美高梅國際酒店集團 (MGM) 2021 Q1 法說會逐字稿

Good afternoon, and welcome to the MGM Resorts International First 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 Jim Freeman, Senior Vice President of Capital Markets and Strategy.

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

Now I would like to turn the call over to Jim Freeman.

Please go ahead.

Good afternoon, and welcome to the MGM Resorts International First Quarter 2021 Earnings Call.

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

On this call, we will 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.

And 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, and I will now turn it over to Bill Hornbuckle.

Thank you, Jim, and thank you all for joining us this afternoon.

We're excited to be speaking to you given the significant progress that we have observed in COVID trends, vaccination, consumer sentiment and state-by-state operating restrictions throughout the quarter.

Since we last spoke in mid-February, our domestic business has improved significantly, and the work we have done has allowed us to maximize the pace of our recovery while positioning us for long-term sustainable growth.

As business trends improved, we remain focused on our long-term vision to be the premier gaming entertainment company in the world.

Our strategy for achieving this vision centers on 4 strategic focus areas.

First, investing in people and planet, providing fun and inspiring experiences for our guests, delivering operational excellence at every level and allocating our capital to drive the highest return for our shareholders.

I thought it might be helpful to provide an update on each of these focus areas before turning to the details of our first quarter performance and our outlook for the rest of the year.

Our people and planet strategy is part of everything this company does.

At the pinnacle of this strategy is the investment in our amazing people, reflecting on the past year to say it has been tough would simply be an understatement.

But throughout the year, our employees have been the one consistent bright spot across the organization.

I am humbled and in awe of their dedication, their hard work and resilience in the face of unprecedented uncertainty.

That is why I'm so passionate about the investment in them.

We got to this because of their consistent commitment to this company and ultimately, our guests.

As we continue to bring employees back across the U.S. to meet heightened levels of demand, we, of course, prioritize their health and safety.

To that end, we've dedicated significant resources to getting our people vaccinated.

We recently opened our on-site vaccination clinics here in Las Vegas as well as our regional properties for not only our employees, but also their families as well as our entertainment and partners who work at our properties.

As the largest private employer in Nevada, these efforts are far reaching in the local community, and I believe we are doing more than our part to help combat the virus with the ultimate goal of getting our city back open 100% by June 1. I'm also proud to share what our team has been able to accomplish to solidify MGM Resorts as a leader in environmental sustainability.

In just a few short months, we will flip the switch on MGM Resorts' Mega Solar Array.

This 100-megawatt solar array at full production will provide up to 90% of total daytime electricity needs for all of our Las Vegas Strip properties, representing over 65 million square feet of buildings.

Our second focus area is all about providing fun and inspiring experiences for our guests.

To date, we have opened 8 shows across our portfolio, adhering to current health and safety restrictions.

We continue to work with our local leaders to safely bring large-scale events back, both in Las Vegas and our regional properties, starting in early summer.

In July, T-Mobile Arena is set to host the McGregor fight -- McGregor UFC Fight and you can't get tickets for this event.

We sold 20,000 tickets in 22 minutes.

This is just one of the many examples of the clear demand for entertainment, and we're excited to see a path to delivering these differentiating offerings to our customers.

It's important to note, however, that we've not just focused on what experiences we provide, we've also focused on how to provide them, delivering the highest quality guest service through a culture of yes is an attribute that remains deeply embedded in our values.

We continue to empower our employees to do what they do best, providing world-class service to all of our guests.

Turning to operational excellence.

We refined our operating model in late 2019, increasing spans of control and simplifying organizational layers to accelerate decision-making, bringing us closer to the guest and ultimately, reducing costs.

Driven in part by these efforts, our first quarter domestic margins grew significantly over the fourth quarter.

And we are confident that these sustained changes will enable us to deliver a full target of $450 million of cost savings when business demands return to 2019 levels.

And finally, we are disciplined allocators of capital, always driven by the goal of creating value for our shareholders.

Our targeted growth opportunities align with our long-term vision.

We, along with our partners, Entain, continue to invest in BetMGM as it grows its leadership position in U.S. sports betting and iGaming.

I hope you all listened in on our Investor Day last week.

We're investing in our digital journey to drive deeper customer loyalty and engagement over time.

And with recent developments in New York, we look forward to working with the legislature on a potential path for a full-scale casino license at Empire City.

With that, I'll now provide some high-level comments on our results and future business outlook and then let Jonathan -- and then Jonathan will discuss the first quarter in more detail.

In Las Vegas and across our regional properties, our initial recovery has been strong.

It's been great to see Las Vegas come alive again to the vibrant destination that we've all come to know and enjoy.

Our gross bookings in March were one of the best months in the company's history, clearly backed by pent-up leisure and casino demand.

And our operating performance naturally followed the broader demand trend lines, and adjusted property EBITDAR was heavily driven by the back half of the quarter.

Booking trends are bound to normalize over time as we continue to fill out the resorts in future periods.

But good news is we've built up a large-enough base to start strategically yielding our business, especially now on the weekends.

As we look ahead, we expect robust leisure demand throughout the spring and summer months with hotel occupancies in the 90% range on the weekends.

Weekdays will increasingly be driven by meetings and conventions, and our group business remains solid in the back half of this year.

With more clarity around Nevada's gathering guidelines, we're actively working to secure more in-the-year, for-the-year business and to partially offset the anticipated levels of wash in attendance per group.

Our differentiated Convene with Confidence program, designed to safely accommodate events large and small, has received great feedback from our clients.

With the larger groups expected to return at scale in '22, our business in '22 and '23 is on pace with pre-COVID levels.

While our high-end international casino business will still depend on travel restrictions, our domestic casino demand, which we've successfully levered through the crisis, remains extremely healthy.

We're also proactively engaging more with our fly-in and 50-plus age demographic, and we've seen increased receptivity to travel from that group.

Our regional properties delivered strong results in the first quarter despite some inclement weather aided by easing state-wide restrictions.

It's been encouraging to see, again, our rated 50-plus and higher-value players begin to return as well with the strength particularly in slots and in March, we did see -- our 50- to 64-age segment was close to that of 2019 levels, and we saw a noticeable improvement in our 65-plus age segment as well.

These trends are also continuing now into April.

I'm especially pleased with our regional team's persistent ability to drive operational efficiencies, resulting in our first quarter regional adjusted property EBITDAR surpassing that of 2019 despite lower revenues.

In fact, our regional EBITDAR and margins this quarter were both all-time first quarter records.

As state-wide restrictions ease further and entertainment alternatives begin to expand consumer options, we will monitor the broader top line environment.

But assuming COVID trends remain stable, we are confident, through our cost discipline efforts and resulting structural margin gains, we can sustain full EBITDA recovery this year.

I'd like to share some thoughts now on Macau.

While market-wide GGR in the first quarter improved sequentially compared to the fourth quarter, Macau's business volumes remain well below pre-COVID levels.

MGM China once again outperformed the market pace of recovery.

Our quarter GGR recovered approximately 40% of pre-pandemic fourth quarter 2019 levels compared to the market's overall recovery of 33%.

It is evident that our strength in premium mass is positioning us well as the market gradually turns the corner.

The rate of Macau's recovery, we believe, will remain heavily dependent on broader sentiment as well as the pace of vaccination rollouts throughout the region, which would ultimately lead to the easing of travel restrictions.

Nucleic acid testing requirements and other bottlenecks currently impact this marketplace.

The opening of the Macau-Hong Kong border is also another important variable in Macau's recovery.

I am, however, confident Macau's longer-term growth prospects and believe our investment will ultimately bear much fruit.

We expect construction of the additional suites in the South Tower of MGM Cotai to be complete in the third quarter of this year.

We are also remodeling our MGM Macau villas and the gaming space on Level 35.

And at both properties, we are adding food and beverage options focusing on our gaming floors.

We're also organizing theme property attractions to drive visitation.

And over time, we have the ability to build out another hotel tower at MGM Cotai, along with meaningful entertainment assets, to help diversify our overall offerings in the destination.

And finally, last week, at the Investor Day, BetMGM executive team provided extensive color on its business, and we are incredibly excited about its trajectory in the sports betting and iGaming markets.

Today, we see this space as a 3-horse race where BetMGM offers unique and unparalleled online and off-line experiences.

Given the positive momentum to date, that MGM now expects its revenues from operations to reach over $1 billion in 2022.

It also is now targeting its long-term U.S. market share to be between 20% and 25% range and long-term EBITDA margins in the 30% to 35% range.

One of BetMGM's key competitive advantages is its ability to lever MGM's destinations, our broad-based offerings and our M life loyalty program as efficient and affect customer acquisition and retention tools.

MGM also benefited from its relationship not only our new customers being introduced to M life, but through BetMGM, we're also reigniting relationships with customers that had gone dormant.

In the first quarter, 10% of BetMGM's new players came from MGM, and 44% of the new M Life sign-ups have come from BetMGM.

Putting this together, we see significant value in this opportunity over time, and that's why both partners remain committed to ensuing and ensuring BetMGM's leadership in this space.

With that, I'll turn it over to Jonathan to discuss our first quarter in more detail.

Jonathan?

Thanks a lot, Bill.

Let's first discuss the first quarter results.

Our consolidated first quarter 2021 revenues were $1.6 billion, better than our fourth quarter's $1.5 billion, and our net loss attributable to MGM Resorts was $332 million.

Our first quarter adjusted EBITDAR improved sequentially to $218 million, heavily driven by our domestic operations.

Our Las Vegas Strip net revenues in the first quarter were $545 million, a 14% increase from the fourth quarter.

Adjusted property EBITDAR was $108 million, double that of the fourth quarter, and our margins sequentially improved 860 basis points to 20%, driven by the significant pickup in leisure and casino demand, coupled with cost control and the operating leverage inherent in our business.

Hold had a fairly insignificant impact this quarter.

Our first quarter Strip occupancy was 46% compared to 38% in the fourth quarter.

With each month improving through the quarter, we exited the first quarter with March occupancy at 62%.

Weekends were at 85% and week days were at 52% due to the lack of group business midweek.

Occupancy has continued to grow in April.

Our Las Vegas Strip occupancy through last weekend was approximately 73%.

Our first quarter regional net revenues increased 19% sequentially to $711 million from the fourth quarter.

Adjusted property EBITDAR increased 53% over the fourth quarter as well to $242 million.

Our first quarter regional margins grew sequentially by of 738 basis points to about 34%.

Our domestic margin growth is a testament to all of the great work that our teams have put into maximizing the effectiveness of our operating model and rethink how we run our business.

This ranges from marketing reinvestment to procurement, from energy utilization to labor management.

And the breadth of our efforts gives me confidence that we'll deliver on the $450 million of domestic cost savings which we previously identified.

Our sports betting and iGaming venture, BetMGM, raises the bar every quarter.

BetMGM delivered strong results in the first quarter, driven by market share gains in existing markets as well as successful entries into new ones, including Iowa, Michigan and Virginia.

In February, BetMGM's market share was 22% in its active markets.

It is the clear #1 U.S. iGaming operator.

Its leadership in New Jersey strengthened last month as BetMGM had its best iGaming month ever in the Garden State with over 30% market share.

It has also solidified its position as a top 3 operator in U.S. online sports betting.

We estimate, based on February results, that BetMGM has overtaken the #2 position in overall U.S. sports betting and iGaming.

This growth led to $163 million of net revenues associated with BetMGM operations in the first quarter.

These are remarkable results considering the $178 million of net revenues from operations it delivered in all of 2020.

Given the strong momentum in the early stage of development in a number of their key markets, we expect BetMGM to require $450 million of capital this year, half of which would be funded by MGM Resorts.

In the first quarter, our share of BetMGM's losses amounted to $59 million, which is reported as part of the unconsolidated affiliates line of our adjusted EBITDAR calculation.

MGM China's first quarter revenues were $296 million, down 3% sequentially from the fourth quarter.

Adjusted property EBITDAR of $5 million was also down sequentially from $41 million in the fourth quarter.

Much of this decline was driven by the $23 million bonus accrual reversal last quarter, a benefit to earnings, which we discussed during our call back in February.

In addition, our first quarter mass table games hold was lower than that of the fourth quarter, which had a negative impact on our margins.

Still, due to the largely exogenous reasons Bill described earlier in the call, the demand environment remains challenging in Macau.

Our first quarter corporate expense, excluding share-based compensation, was $67 million, a 26% decrease year-over-year and a 14% decrease sequentially from the fourth quarter.

Now we expect that our quarterly net corporate expense will run higher going forward as our business volumes continue to improve and we ramp our investments in IT, our digital offerings and our IR efforts in Japan.

I'll conclude with a few thoughts on liquidity and capital allocation.

Throughout the last year, our liquidity position served as a stable foundation from which to navigate the crisis.

March was a bit of an inflection point for our company as our domestic operations were roughly cash flow neutral during the month.

Now with an improving backdrop in our core domestic business and a solid path to sustain positive free cash flow, we have progressively begun to shift our posture from capital preservation to capital allocation.

This quarter, we resumed our program of capital returns to shareholders.

In the first quarter, MGM repurchased 3.15 million shares for $119 million and we've purchased an additional 1.41 million shares for $55 million in the second quarter through yesterday.

We will take a disciplined and programmatic approach to share purchases for the balance of the year.

Bill described our vision to be the world's premier gaming and entertainment company.

And we allocate capital and further into that vision in ways that are remunerative to shareholders.

This quarter, we caused MGP to redeem 37.1 million of our MGP OP units for aggregate cash proceeds of approximately $1.2 billion, thus, reducing our ownership stake in MGP to 42% and releasing capital for growth investments or return to shareholders.

Our long-term approach to allocating our capital will be as follows: First, we'll maintain a strong balance sheet with adequate liquidity.

We did this in 2020, and it served our shareholders well.

Second, we'll return cash to shareholders, which we've already begun to do in the first quarter and this quarter through share repurchases.

And third, when assessing potential growth opportunities, we'll invest where we have clear advantages and we'll exercise prudence in measuring prospective returns for our shareholders.

To close, I see meaningful upside in our current equity value as we innovate and pursue accretive investments over time.

BetMGM is one element of this, but there are others.

We will build the value of our brands, improve the quality of our customer interactions and invest in more sophisticated marketing interventions, all toward creating a more valuable offering for our guests, which will translate into market growth for MGM.

Much of this customer value will be delivered digitally and in so doing, will require new pools of talent for the company and investment in technologies.

These are resourced in our current plan, and I look forward to sharing details with you on future calls regarding the payoffs from these investments.

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

Thanks, Jonathan.

Obviously, we're very pleased with the improving operating environment domestically and remain diligent in aggressively managing our operating model and our cost structure.

I'm optimistic about the long-term recovery of all of our markets, and I believe that MGM Resorts is well positioned to then gain share.

I'm also excited about BetMGM's positioning in the rapidly growing U.S. sports betting and iGaming market.

And as Jonathan mentioned, we remain laser-focused on pursuing other -- our long-term vision.

I'd like to end my comments where we started by acknowledging and thanking our employees across the world for the continued dedication to this company and they're enduring efforts to provide the best experience for our guests.

Our people are simply the best, and to them, I say thank you.

With that, I'll open this up for questioning.

(Operator Instructions) And the first question will come from Joe Greff with JPMorgan.

What a difference a year makes is an understatement there.

It's good to hear about the group business in Las Vegas, Bill, and your positive comments on '22 and '23 as well as the second half of the year, and 73% occupancy in April.

Hotel companies would kill for that level of occupancy in most urban markets in the U.S. So where I'm going with these comments, Bill, is can you give us a sense of what your expectations are for airline capacity serving the Las Vegas Strip out of McCarran starting in September.

Do you get a sense that you can be 90% of pre-pandemic seat capacity?

And do you think you get back to 100% starting early next year?

Joe, I'll turn this over to Corey, who studies it intimately with the commercial team, but the answer is yes.

But Corey what's going on?

So Joe, let me give you some stats on where we think we'll be in June and July and then obviously, hopefully, it keeps building.

June, we think we'll be at 93% of capacity; in July, 99% of capacity.

And that's with very little, if any, international travel.

So yes, we expect, at least the airlift, to be pretty close to what it was in prior years.

Great.

And you mentioned earlier, I think it was Bill, your comments about, I guess, maybe this is more for the Strip, but maybe extended to the whole domestic portfolio that the EBITDAR generation in the first quarter was heavily weighted to the second half of the quarter, obviously, given the strength in March.

Can you put a little bit more detail on that in terms of as you exited the quarter, what's sort of the monthly EBITDAR run rate coming out of the Las Vegas Strip, coming out of your U.S. regional portfolio?

Yes.

Joe, it's Jonathan.

We're not going to provide EBITDAR numbers month by month, but it is certainly true that the business accelerated starting around mid-February, particularly in Las Vegas.

I mean just when thinking about the margins, when you consider where we were in January where we had a couple of our big businesses here in Las Vegas closed during the midweek, we changed those practices right at the beginning of March with demand growing.

And so really when -- in Las Vegas, when we had that level of demand against those fixed costs and then even started being able to yield the rooms in Las Vegas, it really had a pretty dramatic impact on the company's earnings generation.

In the regional markets, the change through the quarter was not as pronounced, but we did see relaxing operating restrictions in many of those markets as we got into March as well as just overall aggregate demand.

So we did want to -- as it relates to the occupancy numbers coming out of March, we exited a lot higher than we started March, and that's continued through April.

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

Just a couple of follow-up questions on the Vegas recovery.

Great that you're running at 73% occupancy month-to-date.

Any visibility on when you think you can get back to that kind of low 90s percentage rate?

And then just thinking about the ramp-up of entertainment and conferences.

How do you think that's going to come back online?

I hear your comments that you probably won't be fully back until 2022, 2023.

But is there a way to think about, like, at what levels you are versus historical levels in the next few quarters?

Yes.

Joe, again, I'll kick this off and turn it over to Corey.

I mean the good news for us is come May 1, the county is going to relinquish here in Las Vegas the requirements so that people now can be 3 feet apart and no masks and that we can go to 80% occupancy.

So it unleashes restaurants.

Most importantly, one of our biggest restrictions has been the pools.

At Mandalay, we had restricted occupancy late March through spring break and into April because of the 6-foot requirement, the mask requirement.

But come Saturday, that basically in those environments goes away.

We've got to monitor the 3 feet.

But all things being equal, that opens it up dramatically.

And then come June 1, all things being equal, and we can demonstrate that the county has gotten 60% of its people vaccinated, all of the restrictions go away.

And so when you talk about and you hear about the things we talked about the entertainment, the pent-up demand has been incredible.

We had a Dave Chappelle show go on sale on Monday.

It sold out in 1 day.

You heard my UFC story.

We had a DJ for next year, a baby bunny or whatever that is -- Bad Bunny -- there's so much I know about baby bunny, but Bad Bunny, 45,000 people waiting in queue to buy tickets.

And so the point is I think come June and July 1 and beyond, this year, irrespective of group activity, which will be strong, is going to be a push to accommodate, if you will.

Related to next year, maybe Corey can speak a little bit more about the groups.

So Thomas, I think your question was when do we get to low 90s.

And I think it will be dependent on a normal consistent group business coming back.

We'll start seeing things in the third quarter here with World of Concrete, which we all know -- we know is going to come in a little lower.

It is their high season.

It's right in the middle of their busy season, and they'll be back in January.

So we expect that to be a pretty good conference.

The back half of the year, we have some pretty decent-sized groups at Mandalay Bay.

And the current understanding is some groups are coming in a little lower than normal and some may be coming a little higher.

But until we have some normalcy there, I think we'll have a challenge of hitting that 90%.

I think the encouraging news, CES just announced they'll be back in January.

Hopefully, they come at full scale.

And with any luck, if people get more comfortable with the meeting, business and the social distancing gets relaxed, I think there's a chance -- a slight chance early 2022 we could start seeing 90% occupancies.

Where if you were had asked us last quarter -- you did ask this last quarter, we said the back half of the year.

I think we're changing that feeling, it's the first half of the year.

The only real exception to that based on everything we said might be international business, and that's obviously for us, integral and important.

But that aside, we feel pretty optimistic about coming back to the first half of the year.

And then just a follow-up.

There's a lot of macro discussions around labor shortages leading to wage pressures and inability to operate because of lack of people.

Are you feeling that?

Well, I would say this, and Corey is the operator, but I can't help myself, I used to be.

The first 3 weeks that this thing really took off in the middle of March, we got caught off guard.

If you asked us today, we probably have 1,300 openings.

If you asked us in the middle of '19, how many openings we have in any given moment, it's about 1,300, 1,400.

And so it's just the velocity of how quickly it came back.

I think over the next 60 days, our teams have done a great job in responding.

And I think you'll see us come back to the place where particularly service levels are where they want and need to be because we'll be able to step up.

There's a couple of holes.

Yes, I would agree, Thomas.

It's a national shortage.

We're well aware of it.

We have instituted some things on the hiring front to help alleviate some of that pressure.

As Bill mentioned, we're hoping in the next 60 days, we catch up back in that staffing area.

But in general, we're able to operate at levels that we're comfortable with.

But yes, there's a little bit of burden right now.

And the next question is from Shaun Kelley of Bank of America.

I wanted to turn the attention to kind of flow-through in the quarter.

If we just look at some of the sequential progress, I mean if I measured it right, it looked like over 80% flow-through sequentially in Las Vegas.

And the number in regionals was, I think, a little over 70%, which is pretty astounding given the gaming tax component.

So I was just sort of wondering, overall, what's kind of driving those levels of flow-through?

And how sustainable is that?

Obviously, I think, Corey, you just mentioned some possible catch-up in expense rates a little bit, depending upon maybe the timing of this, but also just how do you factor in non-gaming coming back and some of that?

So just help us kind of think through that progression as we move through the year a little bit.

Shaun, it's Jonathan.

And I think it's a very good question.

It's one we've been studying quite a lot.

We are right now operating these businesses with demand in the past 30, 45 days, particularly in Las Vegas, primarily against gaming and hotel revenue streams and cost structures.

What -- the parts of the business, which -- where the capacity has not yet grown like it has in the hotel and the casino floor is in some of the profitable but lower-margin businesses, food and beverage, particularly things like entertainment and even some of the services that are really important and can be margin-impacting like valet parking and the like.

So we're going to see those costs come back.

They will be -- we expect them to be EBITDA-accretive but potentially margin dilutive.

But it's important because they add to the full suite of offerings that we provide.

So the flow-through really has been strong because in some ways, these businesses in Las Vegas have been presenting the kind of -- almost the kind of revenue profile that many of our regional businesses did.

So I think that there is a -- I'm firmly of the belief that these businesses can, over the long term, both the regional and the Las Vegas businesses, deliver EBITDA margins over 30%.

We had regional businesses in the first quarter that delivered margins everywhere from 25% to 50% for the quarter.

So we certainly intend on securing the gains that we've made in the cost structure, but there will be some give back as we add to the full level of amenities that we can provide.

Great.

Very clear.

And then my follow-up would just be on, really, a follow-up to the last question.

As you're thinking about the occupancy recovery, we're seeing some of the -- I think you mentioned a little bit about yield on -- particularly on the weekends and your ability to yield up a little bit.

Maybe just talk about how you're thinking about hotel rates.

And I mean is there the opportunity to do meaningfully better than pre-COVID levels on hotel rates possibly as soon as the second quarter here?

Just kind of how is that rate trajectory, at least at peak periods or kind of on weekends, trending?

Shaun, it's Corey.

So the second quarter will be a little challenging because we put a lot of rooms on the books to build that base.

Really probably the first month that we'll probably see -- or where we're seeing rates higher than they were pre-COVID were -- is August of 2019 compared to now.

And really, the fourth quarter, we expect to see our rates up slightly, not significantly from the 2019 levels.

Just to give you some flavor, right now, the weekend pricing compared to last year, it's up over $10 to $15.

Now don't take that and multiply it by all of our rooms because we have that base to yield up, and the demands there, we're getting it on the incremental rooms.

It's really the midweek that's the challenge on pricing.

And that will stay challenged until the convention business comes back.

And the next question will be from Carlo Santarelli with Deutsche Bank.

Bill, you talked a little bit about, obviously, the 2019 levels, and you mentioned kind of some of that international high end driving that.

If I'm not mistaken, in 2019, that business was down fairly significantly and obviously, hampered the 2019 year.

But as you look ahead, when comparing to 2019, if you factor in kind of the lower base of international in '19 and obviously, the cost cuts, both would seemingly be kind of upside to your Strip '19 numbers in '22 to the extent, obviously, the international high end returns and obviously, the cost cuts that would be allocated to Vegas.

Is there anything in that line of thinking that you would say is maybe incorrect?

No.

Look, I think on the former, the cost cuts, we're every bit confident based on what we know today, and we know a whole lot more than when we started this, that the $450 million is going to hold, and we feel really, really good about that.

We think this operating structure we put around that work is working and, frankly, working better than it was.

And so we feel really good about that.

The other -- the international problem part of it was about simply getting liquidity out of the market and getting it here back to Las Vegas.

Part of it was the market itself, and it was falling off slightly, particularly the China-based business.

That will depend more on Macau than anything else and how it recovers, how we reestablish our pipeline there.

It's going to be interesting what happens in '22.

Genting will come into the market, but Sands will presumably get out of the market, at least with the direct connectivity to Macau and Singapore.

And so there's a new competitor and potentially somebody falling out over time.

It's probably a net neutral.

It just really gets down to liquidity and the ability of tourists from China and gamers from China getting cash out and into Macau and potentially here to Las Vegas.

And so I think you're thinking about it the right way, though.

We got pretty beaten up in '19 there.

Right.

Great.

And then Jonathan or Bill, whoever wants to handle this one.

As you guys sit here today with obviously $4.9 billion of cash on the domestic or operating balance sheet for MGM, you obviously bought back some stock in the 1Q, you bought back a little bit more here in the 2Q.

Do you see that kind of being core to the story as it was in kind of '19 and prior to the pandemic when you guys were buying back $350 million, $400 million a quarter on average?

Or is this more of a programmatic kind of do it for now and see as options arise, be it in New York, be it in Japan or wherever it may be, spend money in Macau with that -- the expansion that you guys mentioned?

I do see it as being core to the story.

The company had embarked on, I think, a well-thought-out program that was then truncated, in many ways, by the pandemic.

And it was certainly a good thing, as I mentioned in my prepared remarks, that the company had liquidity it did during 2020.

But really having seen the results that we're seeing and our confidence in the remainder of the year, I certainly think it's high time to return to that.

Now we're not going to commit to any specific magnitude.

It kind of depends on how things proceed during the course of the year, but I certainly believe our shares are attractively valued and that return of our capital to shareholders is going to be an important and ongoing part of our capital allocation program.

Carlos, my only comment was the -- I think you said $4.9 billion liquidity.

I think that number is far on to that one.

Sorry, no, I was not referring to the cash.

Okay.

Okay.

And the next question is from Chad Beynon with Macquarie.

Wanted to focus on the regional markets.

Some companies have talked about the strength in unrated play, which has helped volumes and margins, which you talked about, Jonathan.

Can you guys elaborate a little bit more just in terms of what you're seeing from the unrated players coming to the properties, if you think that's sustainable?

And if you've been able to convert some of them over to your M life program?

Chad, it's Corey.

Our unrated player saw a big jump in March compared to February.

We're up over 30% in the regional markets.

Is that sustainable?

I think it's going to continue to grow as revenue grows.

As the total revenue base grows, as restrictions relaxed, I think the unrated component will stay.

The key to your point, is converting them into people that we know.

We have not really spent enough time on that to understand how much of that is converting right now.

But our goal is to put programs in place where we do convert them into MGM M life members and even BetMGM members.

And then with respect to Macau, can you just give us an update on sort of how your team is thinking about the current restrictions.

Obviously, we have May Golden Week coming up.

I don't think the market is ready for a big inflow of people, but when you expect for more visitation to be permitted and how you think this could kind of ramp throughout the year?

Yes.

Chad, I'll turn this over to, Hubert, but I think he's got some good news on the May weekend.

So go ahead, Hubert.

Okay.

Thanks, Chad.

So the May Golden Week demand is actually pretty strong.

We anticipate the hotel to reach almost full occupancy.

So similar to what we saw 2 years ago in 2019 for the upcoming Golden Week in early May.

Exceeding -- actually our booking is pacing faster than what we saw during Chinese New Year this year and October Golden Week or less than New Year at the end of the year last year.

And also very important to point out that the demand from high-end customers remain pretty strong, from premium mass to in-house VIP.

So actually, a lot of our suite products and villas are already overbooked.

So I think looking forward -- we saw this momentum actually started in March, the market gradually pick up.

And I think that in the coming months, in the balance of the year, I think the vaccine rates, as we talked about in Bill's prepared remarks, vaccine rates roll out is important and also Hong Kong's reopening with Macau and also the e-visa application process, resumption of that process in China for the visa are going to be the triggers for further recovery.

The next question will be from David Katz of Jefferies.

(Operator Instructions) We'll move on to our next question, and that's from John DeCree with Union Gaming.

Bill, maybe 2 together, you've talked about Japan and Downstate New York in Yonkers as kind of focus growth initiatives and a little bit cloudy, I guess, as we look at the media reports and how those 2 opportunities are progressing.

Could you give us perhaps a better insight than anyone on progress in Japan and kind of the expected time line as well as your thoughts on how New York might play out at this point?

Sure.

I'll start with Japan.

Not much has really changed since the last quarter.

There is still a deadline in July.

I think it's 20th of this year for an RFP.

It's our company's intent to do that.

They had opened it up.

We have been able to work with Japan and the city of Osaka of note on some of the criteria, given COVID, given the requirements.

And frankly, we're able to enhance them and improve them to the point of they reopened it back up for about 3 weeks.

There were no new participants.

And so we stand as the lone entrant in that process starting in July.

Believe it will be then determined by the national government in June in the following year, where the 3 locations will be anointed and that's to be determined, obviously, at that -- when it happens.

You all know that Japan, the last couple of weeks, are back into lockdown.

So it's tenuous in some respects, but we are still very focused on it.

We intend to hopefully apply in July, if, in fact, that happens.

New York is obviously more immediate.

Nothing is simple, particularly, there in the context of understanding what was done.

As of now, we have until June 10 until the legislature closes.

We were hoping to keep it in the governor's budget.

It didn't make it.

But we have a good reason to believe -- I was literally there on Monday with some of our team talking to legislators at -- all about the process.

And we hope to get from an RFI to ultimately an RFP process that would happen later this year.

We remain optimistic.

We like, obviously, our position there.

Too early to tell exactly what we might do.

It would depend on if there are 2 or 3 entrants; ultimately, what the tax would be, et cetera, et cetera.

But both of those remain on our radar, and we're zeroed in on around those time frames.

The next question, we'll move back to David Katz with Jefferies.

I wanted to discuss MGP and the stake there, which it has continued to generate some proceeds and move lower.

If we could just talk about what the prospective outcomes or alternatives could be and what the sort of gating factors around those would be to that moving lower from here?

Sure, David.

It's been a process that the company has taken over time, over now a period of a few years.

There's no particular gating items, just that we'll look to monetize that stake potentially over time when we think that the opportunity is right for us to do so.

So it's balancing the yield that we have from that investment with MGP with other uses that we have for that capital.

One other consideration that, of course, we think about is the clarity of the story and the investment thesis behind MGM Resorts.

And our shareholders investing in MGP through MGM Resorts and ought they to be better served by being able to invest in MGP directly.

So I think it's a process, one that we advanced further during the first quarter.

But as it relates to where we go from here, I'm not going to really speculate on the magnitude or the timing.

Understood.

And if I can follow that up, obviously, there -- as you said, there's a lot of issues.

But is it fair to take away that the tax implications aren't, in and of themselves, a gating factor in -- a relevant, but not gating factor?

Yes.

Yes, they're certainly relevant.

They're not a gating factor.

The next question is from Barry Jonas with Truist Securities.

I guess the first would be, to what extent, if any, do you think stimulus checks weighed in on the quarter?

Yes.

Look, I think it's definitely had a benefit in the regional performance.

I think there's also things with, like, no entertainment options, really.

Also, there's quite a bit of savings on the sidelines.

So I think to sit there and be able to carve out exactly what each of those have, it would be difficult.

Yes.

This is Jonathan.

I was also going to add, it's -- stimulus checks aside, it's -- I think it's undeniable that sentiment has just improved dramatically as well as some real changes in operating restrictions in our business, together with what we think are just a fantastic product and service that we're offering with our teams.

So it's certainly a combination of events that we think has led to this demand improvement.

Great.

And then just as a follow-up, beyond New York, are there any other land-based development opportunities in the U.S. you'd be interested in pursuing?

There's Chicago, potentially Texas, Georgia or anything else?

Look, Barry, I would say this.

Texas is, of course, of interest.

Presumably, you know it didn't get through the legislative session.

So at the very least, a discussion is 2 years away.

But as it was defined there, the 4 big cities, 1 of them would be something potentially down the road we're interested in.

Florida is complicated, as you know, and we are watching that closely.

Obviously, the governor just made a deal with the tribe.

And so we'll see how that pans out, both in the context of land based as well as sports betting.

Georgia is probably not in the immediate horizon.

Obviously, we spent a great deal of time and energy there.

We know the marketplace well.

It have to be under the right circumstance.

And Chicago is just complicated.

The history there in Chicago, the tax and the notion of integrated resort at scale don't necessarily marry up.

And while I think they've had some improvement, we're not overly keen or focused at this point in time there.

The next question is from Robin Farley with UBS.

I wanted to ask about in the regional area, the cost saves.

And you mentioned some lower-margin things may come back.

But just looking at the high margins on the business that you do have, how much of that is labor efficiency that has nothing to do with, like, competitive issues that you can hold on to?

And how much of it is the fact that you didn't have to do certain promotions or competitive things, maybe trying to get that incremental top line from a property nearby.

Can you kind of help us think about how much of it might be -- of that improvement would be sustain -- kind of more in your control, I guess, versus competitive?

Robin, it's Jonathan.

The labor costs, we expect to be largely sustainable.

I mean there are a couple of circumstances in our regional properties where we've been -- aside from what I mentioned earlier about adding some additional capacity to restaurants, for example, which operate at lower margins than the other revenue centers, there's a couple of circumstances in our businesses where we're under our intended complement of employees, but those are -- there are relatively few of those.

So we put a couple of pages in the presentation up on the website today recapping the cost program.

And much of those operations' streamlining have already been realized in the regions, and we're confident we can sustain them.

It is certainly true that our reinvestment is lower than it was pre-pandemic in the regional markets.

That would -- to the tune of probably -- well, actually, I'm not going to offer a specific on that, just to say that those changes, I think, are also sustainable and that they really haven't been driven as much by competitive issues rather than our own practice of test and control and always improving on the effectiveness of our marketing reinvestment.

Of the 13 kind of percentage points of margin improvement, how much of that would you say is that that labor savings that you -- I know there's the slide that lays out the aggregate dollar amount across the company of cost saves, but just in the regional of those 13 points, which you could say that is...

Yes.

I would say roughly, compared to kind of pre-2019 levels, probably about 300 basis points or so, 300 to 400 basis points of savings.

Okay.

Great.

And then just as a follow-up on a different topic with Macau.

And I'm just looking at the market share, a sequential change from Q4 to Q1.

And I know you mentioned the math holds was lower than you expected.

And of course, there's a new competitor in Q1 as well.

Is there anything else we should -- any other dynamics that we should be thinking about looking at that -- the market share shift sequentially?

No.

I might offer up -- we are -- and the reason we have gained share, given the nature of the company, what we've done historically in Asia with branch offices and environments, we're ideally suited to have our own customer database and our own programs.

And so it's benefiting us.

As the mass market returns, obviously that will go down.

But as the market continues to shift away from junket and ultimately into premium mass, we think we're well positioned.

I don't know, Hubert, if you have anything to add.

Yes.

I think that -- Robin, I can always count on you for 1 question on Macau then.

Last quarter, you did the same.

But I think that the -- if you look at our market share, our market share up October last year.

Overall, we averaged about 12%.

And that's quite an increase from what we were back in 2019.

And yes, first quarter, there was a little decline.

I think that that is anticipated, particularly as more base mass are coming into the market that's what we'll see.

But I think that our focus is on high-end premium mass.

So in the second half of this year, we will introduce more suite products.

Actually, these are very high-end suite products in our portfolio.

So I think that we'll regain some of the market share back that we saw a decline in Q1.

And our final question will come from Stephen Grambling with Goldman Sachs.

This is somewhat of a high-level question.

But I think pre-pandemic, there was some talk of shifting from the MGM 2020 cost-outs to investing in digital to boost loyalty and improve the efficiency of revenues.

And I see in the deck, I think you've highlighted investments in the digital to improve loyalty.

Can you just help us think about what that ultimately looks like as we try to think about that as an opportunity going forward?

Yes, Stephen, Bill.

We have spent a great deal of time trying to study what moves the needle and what doesn't.

And we have identified, we think, some opportunity with high-end retail business, not necessarily garment business, but high-end retail business, non-gaming; some regional movement from regional players to Las Vegas to take better opportunity of the players we already have; some activity around BetMGM and making sure we secure those players and some other ideas there.

And it is around -- part of it is around the digital transformation.

Part of it is around getting some of our tech dev resolved so that we have an environment that's ripe and ready to do those kinds of things.

And so we're going to lean in with teams.

We're going to lean in with investment over the next 3 or 4 years.

We obviously, during the pandemic, put the vast majority of that on stand down.

We went like hell, as you know, to get some of the things completed because of the pandemic, mobile check-in and some of the other digital opportunities.

But now it's going to be really about what's the customer experience, what's the focus on the high end, how do we drive more share, how do we drive more wallet and things of that nature.

And we're going to lean into that side of the business to help us do those things.

And perhaps a related follow-up.

On the rated play in the regional markets, are there changes in the competitive promotions you see where even if it may not be permanent promotion cuts, the cuts may be so significant or drastic, they just can't be turned right back on.

In other words, do you sense your peers may have structurally altered the promotional intensity as well.

I think it depends on the market.

I think Atlantic City, those numbers are published.

You can see they're fairly consistent.

Some actually turned up their promotions at the beginning of the pandemic.

The other markets, I think, you see more rational-type performance.

And just listening to our competitors, it seems like that is the way they're going to run their business.

So I think some of it is definitely sustainable market by market as you pick it up.

Ladies and gentlemen, this concludes our question-and-answer session.

I would like to turn the conference over to Bill Hornbuckle for any closing remarks.

Thank you, operator.

Just a couple of thoughts as we leave the call, and thank you all for your attendance today.

Look, obviously, you can sense we have a great deal of optimism for where we are and where we're going.

There's been huge pent-up demand, and we see it.

We see it here with activity around major events.

And so we're very excited about the summer and fall.

I think you heard us say -- I hope you heard us say, we think the regionals return to '19 levels by end of the year.

And I hope you heard us say come the first half versus the second half, save international, we think we're going to be back to '19 levels here in Las Vegas.

BetMGM continues to amaze.

We're very excited by where we are.

Great kudos to that team.

$1 billion of NGR in 2022 is compelling if you think about where we were about 6 months ago.

And Macau, we still have and continue to have long-term aspirations and hopes for the market returning this year.

We see seeds of it now in the May holiday.

And so we're excited by that.

And then ultimately, I think we've got enough maturity now around our 2020 plan and business that the $450 million we committed to is very real.

And we're going to deliver on that.

And so we're excited by where we are.

We're excited by taking, as Jonathan put it earlier, we had a conservative approach to capital allocation and now going out and thinking about the true growth of the company and the kinds of places to do it, whether it's in Asia or digital or some other place, know that we're excited by that, and we're excited by raising the bar here and across the portfolio in terms of service and the service deliverable.

We want and will do a much better job on that.

So thank you for your attendance.

I hope you all have a great evening.

And thank you, sir.

The conference has now concluded.

Thank you for attending today's presentation.

You may now disconnect.