MGM RESORTS INTERNATIONAL This management's discussion and analysis of financial condition and results of operations contain forward-looking statements that involve risks and uncertainties. Please see "Cautionary Statement Concerning Forward-Looking Statements" for a discussion of the uncertainties, risks and assumptions that may cause our actual results to differ materially from those discussed in the forward-looking statements. This discussion should be read in conjunction with our historical financial statements and related notes thereto and the other disclosures contained elsewhere in this Quarterly Report on Form 10-Q, the audited consolidated financial statements and notes for the fiscal year endedDecember 31, 2022 , which were included in our Form 10-K, filed with theSecurities and Exchange Commission ("SEC") onFebruary 24, 2023 . The results of operations for the periods reflected herein are not necessarily indicative of results that may be expected for future periods.MGM Resorts International together with its subsidiaries may be referred to as "we," "us" or "our."MGM China Holdings Limited together with its subsidiaries is referred to as "MGM China ."MGM Growth Properties LLC together with its subsidiaries is referred to as "MGP."
Description of our business
Our primary business is the operation of casino resorts, which offer gaming, hotel, convention, dining, entertainment, retail and other resort amenities. We operate several of the finest casino resorts in the world and we continually reinvest in our resorts to maintain our competitive advantage. Most of our revenue is cash-based, through customers wagering with cash or paying for non-gaming services with cash or credit cards. We rely on the ability of our resorts to generate operating cash flow to pay rent, fund capital expenditures, provide excess cash flow for future development, repay debt financings, and return capital to our shareholders. We lease the real estate assets of our domestic resorts pursuant to triple-net lease agreements and make significant investments in our resorts through newly remodeled hotel rooms, restaurants, entertainment and nightlife offerings, as well as other new features and amenities. We also offer online gaming and sports betting through LeoVegas, a consolidated subsidiary, as well as through BetMGM, an unconsolidated affiliate.
Impact of COVID-19 - Update
OnJanuary 8, 2023 ,Macau lifted the majority of its COVID-19 pandemic travel and quarantine restrictions with the exception of overseas visitors travelling from outside of mainlandChina ,Hong Kong andTaiwan being required to present a negative nucleic acid test or rapid antigen test result, and onFebruary 6, 2023 all remaining COVID-19 travel restrictions were removed. As ofMarch 31, 2023 , all of our properties were open and not subject to any COVID-19 related operating restrictions.
Other Developments
InFebruary 2023 , we completed the sale of the operations of Gold Strike Tunica to CNE for cash consideration of$450 million , subject to certain purchase price adjustments. At closing, the master lease with VICI was amended to remove Gold Strike Tunica and reflect a$40 million reduction in annual cash rent. Refer to Note 3 in the accompanying consolidated financial statements for further discussion of this transaction. InApril 2023 , the Japanese government officially certified theArea Development Plan ("ADP") previously submitted by the city/prefecture ofOsaka, Japan and our 50% owned venture. Agreements withOsaka on the construction of the planned integrated resort are required to be finalized within 90 days of the ADP approval.
In
Key Performance Indicators
Key performance indicators related to gaming and hotel revenue are:
•Gaming revenue indicators: table games drop and slot handle (volume indicators); "win" or "hold" percentage, which is not fully controllable by us. Our normal table games hold percentage at ourLas Vegas Strip Resorts is in the range of 25.0% to 35.0% of table games drop for baccarat and 19.0% to 23.0% for non-baccarat; and 24 -------------------------------------------------------------------------------- •Hotel revenue indicators (forLas Vegas Strip Resorts ) - hotel occupancy (a volume indicator); average daily rate ("ADR," a price indicator); and revenue per available room ("REVPAR," a summary measure of hotel results, combining ADR and occupancy rate). Our calculation of ADR, which is the average price of occupied rooms per day, includes the impact of complimentary rooms. Complimentary room rates are determined based on standalone selling price. Because the mix of rooms provided on a complimentary basis, particularly to casino customers, includes a disproportionate suite component, the composite ADR including complimentary rooms is slightly higher than the ADR for cash rooms, reflecting the higher retail value of suites.
Results of Operations
Summary Operating Results
The following table summarizes our consolidated operating results:
Three Months Ended
March 31,
2023 2022
(In thousands)
Net revenues $ 3,873,296 $ 2,854,309
Operating income 730,839 105,788
Net income (loss) 479,883 (34,793)
Net income (loss) attributable to
(18,016)
Consolidated net revenues were $3.9 billion for the three months ended March 31,
2023 compared to $2.9 billion in the prior year quarter, an increase of 36%. The
current year quarter benefited from the inclusion of The Cosmopolitan, which was
partially offset by the disposition of The Mirage and Gold Strike Tunica. The
prior year quarter was negatively affected by a decrease in business volume and
travel due to the spread of the omicron variant in the early part of the
quarter. At MGM China , the current year quarter benefited from the removal of
travel and entry restrictions in Macau . As a result, net revenues at our Las
Vegas Strip Resorts increased 31%, Regional Operations increased 6%, and MGM
China increased 130% compared to the prior year quarter.
Consolidated operating income was $731 million for the three months ended March
31, 2023 compared to $106 million in the prior year quarter. The current year
quarter benefited from a $398 million gain related to the sale of the operations
of Gold Strike Tunica recorded in property transactions, net, the increase in
net revenues, as discussed above, and an $85 million decrease in depreciation
and amortization expense, partially offset by an increase in rent expense
recorded within general and administrative expense for the VICI and The
Cosmopolitan leases, which commenced in April 2022 and May 2022 , respectively.
Depreciation and amortization expense decreased compared to the prior year
quarter due to the deconsolidation of MGP in April 2022 and due to the MGM Grand
Paradise gaming subconcession becoming fully amortized as of December 31, 2022 .
25
--------------------------------------------------------------------------------Net Revenues by Segment
The following table presents a detail by segment of net revenues:
Three Months Ended
March 31,
2023 2022
(In thousands)
Las Vegas Strip Resorts
Casino $ 500,563 $ 475,298
Rooms 751,691 485,288
Food and beverage 582,627 384,276
Entertainment, retail and other 341,271 318,030
2,176,152 1,662,892
Regional Operations
Casino 716,977 703,679
Rooms 67,304 56,114
Food and beverage 111,879 91,138Entertainment, retail and other, and reimbursed costs 49,683
39,898
945,843 890,829
MGM China
Casino 555,272 231,203
Rooms 29,493 15,671
Food and beverage 27,625 17,441
Entertainment, retail and other 5,202 4,060
617,592 268,375
Reportable segment net revenues 3,739,587 2,822,096
Corporate and other 133,709 32,213
$ 3,873,296 $ 2,854,309
Las Vegas Strip Resorts
Las Vegas Strip Resorts net revenues for the three months ended March 31, 2023
for each revenue type increased compared to the prior year quarter due primarily
to the inclusion of The Cosmopolitan, partially offset by the disposition of The
Mirage, and also due to the early part of the prior year quarter being
negatively affected by the spread of the omicron variant.
The following table shows key gaming statistics for ourLas Vegas Strip Resorts : Three Months Ended March 31, 2023 2022 (Dollars in millions) Table games drop$ 1,524 $ 1,203 Table games win$ 346 $ 296 Table games win % 22.7 % 24.6 % Slot handle$ 5,759 $ 4,607 Slot win$ 544 $ 427 Slot win % 9.4 % 9.3 % 26
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The following table shows key hotel statistics for ourLas Vegas Strip Resorts : Three Months Ended March 31, 2023 2022 Occupancy 92 % 78 % Average daily rate (ADR)$ 258 $ 197 Revenue per available room (REVPAR)$ 239 $ 154 Las Vegas Strip Resorts food and beverage revenue was$583 million for the three months endedMarch 31, 2023 compared to$384 million in the prior year quarter, an increase of 52%, andLas Vegas Strip Resorts entertainment, retail and other revenues were$341 million for the three months endedMarch 31, 2023 compared to$318 million in the prior year quarter, an increase of 7%.
Regional Operations
Regional Operations casino revenue was$717 million for the three months endedMarch 31, 2023 compared to$704 million in the prior year quarter, an increase of 2%, due primarily to an increase in slot handle over the prior year quarter. The following table shows key gaming statistics for our Regional Operations: Three Months Ended March 31, 2023 2022 (Dollars in millions) Table games drop$ 1,013 $ 1,021 Table games win$ 214 $ 216 Table games win % 21.1 % 21.2 % Slot handle$ 6,999 $ 6,662 Slot win$ 670 $ 638 Slot win % 9.6 % 9.6 % Regional Operations rooms revenue was$67 million for the three months endedMarch 31, 2023 compared to$56 million in the prior year quarter, an increase of 20%, due to an increase in occupancy. Regional Operations food and beverage revenue was$112 million for the three months endedMarch 31, 2023 compared to$91 million in the prior year quarter, an increase of 23%, and Regional Operations entertainment, retail and other revenue, and reimbursed costs was$50 million for the three months endedMarch 31, 2023 compared to$40 million in the prior year quarter, an increase of 25%, as non-gaming amenities had not yet returned to pre-COVID-19 volumes in the comparative prior year quarter.
The following table shows key gaming statistics for
Three Months Ended
March 31,
2023 2022
(Dollars in millions)
Main floor table games drop $ 2,177 $ 1,096
Main floor table games win $ 523 $ 239
Main floor table games win % 24.0 % 21.8 %
27--------------------------------------------------------------------------------MGM China net revenues were$618 million for the three months endedMarch 31, 2023 compared to$268 million in the prior year quarter, an increase of 130%, due to the current year quarter being positively affected by the removal of COVID-19 related travel and entry restrictions inMacau .
Corporate and other
Corporate and other revenue primarily includes revenues from LeoVegas, other corporate operations, and management services. The increase in the current year quarter compared to the prior year quarter is primarily due to the acquisition of LeoVegas inSeptember 2022 .
Adjusted Property EBITDAR and Adjusted EBITDAR
The following table presents Adjusted Property EBITDAR and Adjusted EBITDAR.
Adjusted Property EBITDAR is our reportable segment GAAP measure, which we
utilize as the primary profit measure for our reportable segments. See Note 12
in the accompanying consolidated financial statements and "Reportable Segment
GAAP measure" below for additional information. Adjusted EBITDAR is a non-GAAP
measure, discussed within "Non-GAAP measures" below.
Three Months Ended
March 31,
2023 2022
(In thousands)
Las Vegas Strip Resorts $ 835,809 $ 593,634
Regional Operations 313,175 313,279
MGM China 168,948 (25,656)
Corporate and other (211,669) (210,853)
Adjusted EBITDAR $ 1,106,263 Las Vegas Strip Resorts Adjusted Property EBITDAR was$836 million for the three months endedMarch 31, 2023 compared to$594 million in the prior year quarter, an increase of 41%. Las Vegas Strip Resorts Adjusted Property EBITDAR margin increased to 38.4% for the three months endedMarch 31, 2023 compared to 35.7% in the prior year quarter as the current year quarter primarily benefited from the increase in rooms revenues discussed above.
Regional Operations
Regional Operations Adjusted Property EBITDAR was$313 million for the three months endedMarch 31, 2023 , which was flat compared to the prior year quarter. Regional Operations Adjusted Property EBITDAR margin decreased to 33.1% for the three months endedMarch 31, 2023 compared to 35.2% in the prior year quarter. The margin decreases were due primarily to an increase in contribution from lower margin non-gaming outlets and venues.
MGM China Adjusted Property EBITDAR was$169 million for the three months endedMarch 31, 2023 compared to Adjusted Property EBITDAR loss of$26 million in the prior year quarter. The increase was due primarily to the increase in revenues, discussed above, and the prior year quarter included an$18 million charge related to litigation reserves. 28 --------------------------------------------------------------------------------
Supplemental Information - Same-store Results of Operations
The following table presents the financial results of
Three Months Ended
March 31,
2023 2022
(In thousands)
Las Vegas Strip Resorts net revenues $ 2,176,152 $ 1,662,892
Acquisitions (1) (308,168) -
Dispositions (2) - (127,797)
Las Vegas Strip Resorts same-store net revenues $ 1,867,984
Las Vegas Strip Resorts Adjusted Property EBITDAR
$ 593,634 Acquisitions (1) (129,854) - Dispositions (2) - (32,892)
Las Vegas Strip Resorts Same-Store Adjusted Property EBITDAR
$ 705,955
(1)Excludes the net revenues and Adjusted Property EBITDAR of The Cosmopolitan. (2)Excludes the net revenues and Adjusted Property EBITDAR of The Mirage.
Three Months Ended
March 31,
2023 2022
(In thousands)
Regional Operations net revenues $ 945,843 Dispositions (1) (26,967)
(58,073)
Regional Operations same-store net revenues$ 918,876
Regional Operations Adjusted Property EBITDAR$ 313,175
Dispositions (1) (11,073)
(28,611)
Regional Operations Same-Store Adjusted Property EBITDAR
(1)Excludes the net revenues and Adjusted Property EBITDAR of Gold Strike Tunica.
Income (loss) from Unconsolidated Affiliates
The following table summarizes information related to our share of operating loss from unconsolidated affiliates:
Three Months Ended
March 31,
2023 2022
(In thousands)
MGP BREIT Venture (through April 29, 2022) $ - $ 38,936
BetMGM (81,872) (91,993)
Other 6,873 6,219
$ (74,999) $ (46,838)
In April 2022 , we completed the VICI Transaction pursuant to which the assets
and liabilities of MGP were derecognized, which included MGP OP's investment in
MGP BREIT Venture.
29
--------------------------------------------------------------------------------Non-operating Results
Interest Expense
Gross interest expense was$131 million and$196 million for the three months endedMarch 31, 2023 and 2022, respectively. The decrease from the prior year quarter is due primarily to a decrease in debt outstanding as a result of the repayment of the$1.0 billion 7.75% senior notes inMarch 2022 , the derecognition of MGP OP's senior notes in connection with the deconsolidation of MGP inApril 2022 , and the repayment of the$1.25 billion 6% senior notes inMarch 2023 , partially offset by an increase in the debt outstanding underMGM China's revolving credit facilities. See Note 6 to the accompanying consolidated financial statements for discussion on long-term debt and see "Liquidity and Capital Resources" for discussion on issuances and repayments of long-term debt and other sources and uses of cash.
Other, net
Other income, net was
Income Taxes
Our effective income tax rate was a provision of 25.7% on income before income taxes and a benefit of 51.1% on loss before income taxes for the three months endedMarch 31, 2023 and 2022, respectively. The prior year quarter was unfavorably impacted by losses inMacau from which we could not benefit.
Reportable segment GAAP measure
"Adjusted Property EBITDAR" is our reportable segment GAAP measure, which we utilize as the primary profit measure for our reportable segments and underlying operating segments. Adjusted Property EBITDAR is a measure defined as earnings before interest and other non-operating income (expense), taxes, depreciation and amortization, preopening and start-up expenses, property transactions, net, rent expense related to triple-net operating leases and ground leases, income from unconsolidated affiliates related to investments in real estate ventures, and also excludes corporate expense and stock compensation expense, which are not allocated to each operating segment, and rent expense related to the master lease with MGP that eliminated in consolidation. "Adjusted Property EBITDAR margin" is Adjusted Property EBITDAR divided by related segment net revenues.
Non-GAAP measures
"Same-Store Adjusted Property EBITDAR" is Adjusted Property EBITDAR further adjusted to exclude the Adjusted Property EBITDAR of acquired operating segments from the date of acquisition through the end of the reporting period and to exclude the Adjusted Property EBITDAR of disposed operating segments from the beginning of the reporting period through the date of disposition. Accordingly, forLas Vegas Strip Resorts , we have excluded the Adjusted Property EBITDAR of The Cosmopolitan for periods subsequent to its acquisition onMay 17, 2022 and of The Mirage for the periods prior to its disposition onDecember 19, 2022 , as applicable. For Regional Operations, we have excluded the Adjusted Property EBITDAR of Gold Strike Tunica for the periods prior to its disposition onFebruary 15, 2023 , as applicable. Same-Store Adjusted Property EBITDAR is a non-GAAP measure and is presented solely as a supplemental disclosure to reported GAAP measures because management believes this measure is useful in providing meaningful period-to-period comparisons of the results of our operations for operating segments that were consolidated for the full period presented to assist users of the financial statements in reviewing operating performance over time. Same-Store Adjusted Property EBITDAR should not be viewed as a measure of overall operating performance, considered in isolation, or as an alternative to our reportable segment GAAP measure or net income, or as an alternative to any other measure determined in accordance with generally accepted accounting principles, because this measure is not presented on a GAAP basis, and is provided for the limited purposes discussed herein. In addition, Same-Store Adjusted Property EBITDAR may not be defined in the same manner by all companies and, as a result, may not be comparable to similarly titled non-GAAP financial measures of other companies, and such differences may be material. A reconciliation of our reportable segment Adjusted Property EBITDAR GAAP measure to Same-Store Adjusted Property EBITDAR is included herein. "Adjusted EBITDAR" is earnings before interest and other non-operating income (expense), taxes, depreciation and amortization, preopening and start-up expenses, property transactions, net, rent expense related to triple-net operating leases and ground leases, and income from unconsolidated affiliates related to investments in real estate ventures. 30 -------------------------------------------------------------------------------- Adjusted EBITDAR information is a non-GAAP measure that is a valuation metric, should not be used as an operating metric, and is presented solely as a supplemental disclosure to reported GAAP measures because we believe this measure is widely used by analysts, lenders, financial institutions, and investors as a principal basis for the valuation of gaming companies. We believe that while items excluded from Adjusted EBITDAR may be recurring in nature and should not be disregarded in evaluation of our earnings performance, it is useful to exclude such items when analyzing current results and trends. Also, we believe excluded items may not relate specifically to current trends or be indicative of future results. For example, preopening and start-up expenses will be significantly different in periods when we are developing and constructing a major expansion project and will depend on where the current period lies within the development cycle, as well as the size and scope of the project(s). Property transactions, net includes normal recurring disposals, gains and losses on sales of assets related to specific assets within our resorts, but also includes gains or losses on sales of an entire operating resort or a group of resorts and impairment charges on entire asset groups or investments in unconsolidated affiliates, which may not be comparable period over period. In addition, management excludes rent expense related to triple-net operating leases and ground leases. Management believes excluding rent expense related to triple-net operating leases and ground leases provides useful information to analysts, lenders, financial institutions, and investors when valuing the Company, as well as comparing the Company's results to other gaming companies, without regard to differences in capital structure and leasing arrangements since the operations of other gaming companies may or may not include triple-net operating leases or ground leases. However, as discussed herein, Adjusted EBITDAR should not be viewed as a measure of overall operating performance, an indicator of our performance, considered in isolation, or construed as an alternative to operating income or net income, or as an alternative to cash flows from operating activities, as a measure of liquidity, or as an alternative to any other measure determined in accordance with generally accepted accounting principles because this measure is not presented on a GAAP basis and excludes certain expenses, including the rent expense related to triple-net operating leases and ground leases, and is provided for the limited purposes discussed herein. In addition, other companies in the gaming and hospitality industries that report Adjusted EBITDAR may calculate Adjusted EBITDAR in a different manner and such differences may be material. We have significant uses of cash flows, including capital expenditures, interest payments, taxes, real estate triple-net lease and ground lease payments, and debt principal repayments, which are not reflected in Adjusted EBITDAR. A reconciliation of GAAP net income (loss) to Adjusted EBITDAR is included herein.
The following table presents a reconciliation of net income (loss) attributable
to
Three Months Ended
March 31,
2023 2022
(In thousands)
Net income (loss) attributable to MGM Resorts International $ 466,807 $ (18,016)
Plus: Net income (loss) attributable to noncontrolling
interests 13,076 (16,777)
Net income (loss) 479,883 (34,793)
Provision (benefit) for income taxes 165,779 (36,341)
Income (loss) before income taxes 645,662 (71,134)
Non-operating (income) expense:
Interest expense, net of amounts capitalized 130,300 196,091
Non-operating items from unconsolidated affiliates 1,184 15,133
Other, net (46,307) (34,302)
85,177 176,922
Operating income 730,839 105,788
Preopening and start-up expenses 139 434
Property transactions, net (396,076) 54,738
Depreciation and amortization 203,501 288,638
Triple-net operating lease and ground lease rent expense 570,555 262,452
Income from unconsolidated affiliates related to real estate
ventures (2,695) (41,646)
Adjusted EBITDAR $ 1,106,263
31--------------------------------------------------------------------------------
Guarantor Financial Information
As ofMarch 31, 2023 , all of our principal debt arrangements are guaranteed by each of our wholly owned material domestic subsidiaries that guarantee our senior credit facility. Our principal debt arrangements are not guaranteed byMGM Grand Detroit ,MGM National Harbor , Blue Tarp reDevelopment, LLC (the entity that owns the operations ofMGM Springfield ),MGM Sports & Interactive Gaming, LLC (the entity that owns our 50% interest in BetMGM), and each of their respective subsidiaries. Our foreign subsidiaries, including LeoVegas,MGM China , and each of their respective subsidiaries, are also not guarantors of our principal debt arrangements. In the event that any subsidiary is no longer a guarantor of our credit facility or any of our future capital markets indebtedness, that subsidiary will be released and relieved of its obligations to guarantee our existing senior notes. The indentures governing the senior notes further provide that in the event of a sale of all or substantially all of the assets of, or capital stock in a subsidiary guarantor then such subsidiary guarantor will be released and relieved of any obligations under its subsidiary guarantee. The guarantees provided by the subsidiary guarantors rank senior in right of payment to any future subordinated debt of ours or such subsidiary guarantors, junior to any secured indebtedness to the extent of the value of the assets securing such debt and effectively subordinated to any indebtedness and other obligations of our subsidiaries that do not guarantee the senior notes. In addition, the obligations of each subsidiary guarantor under its guarantee is limited so as not to constitute a fraudulent conveyance under applicable law, which may eliminate the subsidiary guarantor's obligations or reduce such obligations to an amount that effectively makes the subsidiary guarantee lack value. The summarized financial information of us and our guarantor subsidiaries, on a combined basis, is presented below. Assets held for sale and liabilities related to assets held for sale associated with Gold Strike Tunica are included within current assets and other current liabilities, respectively, within the summarized financial information as ofDecember 31, 2022 .
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