“MGM CEO hopeful Las Vegas will be 90 percent back by the end of 2022 - Las Vegas Review-Journal” plus 1 more

“MGM CEO hopeful Las Vegas will be 90 percent back by the end of 2022 - Las Vegas Review-Journal” plus 1 more

MGM CEO hopeful Las Vegas will be 90 percent back by the end of 2022 - Las Vegas Review-Journal

Posted: 10 Feb 2021 12:00 AM PST

MGM Resorts International's regional properties have been driving its recovery, but the company says it is still confident in the Las Vegas market.

The casino operator reported fourth-quarter and full-year 2020 earnings Wednesday, revealing that 40 percent of its net revenues from the quarter came from its regional operations. Las Vegas — which usually earns the highest share of revenues —accounted for 32 percent.

Nevertheless, the company said Wednesday that it remains optimistic on the Strip's future, even if President and CEO Bill Hornbuckle believes a full recovery may not come until 2022. Forward-looking bookings are on the rise, and the company said it plans to keep all of its properties — including Mandalay Bay, The Mirage and Park MGM — open throughout the week, starting next month.

"We believe the demand for travel and visitation in Las Vegas could be robust later in the year," Hornbuckle said during a call with investors. "Guests are increasingly booking 90-plus days out."

Regional markets driving growth

Net revenues in the fourth quarter reached $1.5 billion, a 53 percent drop compared with the same period last year. Net loss was $448 million for the quarter, a steep drop compared with the $2 billion net income in the fourth quarter of 2019.

The company's annual net loss in 2020 was $1 billion, compared with a net income of $2 billion in 2019. It could have been worse; the company saw a $1.5 billion gain by selling the land under MGM Grand and Mandalay Bay in January 2020. 

The bulk of the fourth-quarter losses were tied to operational challenges at MGM's Las Vegas and China properties.

Net revenues at Strip resorts fell 66 percent to $480 million in the fourth quarter compared with the prior year, and MGM China net revenues fell 58 percent to $305 million in that same period. Regional properties, in comparison, fell 34 percent to $595 million.

"The operating dynamics in Las Vegas and our regional properties were … quite different in the fourth quarter," Hornbuckle said.

The quarter had started off strong in Las Vegas, with the company reporting its strongest month in October since the onset of the pandemic. But Nevada began to enforce stricter operating restrictions as COVID-19 spiked, introducing a statewide "pause" in November that capped casino floor occupancy at 25 percent.

The pandemic and midweek hotel closures at Mandalay Bay, The Mirage and Park MGM, first announced in November, also played a role in dampened visitation, which Hornbuckle said remains low to this day.

Jefferies gaming analyst David Katz, who issued a report Sunday examining foot traffic inside casinos, said the Las Vegas Strip market "continued to see the slowest recovery in foot traffic given the dependence on convention and fly-in traffic."

According to his note, foot traffic on the Strip in January was down 68 percent on a year-over-year basis. Meanwhile, the Las Vegas locals and downtown Las Vegas markets saw volume drop 53 percent and 60 percent, respectively. Reno outperformed all the other Nevada markets, with volume down 25 percent.

The low visitation rates were evident in MGM's casino and hotel revenue in the forth quarter.

Casino revenue in Las Vegas fell 38 percent compared with the same period the year prior. Occupancy rates in town were 38 percent in the quarter compared with 89 percent in the fourth quarter of 2019, resulting in a 70 percent drop in room revenue.

Occupancy rates were hit hardest midweek in the fourth quarter with fewer convention and meeting bookings. MGM filled 31 percent of its rooms on average midweek, and 52 percent on weekends.

It may take until next year for things to get close to 2019 levels, Hornbuckle said.

"I would hope by the fourth quarter of '22, we're at about a 90 percent pace of where we were in 2019," he said. "It just depends on how much rebound and enthusiasm we have from customers wanting to get out of the house. … (But) I think there is going to be massive pent-up demand in terms of leisure business wanting to come."

Hornbuckle said he is hopeful that restrictions will ease next month, followed by more rollbacks in the late spring if COVID-19 rates continue to improve. More details should be made clear Thursday, when Gov. Steve Sisolak is set to conduct a news conference on the state's COVID-19 response efforts.

"I think March may hopefully begin to feel like October if we're lucky," Hornbuckle said. "There are several large conferences, conventions … (and) March Madness followed by spring break, pool season around here is substantive and meaningful. So I think we'll see occupancies hopefully go back to October (levels) and then beyond."

More MGM workers should return as business picks up. Hornbuckle said MGM would rehire and retrain its staff as operating restrictions abate, and entertainers are expected to be brought back over the course of the year.

The company also announced a quarterly dividend of $0.0025 per share on Wednesday.

BetMGM's accelerated growth

One of the bright spots in MGM's fourth-quarter earnings were results tied to BetMGM, a sports betting and online gaming platform MGM runs in a joint operation with Entain. MGM has established a long-term goal to be a "premier global omni-channel gaming, hospitality and entertainment company," and the success of BetMGM plays a large role in that vision.

"Our BetMGM business is now really hitting stride," BetMGM CEO Adam Greenblatt said. "We've got the right team, the tools are working, and we're seeing the fruits of that in the numbers."

The platform had a 17 percent market share in the sports betting and iGaming markets where it was active in the fourth quarter, and it expects its piece of the pie will continue to grow.

BetMGM launched in seven new states last year and is expected to be in 20 markets by the end of 2021, which would open up access to about 40 percent of the total U.S. population.

The platform has already seen success in its current markets, with revenues doubling between the third and fourth quarter of 2020. On Super Bowl Sunday, its online handle was 17 times greater than last year's game, even with an outage in Nevada during the game executives says was caused by human error.

"In 2021, we and our partner Entain expect new revenue associated with BetMGM to grow well over 100 percent," Hornbuckle said. "We remain aligned on investing aggressively to fund the growth of this business."

The sports and iGaming betting markets are expected to grow exponentially in the coming years, especially now that states are looking for new ways to ease budget deficits. The combined market size for the two is expected to reach $20.3 billion by 2025, according to MGM's fourth-quarter earnings presentation.

MGM shares closed up 1.8 percent Wednesday to $36.47 on the New York Stock Exchange but lost gains after hours, dropping nearly 3 percent after it released its earnings.


Contact Bailey Schulz at bschulz@reviewjournal.com. Follow @bailey_schulz on Twitter.

MGM Earnings: What Happened - Investopedia

Posted: 08 Feb 2021 12:00 AM PST

Key Takeaways

  • Adjusted EPS was -$0.90 vs. the -$0.89 analysts expected.
  • Revenue fell below analyst expectations.
  • The Las Vegas Strip room occupancy rate was lower than the level forecast.
  • BetMGM, MGM's online gambling app, gained significant market share.

What Happened

MGM reported an adjusted loss per share for Q4 FY 2020 that was slightly larger than analysts expected. Revenue missed expectations and fell by more than half the year-ago quarter's total revenue. MGM's Las Vegas Strip room occupancy rate missed expectations by a wide margin. Analysts were forecasting sequential improvement in the occupancy rate for the firm's Las Vegas properties compared to Q3 and Q2. Instead, that rate fell to its lowest level in recent history.

MGM indicated that it remained confident in the long-term recovery of its business amid the pandemic, but also noted the strong performance of BetMGM, its online gambling business. "BetMGM gained significant market share throughout 2020 while successfully launching in seven new states," said CEO and President Bill Hornbuckle.

(Below is Investopedia's original earnings preview, published February 8, 2021.)

What to Look For

MGM Resorts International (MGM), the global resort and casino operator, is coming off one of its most difficult years in recent history. The company's revenue has plunged, leading to mounting losses and massive layoffs amid the worldwide COVID-19 pandemic.

Investors will be watching to see if MGM can limit the financial damage caused by the pandemic when it reports earnings on February 10, 2021 for Q4 FY 2020. Analysts are expecting the company to report is fourth straight quarterly adjusted loss per share. Revenue also is expected to fall for the fourth consecutive quarter.

Investors will also be focusing on the room occupancy rate of MGM's properties along the Las Vegas Strip, which usually generate the majority of the company's revenues. This key metric shows what proportion of a resort's rooms are being filled by paying guests. Analysts expect the Las Vegas Strip room occupancy rate to be down dramatically compared to the year-ago quarter, but up from the low point in the second quarter.

Shares of MGM have lagged the broader market over the past year. The stock plunged much further than the rest of the market during the coronavirus-induced market crash between late February and late March 2020. It has gradually closed the performance gap with the market, making significant gains since its last earnings report at the end of October 2020. MGM shares have provided a total return of 6.6% over the past 12 months, well below the S&P 500's total return of 16.6%.

Source: TradingView.

MGM posted an adjusted loss per share of $1.08 in Q3 FY 2020, as revenue plunged 66.0% compared to the same three-month period a year ago. It marked the third consecutive quarter of adjusted losses per share and declining revenue. During the quarter, the company indicated that it planned to lay off 18,000 workers who had been furloughed because of the pandemic. On the bright side, MGM noted in its quarterly press release that all of its properties were open as of September 30, 2020, following pandemic-related closures earlier in the year.

The low point of the year was the second quarter, when MGM first felt the full financial impact of the pandemic. MGM reported an adjusted loss per share of $1.59 while revenue collapsed by 91.0% to just $289.8 million. By comparison, the company generated more than $3.1 billion in revenue in each quarter during FY 2019. Despite beginning to re-open certain properties during the quarter, many of MGM's properties remained closed.

Analysts expect continued sequential improvements in earnings and revenue in Q4 FY 2020, but still below last year's levels. Revenue is expected to fall 50.0% compared to the year-ago quarter, leading to a fourth consecutive adjusted loss per share. For full-year FY 2020, analysts forecast an adjusted loss per share of $4.06 as revenue declines 59.2%, the worst performance in either metric in at least five years.

MGM Key Metrics
  Estimate for Q4 2020 (FY) Q4 2019 (FY) Q4 2018 (FY)
Adjusted Earnings Per Share ($) -0.89 0.08 -0.03
Revenue ($B) 1.6 3.2 3.1
Las Vegas Strip Room Occupancy Rate (%) 49.0 89.0 89.0

Source: Visible Alpha

As mentioned above, investors will also be watching the room occupancy rate for MGM's Las Vegas Strip properties. The company owns 13 resort properties in Las Vegas, including the Bellagio, MGM Grand, Luxor, Mandalay Bay, The Mirage, and Excalibur. MGM's Las Vegas properties normally generate the majority of the company's revenue, but those revenues dipped below those generated by its other U.S. properties in Q3 FY 2020. The room occupancy rate, a metric indicating the percentage of a resort's rooms being occupied by paying guests, highlights the adverse impacts that pandemic-related travel restrictions, resort closures, and shelter-in-place measures have had on MGM's business.

Prior to the pandemic, the annual room occupancy rate for MGM's Las Vegas Strip properties was 91.0% in each of the past three years. Only in a single quarter from Q1 FY 2017 to Q1 FY 2020 did the occupancy rate fall below 85.0%, the rate during the fourth quarter of FY 2017. However, in Q2 FY 2020, the occupancy rate for MGM's Strip properties fell by more than half the annual rate over the past three years to 43.0%. The rate improved only slightly to 44.0% in the third quarter. Analysts expect an occupancy of 49.0% for Q4 FY 2020, and an annual rate of 50.5% for the entire year. MGM's room occupancy rate is likely to gradually improve as vaccines for COVID-19 are rolled out, but it's unclear how quickly the occupancy rate will return to its historic highs.


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