美高梅國際酒店集團 (MGM) 2021 Q3 法說會逐字稿

Good afternoon, and welcome to the MGM Resorts International Third Quarter 2021 Earnings Conference Call. Joining the call from the company today are Bill Hornbuckle, Chief Executive Officer and President; Corey Sanders, Chief Operating Officer; Jonathan Halkyard, Chief Financial Officer; Hubert Wang, President and Chief Operating Officer of MGM China; and Cathy Park, Executive Director, Investor Relations. (Operator Instructions) Please also note, this conference is being recorded.

Now I would like to turn the conference over to Cathy. Please go ahead.

Thank you, Chad. 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 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 will 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 investor presentation, which are available on our website. Finally, this presentation is being recorded.

I will now turn it over to Bill Hornbuckle.

Thank you, Cathy, and thank you all for joining us today. Well, we delivered another quarter of strong domestic results with our Las Vegas Strip and regional segments, reaching all-time adjusted property EBITDA records in the third quarter. I remain in awe of what our talented teams have accomplished this year given the ongoing COVID pandemic. We are emerging from it a stronger company with a sharpened focus on operational efficiencies and providing the best experiences for our guests as we carry out the vision to become the world's premier gaming entertainment company.

I continue to express my sincere pride and gratitude of the tremendous effort of our employees, who are the foundation upon which we built our strategic plan and long-term vision. As a reminder, our strategic plan consists of the following 4 key elements: investing in our people and planet, providing unique experiences for guests by leveraging data-driven consumer insights and digital capabilities, delivering operational excellence at every level, and allocating our capital responsibly to yield the high returns to our shareholders.

On last earnings call, we discussed the meaningful steps our company has taken to simplify our story and monetize our real estate. We have reached a number of milestones in this regard. In August, we announced a transaction with VICI and MGP to redeem the majority of our operating partnership units and deconsolidate MGP within our financial reporting structure. In September, we acquired the other 50% interest in CityCenter, monetizing its underlying real estate and are now proud owners of 100% of its operations.

In October, we monetized MGM Springfield's underlying real estate as well. And these transactions grant us the financial flexibility to take foothold of front-footed actions to invest in our core business and to maximize growth and pursue opportunities that align to our long-term vision.

For example, this quarter, we announced an agreement to acquire the operations of the Cosmopolitan of Las Vegas, a high-quality resort with enviable product offerings, strong brand awareness and complementary customer base making it an ideal addition to our Las Vegas Strip portfolio. We also believe that the synergies we have identified are highly achievable. We are incredibly excited to welcome The Cosmopolitan team to the MGM Resorts family, pending the transaction closing next year.

Now I've mentioned in the past that we are happy with the amount of exposure we currently have in Las Vegas. As such, we are currently in the early stages of a process to sell the operations of the Mirage. Doing so will allow us to maintain our existing Las Vegas exposure, while focusing on the complementary and diverse nature of our offerings in our hometown. I spent the early part of my career at Mirage, I've been a part of that team's opening of the property in 1989. It's a stored property with great brand recognition and a strong customer and loyal following.

The campus also sits on approximately 77 acres that provides attractive development opportunities to capture large amounts of foot traffic. Mirage has served us well over the years, and we are certain it will remain a success with a new operator in the future. Importantly, I want to thank our valued team members at the Mirage. They're an integral part of what makes that property so special, and I know they will remain strong ambassadors of the brand during this transition.

We also remain keen on diversifying our business and further expanding our operations globally. To that end, in September, we announced that our MGM Orix consortium had achieved a milestone in Japan having been selected as a Osaka's partner to build and operate a world-class integrated resort. We are now working with Orix in the city to submit an area development plan to the central government in the coming months and are hopeful and confident that we'll be awarded a license next year.

Outside of Japan, we will continue to study key U.S. regional markets of significance. This includes the commercial gaming license in New York, for which we believe MGM is well positioned given our existing operations at Empire City.

Moving on to BetMGM. Our sports betting and iGaming venture continues to build on its success every quarter. In the third quarter, BetMGM launched in 3 new states: Arizona, South Dakota and Wyoming. And within a short 9-day period, BetMGM is now live in 16 markets and is well on its way to 20 by the end of the first quarter of 2022. In the 3 months ending August, BetMGM commanded 23% share nationwide in both U.S. sports and betting and iGaming. And in the month of August, we believe BetMGM was competing for first place driven by iGaming in which BetMGM remains the clear leader with a 32% market share.

We're in the middle of the NFL season and the market remains competitive, however, the team has performed exceptionally well, focusing on ROI-positive marketing spend, and we are encouraged to see early signs of a more rational environment as the season progresses. BetMGM continued momentum through this year has been extraordinary, and we expect full year 2021 net revenues associated with BetMGM will be in excess of $800 million.

Finally, we think about opportunities for organic growth in our core business. We have a great network of premier properties across the U.S. that we believe we can better leverage to drive customer choice, increase loyalty and maximize wallet share over time. For example, we recently launched a new tailgating experience at Mandalay for events at Allegiant Stadium. We've hosted Bruno Mars and Lady Gaga's concert of Park MGM, and completed our room remodels at Bellagio's main tower as well as the pyramid at Luxor with additional remodels ongoing at Aria suites and villas. We also continue to focus on targeting strategies that draw on our competitive advantage to acquire and drive sustainable growth from high-value customers in our business. Over the years, we will invest in customer-centric products and services to execute these strategies, which we will be enabled by advanced marketing practices and enhanced physical and digital experiences.

Before I turn it over to Jonathan to discuss our third quarter results, I'd like to make some high-level comments on our current trends and our future outlook. I must say it's simply great to be in Las Vegas right now. We've kicked off the quarter exceptionally strong, anchored by a great fourth of July holiday, better than pre-pandemic casino spend levels, and pent-up demand for the city's wide-scale entertainment relaunch that drew large crowds in the town, especially on the weekends. While the Delta variant impacted our group business during the quarter, we have been able to offset with leisure and casino customers. With cases on the downswing, we have built -- quickly, we built momentum into October. And the level of demand in the marketplace, especially on the weekends, has simply been incredible, October will be another all-time record month.

Groups are still coming to town. We have a healthy amount of group room nights on the books through the rest of the year. And we look ahead -- and as we look ahead, we feel good about our group business coming together, anchored by the back half of this year and what's already on the books for '23 and 2024.

With the relaunch of large-scale entertainment in July, these offerings are driving visitation to Las Vegas. Allegiant Stadium brings fans to the Strip for events, and we've had some of the best weekends around these events. The Raiders estimate that roughly 60% of tickets are sold to out-of-state fans. And with the majority of the 50,000 to 60,000 people walking to and from Allegiant Stadium over the Hacienda Bridge between Mandalay Bay and Luxor, we are seeing significant broad-based uplift at both properties on event days and even more so on Raiders games.

We're also driving our own destiny with a fantastic line of events across our venues, which have been met with great enthusiasm whether it was the McGregor fight at T-Mobile, which by the way, produced our second highest single day for table games win in the company's history, or the debut of our new Americas Got Talent Show At Luxor this week. We continue to demonstrate that the city, and MGM Resorts is a leading destination for exceptional entertainment.

Turning to our regional properties. As I mentioned earlier, our regional operations delivered another all-time record EBITDAR and margin quarter driven by continued strength in our rated gaming spend levels as we yield to our higher net worth customers. With the easing of statewide restrictions, we have begun to strategically reintroduce entertainment and F&B at all of our regional properties. And I'm gratified that our customers can once again enjoy the quality experience for which MGM is known.

On the cost side, our team continues to focus on productivity across labor, player reinvestment and other streamlining initiatives, and this gives us great confidence in our ability to sustain strong margins as we head into 2022.

I'll conclude with some final thoughts on Macau. The market continues to operate well below pre-pandemic levels as varying forms of travel restrictions have limited visitation to the region. The obvious catalyst to Macau's recovery is a sustained resumption of frictionless travel between Macau, Hong Kong and Mainland China, which heavily relies on the higher vaccination rates that will take some time.

When the market does rebound more meaningfully, we believe MGM China is well positioned given its strength in premium mass. Macau remains an important part of our business, and we have high conviction in the future success of this region. We will continue to work with the government, and we are highly confident in ultimately getting our license renewed. Ongoing discussions with the government give us a greater confidence in our belief that the process will be both judicious and fair. We look forward to further promoting the long-term development of Macau's gaming industry and to supporting the government's tourism and diversification goals for the region.

With that, I'll turn it over to Jonathan to discuss the details before some final comments and questions. Jonathan?

Thanks very much, Bill. I certainly join Bill in gratitude to our entire team for outstanding results this quarter. What a difference in performance and momentum as we have moved through the course of the year. And now with only 60 days until the start of 2022, I could not be more excited about our prospects for the year ahead, and it's all due to the heroic efforts of our thousands of colleagues here at MGM Resorts. Now let's talk about our third quarter results in some detail.

Our consolidated third quarter net revenues were $2.7 billion, a 19% sequential improvement over our second quarter results. Our net income attributable to MGM Resorts was $1.4 billion driven by a $1.6 billion net gain from the consolidation of CityCenter. Our third quarter adjusted EBITDAR improved sequentially to $765 million, led once again by our domestic operations. 12 of our 18 domestic properties achieved either all-time or third quarter EBITDAR records, and 15 achieved either all-time or third quarter margin records. This performance was driven by strong leisure, transient and domestic casino demand.

We have demonstrated our ability to improve and expand our operations while maintaining cost discipline, all against the backdrop of ramping nongaming revenues and a stabilizing workforce complement. Our Las Vegas Strip net revenues were $1.4 billion, just 8% below the third quarter of 2019. Adjusted property EBITDAR for the Strip was $535 million, 21% above the third quarter of 2019.

Hold had a $20 million positive impact on our EBITDAR this quarter. So Hold Adjusted Strip EBITDAR was approximately $514 million. Our Strip margins were 39% in the third quarter, a 943 basis point improvement over the third quarter of 2019 and a slight decline on a sequential basis over the second quarter of 2021. This was driven by a combination of effective casino marketing efforts and continued cost discipline across the business. Availability of labor also improved sequentially each month in the third quarter, and our payroll per FTE remained in line with the third quarter of 2019.

We continue to attract strong casino demand and drive healthy performance in the third quarter. Here are a few data points. Third quarter Strip casino room nights were 27% greater than in the third quarter of 2019. Casino revenues per casino room night was up 10% above the third quarter of 2019. And not surprisingly, our slot handle was an all-time quarterly record. All of this translated into third quarter casino revenues increasing to 26% above the third quarter of 2019, contributing 31% of our total Strip revenues in the third quarter, and that compares to our casino revenue mix of 22% back in 2019.

Our Strip hotel occupancy was 82% in the third quarter, improving from 77% in the second quarter. And for the first time since reopening, the third quarter's room rates ran higher than pre-pandemic levels, with ADR 10% above that of the third quarter of 2019 or 5% when we exclude Circus Circus. We finished a strong October with occupancy of 92%, the highest since reopening, and we expect November and December to be strong but also to follow seasonal slowdowns as we typically do every year heading into the holidays.

As we ramp staffing and our nongaming revenues increasingly become larger contributors to our overall business, I expect margins to come in a bit in our Las Vegas operations. Our customers demand, and are willing to pay for the breadth of offerings we provide here at MGM Resorts. And while healthy margins are an important feature of our business model and financial health, we are focused on growing our absolute EBITDAR dollars, a goal well supported by future upside from the recovery in group events and international visitation. We expect our margins to stabilize well above pre-pandemic levels, resulting from our efficiency and cost-saving efforts.

Finally, it's important to note that we closed the CityCenter transactions towards the end of the quarter. And as a result, we started consolidating CityCenter within our Las Vegas Strip results beginning on September 27. Our third quarter Strip numbers include 4 days of Aria and Vdara's results. Led by Anton Nikodemus and his team, the CityCenter joint venture reported quarter-to-date ended September 26, adjusted EBITDA of approximately $120 million, with 40% margins. Had CityCenter been consolidated for the full quarter, our Las Vegas Strip EBITDAR would have been approximately 22% higher than what we reported in the third quarter. Its magnitude and growth potential makes CityCenter a difference maker for us financially.

Our third quarter regional net revenues were $925 million, just 1% below that of the third quarter in 2019. We delivered adjusted property EBITDAR of $348 million, which was 29% above 2019 levels and 9% above what we achieved in the second quarter of 2021. Our regional casino business further strengthened in the third quarter with our slots and table games volumes improving sequentially by 6% and 11%, respectively, from the second quarter this year.

We measure rated player spend levels through theoretical win or theo per day, net of promotions. Our net theo per day for our rated customers reached record levels in the third quarter, led by our younger demographic despite fewer trips as compared with their visitation pre-COVID. Unlike the younger crowd, visitation and spend from our -- from our 65-plus demographic has not yet fully recovered but we're encouraged with the resiliency in this segment's demand, especially through the Delta variant outbreak.

Our third quarter regional margins of 38% were another all-time record growing 886 basis points over the third quarter of 2019. While our strong EBITDAR margin has benefited from elevated casino spend, and importantly, also validates the great work that our teams have put into maximizing the effectiveness of our operating model and rethinking how we run our business.

Disciplined customer reinvestment is a key component of this, where we track marketing efficiency across all of our properties against specific goals. With the return of more nongaming amenities, we'll continue to exercise prudence in our marketing reinvestment strategies, taking a test-and-learn approach to ensure intended returns on any increases in reinvestment. We're also rightsizing labor in the near term, which has had a near-term favorable impact on our margins, but it's also caused capacity constraints in certain segments of our operations. Overall, I believe our regional margins will stabilize well above 2019 levels.

Moving on to BetMGM. Our 50% share of BetMGM's losses in the third quarter amounted to $49 million, which is reported as a part of the unconsolidated affiliates line of our adjusted EBITDAR calculation. Net revenues associated with BetMGM operations were $227 million in the quarter, exhibiting a 17% sequential growth from the second quarter, led by the continued strength in iGaming.

This was partially offset by heavier customer acquisition and reactivation spend from BetMGM's successful Arizona launch and the return of football, resulting in September first-time deposits growing to over 5x, 5x that of September 2020. We know that an omni-channel customer is worth more than a single channel customer. We're particularly excited about the mutually beneficial advantages of our omnichannel strategy with BetMGM, and we remain its top partner for driving new players. In the third quarter, 16% of BetMGM's new players were attributed to MGM, meaning they were active with MGM in the last 12 months. This percentage has remained in a relatively stable range while BetMGM has significantly broadened its reach, illustrating our ability to continually optimize the conversion of M life members to BetMGM.

The BetMGM team previously disclosed during their April Investor Day that MGM-sourced players have much lower customer acquisition costs and over 5x the marketing ROI when compared to non-MGM-sourced players. What's also encouraging is that in New Jersey, our most mature market, based upon preliminary data, we found that MGM-sourced omni customers are spending more on property at Borgata than they did when they were exclusively land-based. And clearly, the benefit goes both ways. In the third quarter, 42% of our new M life sign-ups have come from BetMGM, which plays a crucial role in our database expansion, a database, which currently stands at over 37 million members.

Finally, in Macau, third quarter market-wide gross gaming revenues sequentially declined 26% from the second quarter and was 27% of the third quarter 2019. MGM China's third quarter results were also sequentially lower from the second quarter with net revenues of $289 million and adjusted property EBITDAR of $7 million. Hold adjusted EBITDAR was a $2 million loss. While the latest hurdles surrounding the local outbreaks in Macau negatively impacted travel in September and most of October, the situation has now largely been contained. And with quarantine-free travel having resumed on October 19, the market has seen daily visitation rebound from less than 1,000 in the first 18 days to over 26,000 for the remainder of the month.

Our third quarter corporate expense, excluding share-based compensation, was $105 million, which included approximately $18 million of transaction costs for both MGM and MGP. We expect that our net corporate expense will run at a similar level in the fourth quarter, heavily driven by our ramping Japan effort as well as our investments in IT and digital. In the near term, we also expect to incur incremental costs related to our recently announced transactions.

We believe repurchasing our shares is an attractive use of capital. In the third quarter, we repurchased 17.2 million shares for $687 million, and we purchased an additional 1.8 million shares for $80 million in the fourth quarter through today. That's $1.1 billion of share repurchases year-to-date, or approximately 5% of our market cap, and that is this year since March.

Over the past few months, we announced some significant deals that simplify our corporate structure, further bolster our liquidity position and advance our vision to be the world's premier gaming entertainment company. We closed the CityCenter transactions in the third quarter. In October, we closed the MGM Springfield transaction for cash proceeds of $400 million. Our transaction with VICI is on track to close in the first half of next year, subject to regulatory approval, at which point we will bring in an additional $4.4 billion in proceeds.

In September, we announced an agreement to acquire the operations of The Cosmopolitan of Las Vegas for $1.625 billion. This represents a multiple of approximately 8x adjusted EBITDA, inclusive of expected operational synergies, and revenue growth opportunities that we have identified. The transaction is expected to close in the first half of next year, subject to regulatory approvals.

As of September 30, our liquidity position, excluding MGM China and MGP, was $6.4 billion, or $9.6 billion when adjusted for the Springfield, VICI and The Cosmopolitan transactions. So our approach to capital allocation is critical. And our approach to capital allocation will be as follows. First, we'll maintain a strong balance sheet with adequate liquidity. Second, we will return cash to our shareholders. And finally, when assessing potential growth opportunities, we'll invest where we have clear advantages, and will exercise discipline in measuring prospective returns for our shareholders.

With that, I'll turn it back to Bill for his closing remarks.

Thanks, Jonathan, and apologize for the time of the comments. But as you can all tell, we have a lot going on. I'm proud to say I think we've accomplished (technical difficulty)

This is the operator. It appears that we've lost audio from Mr. Hornbuckle's location. Please be patient while we restore audio.

Got it. Thank you, operator. I don't know what happened there. I apologize for the length of this, but as you can tell from Jonathan's comments, we've been extremely busy. We've accomplished obviously, a great deal in the past year, and I'm very proud of our entire team, and I'm enthusiastic and optimistic about our path forward. We've taken actions to simplify our corporate structure and monetize our real estate. We're maximizing our profits in our core domestic business and are reinvesting in the company for our long-term success.

As it relates to Macau, we're confident in the eventual recovery in the region, and we believe we are well positioned with respect to license renewals. And we're excited by the diversification of both BetMGM and Japan that it brings to our ultimate business. And as you can tell, our liquidity position is very, very strong and we remain focused and disciplined in the allocation of our capital to drive long-term shareholder value. Again, I'd like to close, how we started by thanking all of our employees once again for their commitment and dedication to this company. I believe we have literally the best team in the business, and I'm excited about what we will further accomplish in the future together.

With that, we will take your questions.

(Operator Instructions)

And our first question will come from Joe Greff with JPMorgan.

Jonathan, Bill, I'd like to talk a little bit about the capital allocation approach that you referenced on the call, particularly that second stool about returning cash to shareholders. I was hoping maybe you can talk about it in a sort of a different way and think about returning cash to shareholders, maybe kind of near term, medium term and long term. Obviously, in the near term, you have more cash coming in. And if you get another $500 million or $600 million from Mirage, that's just even more to play with.

Longer term, you have Japan, but that's not going to be a huge source in any given year. And then medium term, you have whatever external growth opportunities that maybe you want to kind of talk about how you're thinking about that. But then when you think about that general overlay, how do you think about sort of the timing of capital return? And the capital return that you mentioned, Jonathan, that the share repurchases in October, has that paused? Or is that still ongoing?

Thanks, Joe. I'll offer a few thoughts. First of all, the real estate monetizations that we have undertaken recently, and I would include the MGP transaction in that category broadly, really is the completion of a strategy that the company began 4 or 5 years ago. And I think when originally conceived, the idea was that we would be monetizing that real estate, returning the cash to shareholders. And so I think to address the question directly that the completion of that strategy, freeing up that cash will likely entail some accelerated return of that capital to shareholders as we've been doing this year. That's, I think, a different matter from the long term -- the longer-term plan for return of capital to shareholders, which will be driven really out of free cash flow of the business, whereas in the shorter term, it's really driven more by these asset transactions we've undertaken.

And then just finally, as it relates to October, we've been disciplined and regular, repurchases of our shares, but we certainly -- we moderate depending upon where we see the share price to a certain extent. So we remain active because we believe that the share price right now is still attractively values the company, but we do moderate our purchases from time-to-time.

And Joe, just maybe additional color. Look, through COVID, through obviously the Great Recession, we've got some deferred maintenance. So there's a couple of projects we're going to do here regarding rooms and catching up, not a massive amount of capital in relative terms, but real money. We are just getting started in the digital world. You understand what we've done to date. And as we continue to think about expanding that business with partners, through partners or with others, that will take some capital.

Clearly, it's a space in the place, we've indicated many times, we want to be progressive in and be dominant in both domestic and potentially a global basis. And so I think that will take some cash. Japan, you're right, it's down the road. It's probably not until '24 and beyond. And New York, hopefully, they'll start earlier. I'm hoping in '23, we've given an opportunity to deploy some cash there and start to grow that business. We said that's a unique opportunity sitting on 97 acres, 15 miles from Downtown Manhattan. We can't help but think we could do more there. And so those are some of the immediate things that I think lie ahead. And then obviously, we'll wait and see.

And the next question will be from David Katz from Jefferies.

I wanted to, again, go back to some of the capital allocation and pick number 3 on the list, Jonathan, which I think was external investments in a disciplined way where you feel like you have a clear advantage. And given all of the prospective events around your partner, BetMGM. I just wanted to see if there are any updated thoughts or perspectives that you can share with respect to your -- the outstanding share of BetMGM and/or Entain?

Yes. I'll -- David, thank you for the question. I'm very intentional about the order of those priorities because I do believe that returning cash to shareholders is the case to beat when it comes to making growth capital investments because it's the shareholders' money. And so that's a purposeful hurdle that we set for ourselves. Regarding the second part of the question, I'll just -- I'll defer to Bill.

Thanks, Jonathan. So David, look, obviously, there remains a great deal of enthusiasm in the market. We all saw -- and obviously, we were an insider to a certain degree to the experience that DraftKings and Entain just went through. Time to tell where that all goes, if it goes anywhere. We enjoy our partnership. I think we're doing well by it. They've been good partners as it relates to the day-to-day business activity. We'd like to do more domestically. And whether we ultimately do more internationally or not with or without them, I think time will tell as well. But for now, we're going to wait and see and see what happens to that marketplace for a while.

Perfect. And as my follow-up, just 1 detail. With respect to the fourth quarter, and I suppose, particularly in Las Vegas, it sounds like October has gotten off to a very strong start. But any helpful thoughts around what a new normal for the fourth quarter could be? We would normally think it might be a little bit softer than 3Q with some holidays. But just the puts and takes in review would be really helpful.

I'll add a couple, David. It's Jonathan. One is certainly that we are now consolidating the operations of CityCenter. And as I pointed out in my prepared remarks, that's a material addition to our consolidated earnings for the quarter. So that's an important one. I think the other thing I would add is that midweek occupancy in Las Vegas has really found solid footing, and where we have had some near-term cancellations in group business, it has been filled and in many cases, more than filled with transient and gaming demand.

Now all that is against what is normally just a softening of overall business levels as we get into late November, into December. I don't think this year will be any different. But we feel very good right now with the start of the fourth quarter, and we do have some of those catalysts that I mentioned.

And David, it's Corey. What I would also add, traditionally, pre-Thanksgiving to right about the week before Christmas is traditionally slow. We -- similar to last year, we're seeing some pretty good pickup during the Thanksgiving period. So this is unlike any other third and fourth quarter. So it's hard to say whether -- what the new norm would be, but we're pretty optimistic about the pickup we're seeing, especially midweek. Weekends are -- every weekend from now until the end of the year is strong with strong ADR pickup.

We've got -- remember, we got the Raiders programming every other -- you got -- for example, this weekend, you've got Rolling Stones at Allegiant. That's a 50,000 seater. So programming just looks great.

And the next question will be from Thomas Allen with Morgan Stanley.

On BetMGM, couldn't help but notice that you took out the $1 billion revenue guide from next year because you're already breaking $800 million this year. Any updated taking around next year?

At this point, no. But we'll, I'm sure, introduce a revised estimate for 2022 during our fourth quarter call.

Okay. A follow-up on BetMGM. Just -- there are some news reports out that you're one of the winning operators in New York. Can you just help us think about how you're going to operate in that market with such a high tax rate?

Well, look, I can assure you we weren't the 62% crowd. It's probably going to end up at 50%, time to tell, but I think that's what we're all contemplating, be 9 or 10 operatives, give or take. Going into it, I'm happy we have a property there. So the omnichannel thing we talked about is relevant and real. We all understand because we're in New Jersey. It's one of the more expensive media markets in the world. But I will tell you, it is the largest market we will launch in to date with M life database.

Obviously, we haven't launched in Southern California or California. So as a database way to think about this -- and we'll be there day 1, which is also critical. So I think we'll get off to a great start. Time will tell with sports how much money is to be made. Again, for us, it's an omnichannel play. It's a brand play, and we're going to have a huge presence there. And hopefully, someday, we get to online, iCasino, but that's something for well down the road.

And the next question will be from Dan Politzer with Wells Fargo.

So first on BetMGM and just in terms of the value there. We all see the same level of valuations for sports betting iGaming operators. Now that you're competing arguably for the top spot here in terms of overall share, do you think you're getting full value for it in your stock? And if not, how do you think about some of the levers that you might pull to maybe unlock that full value?

Well, you'd be surprised to hear the answer is no. If I look at DraftKings and others, as a multiple. Obviously, it's complicated inside a huge company and a huge story. And we have a JV that's not -- in the context of basic structure, it's not pure in terms of value creation. So we understand all of that.

I think as you look forward, though, we've had all enough exposure and experience to understand a couple of things. BetMGM is here to stay. It will be a dominant player in this space. We can argue every day all day 1, 2 or 3. What's really relevant to us are 2 things. We dominate in iGaming, principally based on the heels of legacy of who and what we are. I think the BetMGM folks put up a great gaming product. We've seen our branded products work exceptionally well.

We have a huge database to lean into it. And ultimately, we're going to have a huge reward mechanism with the omnichannel idea of coming to Las Vegas or some of our regional properties to enjoy themselves with a great retail footprint. I mean not only are we in the places that are obvious. But next year, in Arizona, at the Cardinals Stadium, we're going to have a presence. We are literally opening as we speak in that stadium a betting shop. And so we're going to be in other places, and we have an opportunity finally with Illinois freeing up to get into Illinois come, hopefully, March or April of next year.

And so no, obviously, we think there could be more value accretive to it. It is complicated. But we know we have a serious bet. We know we have a serious play. And we're continuing to invest and hopefully wisely. I'd like to think we've been a little bit more prudent, judicious than others, but it's not for the ill of heart as we know. And I still think we'll see more consolidation over time, which I think ultimately will be accretive to the players that remain.

Got it. And just for my follow-up, in terms of BetMGM for the revenue guidance, I think you said $800 million in the deck, which would imply something like a sequential decrease versus 3Q. Is there anything to read into there in terms of seasonality or maybe increased promotions from competitors that might pressure your iGaming revenues?

No. It's $800 million plus, by the way. Notice there's a little plus sign in that deck. So we didn't go backwards to the contrary. Football got off to a rougher start in September. But all that being said, no, it's motivated and growing in the right direction. I think you heard Jonathan year-over-year 5x more in terms of first-time deposits in September. We like the trajectory of the business. Arizona is off to a massive start for us. And obviously, we've got some other states yet to come here. So no, we don't want to give a real number because we are truly studying it because we want to hold ourselves accountable to it. So we will, by the fourth quarter, though.

The next question is from Shaun Kelley from Bank of America.

Maybe I wanted to touch on a couple of other areas since we've covered a lot of ground on BetMGM. Maybe I was wondering, to specifically would be one, Jonathan was your comment on the margin outlook in Las Vegas. So if you could give a little bit more color on sort of how you expect that to maybe trend sequentially or into '22, just given as you sort of reramp costs? That would be really helpful. And then my follow-up would be. If you could just talk a little bit about -- a little bit more about the sale of the Mirage? How specifically do you identify that property as maybe the right one out of the portfolio to look for options for?

Sure. I'll address the first, and maybe pass the second one on to Bill. As it relates to Las Vegas margins, the margins of about 39% this quarter. They do benefit from the higher intensity of gaming revenue that we have. As we introduce more nongaming revenue and offerings to the system, and that's going on literally during the month of November with a number of our entertainment offerings opening here. And certainly, we anticipate more groups and so more catering and banquet revenue.

We will be making a trade and a very profitable trade over time of customers as lower-worth gaming customers are yielded for in favor of group customers as we go into 2022. Now that's a good trade for us. A group customer will generate revenue per occupied room 80% higher than a leisure customer will or a lower-rated gaming customer, but they'll do so at a slightly lower margin. And that's the effect that I was trying to describe in the remarks. So we, back in 2019, had margins in the high 20s. And of course, now we're in the high 30s.

I expect that with a proper mix of business that we'll be well above those margins back in 2019, meeting our profit improvement goal of $450 million across the enterprise. But believe me, we have also -- we've learned a lot about ways to do our business differently over the past 9 months, and we don't intend on backtracking there to carry that better margin performance even against a more normalized mix of business.

And then on the Mirage. If you think about our portfolio, particularly here in Las Vegas, look, there is no better place in the context of history of Las Vegas. There are no better bones. It's a center of the Strip. It was built to last, and it has. There's 77 acres, many -- much of it is really undeveloped in the context of what could be there. But as we look at capital allocation, and we look at the notion of diversification, we have enough of Las Vegas. And so -- and we look at the marketplace right now.

Obviously, we're buying and selling at the same time, so we understand the marketplace. We all heard Tom Reeg yesterday. We agree. We think there is an opportune time and we think this might be it to sell asset an in Las Vegas. And so it became for us the obvious one. As we think about our portfolio, we think about things going forward in capital allocation. And so no discredit to what's been done there. It's an amazing property. And I'm excited for somebody to come in and make it their marquee property. I think between the villas that are there, the access to the real estate, its general location. I think the right owner could do a lot, but it just fell pretty far down in the spectrum of how much of capital we'd allocate to it in any given period of time in the near future. And so we just took a strategic decision to sell it.

The next question will be from Chad Beynon from Macquarie.

I wanted to go back on BetMGM. Just from a product or tech standpoint, we've seen a lot of new features and just different products that have rolled out. Is there anything from a same-day parlay, live dealer, social features that you currently aren't offering that others are to kind of help with retention? And I guess if not, is there anything kind of on the come that will help you keep your customer base as others are pretty aggressive with marketing?

Well, yes, I mean, fair question, Chad. I mean all of the above. We have just launched with Evolution some product out of New Jersey, and we are doing the same in Michigan with live dealer. We think it's an integral part of the business and something that people are leaning more and more into will be there. Same with same-day parlay. We've got a bunch of product work and revisions. We didn't want to do it in the middle of football season that tends to -- as we tried to do some couple of things last year, got us in a little bit of trouble. And so we'll continue to evolve. The great part about the relationship with Entain is there are literally 3,500 people in Hyderabad who are focused on a lot of their businesses, but primarily ours. And so Adam and their whole team, Matt and company, have about 8 or 9 things shared wallet, all kinds of things that will change that dynamic and continue to develop that product as a priority because it will be part of the race over the next couple of years in terms of getting and sustaining and retaining customers.

Okay. And then separately, regarding some comments you made before about the hub-and-spoke approach, owning and operating some premier assets around the country outside of Las Vegas that you can feed into Vegas. Does the acquisition of CityCenter and Cosmo and the disposition of Mirage change how you're thinking about that, given that your properties will just skew more luxury pro forma?

No. Not really. I think I understand the nature of the question, as we skew up the spectrum will the regional property be able to feed that? I would still suggest with Excalibur, Luxor, New York, New York, to a certain degree, Park and to a certain degree, MGM of note. Remember, we've got 40,000 rooms in Las Vegas to fill. And what is clear and differentiating between us and Caesars is our casino marketing share is 10 -- 100 basis points behind their in terms of market mix. And so no, I think there's room and opportunity for both simultaneous.

And the next question will be from Jon Galligan from CLSA.

Yes. Two questions. One, can you talk a little bit about whether you've seen a recovery in Macau post Golden Week with COVID cases now coming down? And secondly, also on Macau. Can you talk a little bit about where we are with the concession process now that the public consultation period has ended, what happens next? And where do you see this going?

Hubert, I know you're awake. So thank you, you want to handle the first part of this?

Sure. Thank you, Jon, for your questions. The travel restriction was lifted in October the 19, and the right after that we saw business start to ramp up. And right now, the travel requirement is NAT test within 48 hours. And so we have seen the key indicators on business side going back to early part of September, in some cases, even stronger going back to July, depending on which segment you're looking at. And what kind of traffic indicators you're looking at. So overall speaking, I think that it's on the rise. And we also anticipate that by mid of November, probably we'll get back to a higher level to July level, if everything remains calm in China and in Macau. There is no serious outbreak. So regarding concession progress, I can now hand over to Bill for that question.

Yes. And John, I think just to put a capstone on Hubert's comment. We've gone from losing money to making a little bit of money again. So we've shifted back into the black. And as long as we don't hit yet another instance, we'll hopefully stay there and grow from that. Obviously, we submitted on the 29th, like all the other concessionaires and many other people in the community, by the way, answers to the 9 core questions that were asked. We had an opportunity to brief that with the government. They'll now continue that public consultation process. I suspect that will go on for another 30 days or so. That's obviously up to their discretion when to end that and form some of their own opinions.

Whether this all gets done in time for June, we don't know yet because there are some steps that they still have to publicly go through with LegCo. But I feel good about what was said. I feel good that we had an opportunity to air some of our concerns, and that they were heard and listened to. And so I think it's relatively given the environment and given what the stake, been progressive. We've been there like everyone else 20 years. They've been fair to us to date as we have to them. And I think we've been good to the community and vice versa. And so hopefully, we continue on. Whether this gets done by June, I just don't know. There's some complications around several of the issues, as you know. And so time to tell.

The next question will be from Stephen Grambling from Goldman Sachs.

My first question is just really a follow-up on BetMGM. And I may have missed this, but what is the current split of the $227 million in revenues between iGaming and sports betting? And then as you noted, omnichannel customers tend to be more valuable, how do you strategically align incentives between managers of your physical assets and those at BetMGM to ensure you maximize the total value?

Well, look, for competitive reasons, I'm not going to give out the outright split, but just say it leans heavy iGaming, which I think longer term speaks to the success of the model that we're pursuing. We have -- and one of the reasons that the iGaming is doing to say, well, it's both the product. And ultimately, the team there in CRM has done an amazing job. As a matter of fact, reports of the job that I want to catch up with MGM to in the context of reaching out to customers, understanding game type, cycles, what they like to do, how they like to do, how to personalize it for them, identifying them.

And then we have hosting groups, both at BetMGM and MGM that are tied together. We have -- for example, on site here, we have a Vice President of Marketing, whose principal and only job is to market to and make sure programs are attached to BetMGM and those customers, whether it's sign up when somebody registered at Aria down to making sure their best customers are taking care of, making sure they get tickets for what they may want to have earned or done. And so we're as linked up as one can be at this point in time.

I think we have some work to do on the back-end loyalty to make it completely seamless. But now through tier credits, they have exposure to anything and everything they want and can get. And so again, we lean heavily into iGaming. I feel really good about it, and we'll continue to develop product. And it's a combination of branded product, homemade product and licenses with some of the biggest brands, and generally speaking, doing very well.

Great. And then maybe one other follow-up for Jonathan regarding simplification and capital allocation. Can you remind us after all is said and done with Cosmo and MGP, where is lease adjusted net debt to EBITDA kind of enterprise-wide, and as we look at the U.S. versus China? And how do you think about the right leverage on the business as we think about those capital allocation priorities?

Yes. Thank you for the question. We'll be updating that next year as we get closer to the closure of the MGP transaction. And clearly to kind of provide a -- that metric right now would be to provide guidance into 2022 consolidated EBITDA, and we're not going to do that yet. Regarding the question around leverage for the business, I do think on a lease-adjusted basis, this business can comfortably sustain 4 to 5x leverage, and that's adjusting our lease expense at 8x the rent, which is the convention and observers of the company.

I think given the company's diversification both geographically as well as by business segment that we can sustain that level of leverage. But as we get into next year and closer to the closure of these transactions, we'll update where those measures are.

The next question will be from Robin Farley from UBS.

I wanted to go back to BetMGM for a moment. During the quarter, Bill, I think you mentioned publicly the potential to buy out your joint venture partner. And I guess, how should we think about whether that would be a better outcome for you than having the joint venture with them (inaudible) positive? Or would you essentially use their tech help if you were to buy out the other half of the joint venture?

Thanks, Robin. So look, obviously, a great deal of commentary speculation in editorialization, back and forth over the last 45 days. We would not do a venture without technology. This is a technology-based enterprise at the end of the day, and so that becomes a key point of what to do and how we think about our future. Given the environment that was being described, there was potentially an opportunity to walk away with technology. And so that would have been interesting. We were prepared to do it if, in fact, the other parties could get to the finish line or decide to get to the finish line. There wasn't all of the details worked out, but time to tell whether that ultimately gets to -- well, that was not going anywhere, but time to tell whether we ultimately end up in a different place.

For now, though, again, I just go back to where we were. We were content and happy with our business, how it's progressing. We wouldn't do it without a technology platform to be sure. And right now I'm not anxious to do it. I mean I like where we are to developing business. I like the fact that Entain shares in half of this development cost. It's a progressive and aggressive environment as we know. And so I still like where we are. But I'm not -- we did comment earlier that we want to be bigger. We want to be global. We want to be a lot of things. And time will tell how we ultimately project into that space.

Okay. Great. That's helpful. And if I could ask a follow-up on the margin topic, on the margin of your operations. I think that you might have said last quarter that you thought you would keep about half of the margin improvement kind of when things stabilize. So I may not be remembering that right, but is that -- I don't think I heard you say that today. And so I'm wondering if you're thinking that or lower than that? Or -- what you think about that stabilization?

Yes. That's a fair estimate. It's really -- it's difficult to anticipate right now just given the way in which the business mix will ultimately levels out, but that's not a bad estimate.

So that's kind of similar to what your thought was?

Yes. Our view of the way that our margins evolve has really not changed in the past quarter.

Ladies and gentlemen, this concludes our question-and-answer session. I would like to turn the conference back over to Bill Hornbuckle for any closing remarks.

Thank you, operator, and thank you all again. I know on the East Coast, it's late. Look, obviously, we've had a stellar quarter. Again, I couldn't be prouder of the team. Things are motivated in moving at BetMGM. We've got a lot up in the air, obviously, the announcement of Mirage, which we have told that team about a half hour before this call. We'll try to continue to be as transparent in that process as we can going forward. .

But we're excited by our future. I -- believing Macau will stabilize, I believe we're in a good position there. We have 1 in Osaka, and it's hard to imagine an Osaka does not become one of the 3 designated locations. But again, we will see what happens come middle of next year. And I'm really pleased with the operating environment we've created. COVID has taught us a lot. We have figured out how to do things with less and do them productively. There are still a couple of short places. We need to fill some staff, and open up some operations. But overall, I'm excited by where we are and frankly, excited by our future.

And obviously, we've got a great deal of liquidity and the potential to put that to work for our shareholders like this company hasn't had in a very, very long time. And so I think for all of us, it's pretty exciting news. So again, thank you for your time.

And thank you, sir. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.