MGM Resorts International — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022. Figures are in U.S. dollars unless stated otherwise. Comparisons are with Q1 2021; the periods are not fully comparable because Aria was consolidated beginning in September 2021 and many properties faced pandemic-related closures or restrictions in the prior-year quarter.
Business context and results
MGM operates casino resorts in Las Vegas, other U.S. regional markets, and Macau. Its reportable segments are Las Vegas Strip Resorts, Regional Operations, and MGM China. All properties were open without operating restrictions in Q1 2022, although Omicron affected travel and business volume early in the quarter. Macau operations remained significantly affected by travel and entry restrictions.
| Metric | Q1 2022 | Q1 2021 |
|---|---|---|
| Revenue | $2.854 billion | $1.648 billion |
| Operating income (loss) | $106 million | $(247) million |
| Net loss | $(35) million | $(336) million |
| Net loss attributable to MGM | $(18) million | $(332) million |
| Diluted loss per share | $(0.06) | $(0.69) |
| Cash provided by (used in) operating activities | $420 million | $(88) million |
Revenue increased 73%. Management attributed the improvement principally to the prior-year effects of pandemic closures, reduced travel and operating restrictions, as well as the inclusion of Aria in the current period. Revenue rose 205% at Las Vegas Strip Resorts and 25% in Regional Operations, but fell 9% at MGM China.
Segment Adjusted Property EBITDAR was $594 million for Las Vegas Strip Resorts, $313 million for Regional Operations, and a loss of $26 million for MGM China. Strip and regional margins were 35.7% and 35.2%, respectively, versus 19.8% and 34.0% in Q1 2021. MGM China’s loss included an $18 million litigation-reserve charge. Adjusted EBITDAR is a non-GAAP valuation measure, not a substitute for GAAP earnings or cash flow.
Financial position, cash flow and capital allocation
- Liquidity: Cash and cash equivalents were $2.719 billion at March 31, down from $4.703 billion at year-end; restricted cash was $500 million. The company had no borrowings on its $1.675 billion revolving facility or the Operating Partnership’s $1.35 billion revolver. MGM China had $391 million drawn on its $1.25 billion facility.
- Debt: Principal indebtedness was approximately $11.8 billion, including $1.25 billion due in 2023 and $391 million drawn by MGM China. MGM repaid $1.0 billion of 7.75% senior notes at maturity in March. It expected to repay $1.25 billion of debt due within 12 months using cash on hand. Credit facility covenants were met at quarter-end; MGM China’s covenant waivers were extended through facility maturity in May 2024.
- Cash uses: Investing activities used $237 million, including $102 million of capital expenditures and $125 million contributed to BetMGM. Financing activities used $2.166 billion, including $1.0 billion of share repurchases, $1.0 billion of debt retirement and $118 million of distributions to noncontrolling owners. The resulting net decrease in cash, cash equivalents and restricted cash was $1.984 billion.
- Leases: Operating lease liabilities totaled $11.842 billion at March 31. MGM reported approximately $1.7 billion of annual cash rent under triple-net leases as of that date; these leases also require payment of substantial property costs. After quarter-end, the VICI lease replaced the MGP master lease, with initial annual rent of $860 million, annual escalators and a 25-year initial term.
- Shareholder returns: MGM repurchased approximately 23 million shares for $1.0 billion during the quarter at an average $42.92 per share. It repurchased a further 7 million shares for $269 million after quarter-end. The board approved a quarterly dividend of $0.0025 per share, payable June 15, 2022.
Material developments, outlook and risks
- VICI/MGP transaction: Completed April 29, 2022, after quarter-end. VICI acquired MGP; MGM received $4.4 billion cash for most of its VICI operating partnership units and retained an approximately 1% interest valued at about $375 million. MGM deconsolidated MGP. The resulting lease has a 25-year initial term, three 10-year renewal options, and initial annual rent of $860 million.
- Expected spending: Management estimated remaining-2022 capital expenditures of approximately $700–$710 million domestically and $75–$90 million at MGM China, plus about $100 million in planned BetMGM contributions. These are estimates, not earnings guidance.
- Pending transactions: The Cosmopolitan operations acquisition for $1.625 billion was expected to close in the first half of 2022, subject to approvals and other conditions. The Mirage operations sale for $1.075 billion was expected to close in the second half of 2022; its closing would reduce annual cash rent by $90 million. MGM also announced a May 2022 tender offer for LeoVegas valued at approximately $607 million, subject to conditions and approvals.
- Macau concession: MGM China’s subconcession was due to expire June 26, 2022, with Macau proposing an extension to December 31, 2022 and a new concession tender process. MGM stated it could not assure an extension or successful tender outcome. Loss of the concession could result in cessation of gaming revenue and could trigger debt-related consequences.
- COVID-19 and demand: Management warned that renewed outbreaks, travel restrictions or closures could materially affect operations and cash flow, particularly in Macau, where “dynamic zero” measures and entry restrictions continued to constrain visitation.
- Unusual items: Property transactions included a $31 million non-cash land impairment and a $25 million increase in estimated contingent consideration related to the Empire City acquisition. MGM China’s segment EBITDAR included the $18 million litigation-reserve charge noted above. Management did not expect routine litigation to have a material adverse effect.
- Other financial commitments and risks: Expected cash interest over the next 12 months was $450–$460 million on a consolidated basis, excluding MGP. MGM also cited substantial debt, fixed rent obligations and guarantees of certain venture debt as risks to liquidity and flexibility. A 1% weakening of the Hong Kong dollar against the U.S. dollar was estimated to produce a $28 million foreign-currency transaction loss.
Most important facts for investors to verify
- Whether Macau’s concession extension and subsequent tender award preserve MGM China’s gaming operations, and how Macau travel restrictions affect visitation and profitability.
- The post-quarter VICI transaction’s effects on MGM’s cash, debt, lease burden, recurring cash flow and deconsolidated financial statements.
- Completion, purchase or sale terms, financing and lease consequences for The Cosmopolitan, The Mirage and LeoVegas transactions.
- Whether operating cash generation can support upcoming debt maturities, rent, planned capital expenditures, BetMGM funding and continued share repurchases.
- Comparable operating trends excluding Aria’s acquisition and prior-year pandemic disruptions; MGM reported no specific earnings or revenue guidance in the filing.