美高梅國際酒店集團 (MGM) 2015 Q4 法說會逐字稿

Good morning and welcome to the MGM Resorts International fourth quarter and full year 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; Bill Hornbuckle, President; Corey Sanders, Chief Operating Officer; Grant Bowie, CEO and Executive Director of MGM China Holdings Limited.

(Operator Instructions)

After the Company's remarks, there will be a question-and-answer session.

Please note, this call is being recorded.

I would now like to turn the conference over to Mr. Dan D'Arrigo.

Well, thank you, Keith, and good morning and welcome to MGM Resorts fourth quarter and full year 2015 earnings call.

This call is being broadcast live on the internet, at www.mgmresorts.com, and a replay of the call will be made available on our website.

We furnished our press release this morning on a Form 8-K to the SEC; and on this call, we will make forward-looking statements under the Safe Harbor Provisions of the federal securities laws.

Actual results might differ materially from those projected in these forward-looking statements.

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

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, Dan, and good morning, everyone.

We hope to have a robust call today and answer any questions that you have and clear up any confusion, because we had a great quarter here at MGM in the fourth quarter and for the year.

As you saw, our cash flows were up 15%, above consensus year-over-year.

That's actually three straight quarters of double-digit EBITDA growth.

And that also, by the way, represents the best fourth quarter we have had since our record quarter back in 2007.

And the best cash flow year that we've had since 2008.

Our fourth quarter margins on the wholly owneds were up a really remarkable 330 basis points in the quarter.

CityCenter continues to shine.

It had record cash flow in the quarter and for the year; and our regional resorts also produced excellent cash flows in the fourth quarter, and each had their best fourth quarter cash flows on record.

Over in Macau, Grant will talk about our achievements there shortly, but I have to say that I'm proud of the team's ability to really work through the market, enhance our operations, and maximize the efficiencies there, and you can see that has led to continued margin improvement.

And through those efforts, we believe MGM China is really well positioned when the markets improve.

But as you've seen before, we hold up pretty darn well during turbulent times there.

On the Profit Growth Plan we talked about last year, I'm very pleased to say that we are ahead of schedule.

We're now six months into it.

We've made many accomplishments already thus far.

I'm very, very proud of the incredibly difficult, but excellent work that has been done internally here, and they've poured their hearts and minds into this program.

In the back half of 2015, we really evaluated and thoughtfully initiated many ideas across every department within MGM Resorts, casino, food and beverage, hotel.

And that means all our domestic resorts.

And as we've said before, we're going to be very transparent to you on our progress on this important initiative.

So I can say with pride that our PGP resulted in over $35 million of realized benefit to our property cash flows in the fourth quarter alone.

That means we've achieved over $65 million in that short period of 2015 as a whole.

We're very pleased to report that we're ahead of this plan because, as you recall, we previously guided to achieving about 10% or 15% of the $300 million of total cash flow by last year's year end.

We're very committed to this and, in fact, engaged and inspired by it.

And we believe that our goal is very achievable, which is to realize about $200 million of the $300 million of cash flow by year end this year, and to get the full $300 million hitting the bottom line in 2017.

This, we believe, will help us achieve our 30% target for property cash flow margins by 2017 and, as I said, we are well on our way to achieving that.

And we're very confident in our ability to do it.

Here at home in Las Vegas, we continue to see strength in the market, which, of course, MGM is both a contributor to that strength and the single largest beneficiary.

The Las Vegas Visitors and Convention Authority reported a new record, as you know, in visitation, of over 42 million visitors.

That beat last year's record by 3%.

By the way, that is an additional 6 million annual visitors to the market since 2009.

We expect the visitation to continue to grow this year in the marketplace and the hotel KPIs are all up.

McCarran saw its fifth year of year-over-year passenger increases, and we've seen seat capacity continues to rise this year.

And in fact, it's going to be up about 6% plus in the first quarter alone.

With all the success Las Vegas has only recently enjoyed, it's very important to note that we are still below our prior peak levels as a city.

The city is 9% below its prior ADR.

It's 12% below its prior peak in RevPAR.

MGM's wholly owned strip resorts are also below its peak levels by 7% and 10% in ADR and RevPAR, respectively.

We clearly have more room to grow.

In a country where many cities have not only met, but have significantly exceeded their prior peak RevPARs, it's Las Vegas' turn to take center stage.

And of course, MGM is the best positioned, most leveraged company in order to participate in that.

And why will that happen?

It's because we have literally no new supply growth in the near term, unlike many major markets here in the US.

And that, of course, helps the home team; and MGM is the home team.

We have solidified our position here in Las Vegas as the destination choice for large scale meetings and conventions.

You know that city-wide convention attendance grew dramatically last year, up 13%; and I can tell you, fortunately, we continue to see great strength in 2016 and 2017 and 2018.

I think Dan will talk to that specifically.

But suffice to say that when we completed our expansion to the Mandalay Convention Center, which really fully was only done this year, we had hoped for significant increase in our convention bookings for Mandalay.

We're well ahead of what we had hoped for in terms of bookings into that very important convention center.

That was pre-emptive on our part.

We saw that the convention business was coming back to Las Vegas.

We wanted to keep ahead of demand.

And I can tell you that we are very confident in our ability to fill and, in fact, outgrow that space over the next couple of years, which is why last year, late last year, in December, we announced our plans to expand the ARIA's Convention Center.

Demand there is remarkable, vastly exceeding the capacity that we have at ARIA.

And because ARIA has been so well received and is literally the most sought-after conference facility in Las Vegas, we are adding 200,000 square feet to it.

And it will be very technologically advanced, it will be highly flexible, it will be the state -of-the-art in this marketplace, and it will be completed next year, in early 2018.

I think that when you see this, you'll know that ARIA, with over 500,000 square feet of convention space -- when it opens in 2018, I should say, early 2018 -- we believe that you'll find a significant increase in ARIA's convention business, as well.

And of course, ARIA had a record, in terms of cash flows, in the quarter and the year.

From a standpoint of what do we see in the market -- people ask us this quite a bit and so we need to give you a couple data points before we get into your questions -- it's about creating experiences here, creating reasons to come to Las Vegas again and again.

We've been at the forefront of that, as well, of course.

And before we report our next quarter earnings, many of you will be out here, because on April 4, we're going to debut the park that we've been building, which is spectacular, and we're going to be debuting the new arena.

The new arena, with AEG, I think is the most highly anticipated project that we've seen in Las Vegas in over a decade.

The response here has been incredibly overwhelming, not only from the public, but from the performers that are literally fighting one another to get gigs, dates into the new arena.

I'm looking at a list of concerts that we're going to have this year, ranging from The Killers to Garth Brooks to George Strait, Guns 'N Roses -- that's for Corey -- Janet Jackson -- that's for Dan.

(Laughter) We got a lot of sports fans coming, because we're doing a bunch of fights, UFC contests, a lot more concerts, college basketball, et cetera, et cetera.

And in fact, if you're wondering whether we can fill these facilities, you look to no sooner than the very first weekend when we open up the new arena, when on that weekend, we'll have major events at both the new T-Mobile Arena, the MGM Grand Garden, and the Mandalay Events Center.

And we're going to have over 50,000 guests fully occupying those events, those arenas in one weekend alone.

We think it's really the great time for us to leverage our strengths here in Las Vegas.

We've been waiting for the market to be as robust as it is right now.

We've been a bit jealous about the great strengths in cities like Orlando and Miami, Miami and Chicago.

Las Vegas is pulling ahead now of many of those markets in terms of its growth, and we think that our ability as a leader in this market to meet and exceed the macro trends here, because of our capital investments, is very, very high.

We're excited about this Profit Growth Plan, which will enhance margins, yes, but also add to the overall profitability of our Company as we continue to grow our portfolio outside of Las Vegas.

And we are extremely pleased with the progress that we have made through maximizing our shareholder values through the creation of MGM Growth Properties.

On that front, we've made a lot of progress since we chatted with you last.

We announced our All-Star team from the investment banking world, James Stewart and Andy Chen.

They came in from Greenhill.

They are the CEO and CFO, Wall Street veterans, deal junkies, really smart folks that are going to run MGM Growth Properties for us.

James and Andy are perfect candidates to run this enterprise, given their backgrounds, their enthusiasm.

And we are proud to say that they and their families are moving from California, the tax state of America, to Nevada, the state of business.

We also announced our independent board members last week.

That's important, as well.

We're very deliberate in finding folks that will be independent, be additive, and be very knowledgeable in the field of real estate, which is why we brought in Tom Roberts, because of his governance background, Mike Rietbrock, who many of you know on this call, who consistently outshined me when I was an analyst on Wall Street.

And we brought in an internal candidate that is tremendously knowledgeable in the REIT space, in the hotel space.

Elisa is our Chief Analytics Officer.

She came from Host Marriott, where she spent many years there, literally driving analytics and strategy for that company.

They are going to be very instrumental in guiding the path of this soon-to-be birthed New York Stock Exchange public company.

This is an exciting time for us.

We are prepared to launch this company soon.

We're not going to rush into anything, nor do we have to, but we certainly are getting ready and we believe it's going to be exciting for our shareholders at MGM Resorts, when they see the opportunities.

Really on that last point, I'd have to say that though the transaction merits should be obvious, we look at this, in terms of MGP, as truly an opportunity to grow that enterprise through acquisition, through the opportunities to acquire assets, either from MGM Resorts or from third parties.

We are noting with very great pleasure that trading multiples in the triple net lease space have held up well, and I think that confirms our strategic thought process when we went down this path last year.

And we'll have more to talk about that in the coming months, but suffice to say, we're well on track.

And with that, I'll turn it over to Dan.

Thanks, Jim.

Looking at our fourth quarter and full-year results, our fourth quarter was led by continued strength across our portfolio of domestic resorts.

In Las Vegas, we achieved 2% and 14% year-over-year growth in fourth quarter net revenues and EBITDA, respectively, primarily due to the outperformance of our non-luxury strip resorts in the quarter.

Fourth quarter wholly owned non-luxury strip cash flows were up 47% year-over-year.

Our fourth quarter wholly owned strip margins increased 286 basis points as a result of strong hotel results, as well as the positive impact from our Profit Growth Plan.

These quarterly results are quite impressive, considering our table game revenue was negatively impacted by a lower hold percentage year-over-year.

This impacted our wholly owned strip EBITDA by approximately $20 million in the fourth quarter versus last year, with most of that being felt at the Mirage, which was most impacted, which was roughly $14 million of the $20 million alone.

Our non-gaming offerings remain a key driver of growth, particularly in our hotel business, as we continue to see strong demand from both convention and leisure segments.

Our wholly owned strip properties achieved 12% RevPAR growth in the fourth quarter, exceeding our previous guidance.

This was driven by an 18% increase in RevPAR at our non-luxury resorts and a 9% increase at our luxury resorts.

Our convention mix as a percentage of total occupied room nights was an all-time fourth quarter best for our Company.

And for the full year, we were able to beat last year's record of slightly over 17%, as we achieved a record of about 18.5% in our convention room night mix.

As you recall, we started the year with a goal to meet or exceed our previous 17% record; and throughout the year, our sales and yield teams have done an outstanding job of maximizing our convention space to reach this all-time record high in convention occupied room nights.

And I think they are just getting started.

Looking ahead, the demand for our resort portfolio continues to be strong.

Our contracted forward bookings for 2016 are already approaching 100% of our goal.

And we continue to be encouraged by the quality of the convention customers and the growing lead volumes.

With this backdrop, we believe we are well positioned to beat last year's record high mix, while continuing to grow rate.

We also anticipate wholly owned strip RevPAR growth of 6% in the first quarter.

Our regional properties, as Jim mentioned, had another great quarter.

Net revenue and EBITDA grew by 6% and 23% respectively, led by increased table game volume and hold.

With a backdrop of the improving domestic customer, property margins grew by over 400 basis points.

Moving over to CityCenter, all four segments of CityCenter resort operations showed year-over-year growth.

ARIA led the way, with an increase in EBITDA of 43% over the prior year, driven by higher table game volumes, as well as hold, and a 7% increase in RevPAR.

Vdara cash flows were up 23% for the quarter, driven by a 13% increase in RevPAR.

And as you saw in this morning's release, with the anticipated conversion of the theater into the additional meeting space at ARIA, that resulted in about a $20 million acceleration of depreciation in the fourth quarter.

That $20 million will continue each month at CityCenter for the first four months of the year, until we take the theater out of service.

So that will impact what MGM Resorts will pick up in terms of that depreciation on your EPS modeling going forward of about $10 million a month for the first four months of this year.

Looking at corporate expense in the quarter, it was approximately $15 million higher than we had previously guided, primarily due to costs incurred to accelerate some of the initiatives related to our Profit Growth Plan, as well as some expenses related to the relocation of certain entertainment shows.

As we incur some additional costs on the corporate line item over the next couple of quarters related to PGP and our MGM Growth Properties transaction, we expect our corporate expense to be roughly $70 million in the first quarter.

Switching over to give you some guidance with respect to CapEx, both in the quarter and for 2016, during the fourth quarter, we invested approximately $177 million in CapEx related to our existing domestic operations, bringing the full year total to roughly $490 million.

On the development front, we invested $113 million at National Harbor and a couple of million, $2 million, at MGM Springfield during the quarter, bringing full-year CapEx from these developments to approximately $360 million for National Harbor and $35 million for MGM Springfield.

During the fourth quarter, MGM China spent approximately $174 million, of which $171 million was related to MGM Cotai.

That brings the full-year spend at MGM Cotai to approximately $543 million for 2015.

To help with your modeling for 2016, we expect our CapEx to be as follows.

Our wholly owned domestic resorts will be approximately $440 million for maintenance and growth at our existing properties, as well as from corporate, and also includes the expenditures to complete the park, the Monte Carlo theater, and the new Excalibur parking garage, to name a few.

Our development projects in National Harbor, as we aim to bring that property online by the end of this year, will have roughly $670 million of spending there.

And Springfield, as we begin to ramp up those construction efforts, will be approximately $125 million.

Not to be outdone, Grant's going to spend some money, as well.

He's looking at $1.6 billion to continue the construction efforts for MGM Cotai, and about $75 million of that number is related to MGM Macao.

With that, I'll turn it over to Grant for his comments.

Thank you, Dan.

Good evening, good morning.

And these calls come around pretty quickly.

So as we look at the past quarter, MGM China has consistently operated with agility and to deliver through challenging market conditions.

And certainly, this quarter has been no exception.

In the fourth quarter, MGM China recorded net revenue of $499 million and an adjusted EBITDA of $140 million before license fees.

This is a 2% increase sequentially quarter over quarter.

We were able to grow our margins by a full 2 percentage points from the prior quarter, driven by cost discipline and increased business mix from our main floor operation.

In fact, our main floor business accounted for closer than 80% of (Inaudible) in the fourth quarter, which is a record.

We are seeing some stabilization in the market, led by the mass segment.

And Macao mass GGI has shown improvement for two consecutive quarters.

Meanwhile, MGM is focused on continuing our growth and yielding our database, and its efforts have driven an increase in our main floor player counts for the quarter.

The MGM China Board today also announced that it will be recommending a final dividend of $46 million and this is subject to shareholders approval at the annual general meeting.

As mentioned in our press release, for MGM Cotai, we've made a strategic decision to move the opening of the property.

And this is based on current market conditions, the timing of other property openings.

We now expect to celebrate the opening in Macao by the end of the first quarter of 2017.

And importantly, there is no change in the current budget of $3 billion.

We are working closely with our contractor, China State, and are confident we'll be able to deliver this quality property.

This extra time is also important, as it will allow us to further fine tune the offerings in what is a very rapidly evolving marketplace and ensure that we're able to capture all the efficiencies that are possible, while at the same time presenting a spectacular product, offering what we all know are the unique MGM experiences to this market.

I would also like to conclude by saying that as a Macao-based business, we recognize that our long-term success depends on our commitment to the whole community.

Therefore, we have continued our focus on training and developing the local team, while our volunteer team in 2015 contributed 5,800 hours of community service.

And this is a record for our company.

While we have always been committed to buying locally, with more than 80% of our purchases from local businesses, in 2015, we took this to another level by taking the initiative to establish our MGM small- and medium-sized enterprises committee, which is made up of local business owners and professionals, to help us develop new and innovative ways to engage and work with the local small and medium private-size enterprises.

We are very proud to be a Macao China business and we look forward to further contributing to the development of Macao.

And with that, I would like to turn it back to Jim.

Thank you.

Well, thank you, Grant.

I'll just say a couple brief things, then I want to get to your questions.

We had, obviously, a busy year last year.

The converted CityCenter started paying its first dividends.

We announced a PGP plan.

And as I said, it's tracking really well.

And we, of course, announced a very transformational transaction when we announced MGP.

Those actions last year, we believe, set MGM up for another great year in 2016.

We've got a lot to look forward to.

We're off to a very good start in the first quarter.

In the second quarter, we open up the arena, the park.

Later that year, we're opening up a theater at Monte Carlo.

We have the opening, at the end of the year, of National Harbor, MGM National Harbor, which will be stunning.

And moving into next year, of course, we have Grant's project in Macao, followed by MGM Springfield in 2018.

We are well ahead of our plans as it relates to Profit Growth Plan, and we are dedicated to this being a way of life at MGM, improving margins, increasing efficiencies, driving revenue and cash flows, not only restoring the profitability that we had in 2007, but exceeding it, because of the girth of our Company, the scale, and the way we operate.

We're excited about MGM Growth Properties.

We're going to have a lot more to talk about in the coming months.

And with that, I would like to turn it over to the operator, so we can get to your questions.

Yes, thank you.

(Operator Instructions)

And the first question comes from Harry Curtis with Nomura.

Hello, guys, and good morning, Jim.

Normally it's your custom to give some sense of what to look for as far as pricing, both in the near term and then for the year.

Can you give a sense of what you're seeing so far on the RevPAR front in Vegas?

Maybe I'll start that, since you called me out, Harry, and then I'll turn to my left and my right.

Dan gave a concept of RevPAR, I think, in the first quarter, didn't you, Dan?

Up 6%.

That would be better than the RevPAR growth we had in the first quarter of the prior year.

And it's because we're off to a very good start.

CES was outstanding for us.

We did well as a market, MGM, I think, picked up some share there.

It set the tone for the first quarter on the convention side.

We had tremendous bookings in 2015.

In fact -- this is a fun fact, I think -- we booked an all-time record of $0.5 billion of business last year for this year, next year.

And that is pretty remarkable.

98% of this year is already on the books as it relates to our convention business.

So booking in the year for the year will mean that we're going to have to be creative and move people around; and if anything, that will add to RevPARs in that segment.

We're seeing some good strength in the second half.

We typically don't give guidance outside of the current quarter, but just because you asked, we're seeing good growth on the convention side in the second half of this year.

Rooms are up significantly.

ADR is projected to be up.

Revenue overall, up.

And a lot of that are corporates, and over half of it, for sure.

The financials, tech, those are leading sectors, but pharma and the bio med industry, we're seeing a lot of activity there, as well.

So from the standpoint of what we can discuss, typically it's mostly on the convention side.

As I said, we're off to a good start.

We beat what we thought we could do last year on the convention side, both in terms of revenue and mix.

We're off to a good start here in 2016.

And because of the remarkable progress of bookings last year, we feel more confident than we typically do, given some thought in terms of the back half of the year.

Anyone want to add to that?

What I would add, Harry, we saw the pricing strength, especially during the big conferences like CES, we had a record day for the entire company.

The first quarter, the big challenge there is Easter comes at the end of March, which is usually a slower period of time, especially on the convention side.

So to show a mid single-digit RevPAR growth for the first quarter, I think's pretty strong, especially when you look at our last year's RevPAR growth.

Corey, just a quick follow-up.

When you consider the business that's been done so far, can you give us a sense of attendance, cancellations compared to history?

Is there anything to indicate any softness?

Just looking at the fourth quarter, our attrition was 9%, which is usually lower than normal.

Depending on which convention, I would say the majority of them have showed increased attendance.

There are a few that are flat, but in general, CES, for example, is an example.

There's a nice little increase there.

So Corey, just attrition, I didn't understand the answer on that part.

Was attrition 9%?

Is that good or bad?

That's great.

Our usual trend's about 10%.

We've been running about 12%.

So 9% is excellent for us.

Okay.

Okay.

Thanks, guys.

Thanks, Harry.

Thank you.

And the next question comes from Carlo Santarelli with Deutsche Bank.

Thank you, guys.

Dan, you provided a little bit of color on the table situation in the 4Q, in terms of the $20 million EBITDA impact.

In the press release, you guys talked a little bit about slot revenue decreasing 3% in the 4Q.

The market, I believe, just from a GGR perspective, was up like 6.5% or 7% in the 4Q.

I'm wondering if maybe you could reconcile some of the commentary in the press release regarding the accrual for slot points and how that might have made things a little bit distorted.

Sure, Carlo.

I'll take that.

Our actual slot win in the quarter was up about 1%.

And when you look at the year-over-year comparison on the revenue line item, we're actually down because of that prior year accrual adjustment to our slot revenue numbers.

So our win was actually up marginally, but for the revenue side of the equation, from an accounting standpoint, the tough comparison was really in the contra revenue account for slots.

And what I would add, Carlo, is a few things.

One, we had fewer events in the Grand Garden from the year before, and at Mandalay Bay.

Two, I think with our bigger convention mix -- the year before we probably pumped that up, that area, a lot, especially the lower end casino side, which was probably not a great margin business.

So we thought about not doing that in the fourth quarter this year.

And then finally, if you look at some of our competitors' numbers, they obviously pumped up some of their rooms, which they haven't had in the past, which would improve the market growth in Las Vegas.

So I think just to summarize that last point, so I think what we're saying is that we had more slot promo activity in the fourth quarter of 2014.

We did that to fill rooms in the fourth quarter of 2014.

We had much more convention business in the fourth quarter of 2015, which meant we pulled back on some of our slot marketing programs.

And as a result, our slot margins and our profits were actually higher in the quarter.

Great.

Thanks, everyone.

And then, Jim, if I could ask a follow-up, bigger picture.

As you think about the company structure today, obviously several JVs, and that will expand a little bit.

Have you thought, just bigger picture, more strategically about anything that you might want to do going forward with some of the joint ventures, obviously, some of which are levered lower than the overall company that maybe you don't get full credit for, et cetera?

Have you thought of anything along the lines of maybe the best way to address that as we're looking ahead?

Well, I think we view this as a marathon, and we have a few legs -- maybe it's a decathlon, because we have a few legs of this race.

Number one, we need to be assured that we're making the right decision here with creating this triple net lease REIT.

And we believe we are making the right decision.

It's required a lot of our corporate finance, legal, accounting work.

We've made a lot of regulatory progress on this.

And we feel that is a priority, to properly birth this new company, this up REIT, this year, and make sure it's on a strong footing.

And by the way, it had a great fourth quarter.

If you were to pull out MGP's properties in a great year, its RevPAR is, in fact, better than the rest of the company.

Its RevPAR is, in the fourth quarter, up 12%.

Cash flow is up 17% year-over-year in the fourth quarter.

For the year, MGP Properties were up 7% in RevPAR, up 14% in cash flow.

So first order of busy, I think, is to do that.

The second, and this is on a parallel path, is to look at our portfolio to determine where we can provide value to the shareholders through a corporate finance transaction.

And obviously, Crystals would be front and center on that, given the very low cap rates and the high attractiveness of that asset.

And suffice to say, there will be more to discuss on that sooner rather than later.

The third point, to answer your question, would be do our joint ventures change their capital structure?

Do they dividend out more money?

Certainly possible, given the low leverage in a couple of our joint ventures.

Do they change their capital structure, because we get little or no credit for the actual ownership of many of those joint ventures, because the way you all value companies from an enterprise value to EBITDA perspective.

Certainly worth discussing.

Do they become opportunities for the new company, MGP, going forward?

Obviously, part of a discussion.

And how do we continue to fulfill the promises that we've made in terms of deliberate deleveraging of MGM Resorts International and deliberate growth in our cash flows?

And I have to say that we have a lot of tools at our disposal to do that.

But we're very focused here.

We have a -- not a large corporate finance team, but a mighty one -- and we have a clear vision of what we should do over the next year or two.

And if we execute on our internal vision, we think everyone's going to be well rewarded, including the shareholder employees, like the people in this room, that are working at the Company.

That's great.

Thank you very much.

Thanks, Carlo.

Thank you.

And the next question comes from Joe Greff of JPMorgan.

I have two questions, one on PGP and then one on MGP.

A lot of initials there.

(Laughter) On PGP, the $35 million of EBITDA contribution in the 4Q is certainly more than we, and I think most, were expecting.

And I ask this question maybe in the context of expectation setting or not getting ahead of expectations.

But would you look at the quarterly contribution throughout 2016 to mirror the quarterly contribution that you saw in the 4Q?

How do we think about that?

Or how are you thinking about that, Jim?

Okay.

We're going to have a couple of people answer that, because maybe Dan, you could start on the quarterly, just to get a sense of pace on that.

But we have a special guest star in Chris Nordling, who is running that program for us, and he could give you a little more color in why we're more confident about our ability to perform there.

So Joe, you're right.

And as Jim mentioned, we are ahead of where we thought we would initially be.

We got out of the gates pretty quickly under Chris' leadership and the rest of the project management team's leadership.

We were able to achieve in certain areas faster and quicker than we originally thought.

Probably about half of the $35 million impact was from revenue ideas and initiatives, and the remainder were on the cost side of the equation.

So we think those are some of the quicker, easier to market initiatives that we're benefiting right now.

I think what you'll see is that creates the baseline for us on a quarterly basis to grow, as some of the larger, more complicated initiatives that we've been working on will start to roll out either late in 2015 or start to roll out here in 2016 and gain more traction throughout the upcoming months here in 2016.

And so I think we're ahead of pace from that standpoint, and I think some of the more complicated, larger initiatives will start impacting the 2016 first couple of quarters here.

And so Joe, this is Chris Nordling.

You might remember when we first talked about the Profit Growth Plan, we had 400 or 500 ideas as a group, company-wide.

As we got it organized and set up our PMO office and then our change management office and got control of exactly what we were doing, the top 50 ideas represent a little over $300 million or $350 million.

We actually implemented about 66% of those ideas in implementation stage by year end, which was a little bit ahead of our pace.

And as Dan mentioned, those last 18 or 19 ideas are coming in this 2016, are the most complicated ones, some of them requiring technology changes to fully implement them and get those.

But the progress to date has been overwhelming for our teams as they push through that.

The commitment at the operating company level between our operating presidents and our CFOs and our general staff top to bottom is unbelievably excited about pushing through.

And you'll see, as we move through 2016, you'll see PGP wane away and continuous improvement become the talk of the day, because this is embedded in the core fabric of the business going forward.

And that's really what we're after long-term.

And Joe, the other thing I would add, those PGP amounts we're talking about are specific initiatives that we could identify, but the mindset in the operations is definitely there.

For example, in the fourth quarter, we're down 1,000 FTEs.

And the PGP initiatives have touched very little FTE.

So it's flowing through the whole operation.

Okay.

And then my question on MGP.

Jim, you had mentioned it's a vehicle to grow the acquisitions, whether it's MGM or others.

That comment intrigued me, or others part comment intrigued me.

I know it's early days, but is there a pipeline related to other acquisitions or non-MGM-related assets that you guys might be looking at?

Well, I'm getting a stare-down from my lawyer across the table here.

So if I get muzzled, it's because of somebody else.

But I'll give it a shot.

Look, we could have dusted somebody off the shelf and inserted them as a CEO of MGP.

I could have done that, could have found someone we like that we know well, that had had a fine career in gaming and given them a job, and found some CFO that was looking for work or something.

Those two hires should be very illustrative, very illuminating to you and to everybody.

We were deliberate in our search.

We looked at people in the triple net lease space.

We looked at people in the hotel REIT space.

We looked at hotel operator space.

We looked at former gaming people.

And the resumes of James and Andy speak for themselves in terms of their experience, transactional experience in gaming, lodging, hospitality, entertainment.

They are in the prime of their careers and they are not sitting around waiting for the phone to ring.

The board that we put together, very deliberate, in terms of a premier corporate governance person, a highly regarded Wall Street person, a highly experienced and regarded REIT executive, now working for us.

MGP is not going to be, in my opinion, an after thought, some captive subsidiary of MGM Resorts.

It will be its own company, with its own governance, with its own flight path.

And we hope to see it grow rapidly, because no one benefits more from MGP's success than MGM Resorts.

No one benefits more from its ability to grow internally, as it did with the properties in the fourth quarter and for the year, its ability to execute transactions to continue to grow, its ability to be a counter party, potentially, to transactions that we enter into with them, because of the [rofer] that MGP has on our projects at National Harbor and in Springfield, and its ability to grow outside of anything that MGM Resorts has cooked up or has got in mind.

The gaming landscape is very diverse and there are many assets out there that could be very appealing.

And I can't speak for that company, certainly not now, in this stage.

But I think it would be pretty obvious to say that there will be lots of opportunities for that enterprise, whether or not MGM Resorts manages anything it ends up making an investment in.

So we're very, very deliberate in this and very excited about its potential for the MGM Resorts' shareholders, because of its ability to diversify and its ability to really, I think, once and for all, answer a question of what are our assets worth at MGM Resorts?

What are the physical assets, as well as our operating and brand assets, worth?

And I think the market will determine this once there are two separate companies.

Thanks for that.

I appreciate it.

Thanks, Jim.

Thank you.

And the next question comes from Thomas Allen with Morgan Stanley.

Hello.

Good morning.

Can you give any color on year-to-date gaming trends, both in Macao and in Vegas?

Obviously, we had Chinese New Year and we've had a couple of months behind us.

So any color would be helpful.

Thank you.

Well, I'll take Las Vegas while Grant has another sip of coffee.

What time is it there, Grant?

Just coming up 1:00 AM.

Oh, lovely.

The things you do for our company, Grant.

Thank you again.

The first quarter, as I mentioned, not only off to a good start from a convention perspective, but we had the Super Bowl, and I can say that we had a record sports book volume during that period of time.

And we're in the midst of Chinese New Year's now, so it's really premature to give you an update, except to say that we've got a lot of people still in town.

Not sure about the volumes.

They might be down a bit volume-wise.

But as I said, lots of people in town.

Going into the year, we have a bunch of activities that are gaming-related, a good fight coming up -- when is the Canelo fight?

May.

In May.

We got a Pacquiao fight.

He made some news, didn't he?

We got a Pacquiao fight in April.

We've got all the arena events.

We have a young lady singing I've never heard of.

What's her name?

Ellie Goulding.

What?

Ellie Goulding.

Okay.

(Laughter) But I hear she's great.

We have a lot of casino events.

I think it's -- the colleagues here who have daughters here made a point on that.

I would say that given the activity that we've seen, at least early days, really super early days in Las Vegas as it relates to Super Bowl, which is a really good indicator of national play, having that kind of national play was very rewarding, seeing what's going on in terms of our activities, I'd have to say that's a positive.

We know that our Chinese business has been down, so we anticipated sluggish volumes during Chinese New Year's.

But as I say, we win and lose every day in that, so it's really early days on that part.

But I have to say we're pretty pleased about how the year is beginning.

So I'll turn it over to Grant.

Thanks, Jim.

So let's pick up probably from the start of the year, so we'll pick up in January.

We've started to see some positive signs.

I don't want to get carried away with it.

But as you take and even say our premium mass business, we were looking at like a 12% quarter on quarter growth.

And historically, what happens the early part of Chinese New Year is quiet, and it was particularly quiet, but then we did see a big surge where we were seeing traffic counts that were 30% to 40% above regular week gains, which is a good sign, because I don't think it's possible anymore just to map out against previous Chinese New Year period.

This one, this Chinese New Year period, even in Macao, has actually seemed to extend a little longer for us.

We probably got an extra three or four days.

And strangely enough, some of that appears to be because businesses in China actually took longer holidays and people were traveling.

So particularly in the mass area, not just Chinese New Year, but January and for the prior two quarters, we are quietly optimistic that we can see some performance improvements.

I don't want to get carried away and suggest that this is going to be the start of anything huge, but it is important to us.

And when you put it in the context with the quarter that we had, where we did a 28% margin, and as we've seen business moving from the VIP to the, into, towards the mass business, that's really very solid.

So the critical point to remember is when you see the mass growth, it actually has a significant positive impact in the overall performance of the businesses.

And so that's where I think you're going to see the trends moving forward.

That's where we've always focused.

So not wanting to get carried away, but quietly optimistic that we can see some performance improvements moving forward.

Starting to see some signs of some growth, getting some incremental traffic, getting some new and positive indicators in terms of new player sign-ups.

They are all good signs to suggest that we've got some opportunities moving forward.

And that's really important, because we understand we've got to grow significantly for Cotai.

Is that helpful?

Is that enough color for you, or is there anything else I can help you with, Thomas?

That's great color.

As a quick follow-up, do you expect MGM Cotai to open before or after Parisian?

I am no longer in the position to understand how anybody opens.

I think the critical point for us is we've made a decision when we think is the best time for us to open.

So we are actually just focused on ourselves.

And that's why we made this decision now, because it's really important that we wanted to be in control of this decision rather than trying to dance around other people's decisions.

So that's where we are at.

I would suspect that they would open before us, from what we've been told.

But it doesn't really affect us, because we're focused on the plan that we've set for ourselves.

Very helpful.

Thanks, Grant.

Thank you.

Thank you.

And the next question comes from Felicia Hendrix with Barclays.

Hello there.

Just wondering -- and I'll throw this out for all, or any of you -- when we think about your performance for next year, just how should we think about the relative performance at the core properties versus the luxury properties?

Do you expect both segments to contribute equally?

We've seen some really strong, nice recovery in the core end of your portfolio, so just wondering how you're thinking about that for next year, or this year, I mean, sorry.

Do you want me to take that, or you jump in?

We expect that to continue.

I think it's important to -- I have to take a step back, because stock's down, which we don't understand.

The breathless headlines of losses in Macao are absurd.

We wrote up MGM China by $3.5 billion in 2011, and we reversed some of that this year.

And the other part of the mix was simply purely tax.

On every other basis, we obviously exceeded anyone's expectations.

And the reason why I bring that up is when you look at what even happened in the fourth quarter, it should be illustrative of what's happening.

In the fourth quarter, we had a great fourth quarter here in Las Vegas, and even properties that didn't do as well as they did a year ago, in many cases, were well ahead of their budget.

I'm looking at the MGM Grand, crushed its budget in the fourth quarter, by over $20 million.

What's happening here in the first quarter is nothing but spectacular, from a standpoint of looking forward into 2016.

Our RevPARs are growing.

I don't remember a time when we've talked about the second half of the year here in February.

But because we see such strong convention business, which accrues to the benefit of all 42,000 rooms, but particularly to the core properties, as evidenced in the past, I would have to say that the core properties are off to a great start and also have a lot of runway here for 2016 on the revenue side.

On the profit side, to have over 300 basis point improvement in margins company-wide, think about what the margin potential is for the core properties, and the luxuries, but really the cores, which were devastated by the recession.

And you look at their peak to trough margins and how we are very determined to bring those back to peak margins, and with PGP, I think we'll get there.

As it relates to the luxury properties, ARIA had a record.

Bellagio had a monster quarter.

And we're off to a good start from a standpoint of the activities that we see in the year.

And so setting ourselves up for 2016 is as exciting for us as in any year that I can recall.

So I just wanted to make that -- put that in context -- is that we have now put ourselves in the cat bird seat, as a market, relative to other markets in the United States, because of the literally no supply, and surging demand for Las Vegas as a product.

We, at MGM, we'll beat the market, as we have in the past, because of the capital investments that we are making.

We'll beat the market, I believe, on the revenue side.

And certainly, we'll be able to drive that revenue down to higher margins and higher profitability from a cash flow side.

And I think no property -- I could tell you, in the budget that was just approved by the board, no property is looking to be down year-over-year.

Many of them are looking to be up substantially.

And it's because of the capital investments that we've made and because of what we see on the books already.

Keith, we'll take the final question.

Yes, thank you.

And that comes from Robin Farley with UBS.

Great.

Thank you.

A couple of things just to clarify, and there were some overlapping calls, so I apologize if you said this in the first few minutes.

But you had previously talked about the MGM Growth Properties IPO being a Q1 event.

Is it still something that we can expect in Q1?

We didn't give a timetable.

We said we're on track, which means that from the major points that we needed to get across, to get accomplished, I should say, one would be regulatory, made great progress there.

Not that there is as much to do for us as other companies.

Second was with the SEC, tremendous progress there.

The third was to work with our underwriters and our bankers to set up the capital structure.

And I think Dan and Jim Freedman and the team have done a really great job, with very strong demand from our commercial bank partners.

So we feel very, very good about the capital structure.

And now it's a matter of working, finishing up the S-11, making that a public document, establishing a road show schedule, establishing teach-ins, none of which we can discuss with you today in terms of the timing.

But nothing we said last November, when we talked about this, has changed in terms of our timetable.

Okay.

That's great.

Thanks.

And a follow-up question about the Cotai opening being moved to the end of Q1.

I know you said that, or Grant said, that you weren't as worried about when others are opening.

Does that mean if another property also got pushed to the very end of 2016, would you be comfortable opening within the same month or two as another property, or would you think potentially, if there are delays in some of the other projects that are scheduled to open in 2016, would it make sense to even push back past Q1 of 2017?

Well, you want to take -- I'll maybe start, Grant, and then you can jump in.

We took this decision internally as just a smart financial decision.

We didn't have to push this off a few months.

We did so because we feel like it's in the best interest of the MGM China and the MGM Resorts shareholders.

It certainly benefits 2016 from a standpoint of less pre opening expense in the back half of the year.

It certainly allows us to reduce the amount of overtime that we would have to incur to rush to a deadline.

And it certainly allows us to make sure that we have the best possible product when we open.

There's no way of us knowing when the other guys are going to open and there's no way we're going to pace an opening based on somebody else's opening.

That would set false precision, because we don't have their internal dialogue or timetable.

They are not going to share it with us.

And if they did, it might not be correct, because people have certainly missed published deadlines multiple times in the past.

I think what's important for our standpoint is that we keep to our budget, which I'm proud that we are doing, that we produce a great product, that we open it when we believe it's ready, we open it from a standpoint of making sure that we've thought about where the market is and what's happening, and we don't open too soon, because that would incur an awful lot of needless costs.

And so I think that brings you to our timetable and really the thought process to why it is the Board of MGM China felt this was in the best interest of the shareholders.

Great.

That's helpful.

Thank you.

Just my last quick one is, I heard the comment on Q1 RevPAR, and that it's maybe not as big of an increase just because of the holiday shift, which makes sense.

Did you give color on what full-year RevPAR?

I guess we can assume it would be higher than 6%, but I don't know if you've set a number.

Do you want to tackle that, Corey?

Sure.

Yes.

If you look at what we did last year, last year first quarter we did about 1.1%.

It's usually one of our tougher quarters.

And with March flowing in there this year makes it -- I mean, with Easter flowing in there this year -- it makes it a little bit harder.

As we continue to press rates and continue to enhance our strategies, I would hope that we would continue to be able to grow RevPAR greater than that 6%.

Yes.

So what was our RevPAR last year in the first quarter?

It was only like 1.5% or something.

1.1% on the strip.

Okay.

So on the strip, Robin, we're only up a little over 1%.

The fact that we think we're going to be up 6% this year, and you saw what we did for the year, it certainly gives us some really good momentum going into the balance of this year.

That, combined with the bookings that I talked about earlier in the call, and the fact that we literally are almost completely booked out for 2016, which would require us literally, because we know we're going to get in the year for the year.

We always do.

It's going to mean that we're going to be able to move some people around and be more creative on our spaces and that will have an impact.

And really in the second half of the year, as we build momentum, is why we were able to feel comfortable giving you some second half guidance, as well.

Okay.

Great.

Thank you very much.

Great.

Well, thank you all for participating.

We went over a little bit, so we apologize for that.

But we appreciate your participation today and we'll be around all day for any follow-up questions.

So thank you, and have a great day.

Thank you.

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