MGM Resorts International (NYSE:MGM) Q4 2022 Earnings Call Transcript

MGM Resorts International (NYSE:MGM) Q4 2022 Earnings Call Transcript February 8, 2023

Operator: Good afternoon, and welcome to the MGM Resorts International Fourth Quarter and Full Year 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 Halkyard, Chief Financial Officer and Treasurer; Hubert Wang, President and Chief Operating Officer of MGM China; and Andrew Chapman, Director of Investor Relations. Please note, this conference is being recorded. Now I would like to turn the call over to Andrew Chapman. Please go ahead.

Andrew Chapman : Good afternoon, and welcome to the MGM Resorts International fourth quarter and full year 2022 earnings call. This call is being broadcast live on the internet at investors.mgmresorts.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. 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.

Bill Hornbuckle : Thank you, Andrew, and thank you all for joining us today. I’m proud to announce that MGM Resorts International drove record fourth quarter adjusted property EBITDAR for Las Vegas and regional resorts. What’s more, our full year Las Vegas Strip adjusted property EBITDAR increased by more than 80% year-over-year. These outstanding results are evidence of our focus on optimizing growth in our business and operations as well as our strategic vision of becoming the world’s premier gaming entertainment company. These outcomes are also a testament to our employees who will go above and beyond every day to take care of our guests and create an amazing, great experiences, which drive loyalty among our customers. Our employees are true heroes of this story, and we need to be celebrated.

I couldn’t be proud of them for delivering these financial results alongside the steady improving guest and record employee satisfaction scores we are enjoying. As we look forward, we expect many of the drivers for our 2022 performance to continue into 2023. Importantly, we are well positioned on weathering a variety of environments, given the inherent long-term benefits of MGM’s diverse portfolio. In fact, we have the most diverse offerings in the gaming space. And as such, we are a well-balanced organization that benefits from both scale and a host of premier brand offerings. This distinction — the distinct pieces of our business that creates this diversification are number one, our number of nine Las Vegas Strip and eight regional domestic properties in the U.S. that cater to all market segments and produced consistently strong profitability; two, our two integrated resorts in Macau, the pre-pandemic generated EBITDAR of over $700 million and are just now beginning to see a very real return to profitability; three, our digital strategy with 50% ownership of BetMGM, one of the leading U.S. digital sports betting and gaming operators.

BetMGM is the leader in what is financially the most important segment in the nation, iGaming, and is making overall progress towards its profitability. And our ownership of LeoVegas, which we’re using to grow our digital business internationally and extend both MGM’s brand and content reach. And ultimately, our balance sheet, allowing significant flexibility to invest in areas with the highest return on capital including New York, Japan, further expanding our digital footprint via LeoVegas and other substantive international opportunities we’re pursuing in that space as well as funding and continued share repurchases. In fact, as you know, we have just announced that our Board approved another $2 billion repurchase program. Looking ahead, we see multiple opportunities for growth and momentum in our business, coupling these opportunities with a relentless focus on free cash flow per share, our operating model, our margin control and disciplined expense management, which we believe gives us a great confidence that our best days are ahead of us.

Let me walk through the business case for ’23, starting with our U.S. properties. First, we are encouraged by the early success of The Cosmopolitan of Las Vegas as we migrate the business into MGM Resorts infrastructure. On an annualized basis, we have double-digit growth in revenue and EBITDAR compared to the reported 12-month period prior to the acquisition. We are already beginning to produce cross-property play with hundreds of high-end players from The Cosmopolitan database attending MGM Resorts customer events and driving millions and win at our other sister properties. This is a trend that we saw continued for the Lunar New Year celebration at our properties in Las Vegas, and we expect to expand to the mass market as we integrate MGM Rewards into The Cosmopolitan system.

Next, we have a strong event calendar in Las Vegas. CES has a 115,000 attendees last month, up from 45,000 in 2022. CONEXPO and CON/AGG next month is setting up to be the best ever. And March Madness, Sweet Sixteen and the Elite 8 games are coming to Las Vegas. Together, the calendar in March is positioned to have us have the best hotel revenue month, we believe, in our history. Additionally, Formula 1 is expected to bring $1 billion in economic value to the city, which we believe we are the best positioned to take advantage of. Las Vegas also has Allegiant Stadium, which has brought 40 events and over 1.5 million visitors to Las Vegas in 2022 and is expected to bring even more visitors, even higher quality events in 2023, driving significant spend, particularly at our South end properties.

Another tailwind is the ongoing growth in visitation. The LVCVA expects domestic flight growth capacity to reach 120% of 2019 in the first quarter of 2023, and international recover further with 80% of 2019 available seats. Harry Reid Airport hosted a record 52.6 million passengers in 2022. Outside of our domestic business, we also see tremendous opportunities for growth. Starting with China, fully stated Macau is back. As you well know, COVID restrictions impacted our Macau operations in 2022, causing an operational loss that negatively impacted our overall results. But we are experiencing a rebound in 2023 as our guests are returning in force just that they did in Las Vegas when restrictions were lifted here. In fact, quarter-to-date, we are excited to report that MGM China’s combined properties are the highest earning businesses within our company.

As part of the concession renewal process, we committed to bring nongaming entertainment events to Macau. Those events were strong drivers to visitation to our property during the Lunar New Year and at the end of January. We see these early results as validation and our confidence in Macau markets recovery and the long-term viability upon which we are retendering commitments were built. And unique to MGM China, we have secured 200 additional tables as part of our new gaming concession, which combined with our premier mass positioning, should allow us to drive market share into low to mid-teens. In fact, during the month of January, our market share was 16%, which compares to high single-digit market shares pre-pandemic. This outstanding performance was driven by the MGM Chinese team, strategic focus delivering full gaming floor renovation, a complete hotel product mix for our targeted customers various marketing efforts in producing strong nongaming events, shows and promotions plus our team’s improvement in service levels and operational efficiencies.

These collective efforts position us for a long-term growth story in Macau. We’ve also reason to be optimistic about the growth prospects of our business well into the remainder of this decade, especially in light of the two new gaming licenses that we hope to receive in the near future. We expect to submit our RFA in New York in the first half of this year, and we hope for response in the near future. One advantage we have over the competition in this market is our ability to add tables to our existing casino floor and thus incremental tax revenue for the state almost instantly once approved for license. We expect to spend about two bed in New York inclusive of the license fee. We will fine-tune our program and planning. But right now, we’re expecting extensive property improvements such as a significant entertainment offering, new food and beverage opportunities, covered parking and an overall increase in the casino floor space.

As you may recall, we also submitted our RFP in Japan for an integrated resort license to operate in Osaka approximately 10 months ago. Unfortunately, I’m still waiting for the response from the government, but we are being patient and believe we will hear so soon. MGM Resorts has presented a compelling offer with our partner, ORIX, to develop an integrated resort, which will develop international tourism and growth to that region. We’re extremely excited for the ROI opportunity in a market in which we may be the sole operator for some time in the future. Each of the projects I just mentioned are expected to generate returns well above our current free cash flow yield. These are all future capital investment decisions, we weighed upon that same standard.

In closing, 2022 was a phenomenal year for MGM Resorts, and we’re confident we will see progress into 2023 and beyond. With that, I’ll turn this over to Jon for more color on the fourth quarter and the year.

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Jonathan Halkyard : Thanks very much, Bill. Before I dig into the financial results, let me also thank my colleagues here at MGM Resorts for an outstanding quarter and a truly amazing year. I’ll now share with you some of the exceptional financial results that we achieved. Las Vegas Strip same-store revenues, and so that’s excluding The Cosmopolitan and The Mirage, grew 11% and adjusted property EBITDAR grew 6% in the fourth quarter compared with last year. Fourth quarter occupancy of 91% was up 500 basis points year-over-year and ADR was $260 in the fourth quarter, which grew 30% over last year. Several volume metrics for us set records as well as our Las Vegas slot handle set its seventh consecutive quarterly record in the fourth quarter.

Demand in Las Vegas remains strong across all segments, driven by our exceptional entertainment offerings and other customer demand drivers. The strength continued into January, where occupancy was 90% and rooms booked during the month were on record pace with rates up double digits to last year. In the regions, fourth quarter revenues grew 10% and adjusted property EBITDAR grew 3% year-over-year. While EBITDAR was down 1% versus the third quarter, this sequential decline is in line with normal seasonality for the fourth quarter. Importantly, labor expense as a percentage of revenues was flat sequentially and our current headcount remains approximately 20% below 2019 levels, all while we achieved historic highs in NPS and other indicative customer satisfaction.

In the fourth quarter, corporate expense, excluding stock compensation, was $113 million, which includes $5 million related to MGM China, global development costs of $6 million and transaction costs of $2 million. Going forward, we expect corporate expense for the full year 2023 to be approximately $380 million to $400 million, a decrease of approximately $30 million to $50 million from 2022. Included in MGM’s corporate expense this year is $44 million for MGM China and approximately $37 million in anticipated development expense related to Japan and New York. We intend to invest approximately $800 million in domestic CapEx in 2023, and this compares to the $727 million in CapEx invested in 2022. Maintenance capital will be approximately $600 million of this spend this year.

And this year, it includes room remodels in the Bellagio Spa Tower, Borgata’s Water Club and the completion of our New York-New York room renovation. Since 2019, we’ve reduced the average age of our room since renovation by roughly 3.5 years, and our room age will continue to decrease over the coming years as we refresh our room offerings. The remaining CapEx in 2023 is growth capital, projects that include the Mandalay Bay Convention Center remodel, a new pedestrian bridge connecting The Cosmopolitan to Vdara and investments in technology to drive better customer experience, ease and engagement. Finally, on the development front, we expect to contribute $70 million — $75 million to BetMGM in 2023 and the only material investment in New York this year will be the $500 million license fee, depending upon the timing of the license awards.

I’ll conclude with just a few comments on our strategy for capital allocation. First and foremost, we’ll maintain a strong balance sheet by sustaining adequate liquidity for our enterprise. And as you can see in the presentation that we posted today, we concluded 2022 with $5.3 billion of domestic cash against domestic debt of $4.5 billion. Our resources this year were bolstered by the disposition of The Mirage in December for $850 million in net cash proceeds after tax. Next week, we expect to close on the sale of the Gold Strike in Tunica, which will be in $350 million in net proceeds after tax. Next, we’ll prioritize capital investment to deliver the highest return for our shareholders. Our acquisition of The Cosmopolitan of Las Vegas expanded our reach into the high end of the Las Vegas market.

Our acquisition of LeoVegas jump-started our international iGaming strategy. Our new President of Interactive, Gary Fritz and his team are evaluating a number of opportunities in this area, and our shareholders should expect that we’ll be deploying more capital to grow the MGM brand internationally in iGaming and in digital content development. And finally, we’re going to return capital to shareholders. During 2022, we repurchased 76 million shares for $2.8 billion. Since the beginning of 2021 through yesterday, we’ve repurchased $124 million for a total of $4.7 billion and have reduced our share count to 375 million shares. And we’re not done. As Bill mentioned, our Board of Directors yesterday approved an additional $2 billion share repurchase program.

In evaluating our share repurchase strategy, I consider a number of factors, including the liquidity profile of the company as well as the development and M&A opportunities that are before us. But I also consider the free cash flow yield available in our own shares. So as I conclude, consider the following: adjusted property EBITDAR from Las Vegas last year was approximately $3.1 billion and from our regional operations was $1.3 billion. From that, we had adjusted domestic corporate expense of $400 million and cash rent of $1.7 billion on an annualized basis. Consolidated cash interest was $574 million, but that includes $205 million related to MGM China. And cash taxes and domestic CapEx totaled about $750 million. But our company also has significant reservoirs of value that did not contribute cash earnings in 2022.

This includes excess cash of over $2.5 billion; our ownership position in MGM China, which yesterday had an approximate value of $2.6 billion; and of course, our stake in BetMGM. It’s a lot of numbers, but when taking all of this into account, I see a double-digit yield opportunity in our shares, which is why I see share repurchases as a responsible and accretive use of our capital. Bill, back to you.

Bill Hornbuckle : Thanks, Jonathan. I hope the comments that — you’ve conveyed the excitement that we all have towards our business this year and ultimately beyond. In all my time with the company, I’ve never been more excited about our present and future as I am right now. I think we’re stronger, more agile, more focused and more determined than ever to win. And with that, we’re happy to take your questions.

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Q&A Session

Operator: And our first question will come from Joe Greff from JPMorgan. Our next question then will be from Shaun Kelley from Bank of America.

Shaun Kelley : Thank you for all the detail and color. So a lot of different places we could start, but I want to start with a high-level, strategic one. Jonathan, you ended on walking through a really robust liquidity position, still a lot of cash on the balance sheet that’s either collecting interest at a better yield than before, but not a huge yield. So the question we get all the time remains kind of that ownership interest in upping the stake in maybe one of those areas that you discussed, BetMGM being the big one. And obviously, we know there’s a partner there, but if you could give us your latest thoughts around the strategic value there and how you fold that in with your comments around maybe a more organic or stand-alone international online expansion?

Bill Hornbuckle: Thanks, Shaun, for the question. And I’ll just step in and kind of give the first part of it because I think it’s time to be definitive and give a little direction. The simple answer on Entain is no, we’ve moved on. While we remain highly focused on BetMGM’s business through our partnership with Entain and making sure that, that business continues to grow, we see great potential in LeoVegas expansion capabilities. I’ve said before, we like their technology platform and their leadership team. We’re also interested in the content studio business, we think there’s a real play there. We’ve seen that proven effective with brand when we combine great product in our brands at BetMGM. And over time, we like the live dealer business and the expansion of other global markets and frankly, and directly under our own purview.

So for now, the answer is no, not within Entain. We’re going to go down our own direction, and we begin to allocate capital. We think Gary Fritz has got the right motive, the right drive and the right person to help us lead this forward. We value the relationship with Entain. We value BetMGM. But as it comes to rest of the world, we’re going to move forward with a different proposition.

Jonathan Halkyard : And Shaun, just a couple of comments, the broad strokes around capital allocation as we look forward. We do have a maturity in March, $1.25 billion at 6%. So present plan is to, of course, redeem those bonds and that will capture about $75 million of free cash flow for the business. We were active share repurchases just in the past three quarters. We spent almost $2 billion at a price of about $33 to $34. So we’ll continue to be repurchasers of our shares, but we’ll moderate that depending upon market conditions. And then, of course, funding what Bill described, which is our interactive ambitions, which will be predominantly through M&A but we’re reserving a significant amount of capital for those activities as well.

Shaun Kelley : And I’ll — I don’t want to be greedy with my time here, but just the follow-up to stay on the same theme then, Jonathan, you directly hit it kind of M&A. Or could you just give us some parameters around are we thinking more bolt-on options? Or are there still platform-level investments that could be made to drive up and expand that opportunity to be meaningful to the base business?

Bill Hornbuckle: It’s a combination thereof. When you talk studio business or even live dealer, the technology aspect of that is on our scale, relatively de minimis. When you talk about stepping up to other marketplaces, whether it’s South America over time or rest of Europe, we’ll have to take a different view on that as these opportunities unfold. But for now, it’s more bolt-on and relatively small.

Operator: And for the next question, we’ll move back to the line of Joe Greff from JPMorgan.

Joseph Greff : Can you hear me okay now?

Bill Hornbuckle: Hi, Joe.

Joseph Greff : All right. Nice speaking with you. In Las Vegas, can you talk about how you’re thinking about FTE count and payroll expenses and how they’ll trend this year? Maybe you could break it up between both sort of on a same FTE basis as well as just wages. And what kind of revenue growth do you need to offset wage expense growth in Las Vegas? I’ve got another one.

Bill Hornbuckle: I will open it and I’ll kick it to Corey. If you go back and you look at FTEs, particularly in Las Vegas against 2019, we’re down anywhere from 12% to 15%, depending on the property. Obviously, wage inflation since ’19 has crept. And just so we’re all on the same page, looking forward, we have substantive labor negotiations later this year with about 28,000 of our colleagues, which we’re going to have to contend with and work our way through. And so Corey, maybe the second part of it, just scale…

Corey Sanders : I think from the standpoint of levels of FTEs, from a fixed cost perspective, there will be no increases. It will all be on variable. So if there’s additional catering and banquet business, it would match that revenue component of it. But I think we’re pretty comfortable that we could service our properties, service our guests at the levels we’re at today. And then I don’t know, Jonathan, if you want to take the revenue.

Jonathan Halkyard : Yes, I think on the revenue growth side, if we’re running now with occupancies that are basically full on the weekends. There’s a bit of room during the weekdays. So really, it will need to come through pricing as opposed to occupancy gains largely in Las Vegas. And I think if that’s in the low single digits, we should be able to cover any increases in payroll adequately.

Bill Hornbuckle: I mean, overall, I think we think our margins are going to sustain is really the guide, I think the answer to that.

Joseph Greff : And then Bill, we’re dealing with another earnings call and release today as well, so I want to make sure I understood your comment — your prepared comments you talked about Macau being back that in the month of January, it led the company in profitability or something along those lines. Can you just explain that? Or give a little bit more detail on that?

Bill Hornbuckle: Yes, I can put a little color around it, and then we have Hubert on the line, these guys have worked hard at this for three years. So I’ll let him talk a little bit about the business. But look, the rebound was, interestingly come January 8, fairly instant. I think we peaked during Chinese New Year, making a little over 5 million a day. I mentioned in my prepared comments, 16% share. And for us, for all the reasons I mentioned, our mass piece, volumes were 100% over our ’19 levels. Now we’re talking about a whopping 30 days here. But for the company, particularly from where we have come from, we activated 150 to 200 new tables we have. We’re very excited about what’s happened in the first 30 days. And so Hubert, maybe any other color would be helpful.

Hubert Wang : Sure. Thanks, Bill. Thanks, Joe, for the question. For — since the beginning of the year, I think the market has been growing back and has exceeded the expectations of many participants and observers. For us, in January, on the gaming side, we have seen very healthy, above the market average recovery in both mass and direct VIP segments. And for the month of January, as Bill has mentioned, our market share reached 16%, which is a record high for us. Our daily mass GGR was on par with the 2019 level for the month of January during Chinese New Year, far exceeded last year’s Chinese New Year level actually. And we are also encouraged to see that direct VIP segment in terms of rolling volume far exceeded 2019 level as well. It is also very encouraging to see that January run rate extend into the first week of February so far. So all in all, we are very confident in a solid and sustainable recovery of Macau market this year and beyond.

Operator: The next question will be from David Katz from Jefferies.

Cassandra Lee : This is Cassandra on David’s behalf. I want to expand on Macau’s margin longer term. As we think about the shift in VIP mix from junket to direct, I believe your competitors have also called out increased labor costs and some labor shortage and increased utility. So how should we think about the margins in Macau longer term? A – Bill Hornbuckle Well, again, I’ll kick this to you, but my only initial comment is — I believe everyone knows this, the junket business, I mean, when it was all said and done, it was a 20% margin business. And so while there was a great deal of volume in that business and we all — was accretive to us and obviously, a vehicle for capital into the market, it didn’t help the margin, I can assure you.

So over, I don’t know if you want to talk about more generally what you think will happen there. But I do like where we’re positioned for VIP, Mass VIP. Remembering our branch environment and system is broader than almost anybody else is in the market. We’ve been doing it for 30 years into Las Vegas, and we’ve now taken that network and put it to work directly to the benefit of Macau. Hubert?

Hubert Wang : Yes. I think that in terms of margins, I think that we expect in this year and beyond, probably we’ll at the high end of — in the 20s, but in the higher side of the 20s. And in terms of junket to direct, certainly, there are some conversion in that space, but it’s really too early to give you any concrete numbers. But from the strength we have observed in January and Chinese New Year in our direct business, I think that we’re still very confident in the growth of the direct business and particularly given the wide network of MGM Resorts in terms of global reach of high-end customers.

Cassandra Lee : Great. And for the follow-up, if I may shift here on Las Vegas. There were a lot of very bullish or favorable commentaries. The ADR has been substantially higher than pre-COVID levels. Do you think that is sustainable? And looking beyond ’23 and especially if we’re thinking about a recession, how resilient do you think that ADR should be?

Corey Sanders : Yes, this is Corey. Yes, I think it’s sustainable. As we look at the event calendars on weekends and our forward-looking pacing and what we’re booking rates at now, we have pretty good visibility further out. On the midweek, we see our — not only our convention business getting better, but the whole city’s convention business getting better. So the pricing that we’re seeing today, we should be able to sustain, given where the economy is today.

Operator: The next question is from Carlo Santarelli from Deutsche Bank.

Carlo Santarelli : Just looking at some of the disclosure in Las Vegas and trying to decipher what is kind of the delta between gaming revenue and your net casino revenue has widened in the last few quarters. I’m assuming that is kind of all mix related with Cosmo coming online? And is that kind of a range, that delta, that pretty much will hold firm moving forward?

Bill Hornbuckle: Yes, Carlos, hi, Bill, I think the answer to the question is yes. We got a — we needed to through COVID because obviously, the group segment of note went away. Very active with our casino market, entertained marketing database, personalization and other things we might do in that sector, and we’ve sustained it. And so it’s helped that tremendously. Obviously, now convention business is going to come back and carryout 18%, 19% of our mix this year. But I think it is sustainable is the way to think about the business.

Carlo Santarelli : Great. And then, Corey, just on that, on the topic of convention mix, you made a comment earlier, I believe that the bookings that were done, were done at double digits. If you look at kind of the entirety of the group business on the books or the targeted group business on the books from a pricing perspective, how does that look year-over-year or relative to 2019, however, you guys kind of want to think about it?

Corey Sanders : Yes, I think — look, many of those contracts were in place over 2019, 2020. I think they have price escalators in there. It’s probably an area of opportunity for us in the future as we look at future convention bookings. But just as a reminder, it’s 18% of our business. The new business is getting booked based on where rates are today.

Carlo Santarelli : Okay. And do you believe, like when you think about it overall, just that taking the pricing aside, thinking about the visibility that it provides you do you believe as you look through 2023, all things equal economically and from a macro perspective that there should be pricing power year-over-year on a same-store basis?

Corey Sanders : Yes. I think there should be some pricing power based on the amounts we have on the book and the foundation we have in our bookings.

Bill Hornbuckle: And remember, Carlo, one thing we have strategically decided to do is push more business out of weekends and back into midweek. And so that has an overall play in ADR. Obviously, it brings down the convention ADR, but it raises the overall company’s ADR because it gives us more opportunity we where we see, frankly, and continue to see real upside, particularly in the luxury segment, across Cosmo, MGM, Mandalay, Aria, Bellagio.

Operator: The next question is from Stephen Grambling from Morgan Stanley.

Stephen Grambling : Maybe turning to Japan, that was another one that you referenced is still out there. You’re waiting on some approval but still looking for a return that’s above it sounds like your free cash flow yield. Wondering if you could just elaborate on any of your updated expectations for that market and anything that’s either evolved from the terms of the transaction, even the timing of when construction could start and when the proper to be coming out of the ground..

Bill Hornbuckle: Yes. Steve, we got to be a little careful because some of this is NDA with the government, et cetera. But having said that, we had hoped to hear in October. Obviously, we sit here now in February not having heard. The process lies today with MLIT, the government agency that is going through and consistently asking us questions about the project, about the contract with the government of Osaka, et cetera. Time to tell whether we get through that efficiently over the next 30 days. We would like to think and believe we might, but we’ve been thinking that for a while now. As it relates to macro, look, I’m excited to think that we may be the only player. And so instead of a market of 19 million people, we’re talking about a much larger market.

Having taken the journey many times from Tokyo, it’s only 2.5 hours away by high-speed train, et cetera, so we see upside. Inflation has not hit Japan like it’s in other places, and particularly for us, at our end of the partnership, the value of the yen has gone tremendously in our favor, but we’re still looking at a $10 billion project. We’re looking at a return on that project, we think can bring 15% plus in cash flow and then maybe then some, but it has to mature. And overall timing, the goal was — now we’re going to be challenged with that if we don’t hear soon to get this thing open before the decade close in 2029. But since — there’s a bridge to getting there.

Stephen Grambling : That’s helpful. And maybe a follow-up on BetMGM, just to make sure I understand you correctly. I guess, are you anticipating far out, but any additional capital being put into that JV beyond this year, given the targets for kind of profitability or standalone at this point?

Bill Hornbuckle: No, none substantively. If BetMGM gets into the M&A business for some particular product, maybe. But generally, no. It’s the $50-odd million, I think we’ve — well, collectively, but call it, our $35 million or $45 million we’ve identified. It gives us every reason to believe it should hit its target this year, starting to make profitability in the second half of the year. We all have to be rational players. There is growth left. There are six additional states yet to go that have been identified. But no, there’s no large-scale capital. That business should begin to mend and take care of itself.

Operator: Next question is from Chad Beynon from Macquarie.

Chad Beynon : Bill, Jonathan, another one on Vegas, just given your diverse portfolio with luxury and core. Can you just kind of help us think about broadly how these segments compared to against each other in ’22? Bill, I think you said obviously, a lot of the group events and the city-wides in ’23, just those compression nights should help probably a little bit more in luxury, but just trying to see — I know you’re not breaking it out, but kind of where the — which way the wave is moving luxury and core.

Bill Hornbuckle: I think Corey you’re best…

Corey Sanders : Yes. In 2022, the majority of the growth here in Las Vegas was driven by the Bellagio, Aria, Cosmopolitan and the MGM Grand. Mandalay Bay had a fantastic year as they, of course, capitalized on the return of the group business to Las Vegas. I mean in the fourth quarter, just as an example, our group room nights were up about 50% versus the fourth quarter of 2021. So it certainly has skewed to the luxury properties. But I will tell you, from a portfolio strategy perspective, all of these properties here in Las Vegas are really important role players. We’ve invested some capital in the Luxor in the last year. We just — we’re doing the rooms in New York-New York right now. And those businesses, we expect, are going to be very solid cash flow generators over the next several years. But no question, the growth is coming from the luxury segment.

Chad Beynon : And then can you just talk a little bit more about the omnichannel opportunities with driving your players from BetMGM back to Las Vegas, given it’s probably one of the more important years of your players wanting to come out and see some of the events, kind of where that stands now and how that should progress in ’23?

Bill Hornbuckle: So I think simple answer is more. And when I say that in the context, it’s now becoming thousands of players that have obviously touch both brands. It’s interesting. The combination of the two, the players spend about 40% more. Now that’s kind of intuitive but 40% more is interesting. The other thing that plays to the events, whether it’s sports or otherwise, sporting events, is that 85% of the players are under 49 years old. And so that network and that combination is bringing us a younger player, bringing us people who have to date have the propensity to spend more when combined with both brick-and-mortar and digital activity. And we’re now reaching thousands of them coming in. We’ve set up fairly elaborate CRM systems, both at BetMGM and ultimately, a hosting program here that captures them.

And so there’s one-to-one dialogue about certain VIP players and what their needs, wants and desires are. And so we’ve treated that network like we would treat any of our branch offices, if you will, when the phone rings and they have somebody of substance, we’re set up to take care of them. So excited by it. We need over time to automate it more, so that there’s true connectivity between BetMGM and its loyalty system and ultimately MGM Rewards system. But for now, focused on the high end between the spend, the use and the numbers, all pretty exciting.

Operator: The next question is from Robin Farley from UBS.

Robin Farley : I wanted to ask a little bit about — you showed the breakdown of same-store gaming revenue in Vegas being down about 10%. And I think it was down a little bit in Q3 as well. I wonder if you could give us some sort of color on what’s happening with the gaming consumer in the last two quarters. Is that kind of fewer trips year-over-year because there are more options in the world? Or is it just lower spend per trip? Or kind of what do you think is driving that in the last few quarters?

Jonathan Halkyard : No. We’ve seen same-store handle and drop and win growing modestly in Las Vegas. Although there’s no question, the majority of the growth that we’ve seen in this quarter on a same-store basis, it’s been on the hotel side. So the gaming customer is healthy here in Las Vegas, the — it is driven mostly by our higher-value gaming customers, but it’s very healthy on a same-store basis.

Robin Farley : With — are the declines — just to sort — Jon, you’re saying it’s coming from the higher-end gaming player? Or you mean they’re holding up, it’s the sort of broader market player where the with the same-store decline?

Jonathan Halkyard : No, we’re — what I’m talking about our slot handle and table game drop and and slot win and table game win increasing.

Robin Farley : Okay. I was looking at your slide showing casino revenues down 10% on a same-store basis in Q4. Kind of know there were some properties and in properties out, but I was just using the number from your slide.

Jonathan Halkyard : Yes, some of that will be on a net basis after accounting for the cost of hotel rooms that are comped against those players. And so that is having an impact on what we’re describing is that gaming revenue. But in terms of the way I consider the health of the gaming customer is to look at the volume metrics and the gross gaming revenue, which are growing on a same-store basis. Does that make sense, Robin? That’s kind of when I think about what the behavior of these customers actually is, it’s on the gross basis.

Robin Farley : Okay. Okay. I was just trying to clarify that number, that’s helpful. Also, I was just curious, given obviously the strength of your liquidity and cash position and what you have going, why suspend the dividend? And I realize it was a small dividend only remaining at this point. But I’m just curious why suspend that when you — liquidity is certainly not the issue?

Jonathan Halkyard : Yes, it’s not. It was really an administrative issue. It was burdensome. It was complex. And that measured against the size of the of the dividend itself, which was de minimis and just how much capital we’ve returned, and we expect to continue to return through the form of share repurchases. We just felt that it was a practice that we did not need to continue. That doesn’t mean that we wouldn’t reconsider it or our Board wouldn’t reconsider it at some point, and in so doing, would make it a more substantial dividend than a de minimis dividend, but it was mostly an administrative solve.

Operator: The next question is from John DeCree from CBRE.

John DeCree : Maybe just, Jonathan, a quick follow-up on Robin’s question regarding casino revenues. So just to clarify, with the higher ADR now essentially the dollar amount that you need to net against casino revenue is what’s causing that kind of accounting decline?

Jonathan Halkyard : Yes. That is the major issue that — that’s the major dynamic which is causing this topic that we are talking about. And it’s not just ADR, but also the size of the casino segment generally.

John DeCree : Okay. Understood. Thank you for that additional clarity. Maybe just for a follow-up question. Bigger picture, I think it was pretty clear as to where you target growth investments, digital international, but the last 24 months or so, you’ve moved a lot of chairs and upgraded the asset base in Las Vegas and opportunistically, I think, divested Gold Strike. Curious if you could give us some comments on how you feel about the domestic portfolio today, both regionally and in Las Vegas? And if there’s potential opportunities you’d consider, more on the M&A side? And we kind of know plans in New York and if other big markets were to open. But on the M&A front, either buy or sell, anything that you’d think about doing or might make sense.

Bill Hornbuckle: Well, let me kick it off. A, I think, particularly after the moves that we’ve made, we’ve truly enjoyed the portfolio we have. In terms of Las Vegas, obviously, we own 40-odd percent of this marketplace, and we love the properties that we have here. We love the positioning. And what’s happened at the south end of the strip, particularly via Allegiant has been productive. When it comes to our regionals, obviously, we’re in a different regional game in most of our markets, A, whether it’s Detroit, Atlantic City or Mississippi, we lead in a big fashion. We’re market leaders there. We tend to want to do that and try to tie out the product offering, integrated resort to integrated resort. We just think there’s an opportunity to get the right kind of customers to transition to Las Vegas and otherwise.

I would never say never on any M&A acquisition. There’s always, I suspect an asset here or there that might be of interest, but I don’t think we have any immediate designs or plans on anything substantive sitting here today. I think our growth will come through the development opportunities we’ve defined, through the digital opportunities that we have defined to date and are going to seek. And yes, we’ve always got an eye and an ear open, but there’s nothing specific that — nor would I actually tell you if there was.

John DeCree : Fair enough. Fair enough. Just engaging the strategy. Appreciate it, Bill.

Operator: And the next question is from Barry Jonas from Truist.

Barry Jonas : Guys, given the strong strip outlook for ’23, is the high end of that 400 basis point to 600 basis point margin expansion, the right place to think about how the year could shake out? Or could you still go higher? And then just with that, can you remind me what the starting point is here? Is it the reported pre-COVID 2019 number or based on sort of a pro forma portfolio?

Jonathan Halkyard : Yes, when we use that 400 basis points to 600 basis points sustainable margin improvement, we’re referencing the 2019 year. So we’re not trying to adjust it for acquisitions or dispositions just because we’re getting pretty far back in the past at that point. We’re very comfortable that for across all of our domestic properties that we can be within that range or possibly exceed it. And exceeding it will be driven mostly by our — the pricing environment. but we’re comfortable with that and that compares to 2019.

Barry Jonas : Great. Great. And then just a follow-up. I think iGaming, we’re hearing that the industry is taking more of a push. I’m curious how you think about the impact that iGaming is having on land-based gaming. Not sure if you’re able to quantify what you’ve seen more recently and say, Michigan, but you could — can you help us understand some of the puts and takes with what would seem to be some cannibalization threat?

Bill Hornbuckle: Yes, I’ll take that. Obviously, in Michigan, to your point, is the best example where we have market-leading brick-and-mortar, and we have obviously a market-leading digital. The digital business now has outsurpassed the brick-and-mortar by about 25%-ish. They’re both doing well over 300 million GGR. Digital is approaching almost 400 million in GGR. It’s an interesting market when you look at it because it’s gone through smoking and nonsmoking. COVID lasted longer there in terms of its policies than anywhere else. I will tell you, there was some concern early in the middle part of last year. The last three months in Detroit, now that we’ve come off of most of those COVID restrictions, we’ve made allocations for smoking and some smoking opportunities for customers who still want to do that.

Our numbers have not only stabilized, but it continued to grow in Detroit. So while it’s obvious that there’s a subset amount of play going on in digital, the chance to connect that with brick-and-mortar and ultimately reward and recognize. And simple things like bonusing or jackpots that I leave — that I’m playing at home, I can come pick up in the brick-and-mortar where I left off as a player and have a contiguous experience is things that we’re highly focused on. And so we think it’s been a great opportunity. We think it can continue to be one. And we are — we’ve seen nothing — Michigan, we have the best laboratory in that. Michigan gives us confidence that going forward, we can replicate some of that in any of these other states, I think we’ll be in great shape.

Operator: The next question is Steve Wieczynski from Stifel.

Steven Wieczynski : So actually I want to ask about your regional assets. And obviously, there’s a fear out there in the investment world that at some point, some of these consumers could start to slow down. And we’ve heard from a lot of your peers so far that there really hasn’t been any softness as of yet. And I just want to understand, have you guys seen the same fundamentals there, meaning no real weakening? And then also, margins were impacted by the inclusion of nongaming amenities in the quarter. I’m just wondering, how much more of that potential margin headwind could those present going forward?

Bill Hornbuckle: So let me take the top end of that and Corey, you can speak to the margins. We have several different kinds of regional properties. And so Maryland this year had an all-time record and then some. It was fantastic. We always dream at that property making over $300 million, and it did. And I know I’m getting dirty looks some of my folks, but — and it did. Atlantic City, given all of the competitive set and the reawakening of Hard Rock and what happened with Oceans, it’s a highly competitive market, and we’re holding our own and that property continues to do the same kind of EBITDA. It’s done traditionally no matter where the marketplace has been. It’s kind of interesting. Detroit, as I just mentioned, continues to do well.

We saw a little softening with Empire as it came out of COVID. Springfield has enhanced and been improving. Look, obviously, it will be the place that I think any major recession activity shows. But I will say, to date, particularly up until and through January, we haven’t seen it. So Corey…

Corey Sanders : Yes. On the other regional properties, mainly in the third quarter, we increased on many of our nongaming amenities. And I think we’re to the level where we’re comfortable with what we have for our guests. So from an additional margin impact on that, I don’t think there’s much there. And then just on the business. December had a little bit of softness, as Bill mentioned, but what we’re seeing in January and February so far as all of our regional markets are performing extremely up.

Steven Wieczynski : Got you. Good to hear. And then second question real quick, and it’s more of a follow-up here. But going back to Macau, it sounds like, Bill, I think you said — or Hubert said this, you were doing about 5 million a day during Chinese New Year. And again, I’m not sure if this was you, Bill or Hubert, but did I hear you say that even after Chinese New Year, which, look, I know it’s only, let’s call it, 7 days or so, but you’re still somewhere in that ballpark?

Bill Hornbuckle: Yes, it was me. I said 5 million during Chinese New Year, but no — but we are at a great pace and a great place. And so no, but that’s extreme. Having said that, it’s still very profitable, and this last — it’s been 5 days or 6 days, whatever it’s been, but it’s been good. And so — but no, I mean, Chinese New Year is one — it’s a unique environment, it happens once a year.

Steven Wieczynski : Okay. Yes, I was just making sure I was not going to…

Bill Hornbuckle: Don’t do 5 million a day times 365.

Steven Wieczynski : It’s already done. Thanks, guys.

Operator: And our next question will be from Dan Politzer from Wells Fargo.

Daniel Politzer : So first question, just on Macau. It’s a two-part question. The 16% share you guys called out, to what extent do you think that’s sustainable? And if you can maybe parse that out, how much of that step-up has been driven from growth in mass or premium mass or direct VIP versus pre-COVID. And then that quarter-to-date comment about the MGM China properties, the highest earning business in the company. I mean should I — if I kind of go back and piece together some math, should I interpret that that they’re pacing well over $100 million of EBITDA for the first quarter?

Bill Hornbuckle: No, no. For the month. Not the quarter, for the month. So you could think about it — if we put them together, it would be the highest EBITDA property we had for the month in our system. Way to think about it. And so Hubert, you can kick in here. Obviously, you’re living this every day on the continuity of going forward.

Hubert Wang : Yes, Dan, in terms of the market share question you asked, it’s too early, but to give you a definitive answer or whether it’s sustainable or not, but they are the things that ahead of us because as you know, we have additional tables, almost 200 additional tables. And we haven’t fully deployed all these tables yet. We’re in the process of doing that, along with some casino floor reconfiguration. So we plan to deploy all these tables by the end of first quarter. And I think that, that’s number one. Number 2 is that in the retendering commitment in terms of investment, we also have a lot of, I think, earning accretive projects. And I think that these offerings that will drive additional traffic. I mean just to give you some color on the nongaming side for Chinese New Year, I mean, our own occupancy approached 100% and our restaurant covers actually exceeded 2019 Chinese New Year level.

And a lot of that was because of all the nongaming events and concerts that do a lot of incremental visitors to us. And we’re also seeing a longer stay by our hotel customers. I think that as we invest more in these nongaming amenities, well, that will help with our market share growth down the road or sustain at that level.

Daniel Politzer : Got it. And then just for my follow-up, this is for Jon. On the pace of buybacks, obviously, you have the new $2 billion authorization, I mean, it sounds like trends are very stable, if not outright encouraging. I mean to what extent would you feel more comfortable giving kind of a quarterly pace of buybacks. And then also, I think it was last quarter or maybe a couple of quarters ago, you mentioned kind of a decelerating pace of buybacks. So given the outlook on Vegas, is there kind of a run rate we can think about here?

Jonathan Halkyard : I don’t want to give a quarterly pace. I do think you can look at our pace over the preceding four quarters. I think we actually did a bit more in the fourth quarter than we did in the third quarter. And so all I would say is that we have a healthy authorization from our Board. I hope I was able to communicate during the prepared remarks, the value we see in the shares. And despite all of the opportunities we have before us, the liquidity position the company has is going to allow us to continue to be an active share repurchaser. Beyond that, Dan, I just don’t want to give any more specific outlook.

Operator: And our final question will be from Jordan Bender from JMP Securities.

Jordan Bender : Can you just talk about the contribution from Far East play during the quarter in Las Vegas? And then what do bookings look like from Far East play for this point — or for this year at this point?

Bill Hornbuckle: You’re referring to the fourth quarter or Chinese New Year?

Jordan Bender : Fourth quarter and then, I guess, quarter-to-date as well.

Bill Hornbuckle: I can — I know the Chinese New Year number fairly well. Corey, I’ll lean on you for the fourth quarter. Last year, Chinese New Year, we had about 35 million in sale. This year, that number was just under 100. And so the opportunity and what that opportunity provided us this year was 3x what it was last year. And so while not back at the ’19 levels or ’18 levels. It was meaningful.

Jonathan Halkyard : And the Far East play during the fourth quarter, it was up about at least 1/3 over the fourth quarter of 2021 and constituted pretty much all of the growth in our international play during the fourth quarter. So very encouraging.

Operator: 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.

Bill Hornbuckle : Thank you, operator. I just want to thank everyone for joining us today. I know it gets late back on the East Coast. Just a couple of thoughts. Obviously, we continue to show organic growth here in Las Vegas, particularly in our premium product, our luxury brands. If you think about Aria and Bellagio last year that made over $1.2 billion in cash flow, and we see hopefully that sustaining. You think about now Macau and the returning and I think our 200 extra tables will make a difference throughout the course of this year. You think about our development pipeline. You think about both brick-and-mortar digital. I would say, without any disparaging comments to our competitors, that we think about the balance of regional location, domestic location, Las Vegas, international, digital, we are the most well balanced and prepared for growth.

We have no net debt. We have — we’re sitting at about $5.3 billion of cash liquidity. And since Jonathan and I have joined the senior roles, the company has bought back over 25% of its shares, and all of it on the back of an amazing team that we’ve put together here that’s got extensive experience over many decades in many different jurisdictions. And so to say I’m excited by our future would be an understatement. I thank you all for your attention and most importantly, your support. So thank you.

Operator: Thank you, sir. The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.