MGM's net revenues up 13% in Q2, with USD 43 M in 2020 Plan restructuring costs

MGM Resorts International Thursday reported year-on-year financial results for the quarter ended June 30, 2019. Consolidated net revenues increased by 13% compared to the prior-year quarter to $3.2 billion, and operating income grew by 2% to $371 million. The second 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 amounted to $43 million, from $124 million in the prior-year quarter. Diluted earnings per share of $0.08 were down from $0.21. Consolidated Adjusted EBITDA increased 9% to $756 million in the second quarter compared to $695 million in the same period of last year.

"We are pleased with our second quarter results, which were in line with our expectations," 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."

He 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," Murren remarked.

Las Vegas Strip Resorts saw net revenues increased by 1% compared to the prior-year quarter to $1.5 billion; and an Adjusted Property EBITDA of $418 million, a 4% decrease compared to $436 million, due primarily to a decrease in table games revenue primarily attributable to lower table games hold, which had a $26 million negative impact on a year-over-year basis. Adjusted Property EBITDA margin was 28.5%, a 145 basis point decrease compared to the prior-year quarter.

In Las Vegas, casino revenue for the second quarter of 2019 decreased by 12%, 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.

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, acquired from MGP on April 1, 2019.

Adjusted Property EBITDA of $255 million saw a 34% increase compared to the prior year quarter and an Adjusted Property EBITDA margin of 28.0% in the current quarter, a 122 basis point increase compared to the prior year quarter.

Casino revenue increased by 35% 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.

As for 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. Adjusted Property EBITDA of $171 million saw 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."