MGM Resorts International Reports Second Quarter Financial And Operating Results

LAS VEGAS, July 25, 2019 /PRNewswire/ -- MGM Resorts International (NYSE: MGM) ("MGM Resorts" or the "Company") today reported financial results for the quarter ended June 30, 2019.

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.

"We are pleased with our second quarter results, which were in line with our expectations. Our consolidated net revenues increased by 13 percent and consolidated Adjusted EBITDA increased by 9 percent," said Jim Murren, Chairman and CEO of MGM Resorts International. "Our Las Vegas Strip Resorts saw an increase in revenues by 1 percent with non-gaming revenues up 5 percent thanks to a robust performance across our rooms, food and beverage and entertainment segments. This offset a 12 percent decline in gaming revenues, which was approximately two thirds driven by lower table games hold year over year and approximately one third driven by lower baccarat volumes. We continue to benefit from our diversified portfolio driven by strong growth in our Regional Operations and the continued ramp of MGM Cotai."

Mr. Murren continued, "We have the best portfolio of gaming assets in the U.S. with leading positions in most of our markets allowing us to outperform our competitors. We feel good about the remainder of 2019, given the strength in our convention bookings and entertainment calendar. In addition, we expect MGM 2020 will be an additional catalyst for second half earnings growth. Improvements to our operating model, through MGM 2020, also grant us better control over our fixed and variable costs, providing multiple levers to quickly respond to potential changes in business conditions. We are confident that we will achieve our 2020 targets of $3.6 billion to $3.9 billion in consolidated Adjusted EBITDA and significant growth in free cash flow through continued ramp up at our newer properties and further progress in executing our MGM 2020 Plan. We remain excited about our targeted growth opportunities in Japan, sports betting and interactive initiatives while maintaining a disciplined approach to capital allocation and creating long term value for shareholders. To that end, we bought back 11 million shares during the quarter."

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.

"During the quarter, we made significant progress on phase 1 of MGM 2020 with reductions in labor and sourcing savings," said Corey Sanders, Chief Financial Officer and Treasurer of MGM Resorts. "We are transforming the company's operating model to maximize both efficiencies and guest satisfaction. We are also empowering our leaders to make faster decisions. We feel increasingly confident that we will achieve our phase 1 Adjusted EBITDA uplift target of $200 million in 2020, compared to when we started the Plan. In fact, we now expect to realize roughly $100 million in 2019 compared to our previous guidance of around $70 million."

Adjusted Diluted Earnings Per Share

The following table reconciles diluted earnings per share ("EPS") to Adjusted EPS (approximate EPS impact shown, per share; positive adjustments represent charges to income):

Las Vegas Strip Resorts

Casino revenue for the second quarter of 2019 decreased 12% compared to the prior year quarter at the Company's Las Vegas Strip Resorts, due primarily to a 22% decrease in table games win resulting from a 413 basis point decrease in table games hold percentage and a 7% decrease in table games drop, driven by baccarat.

The following table shows key gaming statistics for the Company's Las Vegas Strip Resorts:

Rooms revenue increased 4% compared to the prior year quarter at the Company's Las Vegas Strip Resorts. Las Vegas Strip Resorts REVPAR⁽³⁾ increased 2.3% compared to the prior year quarter.

The following table shows key hotel statistics for the Company's Las Vegas Strip Resorts:

Food and beverage revenue increased 8% at the Company's Las Vegas Strip Resorts compared to the prior year quarter due primarily to the opening of new outlets at Park MGM and NoMad Las Vegas.

Regional Operations

Casino revenue increased 35% compared to the prior year quarter at the Company's Regional Operations, due primarily to the opening of MGM Springfield, the acquisition of Empire City Casino, and the acquisition of MGM Northfield Park's operations from MGP.

The following table shows key gaming statistics for the Company's Regional Operations:

Food and beverage revenue increased 18% compared to the prior year quarter at the Company's Regional Operations due primarily to the opening of MGM Springfield, the acquisition of Empire City Casino, and the acquisition of MGM Northfield Park's operations from MGP, partially offset by a decrease at Borgata.

MGM China

Key second quarter results for MGM China Holdings Limited ("MGM China") include:

• Net revenues of $706 million, a 26% increase compared to the prior year quarter. The current quarter included $316 million of net revenues at MGM Cotai;
• Main floor table games win increased 36% compared to the prior year quarter due to the addition of new-to-market tables at MGM Cotai in 2019 and a 508 basis point increase in win percentage;
• VIP table games win increased 22% compared to the prior year quarter due to the opening of VIP gaming areas in the second half of 2018 at MGM Cotai;
• Adjusted Property EBITDA increased 43% to $171 million compared to $120 million in the prior year quarter. The current quarter included $12 million of license fee expense compared to $10 million in the prior year quarter; and
• Adjusted Property EBITDA margin was 24.2% in the current quarter compared to 21.4% in the prior year quarter, increasing primarily as a result of the continued ramp up of operations at MGM Cotai and improved casino margins at MGM Macau.

The following table shows key gaming statistics for MGM China:

MGM China paid the previously announced final dividend for 2018 of $16 million in June 2019, of which MGM Resorts received $9 million, representing its 56% share of the dividend.

Corporate Expense

Corporate expense, including normal share-based compensation for corporate employees, was $108 million in the second quarter of 2019, an increase of $5 million compared to the prior year quarter. The current quarter included $9 million in costs incurred to implement the MGM 2020 Plan and $3 million in finance modernization initiative costs. The prior year quarter included $12 million of corporate brand campaign expenses.

Unconsolidated Affiliates

The following table summarizes information related to the Company's share of income from unconsolidated affiliates:

Key second quarter results for CityCenter Holdings, LLC ("CityCenter") include the following (see schedule accompanying this release for further detail on CityCenter's second quarter results):

• Net revenues were $329 million, a 4% decrease compared to the prior year quarter, due to a decrease in casino revenue partially offset by increases in rooms and food and beverage revenues;
• Casino revenues at Aria decreased 23% compared to the prior year quarter, due primarily to a 27% decrease in table games win resulting from a 431 basis point decrease in table games hold percentage and a 15% decrease in table games drop;
• REVPAR at Aria increased 6% compared to the prior year quarter to $252;
• REVPAR at Vdara increased 2% compared to the prior year quarter to $196; and
• Adjusted EBITDA from resort operations was $112 million, a 14% decrease compared to the prior year quarter.

MGM Growth Properties

During the second quarter of 2019, the Company made rent payments to MGM Growth Properties Operating Partnership LP ("MGP Operating Partnership") in the amount of $237 million and received distributions of $97 million from the MGP Operating Partnership. In June 2019, the Board of Directors of MGM Growth Properties LLC ("MGP") approved a quarterly dividend of $0.4675 per Class A share (an increase of $0.01 per share based on a $1.87 dividend on an annualized basis) totaling $43 million, which was paid on July 15, 2019 to holders of record on June 28, 2019. The Company concurrently received a $93 million distribution attributable to its ownership of MGP Operating Partnership units.

MGM Resorts Dividend

On July 25, 2019, the Company's Board of Directors approved a quarterly dividend of $0.13 per share totaling approximately $68 million. The dividend will be payable on September 16, 2019 to holders of record on September 10, 2019.

During the current quarter, MGM Resorts repurchased approximately 11 million shares of its common stock at an average price of $25.61 per share for an aggregate amount of $282 million. Approximately $1.1 billion remained available under the $2.0 billion share repurchase program as of June 30, 2019. All shares repurchased under the Company's program have been retired.

Financial Position

The Company's cash balance at June 30, 2019 was $1.2 billion, which included $437 million at MGM China and $54 million at the MGP Operating Partnership. At June 30, 2019, the Company had $14.8 billion of principal amount of indebtedness outstanding, including $1.1 billion outstanding under its $2.3 billion senior secured credit facility, $2.3 billion outstanding under the $3.6 billion MGP Operating Partnership senior secured credit facility and $701 million outstanding under the $1.6 billion MGM China credit facility.

In May 2019, MGM China issued $750 million in aggregate principal amount of 5.375% senior notes due 2024 and $750 million in aggregate principal amount of 5.875% senior notes due 2026 and used the proceeds to permanently repay approximately $1.0 billion on its term loan facility with the remainder used to pay down its revolving credit facility.

Conference Call Details

MGM Resorts will host a conference call at 5:00 p.m. Eastern Time today which will include a brief discussion of the results followed by a question and answer period. The call will be accessible via the Internet through http://investors.mgmresorts.com/investors/events-and-presentations/ or by calling 1-888-317-6003 for domestic callers and 1-412-317-6061 for international callers. The conference call access code is 5931413. A replay of the call will be available through Thursday August 1, 2019. The replay may be accessed by dialing 1-877-344-7529 or 1-412-317-0088. The replay access code is 10133186. The call will be archived at http://investors.mgmresorts.com. In addition, MGM Resorts will post supplemental slides today on its website at http://investors.mgmresorts.com for reference during the earnings call.

1.             "Adjusted EPS" is diluted earnings per share adjusted to exclude preopening and start-up expenses, property transactions, net, restructuring costs (which represents costs related to severance, accelerated stock compensation expense, and consulting fees directly related to the operating model component of the MGM 2020 Plan), gain or loss on retirement of long-term debt, currency translation gain or loss related to MGM China's U.S. dollar-denominated debt and the Company's share of mark-to-market adjustments related to CityCenter's interest rate swaps recorded within non-operating items from unconsolidated affiliates.

Adjusted EPS is a non-GAAP measure and is presented solely as a supplemental disclosure to reported GAAP measures because management believes this measure is useful in providing period-to-period comparisons of the results of the Company's continuing operations to assist investors in reviewing the Company's operating performance over time. Management believes that while certain items excluded from Adjusted EPS may be recurring in nature and should not be disregarded in evaluating the Company's earnings performance, it is useful to exclude such items when comparing current performance to prior periods because these items can vary significantly depending on specific underlying transactions or events. Also, management believes certain excluded items, such as restructuring costs and items further discussed in footnote 2 below, may not relate specifically to current operating trends or be indicative of future results. Adjusted EPS should not be construed as an alternative to GAAP earnings per share as an indicator of the Company's performance. In addition, Adjusted EPS may not be defined in the same manner by all companies and, as a result, may not be comparable to similarly-titled non-GAAP financial measures of other companies. A reconciliation of Adjusted EPS to diluted earnings per share can be found under "Adjusted Diluted Earnings Per Share" included in the earnings release.

2.             "Adjusted EBITDA" is earnings before interest and other non-operating income (expense), taxes, depreciation and amortization, preopening and start-up expenses, restructuring costs (which represents costs related to severance, accelerated stock compensation expense, and consulting fees directly related to the operating model component of the MGM 2020 Plan), and property transactions, net. Management utilizes "Adjusted Property EBITDA" as the primary profit measures for its reportable segments and underlying operating segments. Adjusted Property EBITDA is a measure defined as Adjusted EBITDA before corporate expense and stock compensation expense, which are not allocated to each operating segment, and before rent expense related to the master lease with MGM Growth Properties that eliminates in consolidation. "Adjusted Property EBITDA margin" is Adjusted Property EBITDA divided by related segment net revenues.

Adjusted EBITDA information is presented solely as a supplemental disclosure to reported GAAP measures because management believes these measures are 1) widely used measures of operating performance in the gaming industry, and 2) a principal basis for valuation of gaming companies. Management believes that while items excluded from Adjusted EBITDA, Adjusted Property EBITDA, and Adjusted Property EBITDA margin may be recurring in nature and should not be disregarded in evaluation of the Company's earnings performance, it is useful to exclude such items when analyzing current results and trends compared to other periods because these items can vary significantly depending on specific underlying transactions or events that may not be comparable between the periods being presented. Also, management believes excluded items may not relate specifically to current operating trends or be indicative of future results. For example, preopening and start-up expenses will be significantly different in periods when the Company is developing and constructing a major expansion project and will depend on where the current period lies within the development cycle, as well as the size and scope of the project(s). Property transactions, net includes normal recurring disposals, gains and losses on sales of assets related to specific assets within the Company's resorts, but also includes gains or losses on sales of an entire operating resort or a group of resorts and impairment charges on entire asset groups or investments in unconsolidated affiliates, which may not be comparable period over period. In addition, capital allocation, tax planning, financing and stock compensation awards are all managed at the corporate level. Therefore, management uses Adjusted Property EBITDA as the primary measure of the Company's operating resorts' performance.

Adjusted EBITDA, Adjusted Property EBITDA and Adjusted Property EBITDA margin should not be construed as alternatives to operating income or net income, as indicators of the Company's performance; or as alternatives to cash flows from operating activities, as measures of liquidity; or as any other measure determined in accordance with generally accepted accounting principles. The Company has significant uses of cash flows, including capital expenditures, interest payments, taxes and debt principal repayments, which are not reflected in Adjusted EBITDA, Adjusted Property EBITDA, or Adjusted Property EBITDA margin. Also, other companies in the gaming and hospitality industries that report Adjusted EBITDA, Adjusted Property EBITDA, or Adjusted Property EBITDA margin information may calculate Adjusted EBITDA, Adjusted Property EBITDA, or Adjusted Property EBITDA margin in a different manner.

A reconciliation of GAAP net income (loss) to Adjusted EBITDA is included in the financial schedules in this release. This presentation also includes references to target financial measures and achievement goals (including targeted Adjusted EBITDA and targeted net leverage), which are not presented as forecasts or projections of expected future performance.

The Company does not provide reconciliations of Adjusted EBITDA, Adjusted Property EBITDA, or Adjusted Property EBITDA margin to net income on a forward-looking basis because the Company is unable to forecast the amount or significance of certain items required to develop meaningful comparable GAAP financial measures without unreasonable efforts. These items include gains or losses on sale or consolidation transactions, accelerated depreciation, impairment charges, gains or losses on retirement of debt and variations in effective tax rate, which are difficult to predict and estimate and are primarily dependent on future events, but which are excluded from the Company's calculations of Adjusted EBITDA, Adjusted Property EBITDA, and Adjusted Property EBITDA margin.

3.             REVPAR is hotel revenue per available room.

About MGM Resorts International

MGM Resorts International (NYSE: MGM) is an S&P 500® global entertainment company with national and international locations featuring best-in-class hotels and casinos, state-of-the-art meetings and conference spaces, incredible live and theatrical entertainment experiences, and an extensive array of restaurant, nightlife and retail offerings. MGM Resorts creates immersive, iconic experiences through its suite of Las Vegas-inspired brands. The MGM Resorts portfolio encompasses 30 unique hotel and destination gaming offerings including some of the most recognizable resort brands in the industry. Expanding throughout the U.S. and around the world, the company recently acquired the operations of Empire City Casino in New York and Hard Rock Rocksino in Ohio, which was rebranded as MGM Northfield Park. In 2018, MGM Resorts opened MGM Springfield in Massachusetts, MGM COTAI in Macau, and the first Bellagio-branded hotel in Shanghai. The 82,000 global employees of MGM Resorts are proud of their company for being recognized as one of FORTUNE® Magazine's World's Most Admired Companies®. For more information visit us at www.mgmresorts.com.

Statements in this release that are not historical facts are forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995 and involve risks and/or uncertainties, including those described in the Company's public filings with the Securities and Exchange Commission. The Company has based forward-looking statements on management's current expectations and assumptions and not on historical facts. Examples of these statements include, but are not limited to, the Company's expectations regarding future results and the Company's financial outlook and the Company's ability to deliver on its 2020 targets and goals (including its Adjusted EBITDA, free cash flow and leverage targets). These forward-looking statements involve a number of risks and uncertainties. Among the important factors that could cause actual results to differ materially from those indicated in such forward-looking statements include effects of economic conditions and market conditions in the markets in which the Company operates and competition with other destination travel locations throughout the United States and the world, the design, timing and costs of expansion projects, risks relating to international operations, permits, licenses, financings, approvals and other contingencies in connection with growth in new or existing jurisdictions and additional risks and uncertainties described in the Company's Form 10-K, Form 10-Q and Form 8-K reports (including all amendments to those reports). In providing forward-looking statements, the Company is not undertaking any duty or obligation to update these statements publicly as a result of new information, future events or otherwise, except as required by law. If the Company updates one or more forward-looking statements, no inference should be drawn that it will make additional updates with respect to those other forward-looking statements.

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