美高梅國際酒店集團 (MGM) 2015 Q1 法說會逐字稿

Good morning, and welcome to the MGM Resorts International first-quarter 2015 earnings conference call.

Joining the call from the Company today are Jim Murren, Chairman and Chief Executive Officer; Dan D'Arrigo, Executive Vice President, Chief Financial Officer, and Treasurer; Grant Bowie, CEO and Executive Director of MGM China, and President of MGM Grand Paradise.

(Operator Instructions)

Please note this event is being recorded.

Now I'd like to turn the call over to Ms. Sarah Rogers.

Please go ahead.

Good morning, and welcome to MGM Resorts International first-quarter earnings call.

This call is being broadcast live on the internet at Mgmresorts.com.

A replay of the call will be available on our website.

We furnished our press release on Form 8-K to the SEC this morning.

On this call we will make forward-looking statements under the Safe Harbor provisions of the federal securities laws.

Actual results may differ materially from those projected in the forward-looking statements.

Additional information concerning factors that could cause actual results to materially differ from those in these forward-looking statements is contained in today's press release and in our periodic filings with the SEC, including our most recent Form 10-K.

During the call, we will also discuss non-GAAP financial measures in talking about the Company's performance.

You can find the reconciliation of these measures to GAAP financial measures in our press release, which is available on our website.

Finally, please note that this presentation is being recorded.

With that, I'll turn it over to Jim.

Well, thank you, Sarah, and good morning, everyone.

It was quite a weekend here in Las Vegas.

First weekend of May is always busy here.

We have a bunch of events, typically, of course, the Derby and NBA playoffs, but this weekend was unlike any other that any of us have ever seen, even Bill Hornbuckle, the old guy over there (laughter).

We had, of course, the fight.

And, because of the fight, we achieved one of our highest RevPAR weekends ever in the history of the Company.

And since we had the sole rights to the closed-circuit parties, we hosted dozens of parties around our properties and sold over 46,000 tickets to our guests to watch the fight and then enjoy the rest of what a casino hotel has to offer.

From a gaming perspective I can tell you that we had record front money coming in, tremendous drop in our properties from a very diverse and global group of players, and a lot of those players are still here.

We look forward to talking to you about this on our next call and we'll provide you with many of the details and some fun facts.

As of right now, we're still counting all the money.

This fantastic weekend gives us great confidence in the power of MGM Resorts and Las Vegas, the entertainment capital of the world.

I'm pleased to report that net income attributable to MGM Resorts grew 65%.

EPS of $0.33 was an increase of $0.13 year over year.

We achieved Las Vegas RevPAR growth of 1%, which is not bad compared to the prior year, which was up 14%.

Our RevPAR growth was also better than the market as a whole.

The LVCVA reported strip RevPAR that was down 1.5% for the quarter.

Obviously, the story there is the big Con/Agg effect, which we'll get into in a little while.

Our regional properties achieved record EBITDA growth of 10% -- very strong year over year.

MGM China maintained its market share.

CityCenter Resort operation's profit decreased year over year due to lower volumes and hold at ARIA.

Vdara and Crystals actually had record EBITDA quarters.

We're executing on our plan to improve the free cash flow of our Company and the balance sheet Companywide.

Our convertible notes converted into equity and that took a full turn of leverage off our balance sheet as we continue to improve this through free cash flow and dividends as well.

I'm happy to report that CityCenter paid its first dividend, a $400 million dividend, on Friday.

We have been working towards dividends from this project really since we began, but now that the Perini litigation is behind us, we're gratified that we're now able to accomplish that goal.

CityCenter is a rapidly appreciating asset and has demonstrated significant operating growth since it opened.

And both partners believe that CityCenter's strong financial position, and the ability to drive future free cash flow, positions it to begin returning capital to its shareholders as evidenced, as you also saw, by the approval of an annual dividend policy of 35% of free cash flow.

MGM China has been a tremendous investment for our Company.

And, while the market is currently going through, obviously, its own challenges, we are confident that our investments in Macau will continue to benefit our employees, the citizens of Macau, and our Company.

MGM China's strong balance sheet is prepared to develop and grow in Cotai and beyond.

We recently announced that MGM China had reached an agreement in principle with its creditors to expand the credit facility by $1 billion, to $3 billion, and lengthen its maturity by 1.5 years.

This, obviously, shows a great level of support from our lenders.

We believe that the expanded and extended credit facility will provide our Company with the financial flexibility to continue to invest in the Macau marketplace, whether at MGM Macau, MGM Cotai, or future opportunities as they may arise.

We're very excited with the progress we're making here on the strategic investments in Las Vegas.

Our arena, which broke ground about a year ago, is advancing incredibly quickly, and this will open up in less than a year.

This is a project that MGM owns 50% of and will invest around $87 million as part of our equity contribution.

We expect that it will provide an excellent return on investment for both ourselves and AEG.

And, of course, it will drive a tremendous amount of traffic throughout the neighborhood, which we own.

The lower suites have already been structurally complete in the bowl, and we will soon see exterior glass curtain walls being installed, and the roof will be complete in the next few months.

During the first quarter, the arena secured three tremendous partners: Coca-Cola, Toshiba, and Schneider Electric.

And, at this point, that represents about 53% of our pro forma sponsorship revenues already, and we're still in negotiations with eight other founders, including a naming rights sponsor.

We have signed contracts for over half of the suites and are in contact on about another 30% of them.

We believe that this is another validation that this facility will be a game changer in the market and it will be the best in class seeking for entertainment, music, sports, as well as creating opportunities to bring new events to the city.

And, as we saw this past weekend, events are a key driver to visitation and profitability.

This facility is certainly going to help MGM and help Las Vegas.

The Plaza also received an official brand sponsor and a name -- Toshiba Plaza.

That 2-acre outdoor public plaza will bridge the park and the entertainment district tying together New York-New York and Monte Carlo, and, of course, the entrance to the arena.

At Mandalay Bay, the first phase of the 350,000-square-foot expansion of our convention center will open in a few months, in August of this year.

The demand for meeting and convention space has been so high that, that additional space is already booked and we'll essentially start returning value on day one.

And to ensure that our room offerings remained equally vibrant, we will begin renovating our Mandalay Bay rooms this June, and that will be fully completed in March of next year.

This momentum is developing countrywide.

The team has been very continuously reviewing our development initiatives and have greenlit them based on the attractiveness from a return-on-invested-capital potential.

We are confident that we're going to achieve attractive returns on investments in these new markets, as we have had before.

Projects underway now are, in many ways, similar to MGM Grand Detroit.

If you recall, we built that project in 2007 for around $800 million.

And that property has historically made around $150 million each year, creating tremendous equity value to MGM Resorts.

Which brings me to National Harbor: I was just there last week and, as anyone that knows that area and has been in DC in a while knows, everyone is asking when MGM National Harbor is going to open.

We recently celebrated the hiring of our 1,000th member of the construction force, and we're moving forward very steadily toward a fourth quarter of next year opening.

All the design is reaching completion.

Architecture is now being seen rising from the ground, and we have formally contracted almost 50% of that work.

In Springfield, Massachusetts, we broke ground a couple months ago, and we're targeting a late 2017 opening.

That project is progressing really well, and we will start ramping up our efforts to secure a local contractor which will move forward with construction this summer.

This development project feels to us a lot like MGM Detroit, in many ways, from a return in revenue perspective -- we're very excited about it.

And, in Cotai, we're obviously well underway with our construction and we're thrilled to see our distinctive architecture coming to life.

Our towers have reached the 19th floor, with a target to top it off by the end of November.

We've also been making great progress on our spectacle roof which is now being raised and welded in place 25 meters in the air -- amazing to see.

And we remain on target for a fourth-quarter 2016 opening.

With, clearly, priority of a diversification in our minds, we have taken steps there to complete our designs with a major focus on non-gaming amenities.

Our atrium, for example, situated at the heart of the resort, is going to be enriched with unique elements that we think will mesmerize our guests.

The theater will be a one-of-a-kind space, never constructed before, and will transform that entertainment experience to our guests.

This will be a world's first and we're ecstatic about offering that to the Macau marketplace.

Our joint venture with Diaoyutai, of course, is building hotels throughout China, and has made great success most recently developing the Bellagio in Shanghai, which will open next year.

And, of course, we cross market our properties in Asia, in Las Vegas, and beyond.

Before I turn it over to Dan, I have to have a few moments here about our friends at Land and Buildings.

In January of this year, Land and Buildings asked for a meeting with me.

You all know me well and you know I enjoy speaking with shareholders, large and small -- analysts, investment banks, everyone.

We are always learning, we're always open to ideas, and I communicated that at the time.

The next step was that Land and Buildings filed to nominate four directors to our Board.

And then a deck was put out, without anyone at our Company reviewing it, including myself.

It suggested that MGM Resorts pay a $2.6-billion special dividend out of MGM China, sell assets, create a REIT, and a whole bunch of other stuff.

The pitch was filled with mistakes and very poor assumptions, and we said so at the time.

But let me be very clear -- the concept of a REIT is not a new one.

Our Board has evaluated REITs for years, and there have been many reasons for not pursuing them in those prior years.

Obviously, during the recession, those reasons included very depressed multiples, we weren't even a taxpayer, we had unduly high leverage, and many others.

That said, our business model is evolving, and so has the market, and it is important to regularly review all opportunities.

And I think our Board has reflected that in these many years we've been together.

We're persistent in looking for ways to unlock value.

The Company has done so in the past; we'll continue to do so in the future.

We regularly engage with our very smart financial tax legal advisors to review opportunities in our Company, and we are doing that again.

In fact, we've been doing that intensively for the past year.

These outside advisors are exploring a REIT structure for our Company.

It's complicated.

It will take some time to thoroughly evaluate it.

We're not sure of the current outcome of that.

We've added another advisor to an already large team.

We announced Evercore recently, and they're working with our other corporate finance and capital markets advisors, and legal advisors, to review what our other advisors have been working on.

So, in summary, I can tell you that the existing Board and management team is taking all the necessary steps to create shareholder value for you.

In fact, two of our larger shareholders have Board representation and are supporting our Board and our management team.

We are aligned with our shareholders in the desire for sustainable value.

This proxy contest is truly unwarranted as the Board and the management team are well equipped to create value, have done so before, and we're well equipped to look at REITs and any other opportunity.

The stock has done very well over the last five years, up 135%, and I'm proud that we've been able to rebuild this Company throughout this post-recession period.

We've rebuilt it for our shareholders, our employees, and the communities in which we serve.

And I have to just say that I'm sorry that we're going through this.

I'm sorry that it's devolved into a tabloid-like campaign.

And it shouldn't happen.

But, with that, I'll turn it over to Dan D'Arrigo and you can talk about our operating resorts.

Thank you, Dan.

Thank you, Jim, and good morning, everyone.

Overall net revenue for our wholly owned domestic resorts increased slightly, which was driven by our non-luxury strip resorts and our regional properties, while being offset by our luxury strip resorts.

In Las Vegas, we had a really strong January, with RevPAR up double digits.

February was in line with our expectations, low- to mid-single digits, but March was more challenging than we had anticipated.

As you know, the entire city faced a tough comparison in March, given the large citywide that Jim mentioned earlier was in town last year and rotates every three years.

Excluding that one week of Con/Agg on a year-over-year basis, our RevPAR would have been up 6% in the quarter.

Our convention mix for the quarter improved year over year, resulting in a record at just over 23% of total room nights.

But with less citywide convention room nights year over year, we weren't able to hold occupancy as we anticipated and that impacted all of our business segments.

Looking at the second quarter, our convention business continues to build and we're expecting a slight improvement year over year in convention room nights.

We expect RevPAR growth of at least 5% in the second quarter, driven by growth in corporate meetings and convention business, a strong event calendar, and the trends we are seeing thus far.

Our regional properties, as Jim pointed out, had a great quarter, as our best-in-class resorts continue to drive revenue via incremental spend in visitation, supported by the strengthening domestic consumer.

Beau Rivage had its best first-quarter EBITDA since 2007, and our wholly owned US regional property EBITDA grew 10% year over year.

Geographic diversity has been a key strategy for MGM Resorts and our success in the regionals only supports our expectations for return on investments in both Maryland and Massachusetts.

CityCenter's resort operation, in terms of its EBITDA, decreased by 14% year over year due to lower table games hold and volumes at ARIA, while Crystals and Vdara produced record results.

ARIA's reported EBITDA of $61 million was a decrease of $14 million year over year, primarily due to a 250-basis-point decrease in table games hold and lower volumes as a result of some of the impacts we're seeing at a mainland source Chinese high-end business.

ARIA's hotel business continues to improve, with a record RevPAR of $219.

They were able to achieve 4% RevPAR growth year over year, driven by a 9% increase in convention room nights and a 7% increase in ADR.

Vdara had a record EBITDA during the quarter, driven by a 5% increase in RevPAR, and Crystals also had its best EBITDA quarter ever, with $12 million recorded during the quarter, a 6% increase year over year.

As we announced on our last earnings call, and as part of our global settlement related to the outstanding Perini and Harmon claims, CityCenter recorded a $160-million gain in the first quarter.

As Jim mentioned, CityCenter paid its first dividend of $400 million on Friday, and we received our 50% share, or some $200 million.

That dividend is one of many strengthening elements for our balance sheet, as cash and cash equivalents at the end of the quarter was approximately $2.2 billion, of which roughly $469 million was at MGM China.

We also had $1.1 billion in available liquidity under our corporate revolver and approximately $1.4 billion of excess cash on hand.

On April 15, we successfully converted our $1.5-billion convertible notes into a net 71.7 million shares of MGM common stock.

This conversion was a significant event for our Company as we improved our domestic leverage by approximately one turn, and improved our free cash flow by eliminating almost $62 million in annual interest expense.

The conversion reinforces our improving balance sheet story as we continue to position the Company for future growth.

At the end of March, MGM China had approximately $950 million of debt outstanding and $1.1 billion in availability under its revolver.

CityCenter cash, at the end of the quarter, was approximately $524 million.

Total debt, at the end of the quarter, approximately $1.5 billion, and we'd like to point out that this does not account for the $400-million special dividend that was paid out last week.

During the first quarter, we invested approximately $92 million in capital related to our domestic operations.

We also invested approximately $54 million in National Harbor and MGM Springfield during the quarter.

In addition, we invested approximately $19 million as part of our arena equity contributions.

During the first quarter, MGM China spent approximately $14 million at MGM Macau and $132 million on our Cotai development.

With that, I'll turn it over to Grant for his MGM China report.

Thanks, Dan.

Good morning, and good evening.

Again, the first quarter, MGM China performed relatively better than the challenged market.

The net revenue down by 33% year over year, while the market itself was down some 37%.

Controlling costs and margin are high on our priority list, and we have strategically put in place numerous initiatives aimed at restructuring our cost base and also, obviously, managing costs specifically, while we still remain committed to offering the high-quality experience that our customers have come to associate with our property here in Macau.

Despite these challenges, MGM China was able to maintain its outsized market share of 10% during the quarter, a situation that we've been able to do consistently over the last three years.

MGM China has always been strong in our mass market and we continue to outperform.

While our main floor table games revenue declined by 14%, this is in comparison to the broader market decrease of 19%.

We continue to compete with a focus on targeted-marketing efforts and high-quality offerings, and best-in-class services and standards.

Our mix shift towards the higher-end margin main floor business continued in the quarter, with 50% now of our revenues and approximately 80% of MGM China's EBITDA contribution coming from the mass market.

We continue to shift tables from VIP to the mass, with an additional 44 table units being moved to the main floor this year versus last, representing now approximately 55% of our table allocation.

On the VIP side, VIP table games revenue decreased by 45% year over year, driven primarily by lower turnover, which declined 51%, while hold increased slightly, to 3.3% from 3% in the prior quarter.

To reiterate Jim's earlier comments, we're thrilled to see the progress we're making in Cotai.

And when I go out on the site these days, it's tangible to see the changes that are taking place from visit to visit.

And we remain on schedule to open in the fourth quarter of 2016.

This timing remains contingent on receiving the necessary government approvals, including our future labor quotas.

Our objectives in bringing diversification to Macau is undeniable in the offerings we had planned for MGM Cotai, and it's clear that our current high standards will carry through in the quality of the non-gaming amenities that we will offer at our second resort in the market.

We look forward to our future of growth and, more importantly, we want to grow our business with our team members, particularly our local talent.

In fact, 26 of our local managers at MGM Macau just came back from Las Vegas after an intensive 10-day operational cross training and immersion program, where we've been able to prepare them for the advancement in our organization as we mature and grow.

Right now, more than 80% of the management team at MGM Macau are local employees, and we are committed to nurture our local young people as our business grows.

With that, I'd like to turn it back to Jim for his closing remarks.

Thank you.

Thanks, Grant.

Just a few things, and then we'll turn it over to questions.

Obviously, this weekend was tremendous, and it was a very profitable event for MGM and the strip.

The city, as a whole, tremendously benefited from this worldwide event.

And I have to commend all the stakeholders in doing so -- the first responders, metro, fire department, the county, all collectively worked together to create an exciting and safe environment that only Las Vegas can deliver on.

And I think it's a testament to the collective energy of this town that we're able to deliver -- uniquely, in the world, deliver this type of entertainment.

And the party continues.

Rock in Rio is coming to the north end of the strip on our new festival lot over the next couple weekends.

Tens of thousands of more people will be here, people that love to watch Taylor Swift and Bruno Mars and Metallica -- and the list goes on.

And then, of course, we have some major performers in our arenas: Bette Midler is coming back, and the Eagles.

It's really a great lineup in the second quarter.

Our convention business continues to show very strong demand.

Our lead volumes are up 70% over the first quarter of last year, and corporates are driving over 60% of the booked-room nights, and you know how important that is from an ADR and a non-gaming spend perspective.

The completed expansion at Mandalay Bay's convention center will clearly help us capitalize even further on this strong corporate demand, and that bodes very well for all of next year.

This Company operates on a core set of principles and values that have guided our business and have ultimately led to our success.

Over the past five years, we have dramatically improved the balance sheet, as consolidated leverage is now approximately 5 times and our cost of borrowing has been cut in half.

Our EBITDA margins have increased by 320 basis points in the wholly owned properties from 2010 through 2014, and we have also won very competitive bids for key gaming markets that will drive future growth, of course, in Massachusetts and in Maryland.

Our Board and management has worked hard together, and we will continue to deliver sustainable, long-term value to our shareholders.

And, with that, I'd like to turn it over to Emily to move into the Q&A section of our call.

Thank you.

(Operator Instructions)

Joseph Greff with JPMorgan.

Good morning, everybody.

Question for you all with respect to your outlook for the Las Vegas strip and Jim some of this maybe you answered in your closing comments, but when you are internally forecasting across all metrics for the Las Vegas strip is it getting easier?

Is it improving?

Is the visibility improving?

And maybe I ask it in the context of mainland Chinese player or resort guest that particularly non-Chinese international guest that might be impacted by FX and then when you kind of roll up the 5% RevPAR growth for 2Q (inaudible) as you mentioned it.

Jim how much of a benefit do you think you received from this past weekend which obviously was tremendous?

Thank you.

Maybe I'll start and then anyone jump in.

I think Bill wants to talk about China and Dan or Corey can jump in, too.

Our RevPAR guidance we've made it a point to get as specific as possible over these many years.

We're getting better and better at forecasting this on a RevPAR perspective.

I think some of you thought we were sand bagging you because we kind of beat our RevPAR guidance for about two years or three years in a row every single quarter, and we're a bit short of it this first quarter and the reason for that was some softness in March, but we were up.

We knew it was going to be tough, everyone knew it was going to be tough, but we fell a little bit short in the month of March.

We had a tremendous January, tremendous February, and a little bit of weakness.

April we were up what, 4%?

So RevPAR in the month of April it snapped right back.

And obviously we had a very great weekend and the forecast for RevPAR we gave you for the quarter we feel very good about it.

We don't understand the more negative views that I've heard about what's happening in either the current quarter and certainly it's perplexing to have any kind of constructive opinion on the summer at all given the fact that those similar booking windows are so short.

What we can say is we have a tremendous amount of business on the books for the third quarter as well on the convention side.

So, we're feeling with 42,000 rooms very comfortable with our guidance in terms of RevPAR, even taking into account the negative impact of the stronger dollar and an undoubtedly negative impact of mainland Chinese customers coming to Las Vegas, but I'll turn it may be over to Bill first.

Do you want to say something?

Yes.

As it relates to Las Vegas China business, remind everybody because this came up on the last call, it really is less than 5% of our total cash flows in Las Vegas.

So, put it in perspective and keep it there we were down about 30% collectively.

It principally obviously showcased itself through Chinese New Year.

If you put all that together, it's maybe $15 million or $20 million in net gaming revenues.

I think the other thing, Joe, to your question is to just understand the value of the dollar going for and watch Middle East, Europe, and Latin America.

We're watching that closely.

The value has gone up between 20% and 30% depending on the market, so I think as we go through the balance of the year that's something we will watch.

And then the balance of Asia, Japan, Korea, Taiwan has responded exceptionally well as we refocused our energy and our people towards those markets.

And, Joe, this is Corey.

What I would add is the March softness is really isolated to the first few weeks and in particular the Con/Agg week which was here last year.

We could identify the weakness to those periods and actually if you look at the past five years from an occupancy perspective, the first quarter is pretty much in line with where it normally is without Con Expo.

A few other points that give us some comfort, air capacity is growing 3%.

When you take the city wide out of the visitation, which we were down 110,000 and Con/Agg was [160,000] of that, we're actually upping visitation when you take that week out also.

So everything we see in our business there hasn't been much of a change from what we see.

Joe, on your question about RevPAR ex the Mayweather weekend, the Mayweather weekend benefits us by about 1% for the second quarter.

Great.

Thank you for your comments.

Felicia Hendrix of Barclays.

Hi.

Good morning.

Thank you.

Corey, a question for you just on the cost side of things.

I know it's harder to talk about flow through this quarter, but as we think about the 50% goal I'm wondering if that still stands for the year, and where are you seeing most of the cost pressures and what are you doing to offset those?

Felicia, I'm going to jump in first and then turn it over to Corey.

I think when we look at our overall cost structure, it's pretty much in line with where we expect it.

Our costs were up about 2% in the quarter.

Our FTEs were flat year-over-year.

So, we feel good about how we're managing our costs and there's always room for improvement that maybe Corey can touch on as well, but that's part of our normal process.

I think as we look at kind of the flow-through again we look at it from, and I know we have said this in the past, a longer term perspective and we continue to look at the longer opportunity from a margin perspective and continue to look at flow through over long periods of time because quarter by quarter we are going to get these ups and downs and that happens from time to time.

And, Felicia, we're very focused on margin with that flow through will happen.

Once again as we look at the quarter, 2014 was a very tough quarter because it drove occupancy and very high rates and we had a table game win.

All that stuff would impact margins.

When we look at it more towards a normal quarter like Q1 of 2013, we're actually up almost 6 basis points on the strip in margin.

Okay.

And I would say on the flow through we still feel like the annual 50% is a good number to use and we expect margins will be up this year as a Company as they have been over the last four years.

Great.

That's helpful.

And, Jim, while I have you, when you think about your portfolio of properties on the strip and notwithstanding all the ebbs and flows you have quarter to quarter and different things going on like tough comps and stuff like that, are we kind of at the point of the life cycle right now in the strip where we're going to see better improvement, better recovery on your low end?

How should we think about that for us modelers going forward?

Yes, a few things.

So in the quarter we're talking about Bellagio's margins were 29.5% and that was better than their peer group, that was better than Wynn and Las Vegas Sands in Las Vegas in the first quarter.

We think that our flagship properties, the luxury properties, have had the ability even during a tough convention comp like the first quarter to drive revenue and we expect those margins to improve as well.

So, I would look at the strip in maybe three categories of properties we have.

The luxury properties growing revenues and margin because we're getting better mix and then particularly as it relates to Mandalay, a tremendous impact on mix given this large convention expansion which not only should help Mandalay, it should help Luxor and Excalibur as well as you're driving business.

One is the properties of the luxury end have been more isolated, less vulnerable to swings in citywide conventions.

On the next group of properties we call our core properties, those are the ones that really benefit from inherent demand in citywide convention business and have the ability to grow margin and EBITDA greater from their current base and we feel that way because we see what happens when we do have a large convention in town or mega fight or something of those metrics, we just get huge snap backs in revenue and profit at those core properties.

And so looking at it as a portfolio I think that we can grow everywhere, but mostly the core properties can do I think better as the convention business improves.

I think the RevPAR in the first quarter for core quarter was actually up, it was up 4%, and that's without Con/Agg obviously being here.

So, looking forward I feel like the power that we have and the opportunity is the operating leverage of 42,000 hotel rooms and using them as a collective portfolio we can drive revenue in all of them, but it's clearly core properties are more dependent on the city wides than the luxuries our are.

And I would add I think it's been at least the last three quarters where the core percentage increase in RevPAR have outperformed the luxury, so I think that's going to continue.

They have a lot more to go from peak, so that's why I think they have that opportunity to continue to grow more.

Okay, thank you.

Just housekeeping.

The $8 million hold negative effect on EBITDA from holds in the quarter, was up from one particular property or can you just tell us where that is from?

That was kind of sprinkled around a few, it was actually Bellagio, Mandalay, and believe it or not MGM Detroit as well.

Thanks.

Carlo Santarelli of Deutsche Bank.

Thanks for taking my question.

A two-part question actually.

If you look at the 2Q and the 1Q sequentially in years past when we look at periods that don't include Con Expo, I get the sense that even if we were to ignore the 100 basis point benefit from the Mayweather fight that the plus 5 is conservative based on some of the historical seasonal trends.

If you guys could address how you're thinking about it with a plus 4 for April with the 100 basis points for Mayweather and the seasonal sequential changes in dollar RevPAR on the strip that would be helpful.

And then just one quick followup.

When you guys think about flow-through, when you think about the 2% cost escalation, net revenue on the strip north of 4% is that fair to say in terms of being able to drive that 50% flow-through you guys have spoken about?

Hi, Carlo.

This is Dan.

I think you're fairly accurate in terms of where the overall net revenue growth would need to be to get in and around that 50% level with plus or minus 2% kind of increase on the cost side.

I think when you look at the RevPAR characteristics going forward we always knew that the first quarter was going to be our most challenging quarter and that the comparisons for the rest of the year were going to be stronger because of Con/Agg, and I think as you look at April and May in the second quarter being the driving months, June actually shapes up pretty well first given our group business that's on the books, but it's typically normally the weaker of the three months in the quarter in terms of that group.

And then just on the 3Q as you think about the book of business for the 3Q, what percentage of your room nights at this point in time are generally on the books for the third quarter?

Remember, the city as a whole is about a 60 to 70 day inside booking window, so -- in terms of the visibility, and so you start getting into August and September and we've got good visibility in terms of our group of bookings.

We feel good about how the leisure is shaping up.

There is a little bit of softness in some of that international leisure travel, but we think we can fill it up with some of the domestic business that we're seeing and some of the other lift that we're going to see in the summer months that Corey mentioned earlier as well.

I think we just booked a really big piece of business in August, didn't we?

In the year for the year.

We've been booking in the year for the year pretty effectively here.

I would say the third quarter is looking pretty solid from a relative to seasonally relative to where we were last year, right?

Yes.

Thanks Dan.

Thanks Jim.

Thomas Allen of Morgan Stanley.

Good morning.

Was there any suggestion that 1Q was impacted by high rollers that delayed their trips to come for some of the special events this month?

Thomas, this is Dan.

That's definitely a fair and accurate statement as folks delayed some trips to come in for this weekend's fight for sure, and they came.

And came.

And I just said they're still here.

One little fun fact.

We have to have a couple fun facts right?

So, I asked aviation to look at this.

I said, send a picture of this.

So the most planes we ever had at Atlantic Aviation was 350 planes, that was during the Super Bowl weekend.

This past weekend there were over 500 planes and Sarah can send around the picture.

I cannot believe how they shoe horn these planes.

By the way by 10:00 yesterday morning they stopped receiving planes in Las Vegas and they were diverting planes to North Las Vegas, an airport I've never been to, because the demand was so great.

So, there was a tremendous amount of play in here.

I guess having planes is a good thing because we certainly were flying all night and all day long and so were our competitors.

We saw a lot of tail out there that we have never seen before and that was clearly a reflection of people coming in for the fight.

I saw a picture that was very impressive.

So just as my followup, in the past you talked about potentially monetizing Crystals.

Can you give us your latest thoughts there and when you talked earlier about considering REIT options, would you consider REITing out the whole Company or splitting the Company up or would it -- maybe just doing regionals or just a strip or anything like that?

Thank you.

Sure.

I'll tackle Crystals and then REIT ideas.

We had explored the potential sale of Crystals, was it a couple years ago, and we had a high level of interest for it.

The issue that potential buyers had at the time was what is the growth story and how does the Perini litigation impact potential ownership of Crystals, and what you going to do with that Harmon's site?

It's about 2.2 acres once you resolve your issues with your contractor.

We didn't have any answers to those questions at that time.

We were in the middle of that litigation.

We didn't have a plan for Harmon, what that site would be.

So we just got to a point where we didn't feel as owners we were going to get paid for the potential growth opportunity of Crystals.

And so fast-forward to today it was only last month that we settled with Perini and almost immediately after that the CityCenter board started working on plans of what to do with that land, which obviously could include expanding Crystals and making it a growth vehicle for a potential owner.

We have a keen interest in finding the right buyer for Crystals and we have been smart to wait because the NOI has been growing steadily at Crystals and the tenant mix is improving, and now the growth story is very much intact.

And so I would anticipate we, along with our 50% owners of CityCenter, will be viewing that as a very strong opportunity to monetize what is easily well over $1 billion asset to the owners and so that's where we stand with Crystals.

It's being actively discussed at the Board level and we hope to have something to report at some later date.

As it relates to REITs, I can go back to 2007 when we first started talking about that as a company, and then of course the recession hit.

We were building CityCenter at the time and I guess we didn't have the crystal ball to know that we would have the global recession and financial crisis that we had, but it was always part of the plan to find ways to monetize some of our real estate.

Certainly CityCenter was based in part on that when we developed condominiums that we expected and hoped to sell at a nice profit.

Now, here we are on the other side of that great recession.

We have more opportunities than ever before.

We are very much a real estate rich company.

About the only thing I did agree with in the Land and Buildings discussion is that we are undervalued and have undervalued real estate.

Now, how to unlock that value is something that we along with a very strong group of investment bankers and our team here have been working on.

And REITs could easily play a pivotal role, a central role in fact and how we unlock value.

Whether that is at our regional properties, whether it's at our core properties, whether it's at the company at large or elements of our portfolio and it's certainly attractive, but also asset sales are attractive as we have sold assets in the past.

There's no reason why with rising cash flows and rising multiples the value of real estate here in Las Vegas has gone up as witness by recent trades even this year of 2 older casino properties that have been transacted at really nice values per acre.

So we are in a position of strength, a very different place than we were back in 2008 and 2009 when we were in a position of weakness.

We will use our strength to the advantage of our shareholders and negotiating the best possible values for any of our assets.

And I think we're well advised legally from a tax perspective and from an investment banking perspective and I think we have been well known as a company that's active in either capital markets, hitting windows when they're open, transactions, joint ventures, asset sales, and we are very busy right now I can say.

Thank you.

Harry Curtis of Nomura.

Hi, guys.

Just as a followup on that point.

Dan, when would you expect to be a cash tax payer?

Harry, we will pay some taxes this year.

It's less than $50 million this year in cash taxes.

And so 2016 any idea what your cash tax rate might look like?

From a cash tax standpoint go up a little bit but nothing substantial in 2016.

Okay.

I wanted to also get an opinion from Grant.

There is the bulge in capacity in Macau begins relatively soon and I'm wondering what your contingency plans are as you think about maintaining the market share that you have so far successfully defended?

Thanks, Harry.

I wouldn't call it a contingency plan because it's actually a stated plan.

The critical point I think we're all focused on is we need to continue to grow.

I think the thing we're obviously now also managing is the speed at which we need to diversify into the non-gaming, so for us it's really about acquisition, broadening our base.

We obviously know we are very strong in premium mass and the mass business and we obviously continue to do that and I think that's a discussion you and I had probably 18 months ago.

We're putting those structures in place.

Very pleased how those are coming together, and I think that's the critical point.

We all know what's coming on stream and the structures we're putting in place is responding to that as well as allowing us to double the size of our own business.

Does that help?

It does, but you raise an interesting point about the non-gaming element of it.

What indications have you gotten from or definitions maybe have you gotten from the government on how you fulfill their definition of non-gaming amenities?

I think that's what we're all working through, but I think if you look at each of the companies, I know from our perspective we're very focused on entertainment and building the entertainment base for ourselves, and then on top of that we also add food and beverage in the retail concepts.

Others may be looking at other areas.

Clearly in Cotai we are also looking at building out targeted [mass] business particularly focused on the incentive component of that, so I think the critical point for us is I think all of us who been in the tourism and leisure industry understand what the landscape looks like.

I think what we're doing is making sure that we pick up components that fit comfortably with our strategy and that work well with the type of product and the type of customers that we're targeting, and from the work that we've been doing to date and as Jim indicated, we're very comfortable in terms of being part of the creative process and tapping into that consumption growth of China.

That does it for me.

Thanks, Grant.

Thank you.

Robin Farley of UBS.

Great.

Thanks.

One Vegas question, one Macau question.

For Vegas, on the last call you had talked about the remaining quarters being up more than 2% to 3% in RevPAR and I know visibility -- there is less visibility the further out you go, but would you kind of reiterate that about Q3, Q4 at this point or maybe take more of a wait-and-see attitude?

And I have a Macau question as well.

Hi there.

I'm comfortable saying that.

Okay, great.

And then Cotai you mentioned you are on track for the Q4 2016 opening.

I guess I'm just wondering if you can give some color on the worker quotas that you have does -- you're on track today.

Does staying on track require additional laborers or can you still open at that schedule point without any increase from what you have today?

Hi, Robin.

I think the critical point is that it's actually the labor pool changes from one set of skills to another set of skills, so it's a different group of people.

So the numbers we've got we're tracking well.

We're very lucky we have a very strong contractor in China state.

Clearly that's part of their key responsibilities, but I think we are conscious of the market conditions at the moment and we're obviously doing everything we can to make sure that we design, develop, and execute this to make sure we can get this done as quickly as we can.

Okay, so it sounds like it's maybe talk to get the visibility -- you mentioned the labor pool that your needs will change over the next couple of quarters, so it sounds like there's still changes that will need to happen with labor as you go through the process?

There certainly will be but, as I've said, we're all very conscious of those needs, and our contractor has been very proactive in trying to anticipate where their needs will be and trying to work through those processes.

So as best we possibly can in support in cooperation with the Macau government we will certainly get there.

Okay great thank you so much

Shaun Kelley of Bank of America

Good morning, everyone.

We've covered a lot of ground so I'll try and keep it short but, Dan, could you just let us know sort of what the outlook is for MGM China dividend at this phase, particularly as cash flows there are under some pressure and then of course you're ramping up construction into Cotai?

Sure.

As you know, Shaun, the Board there has approved up to 35% of income annual dividend that is paid semiannual, so that will continue to be reviewed and looked at by the Board.

As a matter of fact, we'll be taking to the annual general meeting here in May in a couple weeks the final 2014 dividend declaration and that Board will continue to assess that piece.

As far special dividends, I think that will be something that that board will continue to look at based on not only market and individual performance but based on overall needs as we continue to ramp up obviously in Cotai and continue to invest in MGM Macau, so that piece will continue to be assessed on a go-forward basis case by case.

Thanks.

Can you just remind us is there a leverage maximum or any sort of leverage constraint covenant wise the people should be aware of?

In the bank agreement I believe it's 5 times for MGM China.

Perfect.

Thank you very much.

That concludes the question-and-answer session today.

I'd like to turn the conference back over to Jim Murren for any closing remarks.

Well, thank you all for joining us today and, as always, we'll be around for any followup questions.

We look forward to seeing you out here in Las Vegas, especially when our new arena opens.

We will have a party then, Sarah, and obviously at National Harbor and all the activities we have going on throughout the year.

Please feel free to give us a call at any time.

Take care.

The conference has now concluded.

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