MGM Resorts International reported record performance by both its China and Las Vegas businesses, which drove the quarterly revenue at a record record of $4.83bn in Q1.
The group’s revenue for the quarter ending 31 March was up 13.2% on an annual basis. MGM’s operations in China, Las Vegas and the rest of Regional more than compensated for a drop within that business.
MGM’s primary revenue source is Las Vegas, even though casino revenues fell slightly in Q1. A 10.0% increase in hotel revenues more than compensated for the decline, pushing MGM’s revenue to new quarter highs.
In China, revenue also reached a record high in Q1, breaking all previous records. MGM continues to grow and recover in China, following the removal of pandemic restrictions early in 2023.
The news was less than positive for Regionals, including the BetMGM-Entain joint venture. The bad weather in the US throughout Q1 affected revenue. When it comes to the outlook, however, operator has a much more positive attitude, talking about current growth and prospects for future.
Bill Hornbuckle, MGM’s chief executive officer and president, said: “We are pretty happy and excited about that.”
It speaks of the diversity and strength of our company, including our Las Vegas properties, regional assets, Macau and, we think, ultimately, digital.
MGM targets self-sustaining digital business
Hornbuckle, speaking more specifically about BetMGM’s digital segment, says that the ultimate goal is for the company to become self-sustaining with all features and products being provided in-house.
BetMGM’s growth continued in Q1 with its launch in North Carolina at the Charlotte Motor Speedway. Hornbuckle also spoke about BetMGM’s success in the UK. Meanwhile, LeoVegas is seeing improvement in Sweden and is, according to Hornbuckle, on the rebound.
As part of the ongoing strategy for expansion, BetMGM also announced this week that it will launch in The Netherlands.
Hornbuckle explained, “There were a number of licensing procedures that involved us and others. This was their main market.” LeoVegas has recovered. BetMGM UK is performing exceptionally well. There’s a strong presence of ours. We’re also excited about this. Yesterday, BetMGM’s soft launch in The Netherlands was the first of its kind.
Our digital strategy is the same. We want our site to become self-sustaining, which includes producing games and products.
Casino revenue tops $2.24bn in Q1
MGM’s revenue for the first quarter was dominated by casino operations in all of its regions. Revenues grew 19.1% to $2.24bn.
Food and beverage revenue increased 6.6%, to $769.4m. Rooms revenue also rose 12.7%. MGM’s entertainment, retail, and other revenues fell 1.3%, to $404.4m. However, MGM reported $12.2m of reimbursed expenses.
Las Vegas Strip revenues reached $2.26 billion, an increase of 3.6%. The casino revenue, at $498m was slightly lower due to lower slot handle and winning, but was helped by an increase in table game handle and subsequent wins.
In Q1, hotel revenues in Las Vegas were 10.0% more than in the previous quarter, at $827m. The occupancy rate increased from 92.0% up to 93.0%. Average daily rates also rose to $277.
Revenue for the Regional division fell 4.5%, to $685m. Slots reported the largest decline. MGM reported that this drop was partly due to bad weather in some US markets during Q1.
MGM China saw its revenue soar 71.0%, to $1.06bn. The 65.8% increase in revenue from casinos was a major factor in this. This is primarily due to the normalization of operations after the Covid-19 restrictions were lifted in January 2023.
Gold Strike Tunica Sale Impacts Bottom Line Comparables
Operating costs in Q1 were up 27.2% at $3.90bn. Casino costs were the largest expense for MGM, at $1.27bn. General and administrative expenses followed at $1.19bn.
MGM also reported an additional $115.0m of non-operating expenses, which included $110.0m in interest costs. This left MGM with a profit before tax of $343.4m. That’s 46.8% less than last year.
The decline in revenue was partly due to the effect of CNE Gaming Holdings’ purchase of Gold Strike Tunica Resort, in Mississippi in February 2023. MGM generated additional funds in the same period of last year.
MGM reported a loss of $82.3m from non-controlling interest in Q1 2018. MGM had paid income taxes totaling $43.7m and incurred a tax bill amounting to $43.7m. The net profit was $217.5m. This is down 53.4% compared to Q1 2023. Again, this can be attributed in part to the Gold Strike Tunica transaction.
The adjusted EBITDA for the consolidated business was $1.23bn. A comparable number was not given.
Hornbuckle stated, “In summary, I’ve used this word before, but this quarter it was probably the most prevalent, the diversification our products and our business.”
Macau has done a lot of work this quarter. Las Vegas was able to hold its own. Regionals are recovering. “The digital business is fully funded, and we are looking forward to seeing what it will do in the future.”
Analysts continue to be “bullish” about MGM
MGM EBITDA for Q1 was 2% higher than what analysts at Macquarie Group expected. MGM shares are currently trading around 5.7x the amount that Macquarie Group predicts MGM will earn in 2025. MGM’s EBITDA was also 3% higher than Truist Securities and 5% above Wall Street estimates. Truist Securities and Wall Street also exceeded their predictions on net revenues.
Macquarie’s “bullish outlook” on MGM was based in part on its 58% exposure to Las Vegas. MGM owns more land along the Las Vegas Strip than any other operator.
Macquarie’s analyst note stated that MGM is located in the epicenter of global sports and entertainment, with its luxurious offerings.
Truist also stated that MGM China had “driven the beat” of MGM’s expectations. MGM China exceeded Truist’s Q1 EBITDA estimate by 6%. Truist expects MGM to maintain “steady growth” in its land-based business, and Las Vegas to be on the upswing thanks to the deal it has with Marriott International.
Macquarie cited MGM’s solid balance sheet, and lofty goals of becoming a digital leader in the world, as reason for its confidence in its future. The company is well placed to grow digital businesses in New York, Japan, and other locations.
Truist did not make any major adjustments to their model, but only made minor changes in its estimations. Truist and Macquarie both kept the price at $58.
Macquarie cited an unanticipatedly high marketing expense, and the fact that it is becoming more costly to maintain market share in the US as possible risks the company will have to manage going forward.
