Q1 2023 MGM Resorts International Earnings Call
[music].
Good afternoon, and welcome to the MGM Resorts International first quarter 2023 earnings Conference call.
Andrew Chapman director of Investor Relations.
Since our analyst normally 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 <unk> International first quarter 2023 earnings call.
This call is being broadcast live on the Internet at investors that MGM resorts Dot Com. We have 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 under Federal Securities laws.
Actual results may differ materially from those contemplated in these statements.
Information concerning factors that could cause actual results to differ from the forward looking statements.
Except as required by law, we undertake no obligation to update these statements as a result of new information or otherwise.
During the call. We will also discuss non-GAAP financial measures in talking about our performance you can find the reconciliation to GAAP financial 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 and thank you Andrew and good afternoon, and thank all of you for joining us today.
Like to start by highlighting the recent news with the Japanese Central government officially certified.
Plant in Osaka.
Which is a recognition of our perseverance and the great partnership that we have forged after more than a dozen years.
It's one of the final steps of paves the way for us to begin our development process in Osaka to create what we would likely be the first integrated resort in Japan I'd like to thank the government of Japan.
Do you have a soccer, our local partner Oryx, and Ed powers and development team and the many MGM employees, who helped make this a reality.
It's truly an honor and we look forward to getting started on this major development to increase our global reach and fulfill our strategy to increase our geographic diversification.
Turning to results MGM resorts posted just an outstanding quarter of financial performance to start 2023, driven by another record Las Vegas quarter and significant recovery at our MGM China.
GM, China is experiencing a rapid recovery following the lift of public health policy restrictions, our first quarter outperformance in Macau is a direct result of a meticulous preparation and well executed plan put together by our team at MGM, China, who ensured that we are ready to capture market share and drive results upon reopening a point.
Two a few kpis to reflect our impressive start to the year in Macau in the first quarter, our MGM, China properties generated adjusted property EBITDAR of $169 million or 88% of our first quarter 2019 adjusted property EBITDAR.
In place key structural advantages, including one.
Refurbishments on the casino floors.
We also enhanced our property in Remodels in the casino floor is it both MGM Macau and MGM Cotai, so focus on mass and premium mass along with adding 57 high end villas suites at our Cotai property.
In addition, we also have the advantage of our global sales International branch marketing network. We are actively leveraging our customer database to bring global customers to our properties. While we recognized an additional hotel supply will enter the market. These drivers along with a deep customer understanding from our property leadership I believe will allow MGM, China to maintain a share.
We're in the teens I'd also like to thank the Macau SAR government for their partnership and we look forward to working alongside them as we support a couch positioning as a world center for tourism and leisure.
Moving state side, we have once again achieved exceptional results in Las Vegas with a record breaking first quarter. This marks our seventh consecutive quarter of record EBITDAR and we all we owe it all to the hard work and dedication of our thousands of employees. This quarter strip performance was fueled by a fantastic Kal calendar.
Sports events, including for the first time hosting suite 16, and March Madness, and other entertainment and convention events at our properties and throughout the city the.
The quality and consisting of entertainment and sports programming and MGM resorts and throughout Las Vegas, It's been a catalyst for the permanent transformation and strengthen demand of our offerings. This is no better example than formula one, which as you know will come to Las Vegas for the first time November . Additionally.
Additionally, we are laser focused on continuing to invest in our properties with a handful of our capital and projects on the strip.
At the large hill, we are completing a three year remodel of all rooms, and suites, where theyre spot tower. This is in addition to enhancing our high end gaming offering with a newly remodeled club survey for high end table games customers and our Farquhar allowance just reopened after a full renovation we have begun construction of a pedestrian beds to connect the cosmopolitan loss.
Vegas with the larger window Dara, we are undergoing a full upgrade of our Mandalay Bay Convention center, along with numerous restaurants bars entertainment outlets and significant room Remodels at New York, New York, MGM and the water club at Borgata by the way will soon carry the MGM flag alongside Borgata as brands. These ines.
Yes, it will be drivers of our customer loyalty and spend and ultimately future free cash flow.
Onto our regional portfolio showed consistent year over year topline growth with stable profitability.
Like to specifically recognize the bow revised Jim and congratulate them for executing well on the beautiful room remodel, which is completed in 2022 and is seeing a very strong customer response.
Turning now to bet MGM and the first quarter, we expanded our footprint by launching in Ohio, and Massachusetts, bringing our total active markets 26 based on results, thus far but MGM remains on track to hit fiscal 'twenty three revenue guidance of one $8 billion to $2 billion.
James is also continuing to make progress towards profitability later this year, all while continuing to expand and improve its product offering with our joint venture partner and chain.
As you look at this business, we are encouraged by the improving economics that will translate into long term profitability as a reminder, as states mature and we focus on growing our MGR optimizing retention bonuses and focusing on the most profitable players overall CPA shall decrease and the conversion from GTR to NCI will increase ultimately drive.
<unk> profitability.
Internationally, we announced today. This is the first major investment by our subsidiary Lille Vegas with Leo Vegas.
<unk> to acquire the majority of a game developer push gaming pushes the proprietary content provider that will allow Leo Vegas to grow its library of games as they extend their digital gaming presence to new markets Bush offer several industry, leading games to over 200 operators globally.
On the development front, we are working through the RFA process in New York, We plan to submit our official application in the summer and hope to receive a response by the first half of next year. We continue to expect total spend in New York to be approximately two van inclusions of licensed inclusive of the licensing fee and should we went a license in New York Our plan is for extensive.
Property improvements such as our new 5000 seat theater, new food and beverage outlets covered parking and an increased overall to the casino floor space, we will share more specifics as part of our submission process continues now back to Japan as we progress we see great opportunity Osaka has approximately 30 million people.
All within a three hour transit time of our site in your machine. Our site is soccer is also expected to drive international tourism in Japan, given its proximity to other major other major Asian countries and I will remind all of the stock is closer to many northern Chinese cities than any other gaming market.
Considering that we will likely be our integrated resource offerings for the first integrate Richard offerings for some time in Japan. We believe this project will generate a minimum to high.
James free cash flow yield.
Putting it altogether MGM resorts offer steady earnings power through our existing operations and World class brands, plus significant growth opportunity through our digital business the recovery in Macau and our development opportunities.
Balance sheet, both impressive stress with $4 5 billion of cash excluding MGM, China as shown in the presentation now to Jonathan for more detail on the quarter.
Thanks, Bill and I too want to congratulate our employees for delivering another record quarter of financial results I'd also like to recognize and thank our teams in both Japan and Macau for their outstanding wins this quarter.
Digging into the numbers, our consolidated businesses generated revenues of $3 9 billion this quarter up 36% from last year and adjusted EBITDAR of $1 1 billion.
And even more impressive story was our free cash flow during the quarter net cash from operating activities was 704 million less capital expenditures free cash flow was $564 million. It's important to note that $184 million in cash flow from operating activities and six.
Of Capex related to MGM, China in the quarter. This was a particularly strong quarter in free cash flow due not only to our operating results, but also timing of taxes interest payments and ramping of Capex.
Our operating results certainly benefited from a recovery at MGM, China as Macao reopened and our team executed on their reopening plan gross gaming revenue or win at MGM, China ramp to 78% of 2019 in the first quarter were $663 million compared to less than 50% market.
This increase was driven by our main floor, GTR, which exceeded 2019 levels in the first quarter.
Adjusted property EBITDAR was 169 million, 88% of 2019 first quarter levels and margin was 27% compared to 26% in 2019.
Here in Las Vegas margins of 38% remained in line with our performance the last several quarters on a year over year basis basis, our revenues grew $513 million and our adjusted property EBITDAR grew 242 million representing.
Representing a flow through of 47% these.
These results are a testament to the market leadership of our properties, our pricing strategy and expense controls.
First quarter occupancy was 92% and ADR was $258 an increase of 31% year over year looking forward, our pace, which reflects on the books rooms is up year over year for every month from now until November .
Each segment versus a year ago.
In the regionals first quarter same store revenues that excludes goldstrike grew 10% with adjusted property EBITDAR up 6% year over year.
Bet MGM generated net gaming revenues from operations of $476 million in the first quarter, representing a 76% increase over 2022 that mgm's market share was 28% <unk> gaming and when blended with online sports betting has 17% market share in the U S across states in which it operates.
Our 50% share of that MGM operating losses was $82 million, which represents our highest expected loss of the year as the first quarter is a heavy acquisition period with Super Bowl and March Madness, plus launches in two states.
The cohort level the data is showing robust player economics, and a successful bonus optimization strategy.
Same store MGR from online sports increased 100% in the first quarter and bet MGM remains on course to profitability later in 2023 before turning it back to Bill I'll conclude as usual with a few observations on our free cash flow and our financial algorithm more generally.
We're in an enviable position financially.
Our collection of superior properties in Las Vegas, together with the stable operating performance of our regional portfolio generates ample free cash flow from our domestic operations.
MGM is fully capitalized now growing rapidly and turning towards profitability. Later this year, our Macau enterprise is already operating at near pre pandemic levels. Our balance sheet is strong and highly liquid at the end of the quarter, Excluding China, we had approximately $4 $5 billion of cash as shown in the presentation and <unk>.
More cash than debt, creating a net cash position of $1 3 billion.
All of this allows us to invest for growth delever and repurchase shares steadily reducing our share count.
In the first quarter, we completed the sale of the gold strike Tunica for $450 million in gross proceeds we received $170 million in the early prepayment of a note receivable that was secured by excess land from our circus Circus transaction, we repaid $1 to $5 billion of our 6% notes in April .
We paid $138 million minority investor in National Harbor, as a result of the sale of their economic interests and we agreed to purchase real estate between the Bellagio and the cosmopolitan of Las Vegas to enable connectivity among these properties going forward.
This morning, we announced the acquisition of push gaming augmenting our international digital strategy, the Japan, and New York development opportunities lie before us and we expect them to offer attractive free cash flow yields for our shareholders.
This year through today, we've repurchased repurchased 16 million shares for $654 million, excluding excise tax and that represents 4% of our share count and we will continue to repurchase shares capturing the free cash flow yield and our shares reducing our share count and growing free.
Cash flow per share Bill back to you. Thanks, Jonathan asked a couple of comments and then we'll open it up for questions.
Got to say I'm extremely proud of the entire team.
Arguably one of our best quarters ever if you think about the overall performance Las Vegas Macau. The major development news, we had in Japan, our pursuit of New York.
Things are going exceptionally well there Jonathan just mentioned.
And obviously, it's our intent that MGM is at an inflection point and then we continue to push through Leo Vegas, and growing our digital business on an international scale.
We are obviously now almost a year into our acquisition of cosmopolitan and so we couldnt be happier with the position and leading resorts. We have here in Las Vegas, we have four of the country's top eight regional casinos in terms of performance, which fortifies. The effort that we have here in not only those markets, but sending people back to Las Vegas.
And we have a fortified balance sheet. There's still continues to allow us to buy back shares when we think appropriate and invest in our company's future.
With that operator, we'll open up to any 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 stuff.
If youre using a speakerphone please pick up your handset before pressing the keys to withdraw your question. Please press Star then two.
As a reminder, in all fairness, please limit yourself to one question and one follow up at this time, we will pause momentarily to assemble our roster.
And the first question will be from Joe Greff from Jpmorgan. Please go ahead.
Good afternoon guys.
Jonathan.
Comment in Las Vegas.
In terms of looking ahead and talking about your bookings.
The pace and how it's up year over year every month now through November very interesting comment can you talk about how even that is or how even.
Performance in Las Vegas between the higher end and the lower end between midweek and weekend.
And then I have a follow up.
Sure I will make a couple of comments, Joe and then I'll certainly invite Corey too to add his perspective as well.
The strength in Las Vegas, really has been driven mostly not entirely but mostly by weekend.
That's where the real pricing power has been it's been certainly supported by the events schedule will bill referenced in his remarks.
But we're still seeing during the quarter saw growth or growth in the mid week room rates as well, but the real strength has been from the weekends.
And then going forward.
Any differences in terms of the pacing on the books as is typically driven by the group customers that are on the books.
<unk> are a bit lighter during the summer months than they are say deeper into the fall, but I would say on balance that it's a pretty even outlook. We have in terms of the way the paces building okay.
The agreement.
Great and thank you and then.
Obviously.
A significant recovery in Macau and did see it's been a long time coming.
Obviously, we got good market wide news.
This morning on market wide performance in April can you talk about what you've seen thus far in April and maybe to add.
What we see from an industry wide market performance is I.
I guess more <unk>.
Brian .
Mass recovery can you talk about what youre seeing in terms of the recovery.
Far in the second quarter.
Alright. Thanks.
<unk>.
I think that we look at the daily visitation to Macao.
Has there been steadily on the rise month after month.
So January tolerance thinking what's left.
Inbound.
Daily visits her pumps.
Averaging about 50% in first quarter and April is already at.
75% of 2019 level.
So if you walk around the streets, you can already see the pre COVID-19 hustle and bustle in the atmosphere.
We didnt merged in Macao were resolved and the streets.
So.
We have seen similar pattern.
In terms of Ah tolerate in terms of the <unk> recovery.
Particularly in March and April .
And the leading towards the Golden week.
And we think that the market will continue.
Continue to recover as more and more gaming customers and leisure travelers make their first post pandemic a trip to Macau.
The source of recovery as the concerted efforts by concession years to attract overseas players now.
Obviously.
I think that Amgen has left the market recovery pace.
For example, our daily mass GTR has already exceeded 2019 level as Bill noted.
The trend continues into April .
Elevated level.
We're already in terms of mass, we're already 115% of 2019 mass level.
Thank you maintained do you think you maintained the market share gains from the <unk>, thus far in April .
One final one.
The market number was released yesterday and we would have seen.
<unk> share being stable.
Great and then.
Reflecting on my comments earlier.
It's not lost on US is probably 10000 rooms give or take left to open in Macau and so arguably that will have an impact, but I think the team's ability to drive high end mass and into some VIP has been demonstrated.
We're well over 90% Paulson GTR in EBITDA in April and the first couple of days of Golden week, We've seen just under a quarter of a million people hit the market and we're getting more than our fair share of that but we do recognize theres 10000 rooms to go.
Great and then just one quick one here.
My follow up allotment of one question, if we adjust for normal VIP hold in Macao, what was that property level EBITDA performance.
You bet.
I think it was 169 at the top.
It's one thing.
VIP hold if we adjust that for normal VIP table hold.
It's 14 million Joseph answer perfect. Thanks, guys.
Thank you and the next question will be from Shaun Kelley from Bank of America. Please go ahead.
Hi, good afternoon, everyone.
And congrats on the results and specifically the news out of Japan. So.
If I may I, just wanted to start with.
The Japan project.
Bill like obviously, you've been working on this milestone for a long time can you help us think about.
Remaining milestones and very specifically.
When should investors start to prepare for capital commitments needing to go into the ground and maybe a little discussion about.
Broad level plans are around project financing for it.
Sure I'll leave the last part to Jonathan but let me kick it off so obviously, the our development plan and the certification by the National Government was the big outstanding item to get across the finish line and that has just been accomplished we have a land lease and we have various agreements with the municipality that we have to get done presuming. This next quarter those will get done.
John .
That being said, we're looking to break ground either late this year or first part of next year and it's between four five and $5 million of the 5 million <unk> 5 million five year build.
It is.
Probably going to open first quarter is second quarter of 2030. So we've got some time to go there is obviously a lot of work to be done. It's a man made island in terms of boring.
And so that's the general timing around it on financing Joe Yes, we are.
We and our partners Orix.
We will be putting together.
Bank financing for the project.
That financing that work has already.
Been underway actually for some period of time.
Our equity investments will begin in earnest in late 2024 and into 2025 really through 2027.
At which point, we will be tapping into this financing for the completion of the project.
Great.
Thank you for that and then my follow up just to switch gears, a b and online.
Great color about some of the.
Kpis and how the GTR NTR side as Kelly could you just talk a little bit about the.
Operating.
Los cadence as we move throughout the year.
Can you reiterate the sort of joint contribution of around $150 million commitment for the full year is that still in.
In play or does that need to be tweaked, a little bit as we sit here today.
No sure.
I'm, hoping not look if you think about last year I think about this year, obviously football and investment into it with Super Bowl March Madness, we opened two states.
We came in a little under our own plant and so we don't we don't think we're going to have to put any more caching of substance. We have maybe we have one more cash call recently and I think we're hopefully done and so we look forward to the back half of this year beginning to show. Some EBITDA. So nothing has changed I think the answer to your question.
Just add on.
Under our plan you mean under the investment that we anticipated putting putting into the.
Into the venture and and in terms of the pace.
We do expect as we go through the year that we're going to be turning towards EBITDA profitability and that will reach that during the second second half of the year.
Thank you very much.
The next question.
<unk> is from David Katz from Jefferies. Please go ahead.
Hi afternoon, everyone. Thanks for taking my questions I wanted to just.
You drill a little deeper on better MGM, which obviously is going.
Better than as planned is going very well when we look at the partnership and think about.
The MGM database and its benefits to the bet MGM JV in conjunction with.
Those customers that are coming in through bet MGM.
Both of which have added to the productivity here.
Yes.
I suppose the question, we ponder with a lot of investors is.
The bigger that gets.
How does that arrangement work and sorted itself out et cetera, and I'm not asking.
When are you going to go back and make another offer I'm really just trying to get a layer down. Thank you.
Look David we're very excited by what's been created obviously to think after this amount of time it could have a $2 billion top line business. This year, which is showing off signs of profitability is exciting for us.
Tens of thousands of customers that are driving on an omnichannel basis over 100 million a year back and forth and so that part of the business is starting to click in and starting to work and we have work to do on product.
We need single single wallet single account to be really effective and in places like Maryland Places like New Jersey, Pennsylvania, and New York. So we've got some work to do on the sports product, obviously, we're market, leading and gaming at 28% share and so no. One even comes close to that but we're mindful that people who are trying so we're very focused on it.
So I'm not going to have a precursor where we go with all of this I think we're in great shape. We've got another couple of years to mature this business and see where it ends up and then we'll take it from there.
Fair enough.
If I can just follow on with the.
Question about Macau, and how we think that or we might theorize, how that revenue mix turns out with one of the questions being how much direct VIP.
Our returns.
And ultimately what that mix and what that margin settles in at as we progress through this year any help there would be I appreciate it.
Yes, Barry why don't you handle the first part of that and ill try to clean up.
Alright so.
Well, David I think that the.
VIP components as total it's probably around 15%.
<unk>.
Number of the total number and in terms of margin I think that we'll see a little bit higher margin.
Yes.
Direct premium business.
Probably around 13% to 15% in that neighborhood.
Bill anything to add.
No David.
What capex you were leaning into mass.
I think the way to look at the totality of the business, obviously, the junket operators were not.
To do business with they took a lot of the margin out of the business.
The fact that now we are on our own doing this there is a formula that suggests somewhere under a 100% of former GTR levels, we could drive over 100% EBITDA.
Its arguable, whether that's going to land, 85% or 90% of total topline but.
But we do believe that we think the business is settling in the mid <unk> in terms of a margin business overall.
And so yes.
We do have a unique not unique but we do have a special opportunity only because we've been out at 30% to 40 years in terms of driving and knowing customers and where they live in Malaysia and the rest of Asia. We just had a very significant group convention, Thailand. It was driven by our branch office there and so we think it's net advantage.
And we think ultimately our margins will be better than once they were given the nature of the junket business.
Okay fair enough, thanks, very much a nice quarter.
Thank you thanks.
And our next question is from Stephen Grambling from Morgan Stanley . Please go ahead.
Hey, good afternoon.
Sticking with the digital side you referenced some of the aspirations to continue to expand worldwide. What are the criteria or priorities that youre focused on or what deal breakers are there any potential partnership or transaction as we think global and do you generally expect them to be more bolt on deals or could you even contemplate something more transformational.
Now we've been looking to try to build a fundamentally strong business. So.
With Leo Vegas, we saw a team we liked a lot and frankly the good news is nine months later, we still do we saw technology that lived in the cloud versus <unk>.
Net or something else of that nature.
So a business that could grow and ultimately scale easily.
We had three other pillars, we wanted to get into the content business and its interesting with push they have several of the leading games in.
In the world in the context of thinks that they've created so we're excited by that and ultimately potentially transforming that and those gains from digital to brick and mortar and vice versa. We think there's a long term play there.
We're interested in live dealer Theres nothing that suggests given the nature of our business that we should not be in that business and so I think to Leo Vegas Theres, an opportunity to do that Leo Vegas currently does life dealing now.
Through a third party, but I think we have to place we'd like to get to and ultimately have our own sports betting technology as well for rest of world.
<unk>.
I'll bet MGM aside from that discussion.
Look we've looked at everything I will continue to do so there are some things that it would be substantive out there, but it's too early to tell I am trying to build a business where the team there Gary Frits has been a big part of this obviously he is the front.
And with Gustaf from the team that Leo Vegas, and so we're excited by where we are we've got a ways to go and it's one of these things hopefully two or three years from alpine reflection. When you look back was built something meaningfully.
It makes sense and maybe as a follow up on the digital side in the U S and thinking through the March to positive EBITDA and beyond we saw sandy.
Andrew I think kept profitability about a year ago, and then ramped a bit lumpy thereafter, given the seasonality and mix of sports given your skew towards the high gaming how about the magnitude of that flipped to positive EBITDA and then consistency compare and contrast, maybe some of the peers.
I think you make a good point look the second quarter last year for us showed a little bit of profit. If you may recall, the third quarter like everyone. We bounced into bumped up to football, which is always a big promotional push at the beginning of football.
I don't suspect that will change much obviously are a few players we've all become a lot more disciplined but I think it will be a little lumpy, but I think the bottom line will be going in the second half of the year, we're going to show profitability in totality.
And obviously I gaming for US is a key thing.
Recognizing it's been five stage six states of which three are meaningful for us.
Fair enough. Thanks, so much.
The next question will be from grant <unk> from Barclays. Please go ahead.
Hey, good evening, everybody. Thanks for taking my questions.
Just wanted to follow up on Joe's first question about Las Vegas room rates and understanding that the weekend is driving most of it but I was also curious if you've seen any difference in pricing elasticity between the higher end properties in the lower end properties.
Recently.
The growth for us has really been in the.
And the higher end properties.
We thank all of our properties are higher end, but certainly the luxury properties have seen.
More of the growth price elasticity elasticity is.
It's a tough concept to apply here since the.
The properties like.
<unk> Cosmopolitan R R.
Or have different customer segments in some ways from the one sei at Mandalay Bay, or Luxor, Excalibur and so we are attempting to.
To drive price wherever we can and at each of these properties, but I would say as a general matter the weekends or where we have greater pricing power and the intellectual properties.
Okay.
Really helpful. And then one follow up on Las Vegas, If you Jonathan might care to comment on.
The seasonality for Las Vegas. This year, if you think it would be different than pre COVID-19 years anything you'd call out out there.
I Wouldnt say there is any difference in seasonality if anything just the strength of the event calendar and just the increased sophistication with which we're marketing to all of our segments, if anything might reduce the seasonality that we face we've.
We've already on previous calls <unk> called out the differences in 2023 against last year with the first quarter and the fourth quarter for different reasons, probably being a bit stronger year over year, but that's really not seasonality as much as just the mediocris syncretic issues during this year and last.
In the fourth quarter, we will see obviously formula one.
Perceivable future yet.
Time to tell how meaningful it ultimately is there's estimates that will bring a billion dollars to the valley, which obviously will take more than our fair share of hopefully.
And then if you go back to 19, the Raiders had just gotten going and if it didn't start till 2020 in the middle of Covid. So that programming is consistent and extremely strong in the fourth quarter ought to look better than the average 2019, but.
Time to tell ultimately where formula one what it brings us.
Great. Thanks, so much thanks Brent.
The next question is from Dan Pulitzer from Wells Fargo. Please go ahead.
Hey, good afternoon, everyone. Thanks for taking my questions.
First on Macau.
Yeah, and would you say that the margins should trend over time I think last time, you guys talked about high Twenty's as an exit rate for this year, but it seems like we're tracking above that.
I know there was some benefit of hold in the quarter, but would you say youre fully ramped in terms of where you need to be and there should be a lot of leverage as we go forward or are there additional head count that you'd look to add.
Youre very much ticket.
Yes, I think it is our goal remains the same our module should be in the high <unk>, but there are a few things.
They bought that further recovery of the mass.
Driven market and.
Also the continuous deployment of incremental tables on the pumps and the basketball. So these will help to generate high margin mass mass goodness.
Some of the labor savings strong Colgate tier and it will be permanent.
At the management level.
And we're also looking at some innovative games two for the <unk>.
<unk>.
<unk> place. So these are the things that will be helpful.
But on the flip side I think that would do to know that the gaming tax increase 1% under the new contract you look concession contract and I think some of the labor savings.
Will it be will be rectified through recruitment for under staffed situation. So in the second half of this year I think that the labor possible increase because we have to fill some vacancies to address service issues.
So, but overall I do believe that we will be able to maintain our margin.
<unk>.
Got it and then didn't just turning to New York I think you mentioned about 2 billion of Capex. There I know timing is kind of.
Kind of a moving target here, but as you think about the cash that will come out and maybe the options to finance. This through <unk> is there any flexibility there where you might be able to pull forward. Some type of sale leaseback or is it you have to build it and then go forward to get an agreement in place.
Yes, I think there is some flexibility not to speak for for BP of course, but they are but they are fantastic partners.
Of ours and.
And as we plan for that project and think about the ways in which we will finance it in the best way to allocate our capital.
Doing.
A sale leaseback with Fiji.
At some point certainly could make a lot of sense for us and that's part of our planning.
Got it thanks.
Okay.
The next question is from.
Chad Beynon.
Please go ahead.
Good afternoon, Thanks for taking my question on.
On slide seven and eight in the deck you pointed out really strong.
Slot handle and table drop it looks like in the regional market and in Vegas.
Is there anything to talk about just in terms of additional detail within the segments strength at the high end does that kind of continued as we've expected for the past couple of quarters any weakening at the low end or anything else to call out to kind of help frame out where the consumers within your database.
Yes, hi.
Corey.
We're seeing some really strong.
Strengthen our database, especially in our gold plus customers. Those are ones that are may not be hosted.
But are around 400, plus and those numbers are pretty significantly we see not only their trips continuing to increase but also their play continue to increase it.
And in most areas of our database, we're seeing increases in both trips and then spend the one area, where we may be seen a little bit less as the younger customer, they're probably a little bit more impacted than anything we've seen but nothing materially.
And then Chad maybe one final point and I'll be answer to see how this manifests itself over the next three to six months with China reopening up the one segment, we still Miss is the high end Asia Slash Chinese Gamer.
And so time to tell we've gotten about 80% of our visitation back from international play, but those players made up like 50% of the play.
Particularly when you think about something like baccarat, and so I see it as an opportunity I don't know how it manifests itself yet given policy given capital restraints, but where we do see it as something we're going to focus on trying to drive the final thing I would add Chad around segmentation as we've now seen it for a sufficient number of quarters to say that it is a nice trend which is <unk>.
The return of our 65 plus.
Players here in Las Vegas.
More importantly in the regions.
Their trips just steadily increasing each quarter for the past three or four quarters.
65, plus.
Okay. Thank you all and then.
Given the conclusion of the U K, a white paper a market that youll be in soon it.
It seems like a win for both the operators and responsible gaming in general does anything change positively or negatively in terms of timing or just your expectations. Your excitement about that market in other global markets as you look to grow this digitally.
Yes, sure. Let me look we're excited that that's finally out.
I don't think there was any harm and it's a matter of fact to the contrary I think it was a good piece a good piece of that legislation, yet, but a good piece of overview.
It set up standards, obviously for protecting folks at the same time it enabled and let VIP continue and so there are some promotional opportunities at one point. If you remember there was a consideration that you would have to stop all of that activity.
I think with Leo Vegas potentially the opportunity presents itself. We're now excited to go look at that market is a real market to push into and push on.
And so I think in our bottom line. It was done responsibly. It was modified I think to a point of it does what it needs to accomplish but still enables our businesses and others like it to continue to go forward progressively.
Yeah.
Thank you very much.
And the next question is from Robin Farley from UBS. Please go ahead.
Great. Thanks, I just wanted to ask about Japan, you laid out a timeline, which is really helpful. I'm just wondering at what point does it become.
Your your committed in terms of the capital investment there.
I know you mentioned potentially breaking ground later this year, but I assume somewhere in between now and then it becomes sort of.
Where.
It's a well commitment I'm just wondering in that timeframe, yes, Robyn look I think at this point we are fairly committed there is the idea of going in reverse would be something hard to contemplate we have decided to land lease and I think given the nature of that lease and given the other documents you have signed with the government city of Osaka are there definitive in nature.
And therefore were paying out cash.
And so.
Within the next three months, it's just hard it's ever going to get and.
So we're going to go forward with some excitement from that.
Okay, great. Thank you and just for my follow up question on <unk>.
Vegas in your slides you break out the.
Same store Vegas casino revenue down and I think it's the third consecutive quarter and I'm. Just wondering if this is obviously hasnt hurt your profitability of course is here.
The revenue comes back so strongly but I'm I'm curious when you look at that trend with the same store gaming revenue is this just kind of do you think like a resetting of it or was this sort of COVID-19 driven.
Covid driven.
Strength, and then it kind of resets and it'll grow again from there or I guess, so in other words, maybe theres another quarter, where that declines and then we've kind of anniversaried that COVID-19 bump and then it goes back to growth or just how should we think about that thanks.
The way to think about that is that the.
The gross gaming revenue, we have netted against that refer rated players the customer complementary.
We provide to them and those are generally priced at retail and the large largest portion of that our rooms, but theres, certainly food and beverage as well.
And the price of doses increase dramatically our ADR year over year grew 31%. So the the cost which is then assessed to that and therefore reflected in and the casino revenues goes up and so.
Hi.
The demand for gaming.
And our business has never been higher across segments.
The cost of the rooms that we provide to these.
Guests to earn those complementary has gone up so that the profit associated with it.
The revenue and profit at the margin is being monetized in our hotel and food and beverage operations.
Not as much in gaming.
So the trick of it is at the margin is that we're making the right decisions about about which customers and segments to have on property weekday and weekend to maximize profitability for the company, but I would not interpret that as any reduction of demand.
On the gaming side.
Okay, great. Thanks for the color.
Thanks.
And the next question is from John Decree from CB Art. Please go ahead.
Hi, everyone. Thank you for taking my questions.
Maybe one, particularly in the regional U S markets on the non gaming spend that has been coming back really strong last couple of quarters obviously.
A longer tail to that recovery, but.
Curious if you could give us some insights into the consumer and that non gaming spend how much is driven by price. Jonathan I think you mentioned in your last response that the cost of obviously F&B and those types of things has gone up but.
Is it new customers coming back that you haven't seen in a while our customers just opting to spend more on F&B is it timing with the opening of additional restaurants or additional hours in our regional markets.
How would you characterize the recovery in the non gaming spend it's been so strong.
Yes, John This is Corey I think last year in the first quarter, especially in our bigger boxes and the regionals, we were constrained on hotel rooms in this quarter, we had full accessibility both in Borgata and as Bill mentioned that brand new bowler advisor and so we're seeing huge demand in a bowl revise rooms from.
<unk>.
Our current customers and new customers, but it's also driving a significant amount of hotel revenue and food and beverage revenue that would not have been there last year.
Got it thanks Corey.
Maybe revisiting a question from earlier or comment about.
The Chinese or Asian gaming play potentially coming back to Las Vegas Corey.
Corey I don't know if you're the best person if you could kind of remind us how big was that business I guess pre COVID-19.
And then maybe in the context of Cosmo if they had a.
Good size Asian gaming business as well.
Which is now part of your portfolio that wasn't previously just to get a sense of how much more opportunity there could be if that if that customer does come back.
Yes, John .
We looked at Q1 of 19.
That customer would have made up about 45% of our right to win at that time.
There are currently about.
25%, 20% of that.
So if that comes back.
From that perspective, it's pretty meaningful.
From a cosmopolitan and they are pretty big in the international business and in particular, the far East and Korea are very strong markets for them their sizes.
Thanks.
What we do.
And John .
Think about baccarat back in 19, it's like $450 million top line.
So got it.
Okay.
No.
Yeah real number thats helpful. Thanks.
Thanks, Bill Thanks Corey.
And the next question will be from Barry Jonas from <unk> Securities. Please go ahead.
Great. Thanks, Yeah, I was hoping I could get more color on the non same store components of Vegas.
The Cosmo integration of ramp going relative to your expectations and then for Mirage to what extent.
Have you been able to redirect revenues to your remaining properties.
Yes.
This is corey the.
Cosmo parks and integration is going extremely well, we're very happy with the results we're seeing there.
Business is continuing to be strong.
Are in the process now.
Finally, when we will be converting them over damage and rewards.
We will make sure from a customer perspective, and employee perspective will be a smooth transition so more to come on that.
In coming quarters the.
The Mirage, it's interesting when we put it up for sale, we started seeing customers starting to convert and come over to our other properties. So in general.
Obviously, there are pure Mirage customers that stayed pure mirage customers, but in general we're happy with what we've been able to obtain in our business.
And as I.
As I kind of rewind the tape.
And look at the capital that we applied to the cosmopolitan versus that which we freed up from the sale of the Mirage.
The incremental EBITDAR.
And more importantly, EBITDA after rent associated with that.
This has just been a fantastic set of transactions.
For for MGM and the shareholders.
That sounds great and then just as a follow up can we get an update on your project in Dubai I'm. Just curious if you think gaming will come at some point to.
Dubai or any of the other emirates for that matter beyond what's been announced by our win thank you.
Yes, I'll take that one.
As it relates to Dubai, we are still doing pylons.
That property continues to evolve.
We that we that we the managers, but the owners yet again want to upgrade the property I think with gaming in mind.
But it's up to office Derby and the National government to ultimately decide.
People on the ground there basically nonstop since the first of the year I'm trying to understand the opportunity in Abu Dhabi and then ultimately if it'll open up to the well if passed and when passed it will open up to the other emirates, whether the rulers of each emirate then taken it upon themselves to prove it is up to them.
Obviously, we're focused on to buy given the nature of our project. We think it would be ideal there happens to be 150 to 200000 square feet of space that could be converted into such a thing.
But time to tell there and we're not saying no to Abu Dhabi either.
Both those markets given the location of the airport right in between both of them as compelling.
Well, we're hoping quote unquote any day, but I got to believe it's a summer fulfills itself.
More news on that.
Sounds great. Thank you so much.
Yes.
And our final question today will come from Steve Wisinski from Stifel. Please go ahead.
Hey, guys good afternoon.
It's obviously very laid the call most of my questions have been answered, but I'll just ask one in this this question might be way out there in left field, but I'm going to ask it anyway. So.
If we think about the impact that the Raiders. The nights have had on visitation to the city, you're now going to get the ease at some point probably in the near future.
And we're talking about let's call it 81 home games, or so and typically slower visitation periods.
It might be too early to know, but just wondering if you guys have thought about this at all and maybe what type of impact you might eventually see there.
We have and obviously given the location and the conversation of a pedestrian bridge from it to the park, which is obviously where T mobile sites.
We think you could bring about 400000 tourists a year so the valley that wouldn't otherwise comp.
We think thats a reasonable number that's a number that's been created by a bunch of folks looking at it.
And so we think that parts accretive.
We're not a fan of any more tax dollars put into this yield.
Yield the governor's position.
And and assume that this will be done responsibly for the state and ultimately for Clark County, all of that said.
I like to believe it will happen.
And it will be accretive I think to the overall visitation.
Okay, great. Thanks, guys I appreciate it good quarter.
Okay.
And 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, I'll be quick I know its latest again want to thank everyone for joining us.
Just on my earlier comments, we couldnt be happier about the quarter and the progress that we've made on so many fronts and again I want to thank all of our employees, particularly this particular quarter on Macau team for successfully launching.
Gonna be participating with Jonathan J P. Morgan's form in Toronto next month, and I will be doing a couple of meetings with Deutsche Bank in New York as well I. Thank everyone for their time and hope you all have a great evening.
Look forward to speaking to you guys in a couple of months. Thank you.
And thank you Sir the conference has now concluded. Thank you for attending today's presentation you may now disconnect.
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Yeah.
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