Net income up 1,599%

MGM sees revenue up 44% to $3.3B in Q2 amid record Vegas performance, sustained customer demand

Bill Hornbuckle, MGM CEO and President.
Reading time 3:52 min

Casino and hospitality giant MGM Resorts International has posted its results for the second quarter of the year, delivering consolidated net revenues of $3.3 billion, up 44% from $2.3 billion in Q2 2021. The company announced record quarterly pre-tax earnings for its Las Vegas properties just one day after fellow gaming giant Caesars Entertainment did the same thing.

MGM has reported $825.3 million in adjusted EBITDAR at its Vegas properties for the three months ending June 30, up a whopping 108% from the same quarter last year ($396.8 million). Overall, the company delivered a net income of $1.78 billion, up an impressive 1,599% from $104.8 million last year.

"Our second quarter results were outstanding, representing the best ever Adjusted Property EBITDAR quarter at the company's Las Vegas Strip Resorts and best second quarter Adjusted Property EBITDAR at our Regional Operations driven by consistent strong demand from the leisure consumer and a return from our convention customers," said in a press statement Bill Hornbuckle, CEO and President.

In a call with investors, Hornbuckle restated his enthusiasm for the results, calling them “nothing short of spectacular.” The CEO also said he is confident in the company going forward, which he believes is well-positioned, even if the US economy slips into a recession.

“We’ve built an incredibly agile business over the last few years due to COVID and other factors and we will adjust and pivot quickly if we see any signs of consumer demand slowing,” Hornbuckle said, according to Las Vegas Review-Journal.

The big jump in MGM’s net income was mostly driven by the deconsolidation of MGM Growth Properties, a real estate investment trust that was bought out by Vici Properties for $17.2 billion. The deal provided $4.4 billion in cash to the company, which invested back in the business by buying the operations of The Cosmopolitan of Las Vegas for $1.6 billion.

Hornbuckle told investors the transaction is already showing promise, with the property having already generated a little under $60 million in pre-tax earnings in just the six weeks MGM owned it in the second quarter. But the Vici transaction has also helped the casino giant in other regards, such as buying back shares of its stock.

The company repurchased 32.4 million shares – or 8% of outstanding shares – in the second quarter for $1.1 billion, and has bought back 104 million shares for $4 billion since the start of 2021. This is about 31% of the company’s market capitalization.

“We’ve been aggressively repurchasing our shares over the past 18 months because of the value we see at current trading multiples,” Jonathan Halkyard, MGM Resorts’ Chief Financial Officer, told investors, according to Review-Journal. The execution of its asset-light strategy is also allowing the company to accumulate domestic cash in excess of debt on its balance sheet.

Going forward, MGM expects to bring in more cash from the sale of operations of The Mirage on the Strip, and the Gold Strike Tunica in Mississippi, the latter deal announced in June. Additionally, Hornbuckle said the firm looks to the future with optimism as its convention and event calendar for the next year remains “notably strong,” and BetMGM “continues to be a market leader with a roadmap for growth.”

Macau and gaming in Asia

While business is good in the US, the company continues to weather a storm in Macau, much like the rest of the operators in the city. The gaming hub has consistently been hit by several travel restrictions in relation to Covid-19, most recently a 12-day casino shutdown that occurred after the second quarter.

For Q2, MGM China’s net revenue was $143 million, a figure down 54% from the $310.6 million delivered the same quarter last year. But the drop is even bigger when compared to the $706.1 million in the second quarter of 2019, before the pandemic, which goes to prove the extended effect Covid-19 has had in the city.

While casinos have now been allowed to go back into business, and China has reopened the border with Macau and resumed quarantine-free travel after a drop in Covid cases, experts believe it might take a few months for meaningful recovery to settle in. The city saw in July its worst-ever month for the casino industry, with gross gaming revenue falling 95% to 398 million patacas ($49 million).

Despite this, Hornbuckle said MGM remains “confident” in the future of the city. “We are proud to be partners in shaping the future of one of the world’s premier tourist, entertainment and gaming destinations,” the CEO commented.

MGM Macau

Asia could play a growing role in the company’s operations, which is advancing plans for an Integrated Resort in Osaka, Japan. If greenlighted for the $8.3 billion project, MGM hopes to see foundation work take place in late 2023. A decision from Japan’s government is expected around October this year.

“We have a keen interest and will invest several billion dollars in Japan if we are given the opportunity, and that will be another cornerstone for us in Asia,” Hornbuckle said, in conversation with investors. But MGM’s CEO also outlined the company’s interest in a potential development in Thailand, should a push to legalize casinos take place

“We will watch, like everyone, what happens in Thailand, or anywhere else for that matter. But we like where we are and we’d like to be in Japan at scale,” the executive added. However, he declined to comment on recent reports suggesting MGM had expressed an interest in acquiring a stake in Genting Singapore, operator of Resorts World Sentosa.

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