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In-line wasn't good enough for Q3 but Q4 off to strong start


"Our forward booking trends remain strong both for our consumer retail segments and corporate events.”

Jim Murren, MGM Resorts International Chairman and CEO

CONF CALL NOTES

  • Continue to see consistency in this recovery
  • 13% RevPAR growth beat their forecast for 10% RevPAR growth - outperformance due to better results in FIT and Leisure segments
  • Convention business is particularly strong.  September was one of their best booking months ever. 
  • October was the most profitable month that they have ever had in Las Vegas and a record month in Macau
  • Cotai: Resort would have 1600 rooms and suites, 2500 slot machines and 500 tables.  No specific date when they expect to receive their land grant issuance. 
  • US Congress is considering efforts to legalize online gaming.  They announced a joint agreement with Bwin.Party and Boyd gaming.  The poker business will be about scale and this opportunity will be the best one to capitalize on any legalization of online poker.
  • M Life continues to gain traction.  Active customers in their database increased 12% YoY this quarter.  Have also seen tier advancement - specifically a 13% increase in their platinum players and a 7% increase in their NOIR players (highest tier). 
  • Have 17 projects at MGM Hospitality at various stages of development.  First one is opening in a few months.  Just announced a development in Mumbai. 
  • Low hold impacted their CF by $16MM- Aria held high, helping them by $5MM.  Net net their EBITDA would have been $255MM if they held at the mid-point of 'normal'.
  • Table game volume ex Strip was up 1-2%
  • Net RevPOR grew a little more than 3% in the Q.  Retail room rates experienced the best increase - up double digits. 
  • Late November/early Dec opening of their VIP in-house gaming area in Macau
  • Spent $78MM of capex (excluding $14MM in MGM China)
  • Expect to spend $275MM in capex in 2011 - completion of room remodel in Bellagio
  • Luxor and Excalibur are in the process of opening 8 new F&B - 3rd party operated partners
  • City Center:
    • Aria: Hotel revenues were up 20%, F+B revs increased 11%, table game volume ex bacc were up 6% and slot was up 24% YoY
    • 2012 and beyond booking pace continues to strengthen
    • Vdara: $131 RevPAR
    • Crystals: SS sales up 27% YoY - 2nd highest sales per SQFT. 86% is under lease. DG is scheduled to open early next year
    • 374 units are leased for residential inventory
    • Feb 4, 2013 trial date vs. Perini
    • $100MM of pre-payments to the credit facility in September and October
  • Have a lot of events in the 4Q which should help them - have 2 new nightclubs openings.  Feel comfortable that RevPAR will increase 10% in the 4Q.  With best gains in FIT.
  • Expect to see an acceleration of CF growth in 2012. 

Q&A

  • 2012: 1Q is a tough convention comp. They expect FY 12' to be at or slightly above where they are in 2011. Pricing is up but volume is down in 1Q.
  • Bellagio is having a tremendous 4Q for RevPAR
  • Aria - up 40% for 2012 Convention Bookings
  • MGM Macau - Since the completion of their construction of the new lounge, they have seen 12-13% improvements per square foot yields.  Still seeing very strong growth in VIP revenues which should continue as they bring on new direct VIP area. 
  • EBITDA impact for rooms out of service at the Bellagio? 
    • At least $1MM of CF impact from 300 rooms out of service
    • Selling rate for the renovated rooms are $30/night higher
    • Renovations for 2,570 rooms
    • $70MM Capex project
  • MGM Grand remodel program is starting now: $160MM remodel program - 4,300 rooms.  700 rooms out of service at any point in time.  Expect to get a $10-20 increase in ADR.
  • MGM Grand benefits during the summer because of their pool.  Also had a lot of events at the property.
  • FIT numbers are still materially lower than peak and a little below last year.  60% flowthrough is pretty good. If they held better, the flowthrough would have been better.
  • M Life should also help them going forward
  • 2012 will be even better from an event standpoint than 2011
  • Highest priority is for MGM to improve the balance sheet. The refinance gives them maximum flexibility - to issue $300MM more of secured paper (removed a cumbersome covenant).  High priority on lowering their cost of capital. Refinancing Macau's credit facility is also a top priority.
    • At a high level - every point of interest savings is $100MM of FCF to them 
    • Will save a lot when they redo their credit facility next Q
    • Will retire the NY notes which are at 13%
    • Expect to see a dramatic reduction on their interest
  • Last year's hold % for Aria was 23% and this year it was 27%
  • MGM China dividend?
    • Will be debt free in that operation this quarter.  Clearly an objective of the board to balance growth and shareholder returns at MGM China.  Will have numerous opportunities to dividend back money to shareholders and to investment in Macau.
  • Flow through on mid-single digit range revenue growth.  Objective is to keep their costs flatish in 2012. 
  • Decrease in baccarat volumes in the quarter?
    • Just a matter of when their players come in. The tone of that travel is strong. Think it was just a timing issue
    • Expect strong baccarat play in 4Q and 1Q12'
  • October strong Vegas performance was broadly based: strong casino play, Bellagio had strong revenue growth
  • No comment on Cotai costs.  Given the size of the property, just look at the recent comps like Galaxy.
  • Shovel ready in Cotai?
    • Ready to do site work right away as long as they get permission
  • Convention mix in 3Q was 12% and will be about 14% in 4Q; YE at 14.5%; 15% in 2012; while Aria's convention mix will be about 16.5%.
  • Bellagio is up double digits even on unrenovated rooms at Bellagio
  • Leisure mix was around 40% and expect it to stay around there in 2012.  Trying to squeeze the gap between FIT and Leisure.  Commissions on leisure still the same.
  • Just completed planning the Luxor, Excalibur, and NY - but mostly in the public areas for those properties
  • Post MGM Grand, they will do the spa Tower at Bellagio (built in 04') Luxor/Excalibor, and the Hotel at Mandalay Bay.  Expect that rooms will be out of service for a while. 

HIGHLIGHTS FROM THE RELEASE

  • $2.2BN of consolidated net revenue and $444MM adjusted EBITDA
  • Las Vegas Strip resorts saw a 13% RevPAR increase
  • "The overall table games hold percentage in the third quarter of 2011 was near the low end of the Company’s normal range of 19% to 23%. The overall table games hold percentage in the prior year was near the mid-point of the Company’s normal range.  Slots revenue increased 4% compared to the prior year quarter, with an increase of 6% at the Company’s Las Vegas Strip resorts."
  • "In the current quarter, the Company recorded an impairment charge of $80 million (or $0.11 per share, net of tax) related to Circus Circus Reno... related to the carrying value of its long-lived assets"
  • MGM China: Adjusted Property EBITDA $139MM
    • "We are extremely pleased with our Cotai development plans while at the same time have some exciting expansion opportunities within our existing MGM Macau property.”
  • CC Adjusted Property EBITDA: $50MM
    • Net revenue: $255MM
    • Aria Adjusted Property EBITDA: $40MM
      • "Hold percentage was above the high end of its normal range in the current quarter, but lower than the prior year hold percentage by approximately 400 basis points"
      • RevPAR: $173 (ADR: $200/ Occ: 87%)
    • Vdara: $5MM of adjusted property EBITDA
    • Crystals: $6MM of adjusted property EBITDA
  • "In September 2011, the Company borrowed an additional $879 million under its senior credit facility to increase its capacity for issuing additional secured indebtedness; these borrowings were repaid immediately after quarter end. As a result, the Company had a higher than normal cash balance at September 30, 2011 of $1.8 billion, which also included approximately $494 million of cash and cash equivalents related to MGM China."
    • At 9/30: $551MM outstanding on MGM Macau's R/C