美高梅國際酒店集團 (MGM) 2019 Q2 法說會逐字稿

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

Joining the call from the company today are: Jim Murren, Chairman and Chief Executive Officer; Corey Sanders, Treasurer and Chief Financial Officer; Bill Hornbuckle, President and Chief Operating Officer; and Grant Bowie, CEO and Executive Director of MGM China Holdings Limited.

(Operator Instructions) Please note, this event is being recorded.

I would now like to turn the conference over to Catherine Park.

Please go ahead.

Thank you, Chad.

Good afternoon, and welcome to the MGM Resorts International Second 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 GAAP financial measures in our press release and the investor presentation, which are available on our website.

Finally, this presentation is being recorded.

I will now turn it over to Jim Murren.

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

We had a fairly straightforward quarter with minimal deviations one way or another.

We're extremely busy on executing on our MGM 2020 Plan, property model transition is complete and our headcount reductions as part of this transition is now behind us.

We continue to make progress with our real estate committee, and we hope to report back to you in the coming months.

As we look to the future, we expect to benefit from quite a few tailwinds with improving property earnings, strong Las Vegas macro trends and MGM 2020 benefiting us in the back half of this year and into next year.

This gives us the confidence in our ability to hit our financial targets next year.

And as an example of this confidence, we bought back 11 million shares in the second quarter alone.

So let's get into the second quarter.

We came in pretty much in line with our expectations with consolidated net revenues up 13% and adjusted EBITDA up 9% year-over-year to $756 million.

We had lower hold at our Strip properties and some onetime items that totaled about $35 million.

And I guess the best help understand the earnings power of the business, you're probably going to want to add those 2 numbers together.

Here in Las Vegas, results were in line with expectations as we saw strong demand across our hotel, food and beverage and entertainment segments, driving 1% growth in overall net revenues.

Our non-gaming revenues were actually up 5%, RevPAR was up 2.3% driven by both occupancy and rate, and this was led by a strong demand in all of our segments.

Gaming revenues declined by 12%, which was 2/3 driven by overall table games hold and 1/3 driven by baccarat volume.

Partially offsetting this were stable mass gaming trends, as our non-bac table games were roughly flat and our slot handle was actually up year-over-year.

Our Strip EBITDA declined 4% to $418 million, mostly driven by lower than normal table game hold of 21%.

As a reminder, we are also comping against a 25% table games hold percentage in the second quarter 2018.

And the year-over-year EBITDA hold impact was roughly $26 million.

That's about 6% of our Strip EBITDA.

On a hold adjusted basis, Strip EBITDA was actually up 2% year-over-year to $436 million.

Though baccarat volumes are still down year-over-year, and that's driven by less Far East play, second quarter volumes have actually leveled out from the first quarter, and that's consistent with our forecast.

To size this for you, Far East baccarat represents just about 6% or 7% of our Strip EBITDA, and so the lower level of play represents only about 3% of our Strip EBITDA.

Our second quarter Strip EBITDA margins were 28.5%, that was down 145 basis points year-over-year.

But excluding the impact of baccarat and year-over-year hold variance, our EBITDA margins would have been actually up slightly.

Turning to our regional properties.

We of course have many of the premier assets across the United States, and we are the profit leader in many of the markets in which we operate.

And this helps us drive market share gains over our peer group.

And our regional properties continue to perform well in the second quarter.

Revenues were up 29%, EBITDA was up 34% with the majority of the growth coming from the inclusion of Springfield, Empire City and Northfield Park.

EBITDA at our Mississippi properties increased 24% during the quarter and continued to benefit from the increased visitation because of sports betting.

And this is encouraging for us as more states come online with that product.

Over at MGM China, revenues grew 26% to $706 million, and adjusted property EBITDA was up 43% to $171 million.

That's due to continued ramping of MGM Cotai.

We did have a weaker than normal VIP hold in the quarter, which negatively impacted EBITDA by about $10 million.

And as we all know, the VIP market has been a bit rugged, but the mass for us continues to show strength.

By property, MGM Macau achieved EBITDA of $116 million, up 17% year-over-year.

Mass business there was stable, and though as I said, VIP volumes were impacted by somewhat -- by transitioning some of the junket rooms over to MGM Cotai.

MGM Cotai continued its ramp, with $56 million (sic) [$54 million] of EBITDA, up 171% over the prior year quarter.

Our mansion is still fairly new and ramping, 20 villas are open, 7 more will follow shortly.

And these villas are already allowing us to better attract premium mass customers.

And as always, Grant is on the line to answer your questions.

Moving to MGM 2020.

We're happy with our progress in MGM 2020.

We now believe we will achieve $100 million of EBITDA uplift this year versus our prior guidance of $70 million.

And while we think it's a bit early to revise our overall MGM 2020 guidance, the progress we have made thus far gives us increased confidence that we will achieve our Phase 1 goal of $200 million in incremental EBITDA by the end of 2020.

As I mentioned earlier, our operating model work is now complete.

And while we have reduced our fixed labor, it's important to note that MGM 2020 is not just a cost-cutting exercise.

We're laying the groundwork to position the company for future growth, creating efficiencies in giving our properties the ability to scale key initiatives and best practices.

And so it's worth taking a moment to talk about our thinking.

We spent years refining our structure with some of the most expert management consultants to land on this model.

Model's designed to foster collaborative relationships between our centers of excellence, or COEs, and the properties.

All strategies are set and enforced at the COE level.

This is after thorough due diligence and guidance from the properties.

So it is to also ensure that the brand identity of each property is preserved, and the MGM portfolio of offerings are complementary to each other, which also minimizes cannibalization.

Further, we have kept senior leadership at the property level.

This is especially the case at the regional properties where we know market knowledge and physical presence is key.

Property presence remain keenly focused on the customer experience and employee engagement.

In fact, by centralizing the strategic functions with our COEs and our portfolio Presidents, as well as clarifying, realigning roles and responsibilities, our property leaders can focus their full attention to enhancing the customer experience.

While this has been a transformative change internally, it's worth repeating, we have not been distracted in our day-to-day operations and the customer experience has not been adversely impacted.

So let me provide some numbers on Phase 1. By the end of May, we reduced headcount by 1,070 people, resulting in approximately $100 million of annualized savings.

These were nearly all managerial or supervisory positions.

It was a 12% reduction off a base of around 8,700 positions, with some more back-office departments seeing heavier reductions.

On the other Phase 1 components, we are making good progress on variable labor, sourcing and revenue optimization.

We expect to implement the majority of these initiatives by year-end.

And so looking out further for 2019, we feel comfortable where the Strip consensus is for the year.

This outlook reflects high-end volumes that remain at current levels.

And as we've highlighted in our previous calls, the majority of the building blocks for the rest of our business is improving throughout the back half of this year.

The fundamental backdrop in Las Vegas remains very sound, and we see robust demand in nearly all of our business segments.

And convention bookings in Las Vegas continue to shape up very nicely in the second half and are actually tracking better than we expected earlier in the year.

In fact, we're expecting a near-record convention mix this year.

We're benefiting from a couple favorable group rotations, and our expansions at MGM Grand and Aria are helping drive momentum into next year.

And over the medium term, the Las Vegas Convention Center expansion is expected to drive even more citywide business to the city.

And while leisure booking windows are naturally always shorter, current trends are also improving there, especially as we progress through the summer months.

This is helped by the strong base of our group business, but we also continue to strategically manage our leisure mix to place the right customers in the right hotels at the right time and opportunistically lean in to fill in periods where we need to.

Our entertainment calendar in the second half of this year is one of the strongest in the company's history.

We're maximizing our leadership in live entertainment and sports.

Of course, we just hosted the MGM Resorts NBA Summer League.

We're sold out its first 2 days, and hit new attendance records in the dead heat of the summer.

The Las Vegas Aces, which currently, by the way, are #1 in the WNBA, will host the All-Star game this weekend at its home at Mandalay Bay.

Mandalay also recently hosted the NHL Awards Ceremony.

And of course, the NFL draft is also coming to Las Vegas next year.

And finally, and excitingly, the Las Vegas home of the Raiders Stadium continues to shift the center of gravity down to the mid- to southern end of the Las Vegas Strip.

Raiders Stadium will be a catalyst for our south Strip resorts, especially Mandalay Bay, as we will take full advantage of its location by hosting the most awesome tailgating experience before and after all of the events at the stadium.

Before we turn over to questions, I'd like to touch on a few of our key strategic objectives.

We remain committed to our long-term growth strategy and are on track to achieve our stated goals of between $3.6 billion and $3.9 billion of consolidated adjusted EBITDA and free cash flow per share of $3.50 by the end of 2020.

The key drivers remain the ramp up of our newly opened properties and our project MGM 2020.

Our major development projects are complete, and our CapEx is dramatically lower and known.

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

And as such, we expect to generate accelerating free cash flow.

And while we are far from done, we have worked diligently this year executing on our MGM 2020.

Property model today gives us far more control over our cost base and positions us well through this cycle.

We are running a very disciplined capital allocation strategy, which is focused on reducing our net leverage to between 3 and 4x on a consolidated basis by the end of 2020.

We aim for steady growth in our dividend and to buy back shares where appropriate.

We have further opportunities to create long-term value in 4 key areas being Japan, Sports, Digital and by maximizing the value of our real estate.

And so before we get to that Q&A, let me quickly touch on our real estate committee, which has been in the news lately.

As you know, the committee was formed back in January and has been working diligently with the help of its advisors.

Our workstreams are right on track with our internal timetable.

It's worth mentioning that the committee is exploring all options with very clear guideposts in mind.

Any recommendation must support MGM's goals of enhancing free cash flow per share, maximizing the value of our owned real estate, preserving the company's financial flexibility and creating sustainable shareholder value.

And I am increasingly optimistic that the committee's work will achieve these goals and anticipate sharing their results in early fall.

And so with that, I would like to turn it over for Q&A.

(Operator Instructions) The first question comes from Joe Greff with JP Morgan.

Jim, with respect to MGM 2020 and the updated target for 2019, the $100 million versus the prior $70 million.

Can you talk about what that $30 million relates to?

And is it more of a timing issue than just finding more cost more efficiently?

And then within the $100 million benefit to this year, can you talk geographically or what reportable segments should we see of this EBITDA uplift from?

Sure, Joe.

I'm going to turn that over to Corey Sanders, who really has been leading the charge more than anyone else and is leading a group of very talented men and women here to achieve these better-than-expected results.

Joe, 2020 is about literally 50 different initiatives.

And the $100 million and the upping of it is really the -- from the initial operating model work, which we felt was going to be more around the $80 million number.

So we exceeded in that area and we're exceeding in some other areas also.

We just want to make sure that all the other initiatives also have the same impact that this one does.

So in general, as of now, it's money that we think is not necessarily additional yet that we're willing to bank, but we're feeling pretty optimistic and confident about 2020.

And then I think your second question was on the impact in each area?

Was that correct?

Right.

Reportable segments for geographic segments, right.

Yes.

So 60% of it is going to probably impact the Strip, 30% will impact regionals and 10% will impact corporate.

Great.

And then my follow-up is for Grant.

Grant, just trying to get a sense of the ramp in the 2Q at MGM Cotai and the $56 million of EBITDA in the quarter.

How much of that was more weighted towards the back half of the quarter just with The Mansion ramping?

And so maybe just trying to get a sense what sort of the exit sort of quarterly run rate was for the coming out of the tube, could be coming out of June?

Thanks, Joe.

Good question.

And yes, obviously, we're actually pretty pleased to see the pace of the ramp-up increasing.

Yes, there was additional enhanced earnings in the second half.

The critical point with The Mansion, and as I think we've always discussed is we're actually building momentum and we're actually seeing that growing pretty well.

So I would what I would prefer to say is that we're continuing to see the pace of that growth continuing into the third quarter.

And we're pretty happy with how we're seeing it.

And most importantly, we're seeing really solid return visitation.

We'll have all the Villas online by the end of September, which is great.

And because we're now starting to run into demand issues, which is really positive and then we can start cranking the yield.

So the pacing is good, primarily in mass, but also seeing some really solid performance growth from returning reactivated in-house VIP customers as well.

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

So Jim and Corey, thanks for the detail on the 2020 Plan.

I think it's really clear.

I guess as investors start to think out now that you started to hit your stride here, can you give us -- I know we want to steer clear of any sort of hard guidance, but can you give us your view on sort of just what is kind of the baseline underlying kind of earnings growth or algorithm you are expecting for the portfolio as we start to think out 12 months and 24 months from today on this kind of new earnings stream?

Just how do you think about broad-based cost growth that you're trying to fight?

And then how do you think about sort of your -- what you would expect this portfolio can do on sort of the top line on a top line basis to sustain or grow margin?

So first, at this stage, we're just going to reiterate that $200 million number.

If you recall back in our PGP plan, I think we're about 9, 10 months into that before we revised the number at all.

So we're a little bit early relative to that period to talk through what could happen going forward.

But I will say that the institutional memory of that and the horsepower we have here gives us a lot of confidence in how holistically we're tackling this plan.

And I have to say, I have to reiterate this because it's not just the cost-cutting plans, and it's not oriented the way PGP was.

This is literally a reengineering our business from the top-down in a way that is very unique to the gaming industry and it is more akin to our companies and other industries.

And I think probably Disney would be a good example of that where we are using the best talent we have organizationally in the company from a corporate perspective and marrying that together with really strong operating people at the properties.

And certainly, it gives us more flexibility on a more real-time basis to manage our expenses.

Yes.

And what I would add, Shaun, is on the inflationary cost of our business, we feel the organic growth should more than offset that.

And anything that we do here on MGM 2020 Phase 1 should all go to the bottom line.

And as Jim mentioned, the pure cost we could take out there, not just what we've done on the labor, but even on the sourcing side, where we spend approximately $2.6 billion a year in product and services, we think there's opportunities there to also increase the bottom line of the company and achieve our margin goals.

Great.

And then just as a follow-up, the other big theme in the quarter was there was some significant consolidation as it relates to Las Vegas and regional gaming.

Maybe it had to do with a little bit of the alignment that you're laying out here, but it also has to do with what you've done so far between Northfield Park, Springfield, Borgata, et cetera.

How are you guys thinking about database and the importance of regional gaming network in feeding Las Vegas as a just overall strategy and how are you positioned for that?

Sure.

Maybe I'll take the M&A part of that.

And then maybe Bill or Corey can take that.

Just to be crystal clear here, we like what we own and are not really interested in owning much anything else.

We didn't look at the Caesars assets before, the Eldorado trade, and we're certainly not going to look at them now.

We're not looking at other opportunities to own bricks-and-mortar businesses simply to be in a market.

As we've said, if we don't believe we could be a market leader and bring an entertainment component to a resort, we're not interested in investing the shareholders' money just to be bigger.

We do believe that sports betting has been a -- continued to provide over time a really strong opportunity for the company, not only in and of itself, but more importantly to enhance the profitability of our existing resorts, and Mississippi is a really good example of that, and more profoundly you're going to see that in other states as time goes by.

But I would say that, that is our strategy from a corporate allocation perspective.

And as it relates to the loyalty, I'll turn it over to you, Bill.

Thanks, Jim.

A couple of different perspectives to look at.

Obviously, with our regional strategy, it's been a couple of years now since we took over management of Borgata, and therefore, we now have full access to that database.

Obviously, Springfield is ramping and growing, and now with the advent of Northfield Park and Empire, we've added over 1.25 million names to our database.

And so what's relevant about that is what we do with them.

Interestingly, Empire City had its best quarter ever, the second quarter since right before the Aqueduct opening.

And so we're encouraged by both of those businesses.

And we're also encouraged by our ability to get cross-regional play and cross-traffic in and out of Las Vegas.

Park MGM has helped that.

We've had over 0.25 million sign-ups since that new brand has been launched.

And we've seen our cross-play go up close to 50% and our room nights about the same from when it was just about a year ago.

So I think the strategy in the Northeast of note is working.

Our ability to port people back and forth from Maryland and New Jersey, now from Empire and to Springfield, and ultimately to Las Vegas as a prize is starting to pay off.

The next question comes from Felicia Hendrix with Barclays.

So Jim, earlier in your prepared remarks, you talked about your EBITDA goals for MGM 2020, which we all know very well.

And you reiterated the drivers of that, which included in there are ramping of your new properties.

And in the past, it's been suggested that the new properties could look something like the following $350 million to $400 million in Macau, slightly below $100 million at Springfield and Park MGM around $100 million.

So just based on what you know now, are you -- I'm wondering if that still seems achievable?

Yes.

As you know, we haven't gotten into the property by property building blocks.

We have said that those ramps are part of our guidance, but we do know how those properties are doing, all of them.

And even with what we know, we are reiterating those cash flow numbers for next year and a free cash flow numbers.

And the reason why we're doing so is that we do see continued growth in those properties.

And frankly, a better macro setup here in Las Vegas than we talked about late last year.

There's no doubt that Las Vegas is doing better, and will continue, we believe, to do better here at the back half of '19 and into 2020.

And some of the business we have on the books on multiple channels, and I think it's encouraging, very encouraging, to think about not only that convention mix, right, Corey?

But also look at our core properties and how they're doing here in Las Vegas, look at their margin growth and understand where the leisure business is right now.

This is a very dynamic company.

So if we're behind in some place, like we're behind in Springfield, we're ahead in many other places.

And that is the value of being a diversified company.

And also, very frankly, we have a very good understanding of this project 2020 initiative.

And we dug deeper than we discussed in the first half of this year, and that's going to accrue to the benefit of the back half and into 2020.

Okay.

That's a helpful perspective.

I appreciate that.

And Grant, hello.

I know you've talked a bit on the call about the ramp of Cotai, but I also know that you're optimistic about the potential for Peninsula, which slightly outperformed the expectations.

So just wondering if you could update us in terms of how you're thinking about that property in light of the Cotai property ramping and then just in light of the market in general.

Okay.

So if we look at the market in general, first, we're still positive and optimistic as we always are in the mass market.

And obviously, that's the way we positioned ourselves.

Junket market, I think is going through correction, and I don't think there's any indicator that we're going to see any significant change in those growth patterns.

On that regard, therefore, focus for Macau is obviously to replace any of the customer traffic that we shifted to Cotai, which has stabilized significantly and we're starting to see share in that regard.

And we're really positive.

The refurbishment of Cotai -- in Macau continues, and we're being -- working on the east of the casino in the last 3, 4 months, which is, obviously, the area where we -- that we were going to see any effect of that was going to occur, and we've had some, but not significant.

We're accelerating that work to get it done before the October holiday.

So we're really positive on just the momentum, the focus and the intensity for Macau.

And so that's solid, we got a good management team in there, and they're dedicated just to that property.

Again, I just want to reiterate the continued performance in Cotai, we're really starting to see collective momentum in terms of, not just in The Mansion, we keep on talking about that because that's a step-up for us, but across of the premium mass area in that property consistently.

Sign-ups continues.

It looks positive.

Our quest to increase market share is undaunting, but obviously, with the market as it is, it's becoming increasingly more difficult.

But we're still really positive that every quarter we've been able to just take a little bit more, and a little bit more, and that's just something that we're going to keep focusing on.

So continuing momentum in the mass, that's where the growth is.

And obviously, in Cotai we're also now starting to work through to make sure that we right size the OpEx relative to the performance of the property as well.

The next person comes from Harry Curtis with Instinet.

I wanted to first follow up with you, Grant.

The roughly 24% margin in the second quarter, it looks like there could be several hundred basis points of eventual upside.

Can you talk about that because at least on the Peninsula in 2017, you achieved 28% and do you get the economies of scale that might get you even beyond 28% depending upon the mix within some reasonable time frame?

That's a really good question, Harry.

I think we've always continued to give guidance on that we see the stabilized margin in that sort of 26% to 27% range.

Yes, we really -- we're able to crank out some really significant high 20s in Macau for a period.

I think we recognize that Cotai is a much bigger property.

Some of the reinvestment rights in Cotai are higher.

Yes, of course, we will always strive for those sorts of numbers, but I'm still giving that guidance that we think it's -- that we will be pretty comfortable in the 27%, but you know us, we're going to continue to strive to get the most that we can.

Is it too aggressive to think that you can get there by 2020?

Or is that probably closer to 2021?

Harry, if we were to see some significant market growth, I think all of those things are possible.

I think one of those margin is also dependent upon the strength of the market and what's the price you have to pay to generate the revenues.

So if you're getting a lot of organic market growth, yes, that's possible.

But I would suggest that's probably the trick or the trigger for that.

Very good.

And then returning to Vegas.

Jim, I had just a quick follow-up question that encompasses the size of the Vegas portfolio.

And really, the kind of the mix of your third-party booking engines.

Is there any thought to actually shrinking the size of the portfolio to match the size of M life?

Would that make sense as a means of increasing efficiency and reducing the reliance on third-party booking engines, particularly given the cyclical nature of the group meeting and convention business?

So I'll start, then I'll turn it over to maybe Corey or Bill to jump in.

We look at everything, we view our business as -- our leadership in our business as portfolio managers.

And we certainly look at all of our properties, not only individually, but what they might be able to do for one another.

And in terms of how we manage the business, we do see scale certainly by having more than 1 property here on the Strip.

I think that it's certainly worth noting that some of our properties do better than others.

But most of all of them are in our database in our M life programs.

The outlier, of course, is Circus Circus.

Circus Circus is not part of M life.

And has not been integrated fully within the MGM Resorts portfolio.

All of our other properties certainly have.

But we do look at how we're running this company as a portfolio, and we do know, and the Summer League was a very good example, having properties at multiple price points is a great benefit to us.

And even the week before that, having Microsoft in-house and having properties at multiple price points is a great benefit to us in the convention side.

As it relates to OTAs, do you...

Yes.

What I would add, Harry, we manage our business and especially who are putting the rooms on a gross profit per segment.

And we have a good understanding of all of our segments.

And even that OTA segment has profitabilities that drive incremental EBITDA and pretty decent margin business because they don't have a lot of investment other than the fee associated with OTAs.

We used it more as filler and we're strategically toggling up and down on those as we need them.

And we think that the balance that we have right now is probably the best we've had in a few years.

And based on what I said about the leisure business, is a good example of that.

And I'd just add, Harry, as a final that our OTA partners, our partners are important to our business.

And so on the collective, well, at times, I understand the question and nature of it, it's important that we're on balance, and we think we manage that relatively well.

They can be demanding at times, but they are great partners in the totality of it all.

The next question will be from Carlo Santarelli with Deutsche Bank.

Jim, I was wondering if you or Corey could kind of opine a little bit, as it pertains to the real estate committee, how are you guys are kind of thinking about the balance between opco, propco?

Clearly there's still a healthy amount of EBITDAR that you guys wholly own on the Strip and then own indirectly through MGP.

But when you think about balancing the financing that it provides you, as well as kind of the ownership versus opco kind of model, what is your personal view?

Well, a few things that are abundantly clear to us here, and we've learned an awful lot over the last 6 or 7 months as we've really dug into with some of the smartest tax, corporate finance, accounting people that work for our company.

And with our advisors, both financial, legal and tax advisors that we have a lot of options in front of us, actually very creative and interesting options in front of us.

We also know that our real estate is misvalued in the marketplace.

That's clear just based on traits that are happening all around, vis-à-vis the owned assets that MGM has today, including the one we're speaking to you from here at Bellagio.

Thirdly, the real estate committee is completely aligned with the full Board, which is to say, anything that we do will be enhancing to our financial objectives, particularly because we're acutely aware that we're in the later stages of an economic expansion.

Anything that we do, anything that we think about going forward will be to improve this company's financial outlook, both in terms of its balance sheet and its earnings power.

And there is a mix between owning assets and operating them.

But we do believe that an asset lighter model makes sense with the key proviso, which is that the operating company, which is responsible for the CapEx of all the properties under this model, is if anything stronger than before.

Because what we won't do is sell assets and diminish the value of MGM Resorts.

So we have a lot of work we have done.

We are glad we've taken the time.

We're certainly glad we didn't have any knee-jerk reaction to ideas that were thrust upon us a year ago.

And we're more educated today than we ever before, and that is why I say that we're coming toward the end of our decision-making process and that you'll hear from us later this year.

That's very helpful.

And then just one quick follow-up.

You mentioned that you were comfortable with Strip consensus for this year, which I believe on property level, Las Vegas Strip basis is about $1.7 billion give or take a couple million dollars.

Is that the number you were referring to?

That is, yes.

The next person comes from Stephen Grambling with Goldman Sachs.

Two quick follow-ups.

First on Park MGM.

It looks like, yes, it's starting to ramp up again here.

How should investors be thinking about the cadence?

And are you seeing or expecting any cannibalization or even halo benefits in the properties around it?

Steve, and this is Bill.

I'll try to tackle that one.

Look, our full ramp will be through 2021 to get to, I think, full value.

We've still got a couple of assets opening.

What we've seen with entertainment has been absolutely spectacular.

Italy is performing exceptionally well.

NoMad, literally has the second highest MPS score in the company.

And so all of those assets are doing well.

Where we need some stickiness, frankly and interestingly, is in the casino on unrated play.

We're focused on it, we're programming against it.

Of note, the entertainment component and if you look at -- and obviously, we're situated, you've got T-Mobile and Park Theater, which are literally the top 2 grossing arenas and midsized theaters in the world right now, driving massive amounts of traffic to the property.

And so over time, we're figuring how to take full benefit of that.

Obviously, Park Theater is ultimately Aria showroom by way of example.

And we leveraged against that if you see the marquee today driving down I-15, you'd understand that relationship.

And so we're pleased with the ramp, we've got some work to do, there's a couple more assets coming on board.

But overall, it's really through to 2021 that you'll see full benefit of it.

And then what I would add is we've definitely seen the benefit in the neighborhood.

New York-New York had a tremendous month.

Second quarter revenues are really close to their top EBITDA.

And we're seeing also the flow-through and even Aria, which is continuing to probably outgrow its peers in RevPAR on a quarter-by-quarter basis.

And when is -- so when's the bridge open?

Yes.

[That's a good strip].

And one of those elements is the pedestrian bridge finishes in October of this year, which will take a great deal of eastbound traffic over to the West side of the Strip, which, obviously, is our sweet spot.

That's helpful.

And I guess, the second follow-up is just on Macau.

And I realize Cotai is still ramping, but how are you evaluating and prioritizing reinvestment or even expansion there over the next few years?

And how dependent is your thought process on further clarity on the next concession renewal?

Grant, you want to tackle that?

Sure.

So on the capital front first, as I think we've already announced, we're deep into the process of design of the additional suites for the completion of what is the top tier at south tower.

And at the same time, we're also starting on a very preliminary Phase 2 expansion strategy.

When we built the property, we actually built foundations for expansion.

We're now working through that in terms of product mix, product requirements, et cetera.

Not likely to see any investment in that its significance until around 2021, 2022.

On the concession renewal, we continue to do exactly the same as we have always done, and that is just continue to be responsive and perform the way we had.

Obviously, with Pansy, she's able to provide us a lot of insights and lot of engagement, and we just continue to work diligently through.

There's no -- with the elections coming up, the new Chief Executive onshore will have designed policy position on that.

And so right now, we're all working through those processes, making sure we continue to do the things that we know we're focused on, small and medium-sized businesses, the localization strategy, all of those things that came up in the midterm review to make sure we're well positioned as well as looking for other initiatives to build our business.

So we're still positive, don't see any reason that we shouldn't be successful.

But what we do -- totally understand that this is a decision for the Macau government.

The next question comes from John DeCree with Union Gaming.

Just I guess 2 high-level questions for me.

One maybe for Corey, it sounds like you've picked up some group business in the back half of the year.

Was wondering if you can elaborate on that, if it was sales-driven or existing groups may be getting bigger?

And then, Jim, at a high level, it sounds like this quarter versus when we spoke last time on this call, last quarter, a little bit of incremental confidence in the outlook.

Maybe it's because we're on the other side of the labor program of MGM 2020, maybe it's some of the health we're seeing in non-gaming in Las Vegas, but are we kind of hearing that right a little bit more optimistic and really, if that's accurate, kind of what's driving that?

It sounds broad-based, but just kind of wanted to recap.

I think you've talked a little bit about it throughout the call, but I think it's important to kind of get those high-level views again.

Sure.

Do want to go first, Corey?

Or do you want to...

Sure.

In the back of the year, the majority of the increase is a bit in the year for the year bookings, in particular, at MGM in Mandalay Bay.

Yes.

And just looking at what we've been seeing, yes, we're in the second half of the year, we have a lot more data in front of us than we did even last quarter call, certainly at the beginning of the year.

And few of the things that are highly encouraging, what we're seeing on the non-bac table side, good news, we are seeing in non-gaming very good news.

The convention bookings have been stronger than we talked about before.

And the leisure business, which of course, was very challenging last year going into the summer, is anything but this year.

And that's a big difference.

The entertainment calendar is I think, the best we've seen in an awful long time.

And the expansions to our facilities, which certainly hadn't -- I'm talking convention now, which certainly hadn't fully actualized before are certainly helping now.

And so there are changes to what we're seeing here in Las Vegas that provide more tailwinds than we had talked about.

And we actually are now -- when you get into this part of the year, you start thinking more and getting more information about next year.

We had a very constructive point of view for quite some time on the year 2020 here in Las Vegas, and we have more data now to show that I think we're going to be right.

Raiders Stadium is going to open up.

AEG now is booking that venue, they're expecting over 40 events a year coming into that venue.

I think there's just, was it today, Bill, about the Pac-12?

Yes, it was like this morning, they announced '20 and '21 Pac-12 football tournament here in Las Vegas.

In December, which obviously, for the community and the town is in a hole that you wouldn't otherwise fill at that scale, so it's real exciting.

And again, reminding everyone, it's literally in our back door of Mandalay.

And one of the things that Bill and his team are working on is how do we maximize the benefit of having the stadium, which is how do we maximize the foot traffic, footfall into Mandalay Bay, Luxor, Excalibur in creating this pedestrian experience because recall that they're going to shut down Hacienda to vehicular traffic.

So people are going to congregate around our properties, walk across I-15 into the stadium and walk back.

The other infrastructure improvements certainly are benefiting on the entire community.

So I would say that what we're seeing on the convention side, the leisure business, our ability on 2020 to yield ever more effectively are all positive signs.

And what we're seeing now on cross marketing because of our regional acceleration, is drawing more business into Las Vegas in the non-rated table play, non-bac table play and in slots.

And maybe one other just symbol, I guess, which is going to cause compression in rooms, which is great for the whole town, but notably us.

Our friends at AG booked a festival called the Day N Vegas, first weekend in November.

It booked 60,000 tickets in 1.5 day.

So the appeal and the draw of this community is still pretty incredible.

And so, obviously, 60,000 folks will cause a significant amount of compression and that we can.

So not that that was a dead weekend by any stretch, but the compression will drive rates and just continued enthusiasm for coming here.

Imagine the -- isn't the Pac-12 tournament during NFR?

It's right after this year.

It depends in the year.

Yes.

So I mean there's a lot going on that's benefiting, and we're really excited for Madison Square Garden and the Sphere, that's going to be another incredible draw to town and certainly we're looking forward to Resorts World opening up.

There's -- the amount of infrastructure being invested in Las Vegas by so many different parties is going to benefit the entire town, and that's good for us.

Congratulations on the quarter.

The next question comes from Thomas Allen of Morgan Stanley.

So just talking about Macau.

So Grant, one of your peers reported yesterday, and their deck highlighted how premium mass revenues were down year-over-year, and the rest of mass was up.

Are you seeing that trend, too?

And how do you think it's going to kind of go going forward?.

Simply no.

We're still seeing solid premium mass games and building, maybe we're in a slightly different cycle to others.

But I would also acknowledge that mid-mass is also pretty strong coming -- the summer can be a bit difficult to judge whether the gaming business continues to grow through the summer.

But this seems to be pretty positive.

So overall for us, we're comfortable that there's growth there for us, both in the principal segments that we're running in.

So we're not seeing that effect.

Helpful.

And then just shifting gears to Vegas.

We're deep in the Q&A, and I'm sure you're all happy that there has been questions on RevPAR but I'm firstly, going to ruin that.

Just on RevPAR, I mean the fact that there has been a shift of focus away from RevPAR, is that helping you manage your business better?

And any way to quantify that or talk about how it manifests itself would be helpful?

Tom, again, it's Bill.

The answer to your question is yes, it has helped us think about our business.

Look, we managed the RevPAR and ultimately, in some instances, particularly looking at casino marketing, and some of the lower quadrants of our M life database, the cash on cash business, we're looking to make the most money by yielding occupied rooms on the totality of the basis.

And so whether we're up 1, 2, 3 or 4 percentage points in RevPAR, while always meaningful and somewhat of an indicator, the bigger indicator is how are we doing in the collective.

And I think particularly over the last several months in this year, we've managed up casino a couple of ticks in marketing, a couple hundred basis points to the expense of leisure, which I think is ultimately been to our betterment.

The next question will be from David Katz with Jefferies.

Congrats on the quarter.

I wanted to follow up on one of the earlier topics around opco and propco.

And Jim, you used the term asset light, and it's one that we debate actively from the perspective that asset light in some circles can refer to fee streams, versus what we have seen in gaming where assets are owned by a REIT, but much of the financial servicing of it is still borne by the operator.

And I just wonder how you sort of think about that issue since the term came up?

Sure.

We have studied a lot of the models as you study and analyze, and we're certainly not a hotel management company that have relationships with different REITs.

We are a company that is in the entertainment business that creates specific entertainment experiences for our guests.

We also know that we can expand our revenue streams by using our expertise in non-capital-intensive ways.

And I think sports betting is a really good example of what will happen over time as we use our brand and our expertise in entertainment to drive revenue and profit without expending a lot of capital.

I think also what's happening here in Las Vegas, finding people to partner with us or encouraging people through partnerships of using our land where they use investments, also through joint ventures will help us.

We also are in the non-gaming business.

And we feel that there is really no company out there in the hotel space that's better than we are in developing and managing hotels.

We're doing that in China.

We'll be doing that elsewhere as well, those are capital-light projects where we can deploy some of our expertise and some of our knowledge.

We are responsible for the CapEx of the properties that we're operating.

And so an asset lighter model that we're pursuing will be used -- will be done through the lens of improving our financial wherewithal with the expectations that there will be a downturn in the future.

Fortunately for MGM, we're far better prepared today than we were before the last downturn.

We have no major capital projects underway, we have no major developments that are being built, we know what our CapEx is going to be in '19, '20, '21, '22.

We know we can manage that CapEx very specifically.

We know we're more diversified now than we were a decade ago.

We know that because of MGM 2020, we're more nimble.

We're more able to react to economic changes or even regional changes, let alone global changes.

And so when we think about what do we do with the owned assets, we do with our assets that are part of MGP, our operating units there.

We also are really proud of the MGP team.

They, too, have been busy, they've been very focused; they've been very, I think disciplined in terms of acquiring assets accretively, but acquiring quality assets because not all assets are equal.

And certainly not all assets are equal when you're in the later stages of a cycle.

And certainly all assets are not equal if you're in a downturn.

MGM Growth Properties and MGM Resorts owns only Class A real estate.

Doesn't own Class B, Class C real estate.

And in more mature areas of real estate, that's well known to investors.

And they value real estate in office, in commercial, residential, retail differently depending upon the quality of the asset.

In the gaming space, that hasn't happened yet.

But it will.

It will happen in our view, because quality counts.

We saw that during the last downturn in markets where we had the market leadership position whether it be Borgata in Atlantic City or Detroit where one property went bankrupt in Detroit, but not MGM Grand Detroit.

And so we are viewing all of this through the lens of improving our financial wherewithal, our financial stability and we understand fully our obligations as the capital provider to our resorts.

We just feel that we're just getting going in terms of how we can best maximize the value for all the shareholders, MGM Resorts, what we own, including our OP units in MGM Growth Properties.

And as my follow up, I just wanted to go back again to one of the other topics since it would seem I might be close to last.

On the subject of M&A, I just wanted to be clear about what the boundaries are.

I think the general expectation is that the focus is much more inward and on what you have on your plate.

But could there be sets of -- some set of circumstances or some opportunity that's too attractive to pass up, where you would meaningfully pursue acquiring a property of some size?

It would be hard for me to foresee and certainly not something we're pursuing.

We did look at a property that you're well aware of earlier this year.

We were presented with that as something that we should or would take a look at, and we did.

It's a high-quality asset in a major city, where MGM already has a very strong brand affinity.

And so we looked at it, and of course, we end up passing on that opportunity.

But it wasn't something, and nor is anything else something we're actively pursuing.

As I said earlier, we like what we have.

And we don't need to own any assets anywhere in the United States to maximize what we believe is our sports betting opportunity.

And so therefore, the only reason why we would look at something is whether or not we believe it will have an outsized return on investment and fits within our capital allocation strategies.

And I think Empire City is a very good example of that.

Certainly, we believe that there is a vast opportunity over time with Empire City as we can diversify that into a broad-based resort.

And so I hope that answers the question.

The answers are perfectly clear, not just for my questions, but frankly, all of them today.

Thank you.

And I want to thank you all for joining us today.

I hope you found it informative.

Just want to recap on a couple of things, one is we are satisfied with the second quarter.

We're really very pleased with how balanced the property performance has been, both throughout the United States and over in Macau.

We are incredibly proud of the men and women here at MGM Resorts that have implemented to date our MGM 2020 Plan.

It has been a tremendous amount of work which is bearing fruit as we speak.

And you'll see the benefits as that accelerate throughout the balance of this year and into next year.

We're pleased that Las Vegas is doing as well from a macro perspective as it is, and it sets up for really a positive performance for the entire market in 2020.

And as I said, now that we have a half year under our belt, we are confident that we're going to hit our 2020 financial targets, that $3.6 billion to $3.9 billion of consolidated EBITDA, our free cash flow per share of $3.50 while running a conservative capital allocation strategy that targets that leverage between 3 and 4x while we increase our dividend and return shares, buybacks to our shareholders.

With that, as always, Cathy, Aaron, Corey, myself, Bill, we're always around for any questions you have.

And thank you very much for joining us.

And thank you, sir.

The conference has now concluded.

Thank you for attending today's presentation.

You may now disconnect.