Strong quarter even stronger considering low hold likely reduced wholly owned EBITDA by $20-25 million and Aria EBITDA by $10-15 million.
"We continue to see broad-based Las Vegas improvement as our Strip EBITDA increased 15%, driven by a 7% increase in casino revenues and a 5% increase in hotel revenues. A strong performance at MGM China led to another quarter of record results, driven by higher volumes in both mass market and VIP."
-Jim Murren, MGM Resorts International Chairman and CEO.
CONF CALL
- Continuation of the LV recovery
- MGM and Bellagio yielding high cash flows; Mandalay Bay will be the next beneficiary with new nightclubs and shows
- Next year, New York New York and Monte Carlo will benefit from new retail offerings
- Significant growth in database; higher bookings
- MGM Cotai - well underway; excavation largely completed; nicely ahead of schedule
- Will develop an Asian Mansion at MGM Cotai
- Prince George casino: date for public presentation will be in late Sept/Oct; final decision by year end.
- Massachusetts: final decision in April 2014
- Very active in Japan; growing consensus that gaming will be expanded there
- Korea: view is becoming more favorable
- Regional: highly competitive, increasingly crowded
- Believes Vegas will outperform regional markets
- Convention remain in-line; mix grew slightly rate grew mid single digits
- 3Q LV REVPAR guidance: +3%
- 2Q Strip convention bookings: 2nd highest in history for future bookings
- 2014 and beyond bookings are getting stronger; 2014 pace remains up double digits
- Up at least high single digits each quarter next year when you're looking at the non-CON/AGG piece of the business.
- MGM China Board will consider special dividend from time to time
- CityCenter: $1.85 BN in senior notes; $365MM cash; $72MM cash remaining from condo units
- 2Q corp expense: above guidance due to ongoing developments
- 3Q Corp expense guidance: $45-50MM
- 3Q stock comp: $6-7MM
- 3Q depreciation will be consistent with 2Q
- 3Q gross interest expense: $210MM ($5MM- MGM China, $9MM non-cash amortization)
- Aria: -$10MM EBITDA impact by low hold; best REVPAR ever at $194
- Crystals: up 21% YoY, best quarter ever
- LV real estate market improving; 45 units at Mandarin Oriental, 7 units at Veer; sold another 21 units at Mandarin Oriental
- MGM China: New VIP operator in April and new 2nd floor benefiting results
- Slot handle up 11%
- Capex: $80MM ($78MM - MGM Cotai); 2013 forecast of $290MM for Cotai
- Expect early 2016 opening
- Airlines are adding more seats to Las Vegas
- Trying to increase international visitation
- Growing Las Vegas market share
- Mayweather/Alvarez fight in September
- Watching costs very aggressively
- Reduced debt by $500MM in Q2
Q & A
- Vegas vs other markets for 2014 bookings: Las Vegas (80-90% contracted room nights before coming into the year; in other words, do not rely much on in the year for the year room bookings)
- 51% bookings booked have been in the corporate/incentive segment (higher margin segment) - historically, it was around 25%; had lost 30% of business from peak and starting to recover
- Interest is high on potentially selling Crystals; cap rates are still pretty low
- Margins: smarter on promotions; M-Life helping with marketing strategy; room remodels have been generating cash flow; FTEs flat YoY
- Lot of FIT/leisure international customers are bookings through Expedia and Bookings.com
- International customers: are spending more on F&B, entertainment venues; worth 15% more than domestic leisure customer
- CityCenter: trailing 12-month cash flow $300MM
- MGM Grand: expects better performance; Sleeping Lion exhibit will be redone;
- Vegas Smoking bill? Govt process ongoing
- 2013 convention room nights mix: 14.5%-15%, ADR up YoY
- 2014 ADR pace: mid single digits
- MGM China: strong across all mass segments;
- Strip core/retail properties: minimal growth; few of the properties had nice shocks of excitement e.g. Monte Carlo (new show), Luxor (new show); not expecting too much growth in 2013
- But a significant increase in cash flow in 2H 2014 (New York, New York, Monte Carlo, Citywides)
- Hold
- Mirage: poor hold (10%)
- Bellagio: down YoY, below normal range
- Grand: up YoY
- Disruptions at MGM China: not signifcant but may move some business from 3Q to 4Q
- M-Life helped MGM build slot share
- Strong domestic table play hints signs of US recovery
- Cotai budget: $2.6BN - includes pre-opening, excludes land concession and cap interest
- Baccarat margins are flat/ slightly up
- Ex Aria, more table win on international side; Aria was challenging because of difficult comps
- LV baccarat volume was slightly down but win was up
- Post-July: Unsold condos - 4 units at Veer and 89 units at Mandarin
- Detroit bankruptcy: have not seen any impact
- Relicensing in NJ: 9-12 month process
- Macau EBITDA margins: revenue mix impacted results; lower hold in direct play; branding fee up YoY
- FTEs: expect to remain flat
- Few million impact from union wage inflation
- Healthcare costs: flat YoY; expect little inflation on healthcare costs
