International edition
April 22, 2019

The results reflect the firm's fiscal quarter ended September 30

Mohegan Gaming & Entertainment announces 2018 Q4 and fiscal year operating results

Mohegan Gaming & Entertainment announces 2018 Q4 and fiscal year operating results
"Consolidated Q4 revenue and Adjusted EBITDA were below expectations. However, we acquired assets at two casinos in Niagara Falls, and we advanced development efforts in South Korea and received $107 M in repayments," announced CEO Mario Kontomerkos.
United States | 12/07/2018

"Consolidated fourth-quarter revenue and Adjusted EBITDA were below prior year results. However, we were named the winning bidder to assets associated with two casino resorts in Niagara Falls, Canada. Further, we made progress advancing our development efforts in South Korea and also received $107 M in repayments," announced Mario Kontomerkos, President & Chief Executive Officer of MGE.

M

ohegan Gaming & Entertainment, developer and operator of global integrated entertainment resorts, including Mohegan Sun in Uncasville, Connecticut and Inspire Korea in Incheon, South Korea, announced today operating results for its fourth fiscal quarter ended September 30, 2018.

"Consistent with the Company's updated guidance, consolidated fourth-quarter revenue and Adjusted EBITDA were below prior year results, in part due to the impact of a recent competitive opening in the Northeast gaming market. The declines in Connecticut were partially offset by stronger year-over-year EBITDA growth in Pennsylvania and in Corporate. Overall results also reflect the initial implementation phases of our previously disclosed multi-year profit enhancement initiatives, initiatives which will continue for the foreseeable future," said Mario Kontomerkos, President & Chief Executive Officer of MGE.

"The fourth quarter was also notable for the Company as we were named the winning bidder to acquire certain assets associated with two significant destination casino resorts in Niagara Falls, Canada. Further, subsequent to quarter end, we made substantial progress advancing our development efforts in South Korea and also received approximately $107 million in repayments as the result of a successful refinancing. Together, these achievements diversify and strengthen our long-term revenue sources and credit profile, and ensure the continued long-term success of MGE."

Selected consolidated operating results for the fourth quarter ended September 30, 2018 and prior year period (unaudited):

Net revenues of $347.2 million vs. $362.0 million in the prior year period, a 4.1% decrease;
Gaming revenues of $291.1 million vs. $307.1 million in the prior year period, a 5.2% decrease;
Gross slot revenues of $205.0 million vs. $213.7 million in the prior year period, a 4.0% decrease;
Table game revenues of $86.9 million vs. $94.3 million in the prior year period, a 7.9% decrease;
Non-gaming revenues of $85.0 million vs. $84.5 million in the prior year period, a 0.5% increase;
Total operating expenses of $277.7 million vs. $283.6 million in the prior year period, a 2.1% decrease; and Adjusted EBITDA of $94.5 million vs. $102.0 million in the prior year period, a 7.3% decrease.

Consolidated net revenues declined modestly during the quarter, primarily driven by a softer July gaming performance, a challenging year over year comparison in gaming revenues at Mohegan Sun in September of 2017, and continued increases in promotional activity in the Mohegan Sun Pocono gaming market. These factors, as well as increases in slot taxes assessed by the Commonwealth of Pennsylvania, contributed to the year-over-year decline in Adjusted EBITDA. Though early in the competitive cycle, the impact of new competition in the New England region has been in-line to slightly better than expected. Total operating expenses were lower than prior year driven by the benefit of the implementation of cost reduction programs. These savings were partially offset by increased costs associated with higher healthcare expenses and utility costs.

Net revenues declined modestly during the quarter, primarily driven by softer overall gaming revenues early in the fourth fiscal quarter and a challenging comparison in the month of September 2017. Overall non-gaming revenue increased during the quarter, driven by better entertainment revenues – especially notable given one less headliner this year in comparison to last year. Additionally, food and beverage revenues were also higher in the period, partially offset by lower tenant revenues and hotel revenues. Overall, Mohegan Sun experienced a decrease in Adjusted EBITDA primarily due to softer gaming revenues, higher health care expenses, and higher overall utility costs in the quarter. Adjusted EBITDA margin decreased to 27.3% for the quarter ended September 30, 2018, from 30.7% in the fourth quarter of fiscal 2017.

Net revenues declined by $5.7 million, or 8.0%. Overall revenues were impacted by lower gaming revenues, which reflect our efforts to manage profitable guest trips and continued aggressive promotional activity from a regional competitor. The year-over-year increase in Adjusted EBITDA primarily reflects the impact of a $3.2 million charge in the fourth quarter of last fiscal year related to the finalization of a repayment schedule to the Pennsylvania Gaming Control Board that was required by all operators in Pennsylvania. Overall EBITDA was adversely impacted from lower revenues, due in part to lower table hold in the quarter, and from higher slot taxes driven, in part, by a 1% increase in slot taxes assessed by the Commonwealth of Pennsylvania that went into effect on January 1, 2018. These results were partially offset by a reduction in gaming costs and expenses, including lower payroll costs and certain casino marketing and promotional expenses, as well as lower costs related to Momentum Dollar redemptions at Mohegan Sun Pocono-owned outlets. Adjusting for the incremental 1% slot tax as discussed above and table hold in the period, overall Adjusted EBITDA at Mohegan Sun Pocono would have been approximately $1.25 million higher. Adjusted EBITDA margin increased to 21.8% for the quarter ended September 30, 2018, from 16.0% in the fourth quarter of fiscal 2017.

Adjusted EBITDA for the quarter ended September 30, 2018 reflects decreased consulting costs associated with our various diversification initiatives. The decrease in net revenues was primarily driven by lower development and consulting fees, partially offset by higher management fees at ilani Casino Resort driven by continued improvement in performance at the property.

Other Information

Liquidity
As of September 30, 2018, MGE held cash and cash equivalents of $103.9 million, compared to $89.0 million as of September 30, 2017. As of September 30, 2018, $66.0 million was drawn on MGE's $250.0 million revolving credit facility, while no amounts were drawn on MGE's $25.0 million line of credit. As of September 30, 2018, letters of credit issued under the revolving credit facility totaled $2.3 million, of which no amounts were drawn. Inclusive of letters of credit, which reduce borrowing availability under the revolving credit facility, MGE had approximately $181.7 million of borrowing capacity under its revolving credit facility and line of credit as of September 30, 2018.

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