Q2 2022 MGM Resorts International Earnings Call
Good afternoon, and welcome to the MGM Resorts International second quarter 2022 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, and Treasurer Hubert.
Wenger President and Chief operating officer of MGM, China, and Andrew Chapman Director of Investor Relations participants are in a listen only mode. After the company's remarks, there will be a question and answer session in fairness to all participants 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 Andrew Chapman. Please go ahead.
Good afternoon, and welcome to the MGM resorts International second quarter 2022 earnings call. This call is being broadcast live on the Internet at investors that MGM resorts Dot Com. We've also 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 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.
That does 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 measures in our press release and Investor presentation, which are available on our website.
Finally, this presentation is being recorded I will now turn it over to Bill hornbuckle. Thank.
Thank you Andrew and thank you all for joining US. This afternoon, our second quarter results represented our highest adjusted property EBITDAR quarter in the history of Las Vegas, both on an absolute and same store basis, and the highest second quarter in our regionals ever with seven of our U S properties setting all time records.
I again want to sincerely. Thank our employees for their continued hard work commitment to excellence and dedication to creating world class experiences for our guests.
Thanks to them, our company's service scores have improved sequentially each quarter, both overall and across all the metrics, we track I could not be more proud of the progress we have seen in servicing our customers before.
Before I dive into our results in more detail, let me reiterate that our long term strategic planning remains unchanged.
We're focused on continually improving our guest experience delivering operational excellence investing in our people and planet and allocating capital responsibly.
So, let's turn to those results.
We took another meaningful step in April to simplify our corporate structure and complete the monetization of our real estate assets with the closing of our strategic transactions between MGM growth properties.
Excuse me and Beachy this.
Action brought us 4.4, being in cash, which we intend to use to invest in our core businesses, while continuing to pursue meaningful growth opportunities.
One such opportunity with the acquisition of the Cosmopolitan of Las Vegas. It officially closed in May I've had the opportunity to spend some time at the property and have met a number of the costars I cannot say enough about the strength of the team at the cosmopolitan and the exceptional service culture that has been created there our focus now is on.
Integrating the operations of the property and Tim Jeremy's or its portfolio and working together to maximize the future success of this world class resort.
We ultimately also recently announced another strategic divestiture and our portfolio in June we reached an agreement to sell the operations of the goldstrike tunica to the Cherokee nation for $450 million as a company. We felt this was an opportunity to sharpen our focus in Mississippi on bowl revived and take advantage of an attractive valuation.
Gold strike is a very special property I'd like again to thank every employee in tunica for consistently delivering amazing first class gaming and entertainment experiences to our guests.
We look forward to seeing goldstrike continued success with the Cherokee nation, and we expect this transaction to close the first part of 2023.
Divestiture follows our prior announcement to sell the operations the Mirage, which still also stay on track for close later this year.
Consistent with our strategy to grow our international online gaming footprint, we announced in May a tender offer for legal Vegas, a leading global online gaming company with licenses and eight jurisdictions, primarily in the Nordics Leo Vegas has a talented management team, our cloud and mobile based technology platform and it appreciably gross an appreciable growth.
Plan that we'll execute on as we develop our digital gaming presence in Europe . We also expect this transaction to close in the third quarter of this year shifting now back to focus on our brick and mortar development pipeline. We are hopeful that New York will solicit applications by the end of the year for one of three additional casino licenses, we are eager to.
Responding and expand our existing property and Empire city, which is less than 15 miles from Manhattan with an attractive footprint for development and growth. If we do receive a license we look forward to working with the state of New York Yonkers enough surrounding jurisdictions should drive jobs and economic growth to that region.
In Japan, we submitted in our area development plan to the Japanese government in April and are optimistic that we receive an approval decision in the fall of this year following that process will share further details about the project.
And in the UAE, we continue to make progress on bringing the MGM brand family to Dubai, where we have a management agreement for non gaming integrated resort Theres been developed in partnership Wassail. The project has broken ground and work continues on the development progress and we will watch with great interest what does or doesn't happen around gaming in the <unk>.
And hopefully in the near future.
Turning to bet MGM, Adam Green Black the team provided a comprehensive update at their announced at analyst day reaffirming their long term road map and path to profitability. The team at bet. MGM is also working on a comprehensive refresh to improve the interface and customer experience later this year.
Following a successful launch in Ontario in April , but MGM announced a partnership with Carnival Cruises Corporation to provide onboard ship betting and gaming under the bet MGM brand that MGM operates now in 23 markets, United States and Canada across retail online sports in our gaming operations in May but M. Jim committed 21 person.
Sure in the active markets in both U S sports betting and I gaming, which puts us in a number two position that MGM is the clear leader in our gaming and having reached 29% market share in may and looking forward with the addition of Ohio, Most recently, Massachusetts as well as the potential for California, we continue to see great.
Need for expansion with Beth M. G. M. We're accessible to those three states is over 45 main addressable audience.
Our investment in bet MGM is an important enabler to our omni channel strategy and a key competitive advantage that allows us to drive incremental earnings between our brick and mortar and online channels. Early results of this strategy had been positive with a strong acquisition story with over 43% of our MGM reward sign ups coming from Beth M. G M versus 30.
3% in Q2, 2021 of.
These sign ups, we have seen substantial growth and those who are visiting MGM property for the first time.
Turning to Macau, our operations were affected by limited visitation to the region, obviously due to the COVID-19 restrictions as you've likely seen the Macau government closed all nonessential businesses in July in the face of rising case counts, which impacted our properties.
Last week, we saw operations reopening on a limited basis, and we're working to minimize our operational costs in the short term and position our properties to capture more than our fair share of premium mass business as demand returns hopefully in the long term.
We're also working on a concession renewal. We're pleased to have received the terms of this tender last week with no surprises with all the submissions due by September 14th the Macau Government will then review the submissions and grant new concessions hopefully by year end, we remain confident in the future of Macao and are proud to be partners in shaping the few.
One of the world's Premier tourist entertainment and gaming destinations.
While our second quarter results were nothing short of spectacular we are of course mindful of the marketplace concerns about a potential recession. We also recognize that starting in the back half of the year, we'll be lapping strong comparisons driven by pent up demand around our reopening.
With all of this in mind. It is important to highlight that we built an incredibly agile business over the last few years due to COVID-19 and other factors and we will adjust and pivot quickly if we see any signs of consumer demand slowing.
That said, we sit here today, our business are forward looking pace remains extremely strong in fact looking ahead, we continue to be quite bullish on our domestic business outlook based on a number of tailwind is coming in the new year, including a rebound in our convention business. The return of international travel and a lineup of exciting events to law.
Vegas, Let me touch on a couple of these points a bit more.
First in 'twenty, three we expect to grow our convention mix and rate year over year also in terms of city Wides, we look forward to welcoming CES back in better form and once again, the Con Expo trade show in Las Vegas in March of 2023.
This will be their first returned post the COVID-19 shortened Twenty-twenty event. One in rotation. This is one of the most well attended citywide events of the year with historical attendance well north of 130000.
Add to that that would be turned up international visitation to Las Vegas, which in 2021 represented only 3% of visitors.
10% to 15% and pre pandemic ear and our international customers have longer stay patterns in domestic guests and we expect these guests return enforces international flight capacity will reach over 80% of 2019 summer levels.
And finally, the event calendar Las Vegas is arguably the best the city has ever seen and MGM will be primarily primary beneficiary, even at our scale and positioning.
Vegas is now truly a powerhouse sports destination with the Golden Knights and radios, calling Las Vegas home looking ahead in 'twenty three the city will host the Sweet 16, and elite eight rounds of the NC two ways men's tournament and our first ever Formula One race and then in early February of 'twenty 'twenty four will play host to the suite.
Per bowl when you put it all together the business case is incredibly compelling for continued growth and momentum in our business and as Jonathan will describe we see tremendous value potential in the shares of MGM resorts with that I'll turn it over to Jonathan to discuss the details of the quarter. Thanks.
Thanks, very much Bill I too would like to express my sincere thanks to all of our employees for the incredible results. We achieved this quarter, we truly have the best team in the best talent in the business.
I also want to acknowledge and thank the employees of the gold strike tunica for their contributions to this great property and also extend my welcome to this costars of the cosmopolitan of Las Vegas.
So, let's discuss our second quarter results in a bit more detail.
Our consolidated second quarter net revenues were $3 $3 billion, an increase of 44% compared to 2021, despite a $168 million negative impact from MGM, China due to the COVID-19 related limitations to visitation Bill mentioned in his remarks.
Our net income attributable to MGM resorts was $1 8 billion benefiting from a gain related to the sale of MGM growth properties.
Our second quarter Las Vegas strip net revenues were $2 1 billion and adjusted property EBITDAR for the strip was $825 million.
Our same store net revenues in Las Vegas, which excludes ARIA, but dara and the cosmopolitan in 2022.
Increased 60% versus the second quarter of 2021 and.
Same store adjusted property EBITDAR in Las Vegas was up 51% versus the second quarter of last year.
Now unlike the visitation or the variation month to month that we experienced in the first quarter due to omicron, our second quarter occupancy ADR and profitability were consistent through the quarter.
Quarter occupancy was 92% continuing the strength that we saw when we exited March as Bill mentioned pricing remains strong with ADR in the second quarter at a record $225.
On a same store basis ADR of $201 was 34% above the second quarter of 2021, our pricing power is driven by a number of factors the attractiveness and sophistication of our marketing efforts the relative value versus other destination markets Midweek convention returning.
And the benefit of certain room renovations, including the Bellagio and ARIA Sky suites, which we completed in 2021.
Our preliminary results for July are also an encouraging sign for the third quarter with occupancy of 94% and ADR up 6% year over year, that's being our toughest comp versus 2021, given the strong reopening trend we experienced last year.
Our gross bookings continue to be robust with occupancy growth and all future months this year and rate up double digits versus 2021 in each month in fact during June we booked the most rooms per day, so far this year.
We really liked the demand outlook for Las Vegas.
Our second quarter regional net revenues were $960 million, an increase of 12% versus the second quarter of 2021.
We delivered regional adjusted property EBITDAR of 340 million, which was 7% above the second quarter of 2021 margins were 35% down approximately 200 basis points compared to last year as we brought back more of our non gaming operations moved.
Moving to Macau net revenues of $143 million in the second quarter represented a 54% decrease compared to the second quarter last year adjusted property EBITDAR was a loss of $52 million in the second quarter versus positive $9 million last year.
Health policies remain a headwind in the region as entrance into Macau has been severely limited.
Turning to bet M. G M. Our 50% share of bad Mgm's losses in the second quarter was $71 million, which is reported as a part of the unconsolidated affiliates line of our adjusted EBITDA calculation, and we expect to contribute $225 million Tibet M. G. M. This year.
Now in the first half of 2022 bet MGM generated net revenues associated with the operations of $608 million, which is an improvement of 70% compared to the first half of 2021 and well on track to meet our forecast of $1.3 billion.
Our second quarter corporate expense, including share based compensation was $120 million, which included $21 million of transaction costs were.
We're strategically investing our corporate expense and growth areas, including improvements to our it infrastructure enhanced digital offerings for our guests and of course, our IR efforts in Japan.
So before we wrap up our prepared remarks, I'd like to restate, our capital allocation strategy and touch briefly on how we view the valuation of our company.
Our strategy is as follows first we will maintain a strong balance sheet with ample liquidity.
We will invest where we have clear advantages exercising prudence in measuring prospective returns for our shareholders and finally, we'll return cash to those shareholders.
The transactions, we completed and announced this quarter, yet again demonstrate our commitment to and execution of these priorities.
We bolstered our liquidity through the closing of the BG transaction, we improved our portfolio with the acquisition of the Cosmopolitan and the announced sale of the operations of the Mirage and gold strike Tunica we.
We invested in our international digital future with the announced Leo Vegas transaction, we returned cash to our shareholders through share repurchases.
During the second quarter, we repurchased 32 4 million shares for $1 1 billion since.
Since the beginning of 2021 through last night, we've repurchased 104 million shares for $4 billion or 31% of our market cap. This activity brings our share count down to approximately 393 million shares.
We've been aggressively repurchasing our shares over the past 18 months because of the value we see a current trading multiples here's how I'd think about it.
As of yesterday, our share price was $33 and we had 393 million shares outstanding. So this implies a market cap of $13 billion.
If we add our quarter end domestic net debt and subtract the value of our 56% stake in MGM. China, then we have the enterprise value of our domestic operations.
Divide this by the trailing 12 months EBITDA adjusted for corporate expense Cosmopolitan Mirage and goldstrike transactions and this implies a trailing multiple of five three times.
Our stake in bed M G M for free.
These deals were announced a few months ago, but our sales of the Mirage and goldstrike traded at trailing EBITDA multiples of 17 times 11 times, respectively, but wait there is more our traditional debt is all fixed rate and our lease agreements escalate by only 2% annually for the firm.
10 years, and thereafter, we have a CPI cap of 3%.
So we enjoy free cash flow operating leverage by driving EBITDAR growth above two or 3% in the second quarter. Our domestic same store adjusted EBITDA grew by 33% Bill back to you. Thanks, Jonathan I know, what my new Chief sales officers going to come from.
As a company we've been busy this year in our pursuit of our vision to be the world's Premier Gaming Entertainment company I could not be more proud of the progress we've made but understand there is clearly more work to do again I'd like to thank all of our employees for their contribution to everything we have accomplished there was a lot of excitement in the rest of 'twenty, two and beyond I can't wait for it.
What's to come I truly believe our best days are yet to come and with that operator I'd like to open it up for questions. Thank you.
We will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone, if you're using a speakerphone. Please pick up your handset before pressing the keys 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 come from Joe Greff from J P. Morgan. Please go ahead.
Good afternoon guys.
My first question to you is into Jonathan as well.
Can you talk about maybe any aspirations for large scale M&A, particularly in Asia.
You know given the news about your potential interest in Singapore.
That to us is a little bit different than.
Some of the other capital allocation.
Activities that you've talked about but I'll leave it open ended and you can discuss it as you wish.
But Joe obviously, we love our position in Macao, we're excited about Japan.
Not going to comment on anything else, we'll continue to be.
Aggressively look at M&A and active to the extent it makes sense, but I.
I really don't want to comment on the Singapore situation I'm jumping one of them.
So.
So we stand is we are Jim.
Okay.
Hum.
No I think you had commented that you know.
Obviously the forward pace.
In Las Vegas and of course, the portfolio is not reflecting any consumer retrenchment from any kind of downturn that we're in or maybe going into which is great.
Great to see and that's consistent with others in the industry and others. Our coverage universe can you talk about what plan B would be in terms of managing the business. If we're going into a downturn and and you see you know spend per visit and length of stay.
You know God forbid start to retrench, how do you how do you manage that from a from an opex perspective from a labor perspective, how does that maybe translate into sort of a flow through particularly in light of sort of the margin gain.
Now that you've achieved.
Dennis started and that's all for me.
I'll kick it off and maybe turn part of this over the Johnson indoor Cory looking at inflation is an interesting thing to our business. Obviously, we price our hotel rooms every day. So we you know we're in a great position there most of our food and beverage is also a dynamic in some respect I think we as a company have done a great job with energy.
We've already bought energy through the end of 'twenty three.
And most of our employees about 60% of them are in some form of a union contract and the biggest lift on that comes next year in 'twenty three with the culinary we've got about 35000 employees in some way shape or form in some kind of a review cycle.
So we feel good generally where we are I would make this broad comment.
We just came through Hell and back with Covid, we've learned how to manage this company at scale at a premium, meaning where premium operators with high end product.
Our margins are still stretching you know high thirties into the forties some of our significant properties even higher.
Obviously, we're not naive to what may or may not happen, but I feel good about the operating model. We've put in place I feel good about the levers that we have in the handle we have on costs.
And so John I'm, not going to talk about some specifics of what might happen, but its.
My General view yeah.
Joe we've done certainly forensics on.
On prior recessions and the the impact of changing customer behavior and pricing on our operating model tried to adjust it for things like the very dramatic.
Different supply environment that we have now are better than what was experienced back and say.
Oh seminar wait and Ah.
And it really depends upon where any reduction in demand would come whether it be from visitation or pricing or both I I certainly believe having seen this now just in my relatively brief time with the company. Our company twice has done has dealt with pretty.
Material reductions in demand last August September and then of course back in January the operating model really works here and the company has playbooks and and I'm confident that we will be able to adjust as much as possible to that kind of reduction.
Reduction and maintain our margins.
Margins, perhaps not where they are now, but but above where they've been in the past under such circumstances and I think that there other thing that I add is we still have a number of initiatives in flight that.
That would help us greatly in such a situation and those would include of course the cost work that we've done over the past couple of years.
And also the MGM rewards program, which is designed in part to stimulate.
Increased visitation from our regional properties in Las Vegas visitation that I don't think we get our fair share up now and also cross property visitation, while our customers are within Las Vegas. These are huge opportunities and I think what would be a bit of a buffer for us in that kind of environment.
And I think maybe one last comment Joe to think about our regionals.
In many cases market, leading large scale ultimately really resorts theyre not smaller properties that do 15 to 20 million there large scale places and hopefully do a couple of hundred million dollars. So.
Our regional portfolio, even sets up a little different you know two thirds of our database. The average household income was over 110000. So its something we havent you know we have an up market opportunity in the context of where our customer base are and therefore, who may or may not be impacted and how severely by a significant downturn.
Great. Thank you.
And the next question is from Carlo Santarelli from Deutsche Bank. Please go ahead.
Hey, guys, thanks, and good afternoon.
I know getting into property level stuff and you certainly gave some same store metrics that were certainly helpful. But I wanted to ask around Cosmo I believe.
I sat in the release at the time of acquisition. It was LTM run rating a little over 415 or so.
I was wondering as you've kind of got wiped out.
It's only been a couple of box that had some time to integrate.
Is there anything along the lines of synergies thank.
Think exists there that might be tangible enough to call out.
Well there are certainly synergies.
In this transaction there relate to the things you might expect the combination of of some facilities at the cosmopolitan needed to maintain and pay for.
Associated with their relatively small footprint things like warehouse space corporate offices and the rest.
I'm proud to say that on the day after we close the transaction we had their employees.
The Costar is able to park in the Bellagio garage and therefore not have to take bus transportation from a remote spot.
But the synergies I think we will realize over the next couple of years I would note that the you can probably do this math yourself, but I'll save you a step on the same store sales are or.
Our same and same store EBITDAR calculation there in the six weeks that we owned a cosmopolitan niblack Vegas during the second quarter. It generated kind of just a just a little bit under $660 million of EBITDAR. So this business is rocking and rolling right now Corey Yeah, and the other thing I would add Carlo that we've identified.
Identified immediately as procurement savings that and they go both ways. They go buys that they were getting through Blackstone and buys that were that we get.
Yeah.
Great. Thank you guys. If I could just one follow up I was wondering if you guys had any color you could add on on the launch in Ontario, and how that's gone maybe at an industry level or at a company level with the experience.
There have been softer.
Soccer season on the sports side, but no perhaps.
Color on the <unk> side.
At Carlisle is bill Lu.
Look at it is softer sports season, as you know, we're exactly where we thought we would be particularly with our I gaming business. Obviously as you know it was a great market that has not been regulated and so there's a couple of dozen competitors were in the single digit high single digit market share and growing.
So you know, it's a real it's clearly a real marketplace. It is used to I gaming and sports betting and so our entry into that has been productive and we're pretty excited about what that ultimately all goes.
Great. Thanks, Bill and thank you everyone.
Okay.
And the next question is from David Katz from Jefferies. Please go ahead.
Afternoon, everyone. Thanks for taking my question.
Could we just spend a moment on Leo Vegas, and just talk through the strategies for that Howard.
You know sort of pitching to the obviously this very busy plate that you have and what success looks like with it.
So again bill.
So David.
Pretty straightforward, we believe ultimately that the digitization of our business and therefore, our ability to take brands through Omnichannel and otherwise it makes something real of it is a real business and obviously.
But mgm's heading to a $2 billion revenue line next year, hopefully profitability by year end and we are interested and want rest of world and so it's a smaller acquisition you know the numbers, we were probably going to be in at just under $600 million hopefully throw off between 40 and 50 of the first year, but.
It's got a expandable platform, it's got a built in team that we'd really like in terms of its management.
So we're looking at M&A, we're looking at gaming studios.
They have dabbled in before live dealer live gaming and so we like the entry.
We recognize it's not as large scale and therefore needle moving as we might want over time, but we thought it was a great place to start and most importantly, we like the platform and the and the players meaning that the team.
And so that's in essence, that's it and.
And we think over time, it's not.
It's in Canada as well so it's an open marketplace, obviously for Beth M. G M. Leland Vegas, and our partners have maintained as well and so we just like the exposure. It gives us a learning curve for us to understand rest of world in it and we think we'll learn a lot from these guys.
Understood and as my follow up for Jonathan I, just wanted to talk about share repurchases, you've obviously done a fair amount of that.
You know of late and just thinking through how share repurchases might be an ongoing or recurring aspect of the strategy and frankly, something that happens quarter in and quarter out and how we might think about that.
Sure David well, we mentioned.
As mentioned in our results today, we purchased $1 $1 billion of.
Shares in the second quarter, that's the that's our highest investments since this program restarted a little over a year ago at the should surprise nobody at the most attractive price just.
30, 34 and change I should note that we since the end of the quarter, we repurchased another $5 3 million shares at a price just above $29. So we did continue the program.
Into the third quarter.
You know my my soliloquy at the end around the around the.
Amidst the value of the shares is certainly one of the reasons. We've been so aggressive here and why we will continue to repurchase shares, but it's also true that.
This was a part of this strategy our asset light strategy to return this capital to our shareholders and fine tuned the leverage of the business and at $4 billion in the past 15 months.
I think more of that strategy is behind US then is still in front of us we.
We do have just under $1 billion remaining on our share repurchase authorization and we'll be opportunistic keeping in mind some of the other capital.
Requirements, we have coming up that we're excited about things like Leo Vegas, New York and so on.
Understood. Thank you.
And the next question is from Shaun Kelley from Bank of America. Please go ahead.
Hi, good afternoon, everyone.
Q2 questions both related to Las Vegas. So the first would be just wondering in the second quarter. We obviously all saw a bit of a return of both group.
Convention and some of that you know some some really large scale events business can you just give us a sense of maybe relative to your normal or stabilized mix how much group made up in the second quarter just to get a sense of maybe what any more at in the recovery. There and then the second part would just be can you just talk a little bit about the health of Las Vegas gaming customer.
Specifically, maybe some areas about rated versus unrated play those types of metrics just to give us a sense of how that's trending as we get kind of further and further into the recovery.
Hey, Shaun it's Corey in Q2, we were about 93% of 2019 room nights in the convention segment, and we actually had our highest catering and banquet numbers since the fourth quarter of 2019, so pretty positive environment. There. We did have one large group that <unk>.
Cancel that's been the only group that has not come back where we're happy to say, we're seeing most of our big groups come back.
Considerably with regards to the gaming customer the business is strong in all age groups across all segments.
Especially in Las Vegas, even our lower end is strong there are in our unrated.
Unrated continues to outpace where we were in 2019, it's flattened out since 2021, but all indications are very strong trends.
And Sean we had said in.
22, we'd be at about 90% pace to 19 with the exception of this cancellation, we're right on that point.
And so that's been the return of what we expected and we've seen it I think next week, we have Cisco in town with 27000 people. So tech is back large scale is back.
So that continues to look real positive into the next year, particularly given as I mentioned earlier the city wides are going to cycle through.
Thank you very much.
The next question is from Dan Palazzo with Wells Fargo. Please go ahead.
Hey, good afternoon, everyone and thank you for taking my questions.
So I wanted to hit on capital allocation and in your general area.
You know you guys have talked about becoming more global and the importance of diversifying our revenues and cash flows I mean, how do you how do you prioritize that in terms of or what what that the pecking order for diversification is it is it.
Europe or international or in Asia or is it just really the media.
These old versus brick and mortar.
But I think it's actually both I mean, obviously, we have a keen interest we're going to invest several billion dollars in Japan, if we're given the opportunity and so that'll be another cornerstone for us in Asia between that in Macau, we feel pretty comfortable what's going on there and obviously, we'll watch like everybody what happens in Tyler.
Land or anyplace else for that matter, but but we like where we are and Furthermore, wed love to be in Japan at scale.
And then for US obviously domestically, particularly if you think about Las Vegas and some other places there's only so many places we can go and continue to grow and so that's why digital among many reasons is so attractive to us and so we're going to continue to lean into that.
Obviously, continuing to invest in bet MGM, while painful is gonna be productive we sincerely believe that now two and a half years into this journey.
It's hitting its marks it's doing what it said it was going to do a time to tell them that business how quickly it goes profitable, but at the end of the day. If I said, we're gonna invest $1 billion in our business and ultimately reap hundreds of millions and by the way. The Bill cycle is three years, you'd I'll say, let's go and so we're excited by that and we remain so.
And we'll watch for other opportunities in digital either through our legal Vegas vehicle or anything else potentially comes up that could be meaningful for either strategic or basically broader economic reasons.
Got any other point.
Got it.
Well the only other point that I would add is that we have these.
We think two embedded.
Growth vehicles within our business right now one is the ultimate recovery of Macau and the second is bet MGM as Bill mentioned.
And those do not require much more capital at least as compared to the company's financial resources.
At the same time, we've been applying capital to reduce our capital base for the benefit of our shareholders and I think that will provide.
Real leverage as we as we expect to see those two businesses provide earnings growth for the company.
Got it.
And just don't bet MGM I think you guys said that you know we're still on pace for the $450 million total investment, which you know your or 50% of as you're pacing through I think you have $160 million or so through the first half of the year, how should we think about the back half of the year on the cadence.
Yeah, the third quarter cadence goes way down given the seasonality.
And then we get back into football, which is productive so the back half of the year, we're going to still hit the target number of about two to two and a quarter invested on Mgm's behalf. We are we are pacing as we thought we would I gaming has been a little better which is accretive to our sports betting not as much and you've probably seen this or heard about this we are.
Turning to pull down some of our marketing spend while share continues to be important, particularly in new markets.
We're getting smarter and smarter and smarter about how we do this and so we feel comfortable as we think about 'twenty three and beyond our ability to make money in this business is within our grasp.
Got it thank you so much.
The next question is from Chad Beynon with Macquarie. Please go ahead.
Hi, Good afternoon. Thanks for taking my question in terms of the Macau Gaming AR Draft. Bill that was released how are you guys thinking about broadly thinking about what's expected from a rebidding process, whether it's time commitments or capital.
When we see this at the back half of the year.
I'll kick this off and then we have you been on the phone who maybe can add some color. Obviously, we just got last week.
The final request for RFP R. I. The process has started we have until September 14th to make our submission.
You know it's been obviously, a tough couple of years time to tell who ultimately shows up for submissions, but I'm pretty confident the original six licensees will be there.
You know 10 year window presents some challenges when you think about we're still in the midst of Covid and so the idea of a significant investment would have to be something we'd really understand it and study.
Theres a lot of things that the government wants around social programming.
Employment job opportunities and other things that we're going to dig heavily into there.
There are a lot of things around programming and existing square footage that we already own as we delever Roddick junkets and into really more mass gaming.
Around experiences around culture around event activity and ultimately this is a big push on which kind of plays to our daily work in sports.
And so sports entertainment is a big big push they'd love to see more of that activity case in that market and so I think we are ideally positioned to be able to do that as well you, but don't know if you want to add any more color.
Thank you Bill.
Thank you Chad.
<unk> for the question I think that.
In terms of timing.
Jaime Ware.
Lastly, walking on the tender package.
We'll submit of course before the body September 14th that long.
In terms of our commitment of the government focus on overseas.
Market.
All of this is I think what Jim has a lot of stress with its global.
Tradition that works, so well be able to focus on that.
A lot of requirements as Bill mentioned on the non gaming side as well so all of that leverage our traditional strengths in arts and culture and together.
Together with the show that way.
Currently underway two to produce to leverage these strengths to fall for the marketing diversification, but the government is asking for.
Thank you very much appreciate it.
And then separate follow up just in terms of Capex Slide nine you noted the U S 750 to 800 million for this year can you just kind of remind us are there other I guess medium size maintenance projects, particularly in Vegas that could be on the come in the next couple of years.
Or how should we think about kind of a go forward maintenance just trying to square a you know what.
Free cash flow could be going forward. Thanks.
No the the largest components of our Capex.
Chat, our room renovations and our technology investments through.
Through the first six months of the year, we've invested about $250 million in Capex. So we're we're behind pace, but I'm confident we'll be pretty close to the number that we've outlined for this year and those will continue going into 'twenty, three and 'twenty four.
And so you know probably a reasonable number for maintenance capex is going to be kind of in the.
Five or 6% of <unk>.
Of of net revenue and net.
We of course have a lot of flexibility on timing of those investments if we need to but we've set forward a multi year schedule of room renovations that we think are important in order to maintain and grow grow revenues and I'll just point out what we have going on right. Now is our room renovation has just begun at New York New York.
And a large segment.
Segment at the MGM Grand.
And then and then down in Biloxi, a room renovation at the Bora barrage of business, which.
Under the leadership of Brandenburg Darko and his team is just having a phenomenal year so far.
Thank you very much I appreciate it.
Yeah.
And the next question is from John Decree from C. B R. E Securities. Please go ahead.
Hi, everyone. Thank you for taking my question.
Maybe one bill or Jonathan on the labor market and in your hiring needs.
How do you feel it staffing right now as it is still difficult to get labor kind of where.
Where you need to be and then perhaps in the context of.
Bill some of the events that you've outlined as international comes back convention ramps. The Big City Wides will you need to kind of continue staffing kick to get ready for those busy peak periods.
Uh huh.
Good question. Thank you John So look at the.
I guess, if there's such a thing as good news when I tell you. This number we're under 4000 open jobs and remember in any given usual time, and I'm, saying, making usual 18, 19 et cetera. We've always had between 12 and 1500, it's just hard to keep the cycle going at the scale that we need.
And so we're in a we're in a better shape.
We still have some key areas like most people in hospitality round.
Around housekeeping security cooks.
That we struggle with in terms of getting people back to work.
And so that continues and it's seaboard here and even into our regions for sure and some of the offshoot markets like Atlantic City and in the bow in Mississippi, Obviously tunica, it's been a challenge, but soon won't be our challenge.
And so I still feel our ability to flex up we flex up into but you think about our portfolio into the block heels in the areas of the world with employees.
And so I'm not overly concerned things like F. One will be a significant undertaking for growing the community, but the company. We're trying to get our head we assembled teams around all of that in terms of the opportunity, which is amazing I think what is going to be ultimately for retail business of note and potentially gaming business.
But generally speaking we're in decent shape.
We are not running around with their hair on fire, if you will anymore.
But theres still some.
Using state of the economy. There is 1.5 million jobs available in this industry of the 11 million jobs still opened in America, and we represent that I think fairly squarely.
But we are getting by and pretty.
Excited by the folks that are coming back on board.
And you know I think we are in decent shape.
That's great Bill, Thanks, and maybe the follow up to that.
With that in context.
Like you said F. One obviously, a big opportunity a lot of the big events Big revenue opportunities in Vegas.
How would you kind of think about or how should we think about the margin profile at some of those big revenue events come back, but but probably some costs as well as you as you hire would you kind of expect margin stability absent any kind of pull back and in leisure consumer spending which is hard to predict at this point, but how would you think about.
Kind of the cadence of business still ramps in Vegas on the revenue side as well.
Look at it call you'll have a view on this but I will tell you as it relates to something like F. One the retail potential on the upside of that are substantive like we're talking roommates three X. What we are normally and potentially then some there are packages that sell for that even at a $100000 retail.
And so you know the scale and scope we have access to.
Our ticket by alone will be about $20 million to $25 million.
And we have access to those tickets and then that the ability to charges, we want and package as we want.
And so I don't think that one will be a margin hurt and in fact I think.
I'm pretty excited by that one I got to tell you.
Some of the other activity.
I would add John is our our margins probably you already seen the impact because of the way we have to record T mobile in the Grand Garden. So now we're going to benefit from these outside advancing including you know what will happen at the spear if they bring you to and in others. It will just bring more people into the city and I think we saw that.
With the Legion with the NFL games, which will be in the fourth quarter and the events that they've had so I don't think these upcoming I think these upcoming events will allow us to bring premium customers and in actually maintain or increase our margins.
Understood. That's really helpful. Everyone. Thank you so much and congratulations on another good quarter.
Thank you.
The next question is from Robin Farley from UBS. Please go ahead.
Great. Thanks for taking the question.
Was curious regarding your JV partner in pain, but you had made an offer now.
Now I guess over 12 months ago, and since then obviously and <unk> stock prices down quite a bit and they've lowered guidance and now your offer.
They offer you'd made last year is a significant premium to where that stack is now I'm just curious whether.
How much does it make you revisit because I would think all the benefits of.
Owning 100% of bet MGM are still the same as they were a year ago. So I'm just curious how you're thinking about that.
Robyn we think about it all the time of course, it would be foolish to think otherwise.
And.
You can't buy what's not for sale.
We remain keenly focused on bet MGM, we'd like more of it we have a great partnership with them that business is working well because of what we ultimately I'll provide our IP our database their technology.
And so.
Uh huh.
There are other ways to skin, a cat and potentially we may have to seek those entities what it is.
But obviously, we continue to follow the math and we understand it intimately.
But for now we have no story there.
Okay, Alright, and then just as a follow up kind of unrelated I know you've talked about the strength and in Vegas that you're seeing and the forward outlook.
Curious on the regional front, you know others have talked about a regional kind of slowing and having tough comps I'm curious your view for the retail outlook. Thanks.
Yes, Robin this is Cory I I think we have two different sets of our regional properties. Unlike our competitors I think when we think about National Harbor Beau revised Borgata.
You get a lot of tourists a lot of.
F T type customers and those properties were seeing the same strength, we're seeing in Las Vegas, as we get into our more traditional drive end markets.
The higher end customers are continuing to come in and play in at the levels. They were probably seeing a little softness at the bottom end of that range and a little bit in the unrated, especially at properties like Empire Alright, great. Thank you.
Yeah.
And the next question will be from Barry Jonas from Truest Securities. Please go ahead.
Oh great.
As we look through your different strip properties in Q2, and now are there any major differences in performance as you sort of moved from the higher end to the lower end.
Well I think it ties to the broader market look anything tied to luxury and high end retail and you can obviously you put into that case bellagio ARIA now the cosmopolitan parts of MTM in parts of mentally are doing amazingly well room rate activity remains in the high teen ADR percentages.
Above all things ever.
Our food and beverage in our costing and our pricing excuse me is extremely strong.
And so.
It ties to just about everything else you've heard about the broader economy, we're able to leverage up on higher end retail products.
And it's done well for us.
And the high end gaming piece in those in those properties, we are seeing that incremental place. So you'll see those properties outperformed the legacy properties.
Got it got it and then just just wanted to ask about gaming.
Just curious if you have any expectations around future state legalization and you think anything that maybe its possible in the next year or two.
Yes, I think there are a couple of states I think the reality is theres not a dozen right now I think there are a couple of states that were clearly targeting we think they have everything bought I gaming in them and they obviously make an interesting subject and interesting discussion with regulatory and government officials and ultimately regulators.
There's a couple though that we have benchmarked for next year, and we think we can break into and continue to grow that because it is the key to the bottom line of that business as you know.
And so we're excited to continue to do that it's going to take some time, though it depending on how deep this recession may or may not be when states need money, sometimes they turn to this vehicle. So we'll see.
Got it alright, thank you and congrats on a great quarter. Thank.
Thank you Barry.
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, just a couple of key thoughts as you think about our call today and again congrats to our entire team I couldnt be happier with where we are and what we've accomplished.
It has been done and frankly, obviously much more to go.
There has been I think a shift there's isn't satiable attitude and appetite for travel experience experience based economy and the millennial stepping into it and I think we've seen it in all of our properties, particularly here in Las Vegas, when you think about the cosmopolitan and others.
I think we're in a great place I think we're ideally suited to take advantage of it you think about travel experiences and how things are reported out we feel ideally situated to do that.
We think we've proven our working model and our operating model has worked I should say, whether we lever up to the success. We've had in the last two quarters or frankly, whether we need to weather the storm coming up we think we're in great shape to do that and so we think we've learned a great deal as we think about the future frankly to go either way.
We're not naive to what the economy may or may not do and so we have constant pressure on ourselves around employment around labor around all things expense related.
We remain keenly focused on that we've all lived through this before and don't want to see some of the mistakes we made in the past replicate it and so we're on that but.
But generally speaking if you think about where the company is today our balance sheet of note the opportunities in front of us to go more to go more into Asia potentially to go more into digital potentially buyback and take back some more shares for our stakeholders.
I think we're in an amazingly great place and I couldnt be more excited for our future. So I appreciate everyone's time today and support generally.
We hope to look to continue to do the same kinds of things. So thank you.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Okay.
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