MGM Views Strategic Plan as Catalyst for Growth

LAS VEGAS—MGM President/CEO Jim Murren kicked off the company’s second quarter earnings call with an update on its MGM 2020 plan, signaling positive progress made and additional benefits to come.

“We had a fairly straightforward quarter with minimal deviations one way or another. We’re extremely busy on executing on our MGM 2020 plan. Our operating model transition is complete, and our headcount reductions as part of this transition is now behind us,” said Murren. “As we look to the future, we expect to benefit from quite a few tailwinds with improving property earnings, strong Las Vegas macro trends and MGM 2020 benefiting us in the back half of this year and into next year. This gives us the confidence in our ability to hit our financial targets next year, and as an example of this confidence, we bought back 11 million shares in the second quarter alone.”

As for the second quarter results, Murren noted the company was “in line with our expectations with consolidated net revenues up 13% and adjusted EBITDA up 9% year-over-year to $756 million.”

Murren added, “We have lower hold at our Strip properties and some one-time items that totaled about $35 million. And I guess the best help to understand the earnings power of the business you’re probably going to want to add those two numbers together. Here in Las Vegas, results were in line with expectations as we saw strong demand across our hotel, food and beverage and entertainment segments driving 1% growth in overall net revenues.”

Second Quarter 2019 Financial Highlights:

Consolidated Results

  • Consolidated net revenues increased 13% compared to the prior year quarter to $3.2 billion;
  • Consolidated operating income increased 2% compared to the prior year quarter to $371 million. The current quarter included $43 million in restructuring costs directly related to the operating model component of the MGM 2020 Plan;
  • Net income attributable to MGM Resorts of $43 million, compared to net income attributable to MGM Resorts of $124 million in the prior year quarter;
  • Diluted earnings per share of $0.08 in the current quarter compared to diluted earnings per share of $0.21 in the prior year quarter
  • Adjusted diluted earnings per share (“Adjusted EPS”)(1) of $0.23 in the current quarter compared to Adjusted EPS of $0.26 in the prior year quarter; and
  • Consolidated Adjusted EBITDA(2) increased 9% to $756 million in the current quarter compared to $695 million in the prior year quarter.

Circling back to MGM 2020, Murren noted the company is on track to achieve $100 million of EBITDA uplift this year versus its prior guidance of $70 million. “While, we think it’s a bit early to revise our overall MGM 2020 guidance. The progress we’ve made thus far gives us increased confidence that we will achieve our phase one goal of $200 million in incremental EBITDA by the end of 2020,” he said.

Las Vegas Strip Resorts

  • Net revenues increased 1% compared to the prior year quarter to $1.5 billion; and
  • Adjusted Property EBITDA of $418 million, a 4% decrease compared to $436 million in the prior year quarter, due primarily to a decrease in table games revenue primarily attributable to lower table games hold, which had a $26 million negative impact to Adjusted Property EBITDA on a year over year basis. Adjusted Property EBITDA margin of 28.5%, a 145 basis point decrease compared to the prior year quarter.

Regional Operations

  • Net revenues increased $202 million or 29% compared to the prior year quarter to $911 million including $76 million in net revenues from MGM Springfield, which opened on August 24, 2018, $55 million in net revenues from Empire City Casino, which was acquired on January 29, 2019, and $68 million in net revenues from MGM Northfield Park’s operations, which was acquired from MGP on April 1, 2019; and
  • Adjusted Property EBITDA of $255 million, a 34% increase compared the prior year quarter and Adjusted Property EBITDA margin of 28.0% in the current quarter, a 122 basis point increase compared to the prior year quarter.

MGM China

  • Net revenues increased 26% to $706 million primarily as a result of the continued ramp up of operations at MGM Cotai following its opening in February 2018 and an increase in main floor table games hold percentage; and
  • Adjusted Property EBITDA of $171 million, a 43% increase compared to the prior year quarter.

Murren also emphasized that the company’s strategic plan is not just a cost cutting exercise.

“We’re laying the groundwork to position the company for future growth creating efficiencies and giving our properties the ability to scale key initiatives and best practices,” he said. “We spent years refining our structure with some of the most expert management consultants to land on this model. Models designed to faster collaborative relationships between our Centers of Excellence or COEs, and the properties. While strategies are set in enforced at the COE level, this is after thorough due diligence and guidance from the properties. COEs also ensure that the brand identity of each property is preserved, and the MGM portfolio offerings are complementary to each other, which also minimizes cannibalization. Further, we have kept senior leadership at the property level. This is especially the case at the regional properties where we know market knowledge and physical presence is key.”

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