MGM Resorts has firmly put to rest any speculation regarding takeover discussions with its major stakeholder, Barry Diller's People Inc., following the release of its third-quarter financial results. During the conference call on Wednesday, CEO Bill Hornbuckle announced that both companies have decided against pursuing an acquisition of one another, marking the end of negotiations that were a significant factor in MGM’s recent financial considerations.
Initially, People Inc. put forth a substantial offer on June 1 to acquire the remaining 74% of MGM's shares at $48.30 each. Despite these discussions lingering for months, People rescinded its offer on September 23, leading to rumors that MGM might consider buying People instead. Hornbuckle clarified this assumption: "We’re going to refocus on our business, the dialogue back and forth between us and People on you-buy-us, we-buy-you… we’re done, and that’s our position and that’s People’s position."
On the same day, MGM announced that it had reached a new voting agreement with People. This new pact limits People’s ownership of MGM to 29.9% and obligates them to vote according to the board’s recommendations regarding any change in control transactions. In return, MGM agreed not to adopt any measures that could negatively impact People or Diller.
For Q3, MGM reported revenue of $4.2 billion, reflecting a slight decrease of 1% year-over-year. The company's adjusted EBITDA fell by 20% to $403 million, while it successfully reduced net losses to $17 million from $285 million a year prior, with losses per share improving from $1.05 to $0.07.
Despite the financial adjustments, MGM's stock dipped 2.5% during trading on Wednesday, closing at $27.27. After the speculative takeover rumors had sent shares soaring above $50 in June, the stock has been on a downward trend, plunging 25% this year and 42% over the last five years.
Analysts on the call expressed significant concerns about MGM's Las Vegas performance, which saw revenues decrease by 2% to $2 billion and adjusted EBITDAR decline by 12% to $531 million. The downturn is primarily linked to non-gaming revenue, where both average daily rates and revenue per available room (revPAR) fell by 8%. However, on a brighter note, table games revenue surged by 17%, generating $363 million.
Hornbuckle noted that while the current Las Vegas market is performing better than historical standards, with EBITDAR for the past year up 70% compared to 2019, analysts remained skeptical given the continued decline in revPAR over the past eight quarters. "Undoubtedly, Las Vegas has been hurt more than most (travel markets)," he acknowledged, attributing some struggles to international travel challenges and stating that they need to tackle these issues gradually.
MGM continues to focus on its premium properties, including Bellagio and Cosmopolitan, during this downturn, and also addressed lower-tier operations, which have faced challenges in recent quarters, partly due to broader economic conditions. Hornbuckle hinted at the necessity for relief in fuel, gas, and airline prices, but expressed optimism for a stronger fourth quarter compared to the previous season.
In the regional market, MGM reported revenues of $883 million, an 8% decrease from the previous year, and adjusted EBITDAR dipped 18% to $243 million. Although casino revenues overall fell by 10%, with slot winnings down by 11%, COO Ayesha Molino emphasized the commitment to efficiently manage operations across their properties.
The company anticipates future benefits from the upcoming 6,000-seat Sphere entertainment venue being constructed in Maryland, adjacent to MGM’s National Harbor casino. The Prince George’s County Council recently approved up to $215 million for this $1.4 billion project, slated to open in 2030.
MGM’s financial health remains stable, with the quarter ending with $2.3 billion in cash against $5.6 billion in long-term debt. CFO Jonathan Halkyard revealed that MGM has over $1 billion left for stock buybacks but opted not to repurchase shares during Q3 amid ongoing acquisition discussions.
In international operations, MGM China achieved a record quarterly revenue of $1.1 billion, a 5% increase from the prior year. Its market share reached 17%, another record, despite adjusted EBITDAR sliding 7% to $264 million. Kenneth Feng, CEO of MGM China, acknowledged various factors affecting their profit margins but affirmed their focus on efficiency.
Additionally, progress on MGM Osaka is ongoing, with the project being the only casino license currently in Japan and expected to open in 2030. Hornbuckle reported that the development is about 11% complete, remaining on schedule and within budget. He described it as the "greatest integrated resort opportunity anywhere on the globe," comparing it favorably to other regional hotels. MGM indicated that Osaka was projected to attract more visitors than Singapore by 2025.
