MGM Resorts reported a record Q2 group revenue of $4.5 billion on Wednesday, representing a 1% increase from the previous year. Despite this milestone, concerns over Las Vegas’ market health and a pending takeover bid from Barry Diller’s People Inc hovered over the company's earnings report.
During a call with analysts, MGM CEO Bill Hornbuckle indicated that an independent committee is still reviewing Diller’s offer of $48.30 per share, made on June 1, shortly after Caesars Entertainment was acquired by Fertitta Entertainment. Hornbuckle expressed confidence in the board's ability to choose the best course for the company and its shareholders but refrained from discussing the offer further.
In addition to the group revenue record, MGM reported an adjusted EBITDA of $610 million, a slight decline of about 6% year-on-year. The company's net income soared to $292 million from just $49 million a year earlier. As of the quarter's end, MGM held $2.5 billion in cash against $6 billion in long-term debt.
In Las Vegas specifically, revenue hit $2.2 billion, and adjusted EBITDA reached $735 million, both up 3% year-over-year. However, analysts were keen to address the company’s strategy to strengthen the low-end market, particularly concerning the Luxor and Excalibur properties, which have faced challenges.
Ayesha Molino, COO of MGM, remarked on the robust performance in the luxury segment, noting that while the lower-end properties struggle, recent promotions have achieved positive reception. In March, MGM introduced all-inclusive two-night packages at Luxor and Excalibur for $330, which Hornbuckle claimed helped stabilize occupancy rates.
With travelers increasingly wary of rising expenses in Las Vegas, Hornbuckle acknowledged previous missteps, referencing a viral social media incident over a $26 bottle of water at MGM's Aria casino. He stressed that current promotional efforts, including the new all-inclusive package, are intended to address these pricing complaints. More than 30,000 room nights were booked under this promotion, he affirmed.
Additionally, MGM’s casino revenues for the quarter reflected solid growth, with a 17% increase year-on-year to $536 million. The company's slot and table hold rates stood at 9.6% and 29.6% respectively, outperforming average rates reported for the Strip by the Nevada Gaming Control Board.
Looking ahead, Hornbuckle and CFO Jonathan Halkyard indicated that renovations are being considered for the Aria and Cosmopolitan casinos, although details regarding costs and timelines were not disclosed.
Meanwhile, on the regional front, MGM recorded same-store quarterly revenue of a record $904 million, despite a 4% drop in net revenue to $924 million and a 9% decline in segment-adjusted EBITDAR to $280 million. The sale of MGM’s Northfield Park racino in Ohio for $546 million in April followed the company's exit from the New York casino license race last October. There are no immediate merger or acquisition plans, according to Hornbuckle.
Renovations at the Borgata casino in Atlantic City and Beau Rivage casino in Mississippi are set to begin later this year, as both have been significant contributors to the recent record regional revenue.
Also discussed was the Sphere Entertainment venue under construction near Washington, D.C. Hornbuckle expressed enthusiasm about its potential to boost tourism for MGM National Harbor. Sphere Entertainment’s CEO James Dolan mentioned that the venue is on track for a 2030 opening, but no further updates were provided on the timeline.
In Macau, MGM China reported stagnant revenue of $1.1 billion year-over-year, with segment-adjusted EBITDAR dropping 15% to $257 million. This decline was partly attributed to high-roller withdrawals during the FIFA World Cup. Kenneth Feng, MGM China's CEO, highlighted efforts to optimize yields rather than solely increasing promotions.
In digital operations, MGM Digital saw a 20% revenue jump to $196 million. However, adjusted EBITDAR losses widened to $31 million from $26 million the year prior. Notably, revenue from the BetMGM joint venture with Entain climbed 3% to $711 million, driven by an 8% increase in iGaming revenues. Despite flat performance in online sports betting, Hornbuckle dismissed concerns regarding whether BetMGM is being fully utilized within the joint venture framework.
MGM’s adjusted earnings per share stood at $0.59, slightly below analysts’ expectations of $0.63. Despite this, analysts responded positively to the financial results, although shares experienced only minimal movement, closing at $45.66 on Thursday. Over the past year, MGM’s stock has appreciated approximately 22%.
During the quarter, MGM repurchased 4 million shares valued at about $164 million, leaving approximately $1.4 billion available for share buybacks from an existing program.
Macquarie analyst Chad Beynon maintained an outperform rating and raised the target price to $54, citing the enduring value of MGM's Las Vegas operations and an improving regional portfolio. Truist analyst Barry Jonas also maintained a buy rating, highlighting strong regional performance and a solid outlook for Las Vegas turnaround amidst ongoing challenges in Macau.
