MGM 2Q 2013 CONFERENCE CALL

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

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