strong balance sheet with adequate liquidity. We did this in 2020 and it served our shareholders well second.
And we'll return cash to shareholders, which we've already begun to do and the first quarter and this quarter through share repurchases and third when assessing potential growth opportunities, we will invest where we have clear advantages and will exercise prudent and measuring prospective returns for our shareholders.
To close I see meaningful upside and our current equity value as we innovate and pursue accretive investments overtime bet. MGM is one element of this but there are others, we will build the value of our brands improve the quality of our customer interactions and invest and more sophisticated marketing interventions all toward creating a more valuable offering for our guest.
<unk>, which will translate into market share growth for MGM much of this customer value will be delivered digitally and in so doing all require new pools of talent for the company and investment and technologies.
These are resorts and our current plan and I look forward to sharing details with you on future calls regarding the payoffs from these investments and with that I'll turn it back to bill for his closing remarks, thanks, Jonathan obviously, and we're very pleased with the improving operating environment.
Domestically and we remain diligent and aggressively managing our operating model and our cost structure and.
I'm optimistic about the long term recovery of all of our markets and I believe that MGM resorts is well positioned to then gain share I'm also excited about bad M. James positioning and the rapidly growing U S sports betting and I gaming market and as Johnson mentioned, we remain laser focused and pursuing other long term our long term vision.
And my comments were we started by acknowledging and thanking our employees across the world for their continued dedication to this company and their enduring efforts to provide the best experience for our guests. Our people are simply the best and to them I say, thank you with that I'll open this up for questioning.
Thank you we will now begin the question and answer session to ask a question and you May Press Star then one on your telephone keypad and if you were using a speakerphone. Please pick up your handset before pressing and keys to withdraw your question. Please press Star then two as.
As a reminder, in all fairness, please limit yourself to one question and one follow up.
And the first question will come from Joe Greff with J P. Morgan. Please go ahead.
Good afternoon everybody.
Different tier mix and.
Yeah.
Okay, and then understanding that there are it's a it's good to hear that the group business and Las Vegas, still and and your positive comments on 22, and 23 as well as the second half of the year and 73% and occupancy in April.
Hotel companies.
You know kill for that level of occupancy and and most urban markets and the U S. So where I'm going with these comments Bill you know can you give us a sense of what your expectations are.
For airline capacity, serving the Las Vegas strip that if mccarron yeah.
And September do you see it you get a sense that you can be you know 90% of pre pandemic seat capacity and do you think you'd get back to a 100% starting early next year.
I'll turn this over to Corey your studies and intimately with the commercial team, but the answer is yes, but Corey when you go and I said, Joe Let me give you some stats of where we think we'll be in June and July and then obviously hopefully it keeps building a June we think we'll be at 93% of capacity and July 99% of capacity and that's with very little if any.
International travel and so yeah, we expect at least the airlift to be pretty close to what it was in prior years.
Great and you mentioned earlier I think it was bill your comments about.
Yeah.
Maybe this is more for the strip and maybe extending to the whole domestic portfolio that the EBITDA generation EBITDAR generation.
And the first quarter was heavily weighted to the second half of.
The quarter, obviously, given the strength and and and March can you put a little bit more detail on that and in terms of you know as you exited the quarter, what's what's sort of the monthly EBITDA run rate coming out of the Las Vegas strip coming out of your U S regional portfolio.
Yeah, Hey, Hey, Joe It's Jonathan.
No we're not going to provide you know EBITDAR numbers month by month, but it is it is certainly true that.
The business accelerated starting around mid February, particularly in Las Vegas, I mean, just.
When thinking about the margins when you consider where we were.
In January where we were we had a couple of our big businesses here in Las Vegas closed during the mid week, we we changed those practices right at the beginning of March with.
With demand growing and so really when and Las Vegas, when we had that that level of demand against those fixed costs and then even started being able to yield the rooms in Las Vegas, It really had a pretty dramatic impact on the company's earnings generation and the regional markets.
The change through the quarter was not as pronounced but we did see relaxing operating restrictions and many of those markets as we got into March.
As well as just overall aggregate demand so we.
We we did want to as it relates to the occupancy numbers coming out of March we exited.
A lot higher than we started March and that's continued through through April.
Great. Thank you.
And the next question will be from Thomas Allen of Morgan Stanley. Please go ahead.
Thanks, just a couple of follow up questions on the Vegas recovery, great that youre running at 73% occupancy, but the day any visibility and when you think you'll get back to that kind of low ninety's percentage rate.
And then just thinking about the ramp up of Red Sustainment and conferences.
How do you think that's going to come back online.
And I hear your comments that you probably won't be fully back until 2020 to 2020 three bids are a way to think about like at what levels you are versus historical levels and the next few quarters. Thank you.
Joe again, I'll kick this off and turn it over to Corey I mean, the good news for US is Tom may 1st.
The county is going to relinquish here in Las Vegas, the requirements. So that people know it can be three peat three feet apart and no masks and that we can go to 80% occupancy. So it unleashes restaurants, most importantly, and one of our biggest restructure as has been the pools and Mandalay, we had to restrict occupancy late March through spring break and into April.
And because of the six foot requirement and the mask requirement bye bye and come Saturday that basically and those environments goes away. We've got a monitor the three feet, but all things being equal that that opens it up dramatically and then come June 1st all things being equal and we can demonstrate that the county has gotten and 60% of its people.
Vaccinated all of the restrictions go away and so when you talk about and you hear about the things we've talked about and entertainment.
The pent up demand has been incredible we added Dave Chappelle show go on sale on Monday, It sold out in one day you heard my UFC story, we had a day change for next year, a baby Bunny or bad Bunny and that's how much and I know about making money.
And that Bunny 45000 people waiting in queue to buy tickets and so the point is I think come June one and July one and beyond.
This year irrespective of group activity, which will be strong is gonna be.
Push and push to accommodate if you will and as it relates to next year, maybe Corey can speak a little more with the groups. So.
Thomas I think your question was when do we get to low Ninety's and that I think it will be dependent on a normal consistent group business coming back we'll start seeing things and the third quarter here with world of concrete, which will know we know is going to come and a little lower it is their high season, and it's right in the middle of their busy.
And and they'll be back in January so we expect that to be a pretty good conference.
Half of the year, we have some pretty decent sized groups at Mandalay Bay and the current understanding there's some groups are coming and a little lower than normal and some may be coming out a little higher but until we have some normalcy. There I think we'll have a challenge of hitting that 90% I think the encouraging news.
<unk>, just announced they'll be back in January and hopefully they come at full scale and with any luck if people get more comfortable with the meeting business and the and the social distancing and gets a relapsed I think theres a chance a slight chance you know early 2020 two we could start seeing 90% occupancies.
Whereas if you had asked this last quarter, but you did ask as last quarter. We said the back half of the year I think we're changing that feeling it's the first half of the year are the only real exception to that based on everything we said it might be international business, and that's obviously for us and integral and important but that aside we feel pretty optimistic about coming back to the first half of the year.
Yeah.
Thank you both and then just a follow up there's a lot of macro discussions around labor shortages and leading to wage pressures and Ed.
And our inability to operate because of lack of lack of people or are you feeling that.
Well I would say this inquiry is the operator, but I can't help myself I used to be.
The first three weeks this thing really took off and the middle of March we got caught off guard.
And just today, we probably have 1300 openings. The asked this in the middle of 19, how many openings we have in any given moment, it's about 1300 1400 and so it just the velocity of how quickly it came back.
I think over the next 60 days our teams have done a great job and responding and I think you'll see us get back to the place where particularly service levels are where they want and need to be because we'll be able to staff up there's a couple of holes.
And I was a great Thomas I said national shortage, we're well aware of it we have instituted.
Instituted some things on the hiring and front to help alleviate some of that pressure as Bill mentioned, we're hoping and next 60 days, where we catch up back and that staffing area, but in general and we're able to operate and at levels that we're comfortable with but yes, there's a little bit burden and right now.
All very helpful. Thank you.
And the next question is from Shaun Kelly of Bank of America. Please go ahead.
Hi, good afternoon, and thanks, everyone.
I wanted to turn the attention to kind of flow through in the quarter. If we just look at some of the sequential progress I mean, if if I measured it right and.
It looked like over 80% and flow through sequentially and Las Vegas and.
And the number and regionals.
A little over 70, which is which is pretty astounding given that the gaming tax component. So I was just sort of wondering overall.
And what's what's kind of driving those levels of flow through and and how sustainable you know.
Is that obviously I think Corey you just mentioned and some possible catch up and expense rates a little bit depending upon maybe the timing of this but also just how do you factor in non gaming coming back and some of that so just help us kind of think through that progression as we move through the year a little bit.
Hey, Sean, it's Jonathan and and and I.
And I think it's a it's a very good question and it's one we've been studying quite a lot you know we we.
We are right now operating these businesses with demand and the past you know 30, and 45 days, particularly in Las Vegas, primarily against gaming and hotel revenues streams.
Or and cost structures and what you know.
Parts of the business, which where the capacity has not yet grown and I'm like it has and the hotel and the and the casino floors is and some of the profitable, but lower margin businesses food and beverage, particularly.
Things like entertainment and even some of the services that are really important and can be margin impacting like valet parking and the like.
So so that we're going to see those costs come back they will be we expect them to be EBITDA accretive, but potentially margin dilutive, but it's important because they add to the full suite of of offerings that we provide.
So the flow through really has been has been strong cause and in some ways. These businesses and Las Vegas have been presenting the kind of almost of the kind of revenue profile that many of our regional businesses did so I I think that are you know there is I'm firmly of the.
Belief that these businesses can over the long term, both the regional and the Las Vegas businesses deliver EBITDA margins over 30%.
We had regional businesses and the first quarter that delivered margins everywhere from 25% to 50% for the quarter.
So we we we certainly intend on securing the gains that we've made and the cost structure, but there will be some some give back as we add to the full level of amenities that we can provide.
Great very clear and then my follow up would just be on <unk>.
Really a follow up to the to the last question.
Youre thinking about the occupancy recovery and you.
And we're seeing some some of the I think you mentioned a little bit about yield on particularly on the weekends and your ability to yield up a little bit and maybe just talk about how youre thinking about hotel rates and I mean is there.
There the opportunity to do meetings.
Meaningfully better than pre COVID-19 levels on hotel rates, possibly as soon as you know the second quarter here, just kind of how has that rate trajectory at least eight peak periods or or kind of on weekend is trending.
Hey, Shaun it's Corey so and you know the second quarter it'll be a little challenging because you know we've put a lot of rooms on the books to build that base are really probably the first month that we'll probably see our where we're seeing rates higher than they were pre COVID-19 where is August of 2019 compared now.
And really the fourth quarter, we expect to see our rates up.
Slightly not not significantly from the 2019 levels just to give you some flavor right now and the weekend pricing compared to last year, it's up over 10 to $15 now don't take that and multiply it by all of our rooms, because we have that base to yield up and the demands there and we're getting it out and the incremental room.
<unk>.
It's really the mid weeks that the challenge on pricing and you know well that will stay challenged and killed the convention business comes back.
Thank you very much.
And the next question will be from Carlo Santarelli with Deutsche Bank. Please go ahead.
Hey, guys. Thank you very much.
Bill you talked a little bit about obviously that the 2019 levels and kind of some of that international high and driving that if it's about expenses in 2019 that that business was down fairly significantly.
And obviously hampered the 20th 19 year, but as you as you look ahead when comparing to 2019, if you factor in and kind of the lower base of internationally 19, and and obviously the cost cuts.
Oh, it would seemingly be kind of of upside to your to your script 19 numbers and in 'twenty two to the extent, obviously the international high and returns.
And obviously the cost cuts that would be allocated to Vegas is there anything in that line of thinking that you would say is maybe incorrect.
Look I think on the on the former the cost cuts you know where every bit of confidence based on what we know today and and we know a whole lot more than when we started this that the $4 50 is going to hold and we feel really really good about that we think this operating structure. We put around that work is working and frankly working better than it was and so we feel really good about that.
The international problem part of it was about simply getting liquidity out of the market and getting into your back to Las Vegas.
Part of it was the market itself and it was falling off slightly.
Particularly the China based business.
And that will depend more on macao than anything else and how it recovers how we reestablish our pipeline there and it's gonna be interesting what happens and 22, you know getting will come into the market, but sands will presumably get out of the market at least with the direct connectivity to.
Our Macao and Singapore, and so there's a new competitor and potentially somebody falling out over time and so it's probably a net neutral it just really gets down to liquidity and and.
And the ability of tourists from China and gave me was from China, getting cash out and into Macau and potentially here to Las Vegas, and so I think youre thinking about the right way and we got pretty beaten up and 19 there.
Right Great. Thank you and then John.
Jonathan or bill or whoever wants to handle this one as you guys sit here today with obviously $4.9 billion of cash on the on kind of the domestic or operating balance sheet for MGM.
You, obviously bought back some stock and that the <unk> you bought back a little bit more here and the two Q do you see that kind of being core to the story.
As it was and kind of 19 and and prior to the pandemic. When you guys were buying back $350 million $400 million a quarter.
And on average or is this more of a programmatic kind of do it for now and see adoptions arise be it and in New York beat and in Japan, or wherever it may be to spend money and Macau with that the expansion that you guys mentioned.
I I I do see it as being core to the story you know the company had embarked on and I think Ah Ah.
A well thought out program that was then truncated and many ways by the pandemic and it was it was certainly a good thing is I mean as I mentioned in my prepared remarks that the company and have liquidity that did during 2020, but really having.
Seeing the results that we're seeing and our confidence and the remainder of the year I certainly think it's it's high time to return to that now.
And now we're not going to commit to any specific magnitude and kind of depends on how things proceed during the course of the year, but but I certainly believe our shares are attractively valued and that return of capital to shareholders is going to be an important and ongoing part of our capital allocation program.
Great. Thank you both very much Oh, sorry, Carlos Carlos My only comment was they I think you said $4 nine and liquidity I think.
And that number is part of that day yeah.
Yeah, sorry.
Referring to the cash cash cash and.
Cash.
Yep.
Thanks, guys Okay.
And the next question is from Chad Beynon with Macquarie. Please go ahead.
Hi, good afternoon, and thanks for taking my question.
Wanted to focus on the regional markets.
Some companies have talked about the strength and and unrated play, which has helped volumes and margins, which you've talked about Jonathan.
Can you guys elaborate a little bit more just in terms of what you're seeing from the unrated players coming to the properties. If you think that's sustainable and if you've been able to convert some of them over to your M life program. Thanks.
Hey, Chad its have Corey you know our unrated players saw a big jump in on March compared to February were up over 30% in the regional markets.
You know is that sustainable I, you know I think it's going to continue to grow as revenue grows.
It's the total revenue base grows as restrictions are get relaxed I think the unrated and a component will stay but the key to your point is converting them into people that we know of.
We have not really spent enough time on that to understand how that how much of that is converting right now, but our goal is to put programs in place, where we do convert them into M. G. M M life members and even bet MGM members.
Thanks, Corey and then with respect to Macau can you just give us an update in terms of how your team is thinking about the current restrictions.
Obviously, we have may Golden week coming up I don't think the market is ready for a big inflow of people, but you know when when you expect four more visitation to be permitted and how you think this could kind of ramp throughout the year. Thank you, Joe and I'll turn this over to you for it but I think he has got some good news on the May a.
We can still go ahead Hubert.
Okay.
Thanks, Chad so.
May Golden week demand is actually pretty strong.
We anticipate hotel to reach almost full occupancy.
And so similar to what we saw two years ago 2019, Bobby Kennedy, our Golden week late night.
Exceeding actual wilkie is on.
Peyton and faster than what we saw during Chinese new year, this year and October Golden week or less.
And here.
And of the year last year.
And also very important to point out that the man.
Hi, and customers remain strong.
And that's to our in house and VIP.
So actually Manav I'll sweep product and all.
And overbooked.
So I think looking forward you know.
And we saw this momentum and actually started in March market graduates and pick up and.
And I think that's a deep and <unk>.
Coming months.
Uh huh.
And the balance and here I think the vaccine and we talked about and built our prepared remarks, and a vaccine rates rollouts is important.
And also a palm palms, we openly with Michael and also the E V but.
Application process.
Resumption of that process and China will be these are going to be true.
Triggers for sort of.
Recovery.
Thank you very much Hubert.
Yeah.
The next question will be from David Katz of Jefferies. Please go ahead.
David Your line is open and perhaps your line is muted on your end.
David we are unable to hear you.
Yeah.
Alright, well move onto our next question and that's from John Decree with Union Gaming. Please go ahead.
Good afternoon, everyone and thanks for taking my questions.
Bill maybe to.
Together, you've talked about Japan, and Downstate, New York and in Yonkers as.
Kind of focus growth initiatives and.
Little bit cloudy I guess as we look at the media reports and.
How those two opportunities are progressing could you give us.
And perhaps a better insight than anyone on our progress and Japan and kind of expected timeline as well as your thoughts on.
New York might play out at this point.
Sure I'll start with Japan.
Not much has really changed since the last quarter there.
And there is still a submission deadline July I think its 20th of this year for an RFP.
Our company is intent to do that they.
And they had opened it up but we have been able to work with Japan and the city of Osaka of note on some of the criteria given COVID-19 given their requirements and frankly, we're able to enhance them and improve them to the point that they reopened it back up for about three weeks there were no new participants and so we stand as alone entrant in that process.
This starting in July.
Believe believe it will be then determined by the National government in June and the following year, where the three locations will be anointed ER and that's to be determined obviously at that and when it happens you all know that Japan and last couple of weeks and back into Lockdown. So you know, it's it's tenuous and some respects, but where we are still very focused on it and we intend to.
And hopefully hopefully apply and July if in fact that that happens.
New York is obviously more immediate and.
Nothing is simple, particularly there and the context of understanding what was done.
As of now we have until June 10th until the legislature closest we were hoping to keep it and the the governor's budget that didn't make it up but we have a good reason to believe I was literally there on Monday and with some of our team talking to legislators at all about the process and we hope to get from them and RFID to and ultimately and RFP.
Process that would happen later this year, we remain optimistic we like obviously our position there too early to tell exactly what we might do and dependent on two or three entrants. Ultimately you know what the tax would be et cetera, et cetera, but both of those remain on our radar and we're we're zeroed in on around those timeframe.
<unk>.
That's very helpful. Thanks, Thanks Bill.
Yeah.
Our next question will move back to David Katz with Jefferies. Please go ahead.
Hi afternoon, everyone. Thanks for taking my question I wanted to.
Discuss M G P and and the stake there, which you know has continued to generate some proceeds and move lower if we could just talk about what the prospect of outcomes or alternatives could be and what the sort of gating factors are around those.
And would be too.
To that moving lower from here.
Yeah.
Sure David.
It's been a process that the company has taken over time over and now appear to have a few years.
There's no particular gating items are just that we'll look to monetize that stake.
Potentially over time, when we think that the opportunity is right for us to do so so it's balancing the yield that we have from that investment with M. G. P. With other uses that we have for that capital and.
You know one other consideration that of course, we we think about is is the the clarity of the story and the <unk> the investment thesis behind MGM resorts and our shareholders investing in M. G. P through MGM resorts and op day to be better served by.
Being able to invest and M. G. P directly so I think it's a process one that we advanced further during the first quarter, but as it relates to where we go from here I'm I'm not going to really speculate on the magnitude or the timing.
Understood and if I can follow that up and.
Obviously, there is as you said theres a lot of issues, but is it fair to take away that the tax implications you know art.
In and of themselves or gating factor and it you know.
Irrelevant, but not gating factor.
And yeah, there are certainly relevant and they're not a gating factor.
Perfect. Thank you very much okay.
Yeah.
The next question is from Barry Jonas with tourists Securities. Please go ahead.
Hi, Thanks for taking my question I guess, the first would be to what extent if any do you think stimulus checks weighed in on the quarter.
Yeah.
Corey once again, let's say original but yeah look I think it's definitely had a benefit in there and the regional.
Performance I think there's also things like no entertainment options really also and you know there's quite a bit of savings on the sidelines and so I think to sit there and be able to carve out exactly what each of those have it it would be difficult.
Okay.
Okay, and sorry, guys.
And it's just Jonathan and I was also going to add it's.
Stimulus, Texas side, it's I think it's undeniable that sentiment has just improved dramatically as well as some real changes and and and operating restrictions and our business together with what we think are just.
A fantastic product and service that were.
We're offering with our teams. So it's it's a it's certainly a combination of events that we think has led to this demand improvement.
Great and then just as a follow up.
Beyond New York are there any other land based development opportunities and the U S you'd be interested in pursuing Theres, you know Chicago, potentially Texas, Georgia or anything else.
You know Barry I would say this tech.
Texas and of course of interest and presumably you know and didn't get through the legislative session. So at the very least the discussion is two years away, but you know as it was defined there the four big cities one of them would be something potentially down the road we're interested in.
Florida is complicated as you know and we are watching that closely and.
Obviously, the governor just made a deal with the tribe and so we'll see how that pans out both in the context of land based as well as sports betting Oh, you know, Georgia is probably not any immediate horizon. Obviously, we spent a great deal of time and energy there we know the marketplace well you'd have to be under the right circumstance and Chicago.
Is just complicated hits the history, there and Chicago are the tax and the notion of integrated resorts at scale and don't necessarily marry up and while I think they've had some improvement.
We're not overly keen and we're focused at this point and time there.
Understood. Thanks, so much.
The next question is from Robin Farley with UBS. Please go ahead.
Great and thanks for taking the question and I wanted to ask about and the regional area and the cost saves and you mentioned some lower margin things may come back, but just looking at the high margins on the business that you do have how much of that is labor efficiency that you know it has nothing to do with like competitive issues.
You can hold on to and how much of it is what was the fact that you know you.
Didn't have to do certain promotions or a competitive thing maybe trying to get that incremental top line from that.
And our property nearby it can kind of help us think about how much of it might be.
And as that equivalent would be sustained.
And more in your control I guess, Chris just competitive thanks.
Provenance Jonathan.
The the labor costs are we expect to be largely sustainable I mean, there's a there are a couple of circumstances and our regional properties, where we've been aside from what I mentioned earlier about adding some additional capacity.
Two restaurants for example, which operate at lower margins than and then the other revenue centers.
Couple of circumstances, and our businesses, where we're under our intended complement of employees, but those are there.
There are relatively few of those so we put a couple of pages and the presentation up and on the website today recapping the cost program and and and much of those you know.
Operations streamlining.
Have already been realized and the regions and and we're confident we can sustain them. It is certainly true that our reinvestment.
Is lower than it was pre pandemic and the regional markets.
That would that would that.
And to the tune of probably well actually I'm not going to offer a specific on that just to say that those are.
Those changes.
And I think are also sustainable and that they really haven't been driven as much by competitive issues, rather than our own practices of test and control and noise and.
Proving on the effectiveness of our marketing reinvestment.
This is the 13th kind of percentage points of margin improvement how much and that would you say is that the labor savings that you I know there's a song.
Got it.
Lays out the aggregate dollar amount across the company and costumes pitched in the regional of this 13 points.
Our team.
Yeah, I would say roughly compared to kind of pre 2019 levels are probably about 300 basis points or so three to 400 basis points and savings.
Okay, great. Thank you and then just as a follow up on a different topic with Macau and and just looking at the market share.
Sequential change from Q4 to Q1, and I know you mentioned.
And the math holds.
With lower than you expected and Chris there's a new competitor and Q1 as well is there anything else we should any other dynamics that we should be thinking about.
And looking at that the market share shifts and sequentially.
No Ryan.
And I might offer up.
Hold on one side and I'll, let you Tom.
And I might offer up you know, we we are and the reason we have gained share given the nature of the company and what we've done historically and Asia with branch offices and environments, where ideally suited to have our own customer one customer database and our own programs and so it's benefiting us as the mass market returns and obviously that will go down but it's the market.
To shift away from junket and ultimately into premium mass with.
We're well positioned them I don't know you, but if you have anything to add.
Yeah.
Yeah, I think that.
Robert I can always count on you for a warm personal and mccallum.
Last quarter, you pick, let's say, but I.
I think that the.
Yeah, and if you look at.
Market share all marketing and you're all of October and lots a year and all we average about 12% and that's a part of the increase and locale.
And what we look back into 2019 and yes.
Yes first quarter, there was a little decline I think that rather than anticipated and mall base mass.
Coming into the market.
That's what we will see I think.
And the floods and I'll cover all focus is on site and premium mass Paul.
And the second half of the year, we will introduce more sleep products.
And it's actually these are very high and suite product portfolio.
I think that we'll regain some market share back that we saw a decline in Q1.
Okay, great. Thank you very much.
And our final question will come from Stephen Grambling with Goldman Sachs. Please go ahead.
Hi, Thanks for sneaking me in somewhat of a high level question, but I think pre pandemic. There was some talk of shifting from the MGM 2020 cost outs to investing in digital to boost loyalty and improve the efficiency of revenues and I see and the deck I think you've highlighted investments into digital to improve loyalty and just help us think about what that ultimately looks like as we try to think about.
That is an opportunity going forward.
Yes, Steve and Bill.
So we have spent a great deal of time trying to study what moves the needle and what doesn't and.
And we've identified we think some opportunity with high and retail business necessarily it garment business, but high end retail business non gaming.
Some regional movement from regional players to Las Vegas to take better opportunity of the players and we already have some activity around bet MGM and making sure we secure those players and some other ideas there and it is around part of it is around the digital transformation part of it is around getting some of our tech that resolved. So that we have an environment that's ripe and.
Ready to do those kinds of things and so we're going to lean in with teams, we're going to lean in with investment over the next three or four years. We obviously during the pandemic put the vast majority of that on stand down and we went like held as you know to get but some of the things completed our fourth because of the pandemic mobile check in and some of the other digital.
<unk>, but now it's going to be really about what's the customer experience, what's the focus on the high and how do we drive more share how do we drive more wallet.
And things of that nature, and and we're going to lean into that side of the business to help us do those things.
And perhaps a related follow up on the rated play and the regional markets are there changes and the competitive promotions you see where even if it may not be permanent promotion cuts the cuts may be so significant.
They just can't be turned right back on and other words do you sense. Your peers may have structurally altered the promotional intensity as well.
And I think it depends on the market I think Atlantic City and those numbers are published you can see they're fairly consistent and some actually turned up their promotions at the beginning of the pandemic. The other markets I think you see more rational type performance and just listening to our competitors. It seems like that is.
The way, they're going to run their business. So I think some of it is definitely sustainable market by market as you pick it up.
Great. Thanks, so much.
Okay.
Ladies and gentlemen, this concludes our question and answer session and I would like to turn the conference back over to Bill Hornbuckle for any closing remarks. Thank you offer just a couple of thoughts as we as we leave the call and thank you all for your attendance today look obviously you can sense, we have a great deal of optimism for where we are and where we're going to spend huge pent up demand and we see it we see it.
Here with activity around major events and so we're very excited about the summer and fall.
You heard us say I hope you heard US say, we think the regionals returned and 19 levels by end of year and I Hope you heard us say come the first half versus the second half save International we think we're going to be back to 19 levels here in Las Vegas bet MGM continues to amaze and we're very excited about where we are great kudos to that team and $1 billion of NN.
<unk> and 2020 two is compelling if you think about where we were about six months ago and Macau, we still have and continue to have long term aspirations and hopes for the market. Returning this year, we see seeds of it now and they may holiday and so we're excited by that and and ultimately I think we've got enough maturity now around our 2020.
Plan and business. That's the 450, we committed to is very real and we're going to deliver on that and so you know we're excited by where we are we're excited by taking as Jonathon Porritt earlier, you know, we're conservative approach to capital allocation and now going out and thinking about the true goes to the company and the kinds of places to do with whether it's in Asia or digital or.
Some other place.
Know that we're excited by that and we're excited by raising the bar here and across the portfolio in terms of service and the service deliverable, we want and we will do a much better job on that so thank you for your attendance and I Hope you all have a great evening.
And thank you Sir the conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Yeah.
Yeah.
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Hmm.
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