美高梅國際酒店集團 (MGM) 2020 Q2 法說會逐字稿

Good afternoon and welcome to the MGM Resorts International Second Quarter 2020 Earnings Conference Call.

Joining the call from the company today are Bill Hornbuckle, Chief Executive Officer and President; Corey Sanders, Treasurer and Chief Financial Officer; Hubert Wang, President of Hospitality and CFO of MGM China Holdings Limited; and Jim Freeman, SVP of Capital Markets and Strategy.

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

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

Sir?

Thank you.

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 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.

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

You can find the reconciliations to the GAAP financial measures in our press release and investor presentation, which are available on our website.

Finally, the presentation is being recorded.

And I'll now turn it over to Bill Hornbuckle.

Thanks, Jim.

Thank you all for joining us today.

I hope you and your families are safe and well.

On the heels of our announcement yesterday, I am pleased and honored to be addressing you as the CEO and President of MGM Resorts.

I'd particularly like to thank, Paul Salem, our Chairman and the entire Board of Directors for placing their confidence in me and in our entire management team.

This is a vote for them -- for not only them but also myself.

They have stepped up during an incredibly challenging time.

Our ability to reopen, remain operational and provide world-class experiences is a tribute to our dedicated workforce, an engaged and supportive Board of Directors, civic leaders across the nation and a sincere commitment to health and safety by all of us in MGM Resorts and the broader gaming industry.

While we are proud of the role we play in helping to restore economic stability to the people and communities that depend on us, we know the public health crisis is far from over.

Therefore, we continue to evolve our 7-point safety plan and our overall response to varying infection rates, including mandating masks at all of our domestic properties and continuing to manage hotel occupancies and facility capacity.

We are committed to learning from each new opening and from each new operational challenge we face.

We are focused on implementing both our MGM 2020 Plan as we -- as our revised operating model, and remain diligent in effecting and managing costs.

We are proactively engaged with local governments, regulators and public health experts, acting as an informed and sought-after voice in conversations about public health and safety trends, restrictions and protocols as they continue to change and evolve.

And we remain focused on ensuring we maintain our strong balance sheet and an operating strategy designed to maximize cash flow despite these very difficult times.

Necessarily, our focus is on operating with diligence and restoring stability in the short term.

But for many of the reasons I just noted, and more detail we'll get into in a moment, I accepted the role as CEO believing our long-term outlook remains positive and that our future is strong.

Our strategy remains unchanged with a disciplined focus on operations and execution of targeted growth opportunities.

With that, let's talk about the quarter and the state of the business.

In the second quarter, we opened 9 domestic properties, and we have subsequently reopened 5 more.

Today, we have a total of 14 properties from our 18 if you count Vdara to start -- at the start of the pandemic.

Domestic properties that opened in the second quarter generated positive EBITDAR faster than expected, and we saw significant growth in our domestic margins driven by optimizing our business to serve higher-quality customers given the pent-up demand, primarily in our casino market side, leveraging our MGM 2020 Plan and operating model work to manage costs and discipline, and we remain selective in keeping lower margin amenities closed.

In Las Vegas, revenues at reopened properties declined 50% year-over-year.

Adjusted property EBITDAR declined 44%.

And our margins increased roughly 450 basis points over the same period.

Despite the lack of conventions, shows, concerts and sporting events, we leveraged our M life database to drive better-than-expected demand in quality casino customers.

We also had a higher-than-normal Table Games Hold, which positively impacted our strip adjusted property EBITDAR by approximately $8 million in the quarter.

Transient and wholesale leisure business also performed better-than-expected as we entered the summer pool season, and as expected, driving traffic levels are recovering faster than fly-in.

Looking at the regional operations.

Second quarter revenues at reopened properties declined 31% year-over-year, and during that period they were open.

Adjusted property EBITDA was down 14%, but margins increased approximately 880 basis points during that same period.

Our regional operations include larger integrated resort properties like those in Las Vegas, which rely on air travel and lodges, like Beau Rivage and Borgata, and to drive markets which are naturally performing better.

During the period they were open, our drive-to regional markets grew EBITDAR by 18%, with margin improvement by over 1,400 basis points.

We've been encouraged by the dedication of our teams to create high-quality experiences for our guests that they can enjoy and believe in messaging -- that our messaging is resonating well in all of our marketplaces.

We are diligently focused on managing costs, while continuing to do everything necessary to ensure the health and well-being of our guests and our employees.

During closures, we reduced 85% of our operating expenses.

And as we reopen, we are managing variable labor to closely match demand.

We also identified certain expenses and amenities that we believe we can eliminate as they are not essential to guest satisfaction or demand.

And as such, we believe we can reduce our overall domestic operating and corporate costs by approximately $450 million compared with the 2019 levels.

These savings are a combination of: one, MGM's 2020 initiatives that were put in place at the end of 2019, and as you heard and remember, yielded tangible results in January and February before the nationwide shutdown; as well, new initiatives that were adopted in a post-COVID world as part of our revised operating model.

Therefore, we believe when demand returns, we'll be a much stronger company.

In the near term, some of these cost savings will be partially offset by approximately $100 million of annual health and safety expenses for a period of time.

Further, as we mentioned last quarter, we remain disciplined on capital spend and have deferred or permanently reduced our domestic CapEx by 50% this year to approximately $200 million.

Liquidity is of utmost importance, especially in current times, and we continue to step -- take steps to further bolster our already strong liquidity position.

During the second quarter, MGM Resorts, MGM China and MGP collectively raised $2.45 billion in the debt capital markets.

As of June 30, MGM had over $8 billion of consolidated liquidity and $4.8 billion at our domestic operations, excluding MGM China and MGP.

Our current stake in MGP is 57%, and in addition to our strong liquidity, we also have the right to have MGP redeem an additional $700 million of OP units under our current agreement for cash.

And finally, we anticipated about $270 million of monthly cash overflows while our properties were closed, and we did a little better than that in April and May.

With our properties beginning to reopen in June, we significantly reduced the cash burn rate, although it remains negative.

Turning to our longer-term domestic outlook.

All of our Las Vegas properties are open with the exception of Mirage and Park MGM NoMad, and 6 of the 8 regional properties have opened.

We just announced that MGM Grand Detroit will open to the public on August 7 with VIP guests coming in a couple of days before.

And Empire City, as you presumably know, will be the last to open out of our regionals.

Currently in Las Vegas, COVID-related headlines continue to have a meaningful impact on booking trends and cancellations.

And candidly, our visibility is limited to booking windows that are currently less than a week.

We're seeing slower occupancies on the weekdays, and we're offsetting this on the weekends where the demand is far more robust.

All of our reopened Las Vegas properties are burning less cash, with the exception of Mandalay Bay, are currently EBITDAR positive.

However, we continue to believe that material recovery will be dependent on the return of conventions, entertainment and significant air travel.

We continue to see results in July at all of our regional properties -- we see strong results in July at all of our regional properties, and our drive-to properties continue to show EBITDAR growth and margin improvement, and our integrated resort properties are simply just now ramping up.

We're encouraged by the relative stability and demand that we have seen, thus far.

The current situation, however, is fluid.

Further openings of our Las Vegas resorts as well as amenities across our domestic properties will continue to be based on expectations for demand and maximizing cash flow, while balancing the needs of our guests, our employees, local regulator and other significant stakeholders.

Despite the current challenges, there are 2 important assurances: first, we absolutely believe the fundamentals of our business and industry have not changed and will ultimately recover; and second, our cost-saving efforts are yielding tangible and seeable results.

Taken together, this means we're poised to emerge from the crisis a stronger, more efficient and sustainable company.

Moving on to BetMGM.

We are focused on targeting growth opportunities.

We're excited to announce that just a few weeks ago that MGM and GVC have committed to an additional $250 million of capital in support of our sports betting vertical, BetMGM.

This brings our total commitment of capital to $450 million, and demonstrates our continued commitment to positioning BetMGM as a leader in sports betting and iGaming.

BetMGM is a business that was created from scratch and is now showing strong momentum.

Evidence of this can be seen in what we've been able to achieve in New Jersey, where BetMGM has gained market share and significant growth in the iGaming revenues.

Driven by this success, BetMGM is now on track to generate over $130 million of net revenues this year.

We have secured access in 19 states, are live in 7 states and expected to be live in 11 by year-end.

We also feel that our omnichannel experience is unmatched and a significant competitive advantage in this space, but BetMGM offers a consistent experience through its web, mobile and desktop platforms as well -- at all of our U.S. land-based resorts, a clear differentiating factor that nobody else can claim.

The new BetMGM app officially started to roll out last fall in New Jersey and launched in Las Vegas and Michigan right before the shutdown in March.

Equally as important is that we believe BetMGM will allow us to more frequently engage with our guests and drive deeper loyalty to the MGM brand.

And to that end, BetMGM achieved a major milestone last week when, we integrated our M life customer loyalty program with the BetMGM platform.

Players will now be able to view their M life tier status, earn tier credits over time and, ultimately, redeem credits for MGM experience beyond sports betting and iGaming.

In addition to our 34 million M life database, we also believe we have the right partners to drive efficient customer acquisition.

Various professional sports leagues and key partnerships as well as exclusive deals with Buffalo Wild Wings and Yahoo!

Sports.

In fact, we just launched to Yahoo!'s 64 million monthly active users last week.

We made a lot of progress, but there's a lot more to be done, and since launching, we began -- we have become convinced that the market opportunity is larger and will develop more rapidly in the U.S. We believe that we have the assets to be a long-term winner in this space, and we are focused on execution to unlock true value.

We continue to believe strongly that this is the largest growth opportunity in U.S. gaming.

Having covered the U.S., let's spend a few moments on Macau.

While MGM China properties were open in the second quarter, the Macau market continued to experience significant year-over-year declines driven by border and travel restrictions, driving second quarter market-wide GGR down 96% and visitation nearly down 100%.

A couple of weeks ago, the 14-day mandatory quarantine between Guangdong and Macau was lifted to major cities within Guangdong, and yesterday, it was extended to the entire province.

Today, we heard that Mainland China was resuming the issuance of Visas, with the exception of tourist Visas, starting on August 12.

These are initial steps in an encouraging direction however, Hong Kong borders remain shut and the IVS and tour visa programs have not yet restarted, which we believe is necessary for a meaningful recovery.

MGM China's monthly cash outflow are currently about $65 million a month, and 1.5 billion -- with $1.5 billion of liquidity, they have over 22 months of buffer in a near-revenue scenario.

We continue to believe that this market can recover quickly once the current restrictions are lifted, and we have an experienced leadership team who is ready when that time comes.

Speaking of leadership, we recently announced the departure of Grant Bowie as CEO of MGM China.

Grant was with the company for over 12 years and the industry for longer, and he had deep experience and knowledge in the marketplace.

While he is no longer involved in the day-to-day, he's on retainer to help us with key strategic opportunities over the next couple of years.

We've had a seamless transition with joint presidents, both Hubert Wang and Kenneth Feng taking on new leadership roles last year as COO and CFO, respectively, in preparation for this development.

The MGM China team is in great hands.

Pansy as Co-Chair and I as Chair will continue to be deeply involved providing additional continuity and strategic leadership.

In closing, our long-term outlook remains fundamentally unchanged, and I draw confidence from 5 key advantages: one, strong MGM 2020 Plan implemented even before COVID and our revised operating model work has created $450 million in permanent cost savings to our business, meaning when we recover from this crisis, we will be a stronger company; two, our proven ability to learn quickly and adapt swiftly.

Our skill as sophisticated and experienced operator has been affirmed by this crisis; three, the high-quality of our assets and our market leadership across the U.S., where we have a significant presence; four, and maybe most notably, our people, who, despite extraordinary stress and hardship have shown up to deliver safe, welcoming and entertaining experience for our guests; and finally, an amazingly strong balance sheet that will help us weather the storm.

Furthermore, while we are currently focused on day-to-day operations, we continue to make progress in our key growth opportunities, developing BetMGM as a leader in U.S. sports betting and iGaming, expanding our footprint in Macau and our relicensure and developing a world-class integrated resort in Osaka with our partner, ORIX, which we remain excited about and committed to.

For these reasons and many more, I was proud to lead MGM Resorts through this period of uncertainty towards a more promising future.

With that, we'll be happy to take your questions.

Thank you.

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

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

Bill, congratulations, well deserved and unsurprising.

One surprising maybe is that my first question -- my follow-up questions relate to Las Vegas.

I'm estimating that the reopened Las Vegas Strip properties in June generated about $50 million of EBITDAR with margins of about 33%.

Are these 5 properties ramping run rate EBITDAR higher or lower in July?

And have the 3 newly reopened properties, have they had any kind of cannibalized impact and are they generating positive EBITDAR?

I heard your comment about Mandalay Bay.

And then I have a follow-up.

Let me start it off and then obviously, Corey, can pick up with some limited detail.

But, obviously, there was a great deal of pent-up demand leading into June.

And so we saw it.

And then I think you also heard clearly the national news that impacted the Southwest in Las Vegas.

And so we were off to a strong start.

Our casino segment responded well.

About 1/3 of our market mix was casino.

There was pent-up demand there.

And so we got off to a really good start, clearly here in Las Vegas and regionally as well, at least on those properties we've had open.

July stabilized, for lack of a better word.

We have not seen nor would we have opened because we took into consideration as we opened each property what the cannibalization would be.

And so we believe, as we opened each property that we'd be net benefit cash, we'd get more people back to work, and then ultimately, in the long run, it would serve us well.

Corey, I don't know if you want to answer any of the specifics, but...

Yes.

Just going into a little bit in July, Joe.

As a reminder, we held pretty well in June, which would help not only the EBITDAR and the margin.

As Bill mentioned, the color is on the weekdays, we're eking out some profit in some places, and in others we're burning less cash.

And the weekends continue to perform the way that they performed in June.

So all in all, I think Las Vegas is challenging.

But -- and the trends in July are a little bit less than they were in June because of the hold.

But I think we're seeing some pretty strong demand in our limited capacity on the weekends.

Just on the pace or the rate of Strip property reopenings, obviously, happy to see them open, but the pace seemed -- I don't know if hurried is the right word, but at an accelerated level, that kind of surprised us.

Why wasn't there a more measured staggering or spread-out of property reopenings?

And maybe I'll help you answer that question, what is the difference between keeping, say, a core Strip property closed and opening it with limited demand in terms of daily OpEx run rate levels?

Well, I guess, at 40,000 feet, sticking to what we said earlier, the only place that's not making cash flow positive is Mandalay.

So collectively, we've made the right decisions.

Remembering there are a series of protocols throughout all of our properties, regional and most notably Las Vegas, that tie us to between social distancing, so many people in the gaming position or the gaming table, the pool of note has been a big restrictor in terms of an amenity that people want and, frankly, not need, but need in the summertime resort.

And so we were answering to demand.

We're running roughly 30s midweek, 50s weekends, and we believe we can -- and we've proven it to date, continue to make a profit at that.

But remembering, there's a lot of protocols put on us.

If you go into a restaurant, it's at 50% capacity at best case.

And so it is about -- you can only get so much and so far with the restrictions we have on us.

And frankly, we thought it was important to keep the brands alive and keep people motivated and excited to come to Las Vegas.

And Joe, what I would add is as we approach this, because of the way we approached it, getting all the cost out of the organization right away, we've been able to staff based on demand.

And to Bill's point, we are able to burn less cash even at low occupancies on the weekdays.

So from an MGM perspective, we think we're increasing our EBITDA by having these properties open, even though we may not be making a ton of profit on the weekdays.

The next question will come from Thomas Allen with Morgan Stanley.

Just focusing on sports betting and iGaming and Bet, you highlighted your impressive share in iGaming, and our numbers suggest you've been taking share in sports betting, too.

Can you just talk about some of the initiatives that drove the higher share?

I mean you mentioned you launched M life, but that was relatively recent.

So can you just talk about some more of the things you've been doing?

Look, like any large-scale organizations, we were large-scale -- GVC, just getting the business up and operating with its first hurdle.

Then getting it orientated, particularly on the sports side, to U.S. customers.

U.S. betting behaviors was an education.

And then, candidly, understanding what it was going to take to win the market and win the day was just that more marketing, more dollars, more commitment to it, and so we got aggressive.

And frankly, we're going to continue to be aggressive.

We think there's 3 or 4 key winners in this space, and we intend to be one of them.

Hence, the reason for the doubling down, if you will, with the additional investment, both from GVC and ourselves.

And it's hard to catch up when you're behind in a market like New Jersey, we have viable and significant competitors.

But our brands do stand for something.

The fact that people can come on, do a loyalty experience and ultimately translate into brick-and-mortar real experience is a key differentiator that I think long-term is going to pay dividends.

And so we've simply turned it up and gotten aggressive.

And particularly because of COVID, iGaming, has paid off.

We're gaining share in sports.

I think we're -- I mean, if you count ping pong as sports, we're up to 7%.

And we have high hopes for Michigan and some of the other states where we've just launched in.

Helpful color.

And then just on the brick-and-mortar side, and maybe specifically around Vegas, what are you seeing in terms of customers coming back?

I suspect you haven't had the properties open that much, but the experience has fundamentally changed for the time being.

Are you still seeing people come back at the same rate?

Well, when you say the same rate, I mean, look, the average customer, remember, Las Vegas comes like 1.2x a year.

Our average M life customer comes between 3 and 5 so the cycle has been -- it's too early to tell.

We've seen some repeat.

But again, remember my comment earlier, the booking cycle is literally 5 or 6 days.

And so some are motivated by promotion, particularly the casino marketing, those that near and dear to their heart, and some are motivated by news or not as the case may be.

And so frankly, Tom, it's just a little too early to tell, I think.

Our next question will be from Stephen Grambling with Goldman Sachs.

Two follow-ups, first, on sports and iGaming.

As you look at the growth in New Jersey, both before and after COVID, how would you characterize the customer demographic of iGaming?

And how much is incremental versus your existing brick-and-mortar customer?

And does the iGaming customer different from sports betting customers?

I'll take a first shot at it.

Look, there is clearly some overlap between our customer database and what the iGaming market was.

I just told you, we just integrated M life, so it wasn't like it was an extensive M life integration.

So those were self-defined customers that were motivated by the promotion and the activity case around the market.

We can and will do, I think, a much better job gaining them.

There is overlap.

20% to 30%, I think, of iGamers are sports betters and vice versa, give or take.

And so I think you'll see a lot of that convergence as we go forward.

And the ability to equally promote and give reward against both activity cases, I think, we'll grow that and grow the scale of convergence back and forth.

It's -- obviously, we've only had Borgata open a couple of weeks, but I will tell you 2 weeks ago was our best iGaming week after Borgata opened in our history, I can tell you that as a point.

Great.

And as I -- changing gears as a follow-up on Las Vegas, perhaps I missed this, but can you just talk a little bit more about what you're seeing on the group side, and maybe even what would normally be the group percentage at this point of the year in June and July versus as we're looking at 3Q, 4Q?

Well, let me give you the macro, and then Corey can get into the specifics.

Look, we've lost just over 2 million group room nights.

83%, give or take, have been in 2020.

And as you probably heard, CES trickled into the first quarter, and so we're losing some activity in the first quarter.

Flip side of that and why I am fundamentally solid on our business is that we've only lost 2 groups of substance beyond the first quarter of next year.

And so what groups are saying and what they're doing is they're hanging in as long as they possibly can.

Fundamentally, they want to come back, they understand this experience, they want and need it, and I think we're ideally positioned, given our scale.

We've got like 3.7 million square feet of space here to spread groups out, make a meaningful opportunity for them as they think about coming back.

But the short term, it's going to be challenging.

Corey, the numbers?

Yes.

In the second quarter and third quarter, this is an area where Las Vegas has done a really good job over the last few years, and we were able to get our mix up in the high teens.

Pre-3 or 4 years ago, that used to be a low -- high single digit, low double-digit occupancy percentage.

So the summer is usually not as much on the convention side as we would expect to see in the fourth quarter.

And our next question will be from Shaun Kelley of Bank of America.

Congratulations, Bill.

I just wanted to ask about the Vegas margin piece a little bit more.

So specifically, it sounds like there was clearly some hold benefit in the quarter.

So when we look at the 450 basis points of improvement that you saw, could you help us split out, just for the operating piece that was open, what maybe the hold impact on that was?

And then probably much more importantly, can we just talk a little bit about kind of your thoughts on, perhaps, when things do normalize and stabilize out probably several years from here, is that 450 basis points sustainable for Vegas?

Or how much of that do you kind of think sticks when you think through some of the initiatives that you've made, the complexing of the property presidents, et cetera?

So let me take the second one first, and I'll turn the first one back over to Corey.

Look, we think the $450 million we talked about earlier in my prepared comments is sustainable.

We think it's real.

It's a combination of -- about half of it comes -- a little less than half carryover from 2020.

Part of it is the restructuring of the organization that we did during COVID.

And part of it is just other margin increase programs in terms of amenities and things we've consciously made a decision to candidly never go back to, and just a keen focus on the broader pieces of our business.

So the $450 million is sustainable.

You may recall, we've spoken about margins that were over 30 historically, and so -- meaning in terms of how we looked at 2020, initially before this all hit.

And so I'd like to think we can improve on that with the $450 million.

But I think to your comment, we've got a long way to go before we get back to '19 levels.

So Corey?

Yes.

So yes the -- of the $450 million, we would be up about 100 basis points on hold.

Just as a reminder, our biggest impact is on the hotel side.

And that is very high-margin business that will always impact our hold.

But as we look forward in the future, as Bill mentioned, with the $450 million of savings in there, that should be equal to the 4.5% of basis points.

And put that to where we were in the past in '19, and I think you'll see margins that are exceeding that -- of what we had even before 2019.

Great, Corey.

And that sort of builds on, I guess, the follow-up, which is really a portion of the 2020 Plan was obviously in process throughout 2019.

I think some significant run rates had been hit by the third and fourth quarters, if I recall correctly, though, obviously, a lot's changed over the last 6 months.

But so is a portion of the $160 million sort of like already in the base, if you will?

Or is -- can we look at that $450 million I'm speaking to as basically entirely incremental to where we started 2020?

It's all incremental.

The run rate did not include this $160 million a lot of these initiatives were implemented in the third or fourth quarter last year, including some of the things we talked about, robobars, cashiering, a lot of the components that we started really seeing the benefits in January and February.

As Bill mentioned, the remaining amount, the corporate expense, the flattening of the properties, the operational processes, all that work was done really while we were closed and working with our portfolio presidents and our properties and our COEs, how fast they were able to move and how quick we were able to identify those areas, we feel really comfortable about the number.

And Shaun, maybe a little more color.

COVID pushed us quickly into the digital world, frankly, faster than we probably would have otherwise gotten there.

So today, 25% to 30% of our market mix is -- our customers are checking in digitally.

They never come by the front desk.

Their iPhone is basically their room key, and that is before business and Corporate America shows up.

And so obviously, there's a greater -- we believe, a greater likelihood they'll even use that -- it is an experience.

It's seamless.

You don't have to wait in the line.

It's effective.

It's working.

We are now launching literally this week, the same thing for menus in ordering food, all digitized, you don't have to make a phone call.

And so this is helping us get really efficient and effective in many of the operating things that we've done.

And so our basis will improve.

That $450 million, we think, is very, very real.

And the next question comes from Felicia Hendrix with Barclays.

I will add to the list of folks who are congratulating you, Bill.

So just -- so looking at the 450 basis point improvement that you saw on the Strip and then the 880 on the regional, Corey, just wondering, is that a good metric to use as we're trying to figure out what your monthly OpEx is today in both of those areas?

I think to look at it from that, there are so many variables.

And obviously, the high quality of customers, the pent-up demand, the revenue side, I think, is something obviously we can't control as much as the cost.

We're really comfortable where our labor components are.

We have brought back less than 50% of our employees based on what we're allowed to do.

And I'm not sure we'll see a change in that anytime in the near future.

So just as a reminder, and Bill said this in his opening remarks, we took out 85% of our costs.

We're running about $20 million a day in payroll -- or in total cost.

We're actually, when we were closed, we're running about $3 million a day, payroll is our biggest expense, being under 50%.

I think you guys could probably do some work there and get to a number.

Okay.

And then just, Hubert, get you going here.

So there was an announcement today that China -- from China, that the Visas are going to be issued to Guangdong residents for business travel and family, not tourists.

So just wondering how you're viewing that announcement.

And do you think it's a good leading indicator for the IVS?

And also, is it fair to assume that people who have a business Visa will be -- could be visiting the casinos?

Yes.

So let's go back a little bit just to see what has happened since mid of July this year.

So first of all, in July -- on July 15, 9 cities in Guangdong Province, quarantine was lifted for these cities.

And then on 29th, quarantine was lifted for entire Guangdong province.

So -- and the news came out also that nontourist Visa will be -- to issue on August 12.

So you can see a pattern that every 2 weeks, there's some new development and loosening of the border restriction.

These are magic steps, I believe, towards IVS resumption in the end.

And we believe that this will happen sometime in mid-September or could be even a little bit earlier if you go by the 2-week intervals, maybe starting with the Guangdong Province.

So in terms of business impact, those people with business Visa before COVID-19 or when they obtain the business Visa, yes, they will be able to travel to Macau.

And when they return, they won't be subject to quarantine.

This will be helpful to our business.

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

Bill, congratulations.

Just a quick housekeeping one, and I'm not sure, Corey, if you have this information.

But for your Las Vegas operations, could you quantify what the negative EBITDAR was for the period of April and may prior to the opening?

Carl, we'll come back to you on it.

Give Cathy and Jim a call, I think we'll be able to get to those numbers.

Got it.

I'll do that.

And just holistically, with respect to kind of the invited guests and things like that that you started with and then kind of opening to a broader subset, if you guys could kind of just talk about what you're seeing kind of post that early opening period that you kind of focused on, on your better M life customers and whatnot.

And what you're seeing maybe more recently as we've moved into July, you moved 4 weeks from specific property opening and whether or not there's a meaningful bifurcation of the trends that you're seeing in your regional assets versus your Las Vegas assets.

So let me kick it off, Carlo.

The regional assets remain strong.

The biggest restrictor, and I'll use National Harbor as the example.

Where we're doing exceptionally well since opening is the number of gaming positions.

It's flat -- it is the restrictions around -- what the government has placed on us in terms of gaming positions, things that you can do, et cetera, number of units that are actually open on the floor.

The RevPARs, if you will, more applicable, I think, here in Las Vegas, up like 25%.

The -- back to the regionals, it remains strong and consistent, particularly in places like Tunica, Ohio, National Harbor, where there's real drive in, places like the Beau, Atlantic City is too early to tell.

And Atlantic City, as you know, has very difficult restrictions where you have to literally eat outside.

By the way, the first 3 days we were open, it rained.

So that was a pleasurable experience.

But even at the Beau, we're just now getting back into our summer air program.

Air is critical to feed that market and that property.

But the pure drive-in properties are doing exceptionally well.

Here, it's been consistent.

Yes, the tampering a couple of weeks ago of news around increasing COVID cases in the whole southwest going red, if you will, every time you turned on CNN, has been a challenge, but not really in that segment.

And so it's more about leisure, it's more about leisure coming and goings.

And again, like I said, it's a short-term window, even for casino customers.

But we've seen a lot of high-end action.

I mean you heard the number for -- even for June, and we continue to see that mostly through the weekends.

Our next question is from Chad Beynon with Macquarie.

Congratulations, Bill.

Sticking on Las Vegas.

You touched on the convention market in 2020 actually holding in quite strong -- or 2021 on the presentation.

Yes, sorry.

How should we think about the entertainment, the residencies, Cirque, those types of events?

How quickly can these be reprogrammed once we get a vaccine and airlift is sufficient?

Yes.

Once we get to an environment where we can fill a better part of 50% of those venues, and that's really up to the government more than anything, we have an opportunity.

And so using O is the most significant example.

We've been looking at how long would it take to gear it up, and it's between 3 and 4 weeks.

The great news is the vast majority of those performers still reside in Southern Nevada.

They've not left the community because, candidly, there's not a lot of places for them to go in this world.

And so everyone's hanging in there waiting obviously, in Cirque's case, they're going through a bankruptcy.

But in every case, everyone we've talked to who are stake -- that were seeking -- control that company, recognizing and understands that Las Vegas is basically the foundation of that company.

And so we have high hopes for Cirque.

Frankly, some of our smaller shows are easier.

Comedians could be back in a week or so.

And then some of the larger events, of course, whether it's sporting, T-Mobile, et cetera, you can't necessarily do it on 50%.

And so we're going to have to wait, I think, unless the artists themselves are prepared to do different economics.

And to date, they have not.

I think you're going to have to wait to see a full recovery for T-Mobile to host 20,000 for pick your favorite artists.

Got you.

And then on, I guess, medium-term regional gaming margin expectations, a lot of your competitors are massively reducing labor and marketing, starting from a fresh sheet of paper.

I think you guys were right around 27%, 28% pre-COVID.

Do you have an updated view on kind of where this could go if revenues are close to normal, just a different level of expense expectations?

Yes.

I think -- this is Corey.

Obviously, we have observed the same type of trends and we would expect some of these costs not to come back, and they are part of the numbers that we have given you as the cost savings.

I think the bigger -- the cost structure, I think, is pretty predictable.

I think it's the revenue structure in the top line on how strong that could remain given the Cares Act is going to -- the unemployment is actually going to go away.

I think you had a pent-up demand where some of your players who used to come weekly had a big wallet.

And so to see how that fulfills and how long that lasts, that's going to be the important thing.

To determine what the margins are going to be at those properties.

The next question is from John DeCree with Union Gaming.

I'll join in, congratulations, Bill.

I wanted to maybe, Bill, get your -- a little bit more update, if any, on Japan, kind of near term, medium-term milestones.

Obviously, a lot has gotten, maybe, brushed to the side a little bit as we all deal with the pandemic, but wondering if you could give us a little bit more information on kind of what you're looking for over the next couple of months as it relates to moving forward in Osaka.

Sure.

I think as everybody knows on the phone, we have a really great partnership we've formed after a lot of hard work for many years with ORIX.

At the end of the day, we'll have between a 40% and 45% stake in that operation.

So it's relative to the overall investment and the risk reward, if you will.

We see, over the next couple of months -- we were prepared by end of July, which was the latest deadline to submit an RFP.

That process has been stopped.

We don't have an extension date yet, but we do believe it will be delayed presumably to the first part of next year, but officially, we don't know that yet, but that's the presumption.

We are ready to submit either way.

As you know, there is a great deal of things to be worked out there, and we'll only make this investment if we think it's going to be prudent, if we think it's going to pay the kind of returns that it needs to pay and to meet our expectation.

So there's a long way to go.

We love where we're sitting.

We love the opportunity in Osaka.

We love our partner in ORIX.

We like that we're not fully all in on this investment.

And we like the fact that there's probably going to be a delay in the reopening of some of the conversations that will hopefully make this a better investment for anybody interested in it, most notably us.

Bill, that's helpful.

And if I could bring one back to Las Vegas, maybe a little bit abstract but I'll take a shot at it.

And when you talk, Corey, to group and meeting planners and they look ahead, you've indicated that, particularly outside of 1Q of next year, demand is holding up and attrition has been limited.

What do they need to see?

What are they telling you, level of comfort?

I mean what are they looking for to get going again?

And -- or maybe the direct question is, beyond cancellations, are you still seeing people book longer out, a year or 2 years out for large events?

Has that business kind of continue to go?

Or I mean planners kind of really looking forward to get back to -- I guess, what are they telling you -- kind of what are they thinking about as they think about planning the next couple of meetings ahead?

Is there kind of any insight you could offer into kind of the customer behavior on the event planning side?

It would be helpful.

Yes, I could tell you this definitively.

Over half of the groups have rebooked for future dates, so of the 2 million-odd room nights I mentioned, many of them have asked to rebook.

And so the ultimate desire to want to come back is, in fact, in play, whether it's an extension in '24, whether it's let's go earlier next year versus earlier -- later this year.

And so there's an appetite to do that.

They have become very comfortable, generally speaking, with the safety protocols that Las Vegas has put in play.

Our team has exceptionally been involved with national organizations around -- with meeting planners, MPI and others around what's required, what's needed, what's necessary, what are people thinking about, what the company is thinking about to make sure the experience is safe.

So obviously, a lot of it has to do with just the incidence of COVID cases, getting that back under control, opening up the airline inventory and not as much about will it be ultimately safe when I get there in the environment that we've created.

I think we've managed to convince customers that once you get here, it will be.

It's -- frankly, our ability to get them here and our ability to host them at scale.

Right now, we're restricted to no more than 50 people.

But again, it's -- I think the predominant reason I have long-term fundamental belief, we're going to be fine.

That group, which is really the only window we have into the future, if you think about it, has been very promising and very deliberate about wanting to stay engaged.

Anybody who sells product, most notably, and it happens often in Las Vegas, whether it's CES or Corporate America that comes here, they got to get in front of people to sell product.

And so if you think about the tech companies we host, you think about the trade shows that come to Las Vegas and our company at Mandalay, it's all -- not all, a vast majority of it is about sales and selling something.

And so you've got to do that one-on-one.

And so they're anxious to return to that to grow their own revenues.

And the other thing I would add, John, look, I think it's -- individually, these groups are trying to figure out how to do this.

So just this week, you heard CES cancel.

But on the same day, SEMA, who's supposed to be in here in November, is saying they want to be here.

They are hoping to be here, and it will all be about the COVID test number.

So I think -- not that we think it's going to be great over the next few quarters, there are opportunities where you'll see some groups meeting.

We actually had our first group, although be it small, at Luxor today.

But I think people are dying to get back in medium, but they want to do it in a safe and in the right environment.

And John, just to set the stage, I mean, look, we think the first half of the year is going to be hampered.

Obviously, the first quarter is, then you run into summer.

So it's going to take probably a full year from now before we get back into real mode.

And then group business takes time -- if it hadn't prebooked, it takes time to rebook.

So we don't -- we're optimistic, but we want to be realistic with you all.

The next question is from Barry Jonas with SunTrust.

First off, congrats, Bill.

I guess I'd start with you in your new permanent role.

Are there any new maybe longer-term philosophical or strategic changes you'd evaluate?

Maybe it could be the composition of the property portfolio or anything else worth highlighting.

Well, I'd tell you some of the operating principles and some of -- how we're thinking about both short, mid- and longer term.

First and foremost, it's ensuring that we're extremely disciplined.

We've got a little less than, frankly, at times.

We saw ourselves in things that maybe didn't matter as much to the ultimate bottom line, which took time, energy and manpower.

And so being disciplined is incredibly important.

Being laser-focused on our expenses, we have heard you loud and clear, although I haven't been on the speaker as much, sat in this room for the last couple of years and heard you loud and clear on margins.

And so being laser-focused on that, and being transparent about where we are.

I think those are some operating disciplines that hopefully we can deliver to all of you.

In terms of longer term, you heard us say it, sports betting is a push now.

It's not even midterm.

We're on a Board call today for several hours about where we're going, what do we do and how are we reinvesting?

How aggressive are we going to be?

And where are we going to do it?

And what's the government affairs?

And push, if you will, to open up additional marketplaces, where we see optimism in the long -- the short and the long term, actually.

And then my other bigger push and my other bigger thing, and that's why I'm so focused on Japan and ultimately, Macau, with growth and its relicensing, it's to put this company in a place where it's extremely well balanced, where half of our revenues, give or take, are coming from Asia, where 30%, 35% are coming from Las Vegas and the balance from regional, where irrespective of what's happening in the world, we probably have and hopefully have the most balanced portfolio there is.

We're not really in the M&A mode right now.

We're still asset-light.

We believe in that original strategy.

The world has changed.

So of course, we will look at that.

And all things that are tied to that over the next impending year, give or take.

But I think longer term, Asia is a big push.

Now it's about sports betting.

And really, the key thing for us to do is to not only survive this year, but to learn from it and to structure an organization that's really prepared to take advantage of what it's created over so many years of hard work.

Great.

That's really helpful.

And then maybe just diving deeper into the margin, is it possible to give some examples of those lower-value amenities that might not come back?

I know nongaming is such a big part of your business, so -- and competitors have talked about stuff like buffet, but I guess that's more in the regional markets where the mix is different.

So any examples, I think, might be helpful.

Well, look, I think buffet is not only in the regions, but I think in Las Vegas.

Does every property have to have a buffet?

Does every property have to have full room service?

I think we will look to see -- do we have too many slot machines?

Are the floors too big based on the fact that they were built a long time ago?

There's a lot of opportunities in all of these areas that we think now is the time to really zone in on it.

Now is the time to experiment and try things.

The risk of failing is more than outweighed by the benefits of what we could learn.

And we look for some more opportunities that hopefully we'll be able to talk to you about in the future quarters.

The next question will come from Robin Farley with UBS.

Great.

I know that you talked a bit about group already, but can you talk a little bit about -- you said limited cancellations after Q1, does that mean Q1 group is itself mostly canceled?

And then a second question is with a lot of your properties open for going on 2 months, when do you expect that 50-person limit might be revisited?

Well, let me work backwards.

The Governor had gone from a 3-phase approach, where we were opened in the second phase, meeting here in Nevada, not the regionals.

The third phase was going to be the lift, among many things, the 50 cap per gathering.

He's now broken that down, and he's going to take it day-by-day You've probably heard, if you go back a couple of weeks ago, we're in the high teens to 20% testing ratio of COVID to positive cases.

That number has come down dramatically over the last 10 days, thankfully.

And so now we're down at an average, down about 35%, 7-day positivity rate about 8.5%.

He will look closely at that.

He'll look closely at, frankly, deaths.

And more importantly, he'll look at ICU beds and what's going on in the hospitals.

And the good news in both those cases, they've been relatively stable.

Because he's got to make sure the environment here is capable of handling what comes its way in terms of COVID and people who need ventilators, et cetera.

That's what's on his mind.

He put it off until September, so we won't -- I don't think he'll say anything in August in terms of gathering.

This is my general view of -- and frankly, I've had the opportunity to talk to him often, he's very transparent.

And I think post that, we'll begin to hopefully get somewhere.

We'd originally talked about 50% or up to 750 people as the next step.

If we can get our prevalence rate back down to single -- low single digits, maybe we can get back on that conversation.

But interim, I think we're 6 weeks -- 4 to 6 weeks away from a real conversation there and with some real success, if you will, in driving down these rates.

So that's the -- I think, the immediate thinking here.

As it relates to the first quarter, the cancellations have begun to seep into there for sure.

Again, the benchmark is now CES, which will be a meaningful miss.

And every week that goes by, a meeting planner has to ask themselves, is the time, energy and money I'm going to spend in advance of something that may or may not happen worth it, not that do I want to go or not.

And so to the extent we can get some rulings in the next 4 or 6 weeks, it will help slow that conversation.

And right now, we're in the middle of that quarter.

If it goes on another month, it may go to the end of that quarter, and so the story goes.

We will take the last question.

Sure.

That question will be from David Katz with Jefferies.

Congrats, Bill.

I very much enjoyed you're sharing your time and attention, and look forward to it continuing.

I just wanted to -- you've given out quite a bit of information.

I just wanted to hear you contemplate the notion of certain properties that may remain closed.

Could we be in a situation where the portfolio is partially opened for an extended period of time?

And how have you thought about the range of contingencies that are out there, given just how fluid this whole situation has been?

Look, with any intent, we have no intent of retreading unless, God forbid, we went into a problem.

So let's start with that basic assumption.

After Michigan opens in -- on the 5th -- or the 7th for the public, we'll be down to Empire.

And I think you guys, particularly most of you, know the New York story better than I. So the governor is very cautious, but I have to think and believe post-Labor Day, we'll have a very earnest, if not, before conversation around that.

Obviously, that's a huge taxpayer, given the way that's structured for the state, and we all understand the state coffers in this challenging environment.

As it relates to Las Vegas, remembering, we're down to 2. Mirage is important to us, it's an amazing brand.

Holy shmoly, I opened it back in 1989, God forbid.

But the reality is, particularly mid-week, unless we see an increase in demand, I'm not worried about Labor Day because the numbers are looking actually quite well for there because as of today, we're taking reservations -- well, we were taking reservations through August.

We've moved it now to August 27.

And that's Park MGM, NoMad and Mirage.

We'll see in a couple of weeks how we feel about that again.

We know Labor Day will be fine, but I do want to understand how people are thinking about school, no school, is the summer travel going to extend itself through September?

By the way, September is probably the prettiest month of the year here, particularly for the pool and resort experience, so if kids aren't back in school, it's just being extended summer.

We just don't know yet.

And so it's not our intent, though, to keep them closed forever.

Obviously, Park MGM was a building brand and a new brand.

We might take a look at NoMad first and then maybe the balance of the property.

But we just don't know.

But I can't imagine -- it could be.

So I'll be careful what I say here, an environment where they're closed for the balance of the year, that I will say.

And hopefully, we can get there sooner.

I think a lot of it's going to be based on COVID numbers, because the bookings we're seeing in Las Vegas, the gross bookings are fairly consistent.

They've been pretty decent.

It's -- when we see the demand start suffering is when the COVID numbers spike up, then we start seeing some cancellations.

When those numbers are down, the cancellations reduced and we start seeing some additional rooms picking up.

So if we could keep the COVID numbers down, things start flowing in a positive way, hopefully, we could get these properties open.

We want to get employees back to work and get the Strip going to where it needs to be going.

Right.

And if I can ask one very short follow-up.

Bill, in response to your thoughtful vision of balancing the company just a bit more, could that potentially include divesting some domestic assets entirely?

Look, everything is on the table, everything is off it.

There's no discussion around that at this point.

We want to get through this immediate crisis.

We'll take a broader perspective on what's best for -- where we are with liquidity, the balance sheet at that time, where the industry is going or has gone.

And so of course, we're not going to rule anything out, but it's certainly not an expectation that we would offer up a property or properties today.

Ladies and gentlemen, this concludes today's question-and-answer session and, thus, concludes today's call.

Thank you for joining MGM Resorts International Second Quarter 2020 Conference call.

You may now disconnect your lines.