美高梅國際酒店集團 (MGM) 2019 Q1 法說會逐字稿

Good afternoon, and welcome to the MGM Resorts International First Quarter 2019 Earnings Conference Call.

Joining the call from the company today are: Jim Murren, Chairman and Chief Executive Officer; Corey Sanders, Chief Financial Officer; Bill Hornbuckle, President and Chief Operating Officer; 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 Catherine Park, please go ahead.

Thanks, Chad, and good afternoon, and welcome to the MGM Resorts International First Quarter 2019 Earnings Call.

This call is being broadcast live on the Internet at investors.mgmresorts.com, and we have also furnished our press release on Form 8-K to the SEC.

On this call, we'll make forward-looking statements under the safe harbor provisions of the federal securities laws.

Actual results may differ materially from those contemplated in these statements.

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

Except as required by law, we undertake no obligation to update these statements as a result of new information or otherwise.

During the call, we'll also discuss non-GAAP financial measures in talking about our performance.

You can find the reconciliation to the GAAP financial measures in our press release.

Also during today's call, we'll be reviewing Slides 14 to 18 of our earnings presentation deck, which is available on our website.

Finally, this presentation is being recorded.

I'll now turn it over to Jim Murren.

Well, thank you, Cathy, and good afternoon, everyone.

We had a very busy and productive quarter here at MGM with a lot of changes happening, all with an eye to the future.

As you all remember, we announced MGM 2020 back in January, and we've been executing on that plan over the past few months.

We've made changes to our leadership, announced the addition of a pioneering new digital leader who will oversee growth and revenue, and we are progressing with Phase 1 of MGM 2020, which is expected to deliver $200 million of EBITDA in 2020.

This is a time of meaningful transition.

We're laying the foundation for a strong future and making a lot of changes that will have a significant impact on how we operate.

Corey will discuss 2020 in further detail in a bit.

But first, a few key points I'd like to make.

The first quarter came in slightly better than our expectations with consolidated net revenues up by 13% and adjusted EBITDA up 5%.

The last time we were together, we highlighted both low hold and a tough comp in our Las Vegas baccarat business.

This was the primary driver of our year-over-year Strip EBITDA decline in the quarter, and clearly something that the market felt as a whole, with Las Vegas baccarat GGR down 32% year-over-year.

Our U.S. regional properties showed tremendous strength, and we were starting to see the fruits of our labor in Macau, which had a nice quarter with the continued ramp-up of MGM Cotai.

I want to first say right up front there is no change in our full year outlook.

We expect a strong second half to the year as we begin to drive financial benefits from 2020 as well as a good convention calendar.

And lastly, our long-term strategy in our 2020 goals of $3.6 billion to $3.9 billion in consolidated adjusted EBITDA and consolidated free cash flow per share of $3.50 are unchanged.

We also continue to work towards reducing our consolidated net leverage to 3 to 4x by year-end 2020, and we feel confident that we will meet these goals.

Let me get into the quarter a little bit.

Here in Las Vegas, revenues were roughly flat year-over-year.

Non-gaming revenues increased by 4%.

We saw good performance in most areas, including hotel, with RevPAR up 3.7%.

Food and beverage and entertainment were also robust, which we know speaks to the overall strength of the demand of the city at our properties.

Gaming revenues declined by 13%, slowly driven by high-end baccarat business, in fact, slots and non-bac table games had higher volumes and win year-over-year.

Along with our non-gaming performance, this, of course, highlights the healthy environment we witnessed in the quarter.

We did mention in the fourth quarter call back in February that our baccarat business faced a very difficult comparison due to the timing of the holidays and a high hold comparison.

Recall we had a record first quarter in baccarat last year, both in terms of volumes and win percentage.

Our baccarat business was lower this year due to fewer visits from certain Far East players and a much lower hold.

The total impact to the quarter was approximately $35 million of EBITDA.

This, of course, therefore, was the main driver of our $46 million or 10% year-over-year decrease in Strip EBITDA.

Importantly, we are optimistic about the underlying health of Las Vegas.

Aria, which you know is not consolidated, for example, was particularly strong in the quarter, with net revenues up 14% and adjusted property EBITDA up 29%.

And including Aria, we gained market share in overall table games.

We're also excited about the early performance of Park MGM, as the property continues to ramp.

It has already become a unique culinary destination, and is bolstered by the programming at Park Theater and it's got, of course, a great location.

Across the United States, we have many of the premier assets.

Our regional properties continue to perform well in the first quarter with revenues up 21% and EBITDA up 24%, benefiting from the inclusion of Springfield and Empire City.

On a same-store basis, regional revenues increased by 3% and adjusted property EBITDA was up 9%.

Detroit had another great quarter with all-time record revenues and a record first quarter EBITDA.

Our Mississippi properties had an excellent quarter with EBITDA up 25% as sports betting continues to drive visitation.

National Harbor's EBITDA was up by 20% due to the strong reception of our expanded gaming floor and a continued focus on expense management.

And Springfield ended up the quarter with a strong March, and that property continues to ramp.

MGM China's revenue grew by 23% to $734 million and adjusted property EBITDA was up 26% to $191 million.

By property, MGM Macau achieved EBITDA of $129 million, while Cotai continued its ramp with 18% growth quarter-over-quarter to $62 million of EBITDA.

We benefited from above-average hold in the quarter of about $16 million in VIP.

But nonetheless, we certainly showed good progress and gained market share for the third consecutive quarter.

And a big milestone for us was the extension of our sub-concession to June of 2022, which is now aligned with the rest of the market.

We're grateful for the support of the Macau government and remain committed to the region's continued evolution into an international leisure and tourist destination.

In terms of our outlook for this year, it remains unchanged, and we expect a good second half to the year as the benefits of MGM 2020 begin to materialize.

Our trends, other than baccarat, have been positive.

Convention bookings for the year remain in very good shape and we continue to benefit from the expansion at the MGM Grand Convention Center.

Our group business in 2020 is also shaping up well.

And this base, on the books, increases our confidence in Las Vegas.

The entertainment calendar is exciting.

T-Mobile with host Paul McCartney this summer and Canelo returns for the Cinco de Mayo fight this coming weekend.

Park Theater is currently hosting Aerosmith, and Janet Jackson is starting her residency here in a few weeks.

Of course, with the return of Lady Gaga and Bruno Mars later in the year, 2019 is looking outstanding.

Non-baccarat gaming trends also remain stable, and with respect to our Far East business, we've seen these dynamics before and we expect these trends to normalize over the coming quarters.

We are focused on ramping up our new properties.

Late last month, we opened The Mansion villas at MGM Cotai to great response from our top players.

This is similar to when we opened The Mansion here in Las Vegas back in 1998.

We're seeing premium mass players who have now previously stayed at Cotai, and they are staying longer, too.

With all of our high-end amenities now operational, this will support growth in our VIP and premium mass business.

We know we have more work to do there, including fine-tuning other elements such as F&B, retail and activating the spectacle.

And we're also working on plans to build out some of the white space we have in the south tower, which could accommodate an extra 50 to 60 suites.

We feel real great about Cotai and believe we will hit our ROI targets.

We will continue to ramp up Springfield and Park MGM and we have recently welcomed Empire City and Northfield Park into our portfolio.

This strengthens our regional footprint and enhances our database and cross-marketing strategy.

We continue to see the benefit of increased diversification in our business in these highly targeted investments in both sports and technology.

We're a more balanced company than in any other time in our history with trophy assets in each of the markets in which we serve across the U.S. and, of course, a meaningful and growing earnings contribution from Asia.

We're excited about this balance and our ability to deliver for our shareholders because of it.

To ramp these assets is a key part of our plan to reach our $3.6 billion and $3.9 billion of consolidated adjusted EBITDA.

The other major driver is MGM 2020.

MGM 2020 is much more than a cost-cutting plan.

It truly changes the way we operate and positions us for continued growth and success.

One of the first changes we made as we started to implement MGM 2020 was promoting Corey Sanders to CFO.

As you all know, Corey has a tremendous history with MGM and, in light of his operational expertise, notably leading the Profit Growth Plan.

He is the right person to lead our efforts on MGM 2020.

And so with that, I'll hand it off to Cory to provide more details.

Thanks, Jim.

And if I could turn people's attention to Slides 14 through 18 in the earnings deck that has been posted on our website.

Starting on Slide 14, we have been working on MGM 2020 for over a year now.

When we announced the plan back in January, we set out to create a company that is streamlined and nimble and one that empowers leaders.

In order to unleash innovation and support dynamic new ideas, we needed a new way of operating.

MGM 2020 is an evolution of our continuous improvement journey, which began with the Profit Growth Plan in 2015.

And as you know, was very successful.

We targeted EBITDA enhancements of $300 million and ended up around $500 million.

Between PGP and the announcement of MGM 2020, we have been busy standing up key centralized functions, redefining our service standards, training our employees on these standards and opening 4 properties.

Through PGP, we laid the foundation for MGM 2020 as we installed a more centralized operating model, which focused primarily on creating and sharing best practices across the enterprise.

We also established our project management office.

MGM 2020 has 2 phases.

Phase 1 of MGM 2020 is about scaling the centralized operating model to improve operational efficiency and effectiveness.

We are moving certain key functions out of the properties and into corporate centralized groups called centers of excellence.

Phase 2 of MGM 2020 is about driving a customer-centric strategy to accelerate revenue growth.

This will be accomplished through better leveraging digital technology and capabilities, plus an enhanced loyalty program.

We will talk more in detail about Phase 2 in upcoming months.

Turning to Slide 52, this is -- 15, I'm sorry.

This is an earnings call, so let's talk about some numbers.

For Phase 1 of MGM 2020, we are targeting $200 million of EBITDA uplift in 2020, and we expect 1/3 of that this year.

We expect $100 million from labor savings, which will be $80 million in fixed labor and $20 million in variable; $50 million from procurement opportunities; and another $50 million from revenue optimization.

For Phase 2, we are targeting an additional $100 million uplift in 2021, and in total, this gets us $300 million of adjusted EBITDA uplift in 2021 compared to when we launched the program.

We feel very confident that we will hit these targets.

We have done it before with PGP, and we will do it again.

For procurement savings, we are exploring opportunities in IT, facilities, marketing and other areas.

We're reducing SKUs in hotel and in food and beverage even beyond what we did during PGP.

For revenue optimization, we are dynamically yielding our food and beverage covers and entertainment offerings.

This is not as simple exercise just to increase price, we're actually optimizing our inventory utilization by setting the right price to attract the right guests at the right time.

This will result in increased covers in slow periods with gradual price increases during high demand periods.

For the variable labor within our labor initiative, we will enforce the new labor standards set by the COEs to optimize our labor cost and better utilize our existing workforce.

We will also leverage technology for greater efficiencies.

These are fairly straightforward, so I want to spend more time discussing the profound change in our operating model.

So -- which brings us to Slide #16.

I mentioned earlier that we are scaling our operating model by moving certain key functions out of the properties and into corporate centers of excellence, which we refer to as COEs.

We have 18 COEs, including a COE for food and beverage, hotel, entertainment, casino and marketing and revenue management, among others.

Effectively, leveraging our COEs will be the key to our operating model evolution as we clearly define and delineate the responsibilities of the COEs and the properties to, one, eliminate duplicate functions to allow quicker decision-making, to optimize our management spends and layers, and to promote greater sharing and implementation of best practices across the company.

Under the old model, personnel at each property set and executed their own strategies and standards consistent with the overall company strategy.

Under our new model, the CEOs will set the strategy and standards.

This allows properties to focus more time on execution and service.

One of the implications of our new operating model is that we will need fewer managers on property creating labor savings.

Let's turn to Slide 17, and this will go more into detail in our new model.

Our COEs now set business strategy for casino, hotel, food and beverage and other divisions that align with each property's brand and complements the portfolio.

They perform market research and analytics for the portfolio and determine the approach to yielding our offerings.

Additionally, COEs working with the properties set standards for labor guidelines, service standards, plus forecasting and accountability.

The properties, of course, will have input into these decisions, but the COEs will drive them.

This structure allows the properties, specifically property leaders, to focus even more on guest service and employee engagement, while driving cash flow at the properties.

On Slide 18, we thought it would be helpful to go through a few examples.

Let's take food and beverage.

Under the old model, labor standards, pricing, menu development, wine list were each set at each individual property.

We have moved this to the food and beverage COE, which allow us to consistently execute these initiatives with a smaller team.

In addition, the responsibilities at these properties have changed, so the level management running the division, the pay and the infrastructure needed at the properties will all be reduced.

On the casino side, decisions around machine and table mix, casino floor layout, minimum bets, labor standards have also moved to the COE.

And much like food and beverage, the infrastructure needed at these properties has changed.

In addition, overall, we believe there are opportunities at both property and corporate as we look at widening our span and control and reducing layers company-wide.

Before I turn it back to Jim, I want to let you know that we made progress already.

MGM 2020 is an extremely complex exercise as this is not just a cost-cutting program.

We are setting up the company to operate in a much more nimble way that will also support us in Phase 2 in the execution of our business transformation led with our digital -- through our digital efforts.

And with the help of consultants and through the leadership of our COEs, our portfolio presidents and property presidents, we have implemented the first wave of the operating model.

Throughout March, we've had approximately 35 of our senior leadership team take a voluntary retirement package.

Before the end of the second quarter, we expect a total of nearly 1,000 position reductions, some of which were announced just last week.

These changes will ensure we hit our targets for this portion of MGM 2020.

In the first quarter, we incurred $52 million in MGM 2020 cost, including $41 million of restructuring charges related to our operating model work and other consultant and technology costs as part of Phase 2. Our consultants are experts in business transformation, and we have worked with them before with successful outcomes.

While these costs have a short-term impact on our profitability, we believe they are an investment that will pay dividends in the future.

These eliminations were identified after a comprehensive process, and the impact is being felt across the company.

This is a significant change that is meant to be transformative with the goal of minimizing impact on our customer experience and employee engagement.

And with any exercise of this nature, we are cognizant of impact to morale.

So we have been very mindful with transparent communication and change management programs to guide our leaders and employees through this time.

While change is hard, particularly change that involves head count reductions, we are confident that this will make us a more efficient, nimble and effective enterprise going forward.

This is also vitally important as we turn our attention to Phase 2 of MGM 2020 where we will focus on using new technology to target, attract and retain new customers to grow our competitive advantage.

Now I will hand it back to Jim.

Well, thanks, Corey.

As you've heard, we're committed to our long-term growth strategy, and we are fully on track to achieve our stated goals of $3.6 billion to $3.9 billion in consolidated adjusted EBITDA by year-end 2020.

Reminder, the key drivers remain the ramp-up of the open properties and the program Corey is talking about, MGM 2020.

We're also targeting free cash flow per share, as I said, of $3.50.

We have dramatically, as you know, reduced our overall CapEx spend as all our major development projects are behind us.

Our properties are all in excellent shape with no deferred CapEx.

We will continue to be focused on fortifying our balance sheet.

Earlier this month, we raised $1 billion in senior notes at a very attractive rate and used the proceeds to address our near-term maturities.

We remain confident in our goal to get our consolidated net leverage to 3x to 4x by year-end 2020.

We did not buy stock in the quarter as we were focused on our debt issuance, the bond tenders and funding our previously announced acquisitions.

But our capital allocation strategy has not changed.

We have a 3 -- I'm sorry, we have a $1.4 billion remaining authorization of our share repurchase, and we intend to use it over time.

As always, we're excited about the opportunities in Japan, in sports and in the digital space.

And to that end, we recently hired Atif Rafiq, who will be our President of Commercial and Growth, where he will develop new customer experiences, business models and revenue streams.

He comes to us from Volvo, where he was overseeing the research on the next generation of automobiles, and he was previously responsible for the global digital transformation at McDonald's.

Very experienced digital leader.

We're very excited to see the changes he will bring when he arrives mid-May.

On Japan, our company has had a team there for roughly 6 years.

We continue to deploy exceptional resources to that market and we expect to win and get a great return on all of it.

Just recently, I've met with both the Mayor and the Governor of Osaka, and was honored to inform them that MGM has adopted an Osaka-first strategy, focusing our company's considerable resources on creating a breathtaking resort that will celebrate the entire Kansai region.

We've been clear from day 1 that we believe it is essential to work in collaboration with Japanese companies to develop a uniquely Japanese integrated resort.

And we have found a like-minded and natural partner in Orix.

We are forming a robust consortium that is anchored by, but not exclusive to Orix, who is a leader in consortium building in Japan.

Orix is a leading Osaka-based Japanese company with its roots and a significant asset base in Osaka and Kansai, and it shares with MGM a strong passion to develop a Kansai-focused integrated resort that will deliver a huge boost to the region's economy.

Over the past 2 decades, MGM has developed and assembled our industry's most successful portfolio of premier real estate in the U.S. During this time, we have executed on strategies to highlight this value and have been focused on unlocking long-term value for our shareholders.

And to that end, our ad hoc real estate committee has made progress in evaluating numerous strategies to maximize the value of our assets, and working with outside advisers has narrowed their analysis to a small handful of options.

While there is no fixed timetable for the recommendation to the Board, I expect it will take months, not quarters.

We're going to let the committee continue to do its work and present its recommendation.

We're not going to get ahead of them, so I appreciate you limiting your questions on this topic.

And finally, while the industry may be on the cusp of another round of consolidation and change, I want to be clear that our path to creating shareholder value does not depend on M&A.

We're undergoing meaningful change ourselves, internally with MGM 2020, and we remain committed to our strategy, focused on our core operations and maintaining the stability at the top levels of management.

We believe that our efforts today will ultimately result in a stronger company with greater competitive positioning in the industry.

Thank you.

Now we'll turn it over to Q&A.

(Operator Instructions) The first question will be from Joe Greff with JPMorgan.

My first question relates to the baccarat segment in Las Vegas.

How does that gaming patron and your views and outlook there compare presently to the outlook that you had on February 13 when you reported fourth quarter results?

As you look ahead, are there any signs to be optimistic given what we're seeing in terms of China macro and the prospects of U.S.-China trade resolutions?

And then I have a follow-up.

Joe, this is Bill Hornbuckle.

Look, I think we're seeing some of the same signs, but I think it's important to keep it relevant.

First and foremost, remembering and go back on Jim's comments, '18 was an exceptional year.

Our market share as it relates to Las Vegas has not deterred.

As a matter of fact, we're mid-40s and we lead the marketplace here.

And it was tied to a handful of customers.

I think as you look at the balance of the year, it's important to understand that, as of the first quarter, 30% to 40% of our net baccarat revenues have been had, if you will, given the cycle of how the year works in that marketplace.

And if you look at our lineup and things that we have going forward and our ability to continue to attract, they're meaningful.

I will -- of note, Jim mentioned we have in May, we have Canelo; in June, we have a Tyson Fury fight; in July, we have Manny Pacquiao; and we also have Paul McCartney coming in June.

All things that attract the Asian business and things we think and we know can motivate folks coming here.

I think the other thing to keep in broad perspective given our diversification is that the net impact of all of this is mid-single digits in terms of our EBITDA.

Fundamentally, the business hasn't changed.

We think we're in good shape.

We're market-leading.

We think we've got an event calendar that will be meaningful and continues to drive the business.

And Joe, this is Jim.

Just to answer the question.

The baccarat trends are exactly what we had thought we would see when we gave you guidance in February.

Great.

And Corey, you gave us a lot of details and information on 2020.

You may have said this, or you may have said this and I didn't catch it or you may have said it in a different way.

Can you give us, maybe as of, I don't know, the end of March or as of now, I guess, maybe the kind of year-to-date or the tally on sort of labor savings where we stand now?

And then how do you see that cadence in the 2Q in the back of the year?

Joe, as I mentioned, we're looking to achieve $80 million in fixed labor savings.

Most of that will be done by the end of Q2 and you'll start seeing that starting to flow-through in Q3 and Q4.

The next question will be from Shaun Kelley with Bank of America.

Maybe, Corey, just to stick with the same comments since you gave us so much detail on the 2020 Plan.

As we get into this, is there -- and there is some real big shuffles happening at the management level.

Is there any risk of sort of near-term disruption to core operations in your view?

Anything that you might be sort of revenue touching?

And then on that also, we've seen some big systems implementations happen in the past and also create some dislocation out there for some companies that have gone through meaningful transitions.

Is there anything on the systems side that investors should be aware of or could cause any disruption there?

So Shaun, I'll answer the technology stuff, and I'll team up with Bill on the operational stuff since we both have a pulse on it, but he is dealing with this real-time every day.

On the technology side, we are implementing the ERP in the finance area.

We have a very thoughtful plan, also through our PMO office, that I think will mitigate any type of transformation there.

All the other technology that we're investing in, I think will only enhance the customer experience and the employee's ability to service the customer.

On the operational side, I'll throw it over to Bill to get his comments.

Thanks, Corey.

Shaun look, I'm looking in the room.

We have 3 new group presidents here with us between their exposure and experience, my own.

We were -- this weekend was the first weekend we were in this new operating mode.

We are all over the business.

We all went to numerous properties.

We have a great deal of faith that when left alone to operate the business and service our customers at the operating levels, at the property levels, we're going to be in great shape.

Obviously, change is not easy.

We're going to be going through a bunch of change dynamics.

But again, we've been looking at this thing since late third quarter of last -- excuse me, early third quarter of last year and we've thought through a lot of the opportunities that something that this would create and we think we're really well positioned to take care of them.

Great.

And just -- my follow-up would just be on Park and Springfield.

Jim, I think, in your comments in the prepared remarks, you said that both are ramping well.

Could you just give us a little bit more color on those?

I mean we now have some hard numbers for both.

Are these in-line with your underwriting?

Are they going to ramp to your levels by the second half?

Or when do you think we'll be at run rates that are consistent with what you're expecting to see there for each?

Well, I think I would point to maybe National Harbor is a good example or other new properties that we have developed.

Park MGM is really a new property.

It certainly -- probably would have been easier to build a new property.

But it is a new property today and we're exceptionally proud of the execution of the delivery of the product and the quality of the product.

The financial returns are tracking what we had underwritten as long as they continue to ramp, which we expect that they will.

Springfield started off slower than we had predicted, but is still on that trajectory that we had also predicted.

So I believe that you're going to see -- we expect to see at Springfield a ramp-up along the lines from a trajectory that we saw at National Harbor.

But I can turn it over to Bill, if you had any more detail on that.

Maybe a little more color on Springfield to start.

Obviously, it's seasonal.

Northeast corridor, particularly spring, will bring more business.

It's happened throughout Connecticut and throughout the region.

We anticipate that.

We're in full leverage mode on entertainment, Cher, Aerosmith, Steve Martin all come to Springfield in the near future.

And so our opportunity to put programming in there to continue to expand it, we feel pretty good about.

And March by far, even if you look back to January, February and March, March was our best month by far so far on the young history of the property.

More on Park, it's beginning already to act like a luxury property, our ability to leverage rooms and particularly entertainment and food and beverage.

Corey talked about [yielding].

But the grosses we're seeing with Gaga and Bruno are unheard of in the industry given the scale.

And so we're pretty excited about what all that's going to bring us long term.

The next question comes from Harry Curtis with Instinet.

First, in Vegas.

There's an awful lot moving parts in the numbers in Vegas and it includes volumes and hold and also the charges that you've been incurring.

So when you finally normalize that, how would you describe your business?

Is it on an adjusted basis?

Do you think that the EBITDA is actually in a growth phase in 2019?

Or is it just going to take another 2 or 3 quarters to see that?

You want me to start and then turn it over to my colleagues.

Harry, I think what we saw when we talked to you on the fourth quarter is what we're seeing right now.

We expect that the market will be up this year in Las Vegas and that we expect at MGM Resorts to maintain, if not, build our share.

And we can get into some of the macros around that.

You get a lot of information from either the LVCVA or airlines, et cetera, and Corey and Bill can speak to that more.

But the overall trends on Las Vegas as a market are the same as we saw in February, and 2020 looks really outstanding, which gives us the comfort to build our book -- our base of business.

Bill mentioned the entertainment side, we are clearly focused on that because we know it drives a lot of business.

So that is a positive trend for '19 and then into 2020 because of the Raiders coming and the other activities that are going to have a major impact on visitation.

The fact that our slot and non-bac table business is growing is an important data point.

That's why we highlighted that.

It generally does speak to the overall health of the market.

And the fact that we're able to quickly absorb the capacity of the MGM conference center and actually make it profitable for us also speaks to the overall tone of the market.

So from a high level, we feel very constructive on Las Vegas in '19 and '20, and then maybe I'll turn it to you, Corey, for more...

And what I would say, Harry, is, as Jim mentioned, the trends that we're seeing, other than the baccarat trend, are positive.

And even that, the hold impact from this year to the prior year was pretty significant.

We are held at the higher range last year.

And this year, we're below the midpoint.

But when you look at the first half of the year, we did mention that it would be a little bit more challenging in that the back half would be positive, and with our implementation of the 2020 efforts, it even gives us that much more confidence in growing our cash flow in the back half of the year.

Very good.

And then I wanted to ask a question of Grant.

Grant, if you would touch on a couple of topics, including the, over the last 3 to 6 months, the direction of your market share, the contribution of The Mansion.

And then just a mindset of VIP -- the VIP junket and premium mass customers, kind of going back to Joe's question, in Macau, are you seeing any green shoots there in their behavior?

Thanks, Harry.

So let's go to the first one about market share.

So we'll continue to increase the share, so we've added about 1%, 100 basis points in the quarter.

And we continue to move forward to what we say is a more appropriate level for us.

In terms of, if I could now jump to the VIP in the market, I think we need to understand that Macau is maturing into very defined segments.

So the VIP businesses, which is both in-house and junket.

The junket is a little contracted at the moment, they went through a very big growth curve.

It seems very flat and I think as everyone sees, that market looks like it's going to be down for the rest of the year.

In terms of the mass business, and then some of our in-house VIP business, before we opened The Mansion, we were already starting to see a positive uptick.

But since we've launched The Mansion and also what we call Mansion One, which is the gaming area, which came on stream actually in the fourth quarter, we're seeing some really positive signs and reemergence of customers that we have not had in the property.

And frankly, we hadn't overly targeted them for Cotai because -- until we had The Mansion and we had the products and services that we know they demand.

It was somewhat inappropriate for us to invite them and I thought it was dangerous.

And so they are coming back in, and I can give you a general indication to this week, but demand for The Mansion and the property is looking very strong for the Golden Week, which starts here tomorrow.

So in terms of our positioning, we're seeing positive indicators, we're seeing new customers, we're seeing new -- existing customers return.

In terms of the market, I -- we would see the mass business continuing probably in that upper single digit.

I think the rest of the year is going to be challenging for junkets.

And I think we also need to put it in our context for Macau and for China, there's lot of issues -- a lot of things going on with the 20th anniversary of Macau.

There's big celebrations, big meetings and activities going on in China.

So I'd say at the junket end, it might be a little challenging.

But I'm very confident and very positive and, most importantly, very positive about our product relative to the balance of this year.

The next question comes from Felicia Hendrix of Barclays.

So Jim, I know you reiterated your outlook for the full year and you gave us some things to think about for the second quarter in the deck, like you faced high holds and you're going to have costs, I think it's $11 million in the second quarter.

Are you -- and then -- so you gave us that.

But I'm wondering are you facing any headwinds in terms of group business in the second quarter?

I think something might have rotated out in June of this year.

And I know you're not giving particular guidance, but when you look at Strip consensus, EBITDA of almost $450 million in the second quarter and RevPAR of a little more than 2%.

Is that something you're comfortable with?

Yes.

We'll -- I'll answer that, Felicia, and we're not going to go into the RevPAR.

But on the convention business in the second quarter, it's going to be a good quarter for us.

We do have a tough comparison because last second -- last year's second quarter is pretty solid.

And in particular, June, we have a little bit of an impact at one of the properties.

But we feel comfortable where the rest of the year is, and that the following year actually is even in a better place than this year.

Yes, June, we had a convention rotate out that happens all the time.

It'll happen this June.

But overall tone, we feel good about and, more importantly, for the year, we haven't seen any change at all, all year in terms of the fundamentals.

They remain very strong.

Okay.

And then I think it was today, actually.

Wynn announced that they are no longer going to charge for parking fees.

Wondering how you guys are thinking about that?

Yes.

Felicia, this is Bill.

Look, we spend a lot of time, energy, money with technology.

We think we have the right policy and the right program.

Their independent decision won't change ours going forward.

The next question comes from Carlo Santarelli with Deutsche Bank.

Bill, you mentioned earlier you talked a little bit about, I think, you said 30% to 40% of the baccarat revs in the first quarter.

And if you just look at the data from the Nevada Gaming Commission, on average, if I look at the first quarter as a percentage of the year, just volumes, it's basically 25% to 26% over the last few years.

And I understand you guys have had hold benefits last year and a little bit of a hold headwind this year.

But is it the expectation that seasonality this year within the baccarat segment will be pretty similar?

As that would imply kind of like a 15% to 20% decline Strip-wide in bac obviously starting from a tough spot here from the first quarter where a lot of that seasonality gets built up.

But do you guys see this first quarter being emblematic of the rest of the year to any extent?

Look, I don't know that we're going to change our overall guidance for the year for sure.

The first quarter is always the biggest quarter coming off of domestic New Year's and Chinese New Year's.

Our programming, although exciting, I mean, we've consistently had major events going forward.

Hoping Pacquiao's fight date is somebody we all know and love could change the dynamic.

But short of that, we think it's going to fall in line with the rest of history.

Okay.

Great.

And then just one more, if I could follow up on that.

Of the $35 million that you guys called out, the year-over-year negative EBITDA headwind from the baccarat shortfalls, how much of that do you think stems from just maybe the higher rent being a little bit softer relative to the confluence of New Year's, Chinese New Year's and the Super Bowl dates being less favorable in '19 relative to '18?

Carlo, as usual, that's half a dozen customers, give or take.

As you mentioned, Super Bowl last year was 12 days apart.

This year, it was literally 2. So the 2 events fell on top of each other.

So that had a lot to do with it.

Obviously, looking forward, we think we can continue to drive the kinds of activity we always have.

Our marketing groups are strong as they've ever been in terms of people and positioning.

I think Grant's growth in market share there has always been to our benefit here in Las Vegas.

We've taken our marketing troops and implemented them more fully into, like we've done here in Las Vegas, into the Macau environment.

And so we hope that, a, control our own market share, which is, again, in the mid-40s; and b, continue forward progressively.

The next question comes from Thomas Allen with Morgan Stanley.

So a question for Grant.

Your mass market hold increased pretty considerably and that mirrors one of your peers when we -- they reported last week.

Anything changing fundamentally with mass market hold?

No, but other than it seems to be moving up and it's staying there, which is a positive thing, which I think recognizes sort of a broadening and a maturation of the market.

Obviously, when you start bringing new customers and broadening the base, you seem to steer the hold move forward and we're seeing that as a sort of almost like a market trend.

And holds in Cotai, in particular, in mass, do seem to be a little bit higher.

And so I think that's just a coincidence in the market, and I think it's a positive thing that we're seeing as we move forward.

Helpful.

And then just on Japan, the RFC for Osaka was launched last week.

Any updated thoughts on timing and then potential spend there?

Yes.

Tom, this is Bill again.

So obviously, they've issued it.

It will be due in late August.

They don't give a specific date.

It's open for questions over the next couple of weeks.

It is a full -- they call it RFC, but the

(technical difficulty)

This is the operator.

Apparently, we have a technical difficulty with our speakers' location.

One moment, please.

Stay on the line.

(technical difficulty)

Hi, everyone.

Apologies for that.

We're in the middle of a huge thunderstorm here and it looks like we were dropped, but we're back on now.

So next question, operator?

Next question will be from Stephen Grambling with Goldman Sachs.

I guess one broader question and then I have a more specific question.

But turning to sports betting as one of your target opportunities, can you talk about the trends you're seeing in New Jersey.

And I think you've even alluded to Mississippi.

How should we anticipate your share evolving in these markets, maybe how the initial trajectories in these markets instruct your thoughts on future markets and strategy?

So Stephen, this is Bill.

So look, overall, we're really excited where we are.

The GVC platform is just coming into play.

We've now put Stadium, which is our primary product in Borgata.

We are finalizing and we'll open permanent retail outlets in time for football in New Jersey and in Mississippi, in both those locations.

And we've gotten through some of our earlier challenges around getting our mobile apps up.

So I intend that we will gain share.

We are obviously in this for the long haul.

We have a massive partner with GVC.

Obviously, our networks with all of the leagues have been and will continue to be very productive for us in the long run.

And then the interesting thing is if you looked at Beau and Tunica's results, I think EBITDA in Beau was up 17% and Tunica was up 38%, and a goodly portion of that was driven solely by people coming in for sporting events and then the general activity case around that.

So we see significant upside not only in retail, but ultimately in mobile.

The other affirmative thing is -- and look I don't want to jinx this year, but it looks like Mass, Ohio and Michigan are all strong movers for '19 legislation.

And we like where those bills stand in terms of our ability to exercise on them and get full benefit from them.

So overall, we're fairly -- we're very optimistic.

We recognize on mobile in New Jersey, we got off to a slow start.

But I promise you we will catch steam in a hurry here.

Great.

And as an unrelated follow-up, Mandalay Bay revenue looked like it was down year-over-year in what seemed like an easier comparison.

How much of that would you attribute to hold versus convention calendar or other factors that we should keep in mind?

I attribute it to the convention calendar.

I think we struggled with a particular group compared to year-over-year.

But again, it's cyclical.

I think overall, Mandalay I think,continues to heal.

I'd say, we're about 90% where we want to be.

And we like where we're going, we're pushing forward.

And remember, I think the real catalyst for change there is the Raiders.

When that opens next August of 2020, the programming is going to change that whole south end of The Strip.

It's literally in our backyard over Hacienda.

It's a pedestrian walkway that will be converted game day and event day.

And so we think it will be substantive to the property.

The next question comes from John DeCree with Union Gaming.

Two quick ones for me, maybe to start for Jim or Grant.

Jim, I think in you're prepared remarks, you've talked about maybe tweaking the offering at Cotai and you mentioned an opportunity to maybe add 50 or 60 suites.

Is there a more formal thought process there and given some of the demand dynamics in Macau?

I mean how quick could you get rooms online and is that something you're thinking about now that the Mansions and some of the VIP products are online?

Yes.

I think I'll turn it over to Grant on the ground there and I can add to it.

Thank you.

I think as many of you know, we actually held back fitting out the top tier of the south tower, and that's what the white box is.

We're actually in the planning phases where we're appointing architects.

It will probably take us into the end of next year.

It's probably a 15- to 16- or a 17-month build-out.

The critical point for us was to work out exactly what we wanted.

And as you hear today, we're clearly defined is it a [sweet] product.

And that's just working through it.

And then on the notion of product and tailoring product, whenever you open a new property, we always know that we do our best to get it right, but we always work out things have changed during the build-out phase.

Our focus is to bring in more food and beverage, and we're working through that process.

We're starting work on another dining space straight after the holiday in the casino space.

And we're now seeking out and locking down a series of new food and beverage concepts, not large, hopefully smaller.

And at the same time, as part of the activation spectacle, we're looking for even pop-up solutions that we can do simply to animate and develop.

And for someone like yourself in Union Gaming, you're very focused on the Macau market.

You'll understand that all the properties are now looking at lots of new initiatives, particularly in the food and beverage space.

So that's really our focus over the next few months.

Jim, anything you want to add?

Yes.

I would just add, Grant, that what you've told me several times in how constructive and bullish we are in the market itself and how we've been frustrated at MGM that we haven't been able to deliver the entire suite of products that people expect of us, particularly in the high end.

Now with The Mansion open, The Mansion Villas as well as the gaming areas, we feel like it's now we're finally on our footing that we can really grow some significant share in a very strong market.

So it's important to us in Asia, of course, is our efforts in Japan.

And I think somebody -- we got cut off on Carlos (sic) [Carlo] when we were talking about Japan.

Can I turn it over to you Bill for a second?

Yes.

Thanks.

I don't know if it was Carlos (sic) [Carlo] or Tom.

But just to reiterate, the RFC has come out.

We have -- sometime in August.

They haven't been exactly definitive for when the RFC is done -- due in Osaka.

It's robust.

It is extensive, it feels like an RFP, which I think plays to our favor between ourselves and our partner in Orix.

We've literally spent a half a dozen years on the ground there.

And we're going to be ready for this thing with a great deal of velocity and programming.

But from there, we hope by next spring to be in the full-on RFP process with the national government and look forward from there.

Last question, please?

And that question comes from Robin Farley with UBS.

Great.

I know you commented on your M&A strategy -- or I'm sorry, that your growth strategy doesn't depend on M&A.

And obviously, I think you've talked before about how properties with a lot of regional exposure don't make sense.

But can you comment on would a single asset, a single property asset in Vegas make sense in your portfolio given all the tremendous synergies that seems like you would have, especially that what you're doing this year in terms of furthering that.

So any comment on that?

And then I was just going to -- as a follow-up, I'll also ask about what convention mix you expect in 2019 because you probably have most of it on the books at this point so get a handle on that?

Sure, Robin.

So the standard answer is not to comment on M&A.

But a couple of thoughts on your question.

I think that something is happening in Las Vegas right now.

It's very exciting, very good for the home team.

There's a tremendous amount of interest in Las Vegas real estate, both non-gaming and gaming real estate.

And certainly, there's a tremendous interest in a luxury property that is being marketed for sale right now.

What that is doing is bringing a lot of attention, both in terms of operators and in terms of real estate owners and investors to Las Vegas to look at the Valley.

And of course, we own about half of the Valley.

And so it's good for us from the standpoint of having some good discussions, and it will be interesting to watch what plays out.

There hasn't been a significant transaction in about a decade on the Strip.

So we love what we own and operate.

We look at things all the time.

However, as I said, we are very focused on what we do have.

And I think we can execute and we'll overdeliver on our 2020 plans and our free cash flow with the team we have in place and the properties we have.

So I would say it's a topical.

It's valuable.

It's actually positive for MGM that there's interest in Las Vegas as a market, but our focus is on executing on these plans because this is within our control.

We've done this before with PGP.

We're confident that we can do it here.

We got the right team to do it.

And if we overdeliver on our expectations here, that's the simplest way, the clearest way of increasing shareholder value.

And we're not going to let anything detract -- distract us from that.

You had another question, Robin?

On conventions?

Oh, the convention mix.

Who's going to tackle that?

I have it in front of me.

Robin, we think it's just north of 18%.

And then I imagine you expect that would go up next year just with CON/AGG rotating back in?

It -- arguably, it should.

Yes.

Okay.

Great.

Thank you very much.

Thank you, Robin.

In closing, I just want to thank you all.

Sorry for that brief drop-off with a rare thunderstorm here in Las Vegas we didn't expect.

But we're very confident on the Las Vegas market, both in terms of this year and moving forward.

I hope you can firmly grasp that the baccarat issue was, we believe, an isolated event, not permanent in nature.

We've been around a long time.

We've seen this movie before.

We have no change in the outlook.

We talked about this in February.

Here we are in April, and we feel very confident in our full year outlook and what's going to happen in the second half.

We're well underway.

A lot of progress has been made on the 2020 plan.

A lot of momentum has been developed, and we're confident that we're going to hit our targets.

And I can't emphasize enough our long-term strategy and the goals that are unchanged: the 2020 targets, winning in Japan, dominating in sports betting, and continue to allocate capital in a disciplined fashion now that our major development cycle is behind us and our annual CapEx number is highly known to us, which would yield a significant and growing free cash flow which we'll use the way we've described.

And with that, I want to thank you all for joining us and, as always, reach out with any questions that you may have.

Thank you, sir.

The conference has now concluded.

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