美高梅國際酒店集團 (MGM) 2016 Q1 法說會逐字稿

Good morning and welcome to the MGM Resorts International first-quarter 2016 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; James Stewart, CEO of MGM Growth Properties; Grant Bowie, CEO and Executive Director of MGM China Holdings Limited.

(Operator Instructions)

Please note, this conference is being recorded.

Now I would like to turn the call over to Mr. Dan D'Arrigo.

Please go ahead.

Well, thank you, Gary.

And good morning and welcome to MGM Resort International's first-quarter conference call.

This call is being broadcast live on the Internet at www.mgmresorts.com.

A replay of the call and electronic copy of an investor presentation we will refer to during today's call is available on the Company's website.

We furnished our press release this morning on Form 8-K with 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 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 the Company's periodic filings with the SEC, including our most recent Form 10-K and 10-Q reports.

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 also available on our website.

Finally, please note that this presentation is being recorded.

And with that, I'll turn it over to Mr. Jim Murren.

Thank you, Dan, and good morning, everyone.

I have got to say, I for one have been looking forward to this earnings call.

We are excited to talk to you about our outstanding results and what we see going on in the future.

We also mixed it up a little bit, we've provided, for the first time, a really strong investor deck.

We encourage you to go through that.

We had a lot of internal folks working on that, and we think it is extremely valuable to understanding the MGM story.

We are clearly very pleased with our earnings results.

We are also pleased that we have executed on the initiatives that we have talked to you about.

Our cash flows in the quarter were up 24%, and our margins were the best that we have achieved since 2007.

We are going to have a lot of time this morning for Q&A, but I want to brag on a few key highlights in the quarter.

First, I'd like to welcome to the New York Stock Exchange, officially, MGM Growth Properties.

Last week we completed that incredible IPO.

It was the largest IPO to date this year, and by the way it is the third largest REIT IPO ever.

In the room we have James Stewart, our outstanding CEO, and our CFO, Andy Chan here, and they are already hard at work.

We are extremely pleased about not only the outcome of the IPO but, really more importantly, what it means for MGM Resorts going forward.

I'm extremely excited about the future of both the companies.

We have talked about Crystals a few times on our earnings call.

We have said that if we got the right price for Crystals we would sell it, and we certainly got the right price.

We sold Crystals for $1.1 billion.

That, by the way, is a really remarkable 4.2% cap rate.

This was the largest sale of a single enclosed mall in the United States in more than a decade.

As result of that, CityCenter declared over $1 billion in dividends to its owners.

Of course, MGM owns half of that, so we received $540 million in dividends.

As result of that transaction, and MGP, we have improved our balance sheet profoundly.

That is $1.6 billion of total cash that goes fully to debt repayments.

Now on the profit growth plan, remember we announced that about nine months ago, and we set ourselves some very ambitious goals.

I'm incredibly proud of the fact that our results have far exceeded our initial expectations and have really been astounding.

We challenged ourselves to really redefine, literally, how we operate every aspect of our business.

This required a comprehensive, unprecedented team effort amongst the 40,000 people that were directly involved and the 63,000 total employees of MGM Resorts.

You can see the results.

In the first quarter our PGP realized $59 million of incremental EBITDA, and that includes our 50% contribution of economic interest of CityCenter.

If you add that up, we're obviously ahead of schedule because we had previously guided to achieving about $200 million of annual EBITDA by the end of this year.

We also, if you recall, announced that we were committed to achieving a 30% EBITDA margin by the end of 2017, and you can see that we are clearly ahead of our forecast on that as well.

I think relative to this point, and I hope you look at the deck, because we talk about in some great detail how we are achieving this.

I want to emphasize the fact that the culture of our Company has changed.

It has improved.

It has been now one of relentless attention to continuous improvement and not accepting the way things have been done for decades upon decades in the gaming industry.

And not simply looking for the fix or the quick buck, but we're literally changing how we conduct our business.

This has permanent long-term accelerating implications for our revenues, our profits, and the culture and the enthusiasm we're working for at MGM Resorts.

I know we will get a lot of questions on Las Vegas -- the outlook on Las Vegas.

Let's cut to the chase and say we are doing great.

And the outlook is strong.

Last month, if you remember, we unveiled the Park, which is that entire entertainment district and of course the T-Mobile Arena.

What a start we've had there.

It's only been a month, and we have hosted over 100,000 guests in the arena.

Most of those people were visiting Las Vegas.

Most of the people that are booking new events are booking because they want to visit Las Vegas to go to the new T-Mobile Arena events, which of course is great for the entire town.

A lot of energy there, a lot of energy in the Park.

We've seen some great F&B numbers in that side of the Strip, and we think that the neighborhood only gets better, and of course we own the neighborhood.

Generally speaking in Las Vegas, trends are strong, and is led by very robust demand in the convention business, but also great growth in our other retail and leisure channels.

As you can see in the first quarter, our wholly-owned Strip resorts achieved an 8% RevPAR growth; that of course is better than the guidance we gave you.

We guided to 6%.

And we continue to see great growth strength in that convention and corporate basis.

In fact, no deceleration at all in sight.

We are really proud of the fact, grateful, that we expanded the Mandalay convention center when we did because it has allowed us to maximize the corporate business, high-margin corporate business, while still maintaining the very solid and important tradeshow business.

And because of that we have a lot more flexibility to manage the largest portfolio of convention space in Las Vegas by a mile.

I know you know we have a tough comp in May because we have the great casino event, the Mayweather Pacquiao event, in May.

But we are off to a good start, really good start here in the second quarter.

We had a great April, and as a result of that, our confidence in the quarter remains very strong, and we believe we can achieve RevPAR growth of 5% in the second quarter even though the month of May is an incredibly tough comp because of what I mentioned.

That is because we did so well in April, we are looking great in June as well, and we have a great calendar of events at all of our venues: T-Mobile, MGM Grand, and Mandalay Bay.

MGM China performed well in the quarter.

Obviously it is a rugged, tough market.

Cash flows have been impacted by the market and roughly by $9 million from a low hold percentage.

But we see encouraging signs now in the mass business, and the key contributor to our profitability there is mass, so that gives us good confidence.

We believe in this story, the long-term prospects of Macau, we are highly confident that the quality of what we produce in terms of our great employees, our great offerings, our great service, not only at MGM Macau, but what we are going to deliver at MGM Cotai, positions that company, MGM China, for renewed and solid growth.

And of course Grant's on the line, and he will tackle any of those questions in a moment.

In conclusion, I just have to emphasize how deliberate we have been internally to execute on a plan that we promised to our Board and we promised to you.

We have literally fundamentally changed the way, not only the way we are operating our business, but I have got to say, we are fundamentally changing the way operators operate in Las Vegas because we are the leader.

We are doing better than anyone else here.

People want to know how we are doing it and then trying to copy us.

We are the premier operator here, and in fact, in every market in which we operate.

We are right to brag about the fact that we have the best properties operating at the highest level in every market in which we operate.

We are driving revenue growth, we are exceeding the revenue growth of the market.

We are exceeding the revenue growth of our competitors.

We are exceeding the revenue growth of the United States hospitality industry, and we are exceeding the revenue margin and profit growth of corporates here in the US.

We told you that we would be absolutely lasered-in on improving our balance sheet, and we sure have.

We are getting, finally, the credit from the rating agencies.

In fact, Moody's gave us a two-notch upgrade recently, and I expect far more of those type of announcements in the future.

We are the preferred developer in new markets.

We win when we go in.

We won in Massachusetts.

We won in Maryland; we are building strong there.

You can see the progress of Maryland, by the way, in the investor deck.

It is going to the most spectacular, integrated resort outside of Las Vegas that exists, and I think, the most profitable one outside of Las Vegas when it opens at the end of this year.

I have to say that looking at how we performed in the marketplace, we outperformed in every aspect.

We are the leader in conventions.

We are the leader in entertainment.

We are the leader in gaming, and we gained market share.

We benefited from the efforts of our PGP plan, our great cultural changes, our strong corporate finance and legal teams.

And we are incredibly proud of how we are doing at MGM Resorts, and we are as excited about MGM as we are about MGM Growth Properties and its future as well.

And so with that, I'd like to turn it over to the operator, and we will get to the questions.

We will now begin the question-and-answer session.

(Operator Instructions)

And the first question comes from Harry Curtis with Nomura, please go ahead.

Good morning everyone.

Thanks for the incremental detail that you provided this quarter.

I have two questions related to Vegas, both focusing on forward trends, booking trends.

My first is if you just take a look at the most recent booking trends over the last 1 or 2 months, for the second half of 2016 and into 2017, how is that booking pace and pricing?

Jim, you mentioned that it has been pretty strong, I was wondering if you could put a little bit of detail around that?

I will turn it over to Corey He's got a bunch of stuff in front of him Harry.

Yes, Harry.

The actual second quarter looks really strong, and actually the third quarter even looks better just from a convention base.

We're looking at significant increases in rooms, and in both those cases the price increases also.

They are decent given where we are in the market.

So I think when you look at that base and look at where the leisure and FIT's booking, we feel pretty strong about where we are right now.

When you look at this back half of 2016, given the guidance of up 5% in the second quarter, is the back half at a similar rate or better?

The third quarter continues to pace pretty strong, Harry.

Fourth quarter is probably our toughest comp for the year, but that being said, we feel pretty good about how October and November is shaping up from the convention standpoint, and we think the back half of the year will be as good as the first half.

We're at a point here where, have we ever been better in terms of our convention bookings?

No.

No way.

We are right now at an all-time record in terms of the amount of convention space, the amount of conventions, we have on the books in the year, for the year, the amount of bookings that we have on a quarterly basis.

Our convention mix, which was a record last year, is going to be higher this year.

And, yes, it's a tough comp because we did so well in the fourth quarter last year, but we are off to a tremendous start.

Want to say anything more Corey?

I think when you look at it from a percent of mix, 2016 will beat 2015 which was a record year, and take us to a new number as a percent of convention.

And we are doing that with the additional space at Mandalay Bay, but we are still constrained to some degree.

In peak periods.

Of how much space we can rent, and so we will continuously look for opportunities to move business around and also invest in opportunities to continue to feed that business.

So that leads to my second question which is, 2017, if you were already at a record mix of group, how much more can you push that in 2017?

Are you seeing it more in the shoulder periods?

Yes, we are.

And also remember we have more on the books in 2017 than we do now.

And remember, ARIA is adding 200,000 square feet of convention space, and we're able to repurpose some of our other spaces here.

Remember also with T-Mobile as a new asset and really important asset in the market, that frees up Mandalay's events center, and sometimes MGM, for more conference space.

We have over 3 million square feet.

Of convention space here in Las Vegas.

We obviously vastly exceed our competitors, and we have more on the way, and we have the ability with a great sales team to move stuff around.

So we fully expect to have a better year in 2017 on the convention business than we do this year.

As reminder, CONEXPO comes back in 2017.

That's Q1.

Thanks.

Great trends.

Thank you, Harry.

The next question comes from Joe Greff with JPMorgan.

Please go ahead.

Good morning everybody.

Obviously the 1, 2 contribution related to the profit growth plan was ahead of what most of us had modeled.

Jim, can you give us what some of the big buckets or the big drivers of that $59 million was, and I am presuming it's a little more OpEx related than revenue related?

I'm going to hit the high points and then I'll turn it over to Corey or to Chris.

Look, we studied a lot of great companies that have gone through a similar exercise, and one of the things that the best companies have done, the ones that have had the best results, they told us very clearly that they established a plan, the plan is based on initiatives that they and outside consultants helped them identify.

Then they set up a target number, and then once they get into it, they realize that some of those initiatives aren't going to work.

But they find dozens and dozens of other ones they never even thought about.

That has happened here in spades.

Almost everything that we identified is working.

But we have found dozens and dozens of other initiatives we didn't think about.

It's because we change the way all of us think about our business.

And it is a big contributor to driving revenue as well.

Being more thoughtful at the front desk, being more thoughtful about pricing, being more thoughtful about our convention our business.

Working together to yield this huge portfolio of properties that we have.

And as you can see in the deck, we got very strong results on the cost side, and many -- the exciting thing is many of the biggest dollar initiatives are just being launched now.

Do you want to hit some of those points Corey?

I think in the deck we go through a lot of those examples, Joe, everything from airplanes to wine up-sells, to room up-sells, to how we manage labor.

We are about 45% revenue, 55% expense right now.

When it is fully implemented we expect to be one-third on the revenue and two-thirds on the cost.

There is still some opportunities on the cost projects that take a little bit longer to see the flow through.

But we are extremely pleased with the way our teams are performing and have stood up to the challenge.

Yes.

And I am just looking at something Chris Nordling gave me.

It's crossed every single department.

Right Chris?

We are getting revenue and profit growth in our casino departments.

Look at our slot revenue, by the way.

See how much more money we are making in our slot department than frankly our competitors or how we used to do.

There is an example.

And our hotel division.

Our entertainment division.

Retail, which was never a particularly great department for us, is -- had a record year last year -- last year.

And is off to a great start here.

Our F&B profits, the way we cut G&A,and really it's across-the-board.

And Chris, how many people do you have working in the PMO office on this?

We have about 40 full-time running initiatives.

And team leads on all the projects.

You know, our best people.

So this isn't like a bunch of people in this room sitting around the room and saying, can we dream up some stuff?

There are 40 of our best and brightest men and women that have left their jobs internally within this Company, gone into a new job in this project management office, and are driving, with project leads that are even more senior to them, these would be property presidents, senior and executive vice presidents, that are leading individual initiatives that are driving this effort.

So I don't -- and by the way, the other message that's really important on this, that we learned from the best and brightest companies, this isn't something that has an end date.

This is going to go on forever.

We're not going to go back to the way we used to run our business, or frankly the way most companies run their business.

And this, in the Japanese term of Kaizen, means continuous improvement.

That's the way we are running the Company now.

And Joe, the other benefit that we are seeing that we don't count in these PGP numbers is just the laser focus on the operations efficiency.

So just to give you an idea, we are down about 1,400 FTEs, and probably 60% of that is PGP.

The rest is purely operators being very focused on proper staffing levels and making sure that we are as effective as possible.

That's helpful.

Thank you.

And then I have a Macau question.

I don't want Grant to feel lonely over there.

Grant, how much excess labor expense are you carrying at the Peninsula that you plan to ultimately shift over to Cotai?

Well at the moment, we -- particularly in gaming, have basically got all of our management, casino management, is in place.

It's probably around 500 FTEs.

And what does that translate into dollar amount?

It doesn't work quite like that, but it is a significant amount.

It's probably, maybe 25 to 30 basis points, in margin.

Great.

The next question comes from Carlo Santarelli with Deutsche Bank.

Please go ahead.

Hey everyone.

Good morning.

And thanks for taking my question.

As you guys look at the 2Q to 4Q periods, and obviously maybe looking at the 2Q more specifically since you provided the plus-5% guidance, would you be able to possibly break out the various segments of the business, i.e., convention, leisure, other casino etc.

and kind of give us a sense for where you are getting the most pricing power?

Which of those segments you are seeing the most pricing power through the balance of the year?

Sure, Carlo.

Much like last year we've seen good strong pricing in convention, and leisure is right behind actually in overall pricing, and that trend has continued.

Corey is digging for the details right now.

But definitely leisure and convention have been our two strongest segments.

All of retail is up too.

Yes.

If you look at what we are expecting from our websites and call centers.

That number, ADR impact, will actually be higher than the guidance we've given.

And that's because of the solid book of base that we have.

That looks pretty strong, leisure channel looks strong.

It is pretty consistent across the board.

Great.

And then Corey, if I can follow up on that.

Just in terms of the percentage of room nights that are booked right now through third parties relative to your direct channels, do you guys have any color on that, that you can provide?

And is that possibly a future opportunity that drives stronger net RevPAR?

I think that trend is very consistent across the hotel industry right now, where you are seeing that, that business increase significantly.

And for many reasons, including the investments that Expedia has put in.

They are a very strong partner for us.

I think there are opportunities with websites and our loyalty program to shift some of that business, and that would obviously increase our RevPAR.

But I think we are constantly looking at it, we are strategically looking at it.

I know some of the bigger chains have been very aggressive in how to attack that.

I'm not sure that we believe that is the right strategy, it's how we use them with our FIT and convention strategy and maximizing RevPAR that way.

That's a good point, Corey.

I just can't overemphasize how unique the Las Vegas market is.

And how different we are versus the broader US.

And Expedia is another dimension of saying the same thing, which is, we're Expedia's largest customer here.

And we had a very good relationship with them as well.

And they know that we are the home team.

We have 42,000 rooms here.

No one anywhere in any market has as many rooms or has a higher percentage of rooms as we do in a rapidly growing market like Las Vegas.

We have a lot of programs, we work with all of our vendors that maximize and actually start with the basic philosophy that the Las Vegas market is unique and you cannot look at the Las Vegas market like you look at New York.

We have no new supply coming online to any major extent.

We have rising visitation.

We have improving room product because of renovations we and our competitors are making.

And we are a vital, vital market on the global landscape.

I read about some of the angst some of the other companies are having, we don't share that angst.

We have a very good relationship and we're seeing growth in revenue in all of our channels.

FIT or our retail business, leisure business, and we are able to do that because of our unprecedentedly strong convention business.

Great.

Thanks everyone.

The next question comes from Shaun Kelley with Bank of America.

Please go ahead.

Hey good morning everyone.

Maybe one more question on what's going on in Las Vegas because obviously the trends there are great.

But when we look at some of the non-room and non-gaming components, it does look like the trend across the wholly-owned resorts there are actually still down a little bit.

At least on the top-line basis.

Part of that is probably initiatives you guys have in place, but could you talk a little bit about what you're seeing in some of those businesses?

Any headwinds or anything you're doing to reposition, what you might be doing in retail, entertainment, and F&B?

Well maybe I will tackle one of them and Corey will probably tackle the F&B.

On entertainment for instance, we made a strategic decision, obviously, on our entertainment focus, where that line item is down year over year.

But that decision was when we teamed up with AEG to build the new T-Mobile Arena, part of that deal beginning with this year on the opening, was the MGM Grand Garden would become part of that joint venture.

And so as part of that joint venture, that now is a leased entity within the MGM complex.

We no longer report the revenues of all those events and that revenue is now basically just a minimum lease stream, and that is in partnership now with the new T-Mobile Arena.

We obviously manage the day-to-day and all of the programming at the Arenas, but it is part of that joint venture.

There's some strategic decisions that we have made that obviously have caused some of that shift.

Obviously we've had the showroom down at Monte Carlo for the new Monte Carlo Theater, that will come online later this month -- I mean later this year.

And then in the first quarter we also had for an extended period of time the Love Show was dark over at the Mirage as we were making some modifications to the show and some enhancements with our Cirque partners there during the first quarter.

So we had a few less in-house shows during the first quarter.

Shaun, what I would say is that you are right.

We are strategically looking at our business and the process is a perfect example where we are actually up in a tough market but we're really driving the bottom line.

We were up almost $12 million in profitability in slots.

On food and beverage, we are seeing pretty good spend in trends there.

When you have more convention business some of that goes into the catering line.

So the restaurants are doing fairly well.

We will keep adjusting based on the changing market needs.

I think the Park is a perfect example of that.

The outlets in the Park are medium-priced, approachable, and we're seeing a lot of that especially in Vegas, to be able to give a diverse variety and change out some of the restaurants to adjust to where the market is now.

In general, I think we're pretty happy with the spend.

We are being strategic about it.

We are making sure that we make as much profitability, that is our main focus, and then to drive the top line with that goal.

That's where we are focused on right now.

Maybe just to sum those two good points, up.

We have meetings constantly on revenue for occupied room.

Total revenue per occupied room.

And profit per occupied room.

So where we find opportunities to drive revenue and profit, even if it means shifting out of some departments into others, we will do that.

And that would be something I think you should focus on going forward is our revenue and our profit per occupied room.

Which is rising.

And that is the result of a lot of these investments that we are making in areas where we think the consumer is going to be more receptive to spend money.

Great, thank you for all the detail.

Maybe to switch gears a little bit.

(Inaudible) and Dan.

There has been a lot of, obviously, big strategic moves that impact the balance sheet.

Here a little bit.

And I was wondering if you could give us a little bit of outlook on the CapEx inclusive of the expenditures required for Cotai so people on the call here can begin thinking about the prospects for free cash flow as we look out to the openings of National Harbor and then Cotai in 1Q 2017.

Sure, Shaun.

Our guidance as far as what we gave on our last call has not changed materially in any respects.

We've got, over in Macau, about $1.5 billion in CapEx planned over the 12 months.

And largely those dollars obviously are all for MGM Cotai and getting that property to its completion by the end of Q1 next year.

And that's obviously is the largest CapEx development on the table right now.

National Harbor for the full year is pacing about $650 million to its completion by the end of this year.

In terms of its overall cash needs and our maintenance and growth within our properties is roughly running in a $425 million to $450 million range for this year.

Springfield will probably be -- the first order of business is obviously the site remediation, and the site prep work that the team is undertaking there.

And the first real construction dollars will be focused on building the parking garage there over the next 12 to 14 months.

And that will probably be about $100 million to $125 million in CapEx for Springfield.

Thank you very much.

By the way, a lot of us were just down at National Harbor.

It is awesome.

It is really unbelievable.

Take a look at the Investor deck and see -- usually when you do a rendering, the building doesn't turn out like the rendering.

But you can see how we are following the vision here.

And the level of excitement -- we're going to have over 40,000 applications for those jobs that we are going to hire at the end of this year.

And the workflows that we are seeing out of our great National Harbor team has been really spectacular.

The creative is going to be outstanding and the building is coming out really remarkably well.

The pictures are great.

Thank you for that.

The next question comes from Felicia Hendrix with Barclays.

Please go ahead.

Hi, good morning.

Just a quickie on National Harbor.

I think in the release it still says end of the year.

Do we have an exact date?

No.

It would be in the middle of December.

Probably second week of December.

We are targeting December 9, probably a month before we put a pin in it, but we are targeting December 9.

Yes, I didn't want to say that, Bill but (laughter).

Thanks for that, Mr. President.

We are going to say middle of December and we are targeting for some date that Bill might have mentioned (laughter).

Okay, so I think I heard like November 27?

(Laughter)

No, no, no.

I'm not ruining my Christmas holiday.

I don't know about you.

We will be open before Christmas.

Okay.

Thanks.

To get to my real questions here.

Regarding the gaming trends on the Strip, just with the 6% decline in table volumes, I'm wondering if you can just call that out.

Was that entirely due to baccarat?

Or was that also mass tables?

And then, assuming the growth in the non-gaming trend in Vegas continues, which it seems like it will, do you think it is driven by more moderating gaming revenues, or increased spend in non-gaming, or both?

How are you analyzing that?

Who wants to take that?

Dan or Corey?

Or Cathy?

Do want to take that?

Sure.

The 6% decline in volumes, you know, we actually did pretty well.

Most of that was due to baccarat.

Actually our non-bacc table in volumes were up.

So to answer your question, most of that was due to baccarat.

I think what we are seeing is we held pretty well in baccarat.

The Far East is still hanging in there, although still struggling a little bit.

But our National play is strong and you are seeing that in the non-baccarat not only drop but win.

Okay.

I was just looking at some other things.

China -- our play from China, China-sourced play was still down a lot.

And Chinese New Year was slow as a result of that.

But as Corey mentioned our other non-China Asian business, we've had much better results out of Japan and other parts of the Far East, and that has helped.

ARIA did very well.

Obviously we have a very large marketing team.

I think we have -- of course we have the largest marketing team.

We've been able to move our emphasis on markets where we feel like there is more fertile territory for developing customers.

That has had an impact and we've been focusing more on domestic play.

And domestic is up.

Our rate of domestic play has been up about 7% in the first quarter, offset by a decline in our international rate of play.

Okay.

That's helpful.

And then we've been looking, that's another part of my question, I think we've all been looking at these trends where we've been seeing moderating gaming revenues and increased non-gaming.

Just wondering if you could talk about that phenomenon regarding the people that you see coming.

Obviously you're growing your convention business, and is that cutting into the gaming side of things?

I think my guess is, and anyone can jump in, my guess is that our non-gaming revenues and profits will continue to grow more rapidly than our gaming revenues and profits.

And part of it has to do with the nature of the business.

Part of it has to do with the investments that we are making.

Expanding convention business, building arenas, hosting music festivals, developing more F&B products, and being able to find more corporate business, more hotel business.

The national business is going to completely be driven by the US economy.

And the US economy is doing well, better than I think the news would tell you.

Certainly we are seeing it in terms of the play and in terms of the spending trends across our portfolio.

And what we like about our Company is, we get to see all kinds of customers.

The customers that check into Circus Circus and the ones who check into Bellagio, and everything in between.

And we are seeing -- you can see this in the results, but we are seeing increased consumer spending in these areas.

The international business is the one that has always been troubling to us ever since the recession.

We don't have as much visibility in terms of how that business is going to grow.

We know we are the largest market share provider on the high-end here in Las Vegas by virtue of having the three properties that cater to that, but I just don't have a visibility on whether the international gaming is going to grow.

I do believe the national gaming is going to grow.

It is, as Dan mentioned.

But I believe that our non-gaming revenues and profits will grow more rapidly.

Anyone agree or disagree?

Okay, And just quickly, Dan, housekeeping.

Just wondering what the current balance of your NOLs is and when you expect to be a cash taxpayer.

We are actually a cash taxpayer today.

Not at the full rate, given our foreign tax credits.

But we are actually a cash taxpayer today, and the NOLs are pretty minimal at this point in time.

It's really based on our foreign tax credit to this point in time.

Our effective rate right now is basically about 17.5%.

And then do you foresee in the near mid term getting to a full rate?

I don't see that really changing for the next few years.

Okay.

Thank you.

The next question comes from Robin Farley with UBS.

Please go ahead.

Two questions.

One is, I know you gave a lot of color by quarter on the Vegas RevPAR, that was helpful.

I want to clarify if we put that all together is that still, you would have about a 6% RevPAR outlook at one point.

So is that still kind of roughly on track as we put all those pieces together?

Robin, when we gave that guidance we thought we would do around 6% in the first quarter.

We are ahead of that pace at this point in time.

I would have to say that if anything, we -- our confidence level has increased significantly since we gave that last guidance.

Okay.

Great, that is helpful.

And then on the count, when you had last quarter pushed back the opening to Q1, one of the factors you mentioned was market conditions.

Now sitting here a couple months later, how do you feel about market conditions?

In other words is there a chance that if market conditions are similar to what they were 2 months ago in your view that, that opening could maybe even go past Q1 of 2017?

Grant, do you want to tackle that, or Bill?

Grant, why don't you speak to the market and I will speak to the project.

When we were talking about market conditions, I think the other critical point for us is the timing of all the projects.

Just in terms of logically the ramping up periods.

And we are seeing the ramp up is taking a bit longer.

And the other component of that is obviously recognizing that Macau government is sensitive to bringing the projects on at a particular place.

So we some see some positive signs in the market in general.

I think everyone is talking about stabilization and if you look at our numbers, our mash numbers are generating 86% of our EBITDA now, so they are pretty strong.

We had a really good April, and we're starting to see some traction and we are seeing collective quarters of that.

So I think to get ourselves into that 2017, assuming that others get open as they say they are going to get open, is probably good timing.

And then I will turn it back to Bill to say getting the project done.

Thanks Grant.

In context of the project, Jim and I, and others, Dan, will be out for a Board meeting later this month.

Will make yet again another assessment.

We are roughly slated to finish construction end of October, early November, and then remembering the last part of this process really resides with the relationship between sign-offs between ourselves and the government, which pushes into, we believe, end of first quarter.

It may trickle over that, but I think we will have some real clarity on that around a month from now, once we have a hands-on view yet once again of where we are.

Great.

Thanks very much.

The next question comes from Thomas Allen with Morgan Stanley.

Please go ahead.

Hi, good morning.

The Bellagio had the highest EBITDA in the entire Vegas market for the first quarter since the second quarter of 2012.

It's quite an achievement.

So EBITDA was up $26 million, $27 million year over year, but can you just talk about what drove that and the expected sustainability of the performance?

Thanks.

Thanks for noticing that.

And not only that, but it's outstanding margin.

And if you have some time you might want to compare it to its competitors in the market.

Maybe also look at how many rooms Bellagio has versus competitors as well.

We've been able to drive really great growth in our room product.

We renovated those rooms.

They have been received extremely well.

We added a couple of very popular F&B outlets.

The convention business is extraordinarily strong at Bellagio to a point where we are studying on a preliminary basis where could we add a little more space here, because it's an extremely good problem to have.

Our slot and table business has been outstanding, and this is the best property in Las Vegas and it proved it in the first quarter.

Corey?

I think it's general across the whole property, we are seeing increases not only in revenue but they are probably -- we've always have had our luxury properties benefit probably the most from the PGP, and so you're seeing it on the expense side also.

Slots had actually an all-time record, in slots for the first quarter.

So it's clicking on all engines.

I think the property's never been better, the upgrades we have made with the restaurants and the facility have all been well-received.

We have some new executives in there that are really clicking and really taking the property to the next level.

I think when we look at it and you look at the margin there, the margin's always been right up there with any luxury property in town and now it's beginning to outpace any property even by that much more.

And keep in mind, because it's sometimes frustrating to us, the Bellagio is not our only luxury property.

It's not the only property that we dedicate our energies on our international and national gaming business to.

It has two other formidable competitors in ARIA and the MGM Grand.

If you were to look at those properties, and obviously ARIA had a great quarter as well, as well as the Grand.

And think about how we are doing vis-a-vis the marketplace in any aspect of the business.

I think there can be only one conclusion, is that, for this quarter at least and I think it's going to continue, MGM Resorts is the best operator in this town.

Thanks for that, and then passing it over to Grant.

Grant, two quick questions, we just had May Golden Week.

What does that feel in the market during that week in your opinion?

And there's been some talk about banning all proxy or phone betting, what are your thoughts about the potential ramifications there?

So on your first question, as I said, the end of April was really sought-out, gave us a good month, and then the holiday has been quite good.

It's run through probably an extra 2 or 3 days, so we were all pretty satisfied, came out looking pretty good.

The key issue for us was that we saw some customers come back and were playing at some really good rates.

So we're starting to see some traction with some increased volumes, and that's what the trend that we're looking for.

On the proxy betting, I think it seems that there is going to be a government announcement in the next few days to clarify the situation with that.

And clearly our position will be that we will follow the direction of the government.

As I said, 86% of our EBITDA now comes out of the mass, so whatever happens in the notion of the proxy, it will probably be yet another continuation of pressure for the junkets themselves but it probably is not going to be that significant for any of the operators.

Certainly not that significant for us.

Thank you.

The next question comes from Steven Kent with Goldman Sachs.

Please go ahead.

Three questions.

First, just on the cost saves.

When I hear you all speak about them, they sound similar to some of the Mirage and MGM merger reductions, the expense reductions, during the financial crisis.

Are these opportunities, Jim, that just naturally escalate?

And you have to go back every few years, and that's why you're saying the culture has to change?

I just wanted to understand that a little bit better.

And then any sort of EBITDA guidance on the JV operating income?

CityCenter comes out because of the sale of Crystals.

What can we expect in terms of EBITDA from the T-Mobile Arena JV and any operating income?

Do we expect operating income from the JV broadly to be down year over year in 2016?

I will leave it there because it is multi-part questions.

I will tackle the first one and anyone can jump in on that.

Interesting insight, and then I think there are some points of comparison, but more, frankly, more stark contrast.

So when MGM and Mirage combined back in 2000, it was really a focus on eliminating duplicate positions, eliminating duplicate corporate functions, consolidating areas that had been completely and utterly independent.

And then to a degree that we were able to do 16 years ago, try to use a larger scale for better procurement.

And it really was more a function of some one-time, if you look at it, savings that really impacted, positively impacted, the margins of Mirage Resorts in the year or so post the May 2000 acquisition.

And fast-forward to the Mandalay Resort Group, we basically did the same thing.

What we did here was from the very beginning we were conscious not to try to go down that path.

We already felt that our labor as one point, the largest variable cost, our labor expenses were reasonable.

We had been tracking FTEs since the Mirage acquisition days, and our FTEs have been flat to down.

And more importantly, we look at labor and a lot of other metrics.

Labor per occupied room, labor per food cover, labor in a way that would show -- and I think we are going to have an Investor Day coming up that will show you that our labor costs have been decreasing along the way.

So in this case, in the PGP, it was really challenging ourselves to do things very, very differently.

How we procure, what kind of procurement policies do we put into place?

How do we pay for our product?

What kind of terms can we generate with reducing the number of vendors that we deal with in every channel, going from dozens of different vendors to a handful?

And what that does to stability and product and pricing.

Looking at more thoughtfully how our volumes are being generated, and using technology that did not exist in 2000 to schedule and use our buildings more efficiently.

Making investments.

You know, we didn't buy any planes we bought the Mirage, we sold planes.

We bought planes not because we needed new planes, because we needed more efficient planes.

And the planes that we have today, the only fleet of its kind in this industry operates at half the operating costs of the traditional fleet.

And that is important when you are spending hundreds of hours a year per plane flying customers in to Las Vegas.

And looking at how we are leveraging also different game types, different products on the casino floor.

I have to say it's a very different program than we had before.

And I think that it really speaks to -- I can tell you as some of that was there in both deals, we didn't have a 42-man and woman PMO office that was reaching out.

We didn't have Bane initially.

We didn't use the resources that are available today to change the culture of our Company.

And so I would think that, did we have expense creep?

Which is kind of part of the question.

Probably, after the Mirage acquisition.

When everything was great, we were having record years in 2005 and 2006 and 2007, and we thought we were really smart and it turned out that there were a lot of things we could have done better.

But this is a very different program and we're using technology more than we ever did before.

The other thing I would add, Jim, is we are really focused on centers of excellence and bringing new skillsets into our industry, including areas like analytics, where the industry has done an okay job, but now we're going into much more advanced analytics that help us match our forecast with our labor needs with our customer service needs.

And we are very focused on constantly improving that customer service experience.

Why don't you brag on her for a moment.

On Alisa?

We just hired Alisa, not just hired, she's been here probably 6 months.

Alisa does -- she came from a host Marriott, no just Host, right?

Host Hotels.

And we are happy to have her here to stand up an analytics' team.

Now, what we used to do is we used to have analytics' teams at every property with multiple layers of people.

So the FTE cuts that you are seeing here are more strategic, more business-oriented, more permanent.

And they are relating to inefficiencies of an old way of doing business compared to new technologies, new methodologies that are out there for us today.

And I think once we get you all in a room we will show you some of these things.

We talked early on about the employee dining room.

We were wasting so much food, which is really -- it's criminal to waste the kind of food that is wasted in the United States.

So to reduce our food waste, to provide a better product, but provide it in a fashion that is more efficient.

What we do in terms of linens, and terry, our programs there have changed dramatically.

What we are doing in terms of amenities and supplies, in terms of -- Chris, how many different kinds of shampoo bottles did we have?

16.

16.

That's a smart move.

When we put the two big acquisitions together, we had some big high-level things we knew we needed to accomplish.

And we did.

But from the ground up, here, this is a very different program.

Steve, I think it was on your guidance on the JV (inaudible) contribution.

As you know, we don't give EBITDA guidance.

What we did do in the Investor deck is we did highlight some things for you to consider as you are modeling out some of the impacts at the joint-venture level.

CityCenter comes to mind obviously with the Crystals sale.

That will be discontinued ops as you saw in the first quarter going forward.

There also be a gain on the sale of Crystals in the second quarter.

And there was some final depreciation adjustments in the Zarkana Theater for April, that will hit the second quarter as well.

We laid all of those out in the Investor deck.

I think the important thing to note on these joint ventures is when you look at CityCenter, you look at Borgata, these are balance sheets that are less than 4 times leverage.

They are throwing off significant free cash flow, and that is a huge opportunity for the owners of these assets going forward.

And obviously we own both 50% of Borgata and CityCenter.

And as you saw with the Crystals' dividend I think you'll see more dividends and more free cash flow opportunities from these joint ventures going forward.

More so than we have in the past.

And I think, remember, we made our 30% target goal we also said at that time that this Company, MGM Resorts, would be an investment-grade company in a very short period of time.

Obviously with these two major transactions, the Crystals and the MGP transaction, we have accelerated that time table even further.

That combined with the dividend potential of all of our enterprises, including MGM China, as soon as MGM Cotai is open.

And the free cash flow we're generating gives us great comfort that we are going to get there in a really relatively short period of time.

Okay.

Thanks for those insights.

The final question comes from Steve Wieczynski with Stifel.

Please go ahead.

Jim, I guess the first question, I know it's still early on, but with the T-Mobile Arena opening up about a month ago, can you give us some color around -- so you know, a night when there is a big concert.

I know Billy Joel was there, and some stuff like that.

What do the trends look like at the properties around the arena?

>> <Jim Murren - Chairman and CEO - MGM Resorts International> <murrenjim> We've had better attendance on these shows than we had predicted.

We have had far greater activation by the sponsors.

They are hosting their own parties, whether it's obviously T-Mobile itself or Toshiba or the other main sponsors.

That generates not only revenue for the joint venture but activation in the area.

We have seen tremendous numbers out of the beer garden and the leased venues that are along the Park.

We seen improved gaming numbers at both New York New York and Monte Carlo, slots and table volumes are up.

And specifically event-driven tremendously.

It's not just in that finite area, it's radiating around.

So if you go around at New York New York, to Tom's Urban, for example, or go to Nine Fine Irishmen, or wrap around the corner in front of Monte Carlo, you are going to see double-digit gains, over 20% gains in bars and lounge revenues and profits.

So foot traffic is up tremendously.

We think the programming -- we've had some events in the Park itself that have been really fun, activating the Park as its own place for art festivals and food festivals, that has generated -- and by the way, it's generated a lot of local interest as well.

For us that live here in town, we know that you rarely come to the Strip unless you are working, like we are, or you've got someone from out of town visiting.

But we are finding more and more locals coming down and going to the Harlem Globetrotters.

Or going to the Killers concert or to Billy Joel.

And we have a big fight this weekend, by the way.

We're activating the Plaza as well.

So, really extremely pleased with the results so far, and it's got us very excited about the future of Monte Carlo.

Something that I've alluded to in prior calls.

But we have taken a good look at this building and believe that amongst our entire portfolio, it has the most profit upside through a repositioning.

And so we've been working, as you know, on that as well.

There will be more to come when we are prepared to talk about it.

Thanks for the color Second question, real quick question, I don't know if you will be able to answer this or not.

But when you look at the Grand and you talked about the Grand being a pretty formidable competitor to the Bellagio, with the Garden Arena there now, and I guess you look at the Grand only having about 600,000 square feet of convention space.

Is that something you guys would look at basically changing out relative to the number of hotel rooms there?

I guess I'm trying to get at, the Grand seems like it has probably not as much convention space as it possibly can need.

We have been, for the last 5 months, undergoing an internal inventory review of our entire portfolio here.

And what we don't want to do is build and expand too rapidly and then not be able to fill that space going forward.

We are trying to be very thoughtful on to not only with what the trends are, which are extraordinary, in 2016, 2017, 2018, but trying to guesstimate what we are going to be in 2018, 2019, 2020.

And that is harder obviously.

The one property that stands above our others in terms of an obvious one for growth of convention business is the MGM Grand.

The MGM Conference Center was built the year I joined the Company.

And it was built and located because there was going to be a development that would have more seamlessly connected the MGM Grand to the conference center.

That development we stopped, and so that's an area where there is no doubt, given the 5,000-plus rooms, given its location, proximity to the airport, its brand, it could fill up a lot more convention space.

And the good news as you know about convention space, it is the least expensive space to build.

And the ROI on the Mandalay Convention expansion is outstanding.

We didn't talk about ROIs, but I will just end on this point.

If you think about the way we are spending our capital today, because we have no intentions of building a new full-scale resort here, we are spending a lot of money here but in areas where we believe we will have immediate and very strong returns.

And I would say the 5,300-seat theater at Monte Carlo is a really good example of that.

When that opens up next year or late this year, Bill Hornbuckle has got a lineup of people, he would kill me if I announce.

Oh, like my date?

Yes I would.

(Laughter)

He's reaching over the table.

But believe me, when we are going to be able to announce a series of A-plus residency acts that will occupy that, and make that investment, that $90 million investment, a very good return for us.

So that is how we are viewing capital in the Las Vegas Strip, is looking for ways where we can build on our strengths, spend a manageable amounts of capital to drive above-average returns.

And one of those areas where we think we could do that at the right location is in the convention space, and I would say that MGM is on the top of that list.

Thanks a lot.

Thanks for the color.

I appreciate it.

Thanks Steve.

Gary, I think that brings us to our allotted time of an hour.

I know we got started a bit little late, but we are clearly and obviously around all day today to answer any follow-up questions and we greatly appreciate everyone for joining the call with us this morning.

The conference is now concluded.

Thank you for attending today's presentation.

You may now disconnect.