MGM Resorts International — Q2 2023 Form 10-Q
Reporting period: Three and six months ended June 30, 2023; filed August 2, 2023. MGM operates casino resorts and related hospitality, entertainment, and online gaming businesses. Reportable segments are Las Vegas Strip Resorts, Regional Operations, and MGM China.
Financial performance
| Metric | Q2 2023 | Q2 2022 | Six months 2023 | Six months 2022 |
|---|---|---|---|---|
| Revenue | $3.94 billion | $3.26 billion | $7.82 billion | $6.12 billion |
| Operating income | $371 million | $2.38 billion | $1.10 billion | $2.49 billion |
| Net income | $244 million | $1.62 billion | $723 million | $1.59 billion |
| Net income attributable to MGM | $201 million | $1.78 billion | $668 million | $1.77 billion |
| Diluted EPS | $0.55 | $4.20 | $1.80 | $4.02 |
| Operating cash flow | — | $1.28 billion | $933 million |
Q2 revenue rose 21% year over year, driven principally by Macau’s reopening and recovery; MGM China revenue increased 418% on a consolidated basis. Q2 Las Vegas Strip revenue was broadly flat, while Regional Operations revenue declined 3%, partly reflecting the Gold Strike Tunica sale.
Reported earnings comparisons are heavily affected by the prior-year $2.3 billion gain on the VICI transaction. Excluding that comparability issue, current-period results also reflect higher rent expense under the VICI and Cosmopolitan leases. Q2 operating income included no comparable transaction gain; first-half 2023 included a $399 million gain on the Gold Strike Tunica sale.
Q2 Adjusted Property EBITDAR was $777 million for Las Vegas Strip Resorts, down 6%; $294 million for Regional Operations, down 14%; and $209 million for MGM China, versus a $52 million loss a year earlier. Strip EBITDAR margin declined to 36.2% from 38.6%, and Regional margin to 31.7% from 35.4%, with payroll costs cited as a factor. These segment measures exclude rent and other items and are not substitutes for GAAP earnings or cash flow.
Las Vegas Strip hotel occupancy was 96% versus 92%; ADR was $234 versus $225; and RevPAR was $224 versus $208. Strip table games drop and slot handle increased year over year, while table-games win percentage was 23.1% in both periods.
Cash, debt, and liquidity
- Cash and cash equivalents were $3.84 billion at June 30, 2023, down from $5.91 billion at year-end 2022. MGM China held $448 million of cash. MGM also reported $508 million of short-term debt investments.
- Six-month operating cash flow was $1.28 billion. Investing activities used $59 million, including $393 million of capital expenditures; financing activities used $3.33 billion, including $2.0 billion of net debt repayments and $1.1 billion of share repurchases.
- Debt principal was approximately $6.7 billion, including $708 million drawn on MGM China’s first revolving facility. MGM repaid its $1.25 billion 6% notes at maturity in March. No amounts were drawn on MGM’s $1.675 billion revolving credit facility or MGM China’s second revolving facility.
- MGM China extended both revolving-credit maturities to May 2026; related financial covenant waivers run through December 31, 2024. MGM reported compliance with applicable covenants at quarter-end. The main company credit facility was also reported in compliance.
- Operating lease liabilities totaled $25.2 billion. MGM stated that required annual cash rent over the next 12 months was $1.7 billion, in addition to associated property costs. Expected consolidated cash interest over that period was $395–$405 million.
Material changes, outlook, and risks
- Macau removed remaining COVID-19 travel restrictions in February 2023; all MGM properties were open without COVID-related operating restrictions at quarter-end.
- Gold Strike Tunica operations were sold in February for $450 million cash consideration, or $474 million net of adjustments and transaction costs. The VICI master lease was amended, reducing annual rent by $40 million. MGM recorded a $399 million gain.
- The Japanese government certified the Osaka integrated-resort development plan in April. MGM expected $80–$100 million in cash commitments for the venture during the rest of 2023, subject to funding and timing.
- LeoVegas agreed to acquire majority ownership of Push Gaming, subject to regulatory and customary approvals; closing was expected in Q3 2023.
- No specific earnings or revenue guidance is provided in the filing. Management estimated remaining-2023 capital expenditures of $450–$460 million domestically and $50–$80 million at MGM China.
- MGM suspended regular dividends in February and said shareholder returns would primarily be through repurchases. It repurchased $1.1 billion of shares in the first half; $1.4 billion remained available under the February 2023 authorization at June 30. After quarter-end, it repurchased about $88 million more.
- Key disclosed risks include substantial debt and fixed lease commitments, competition and economic conditions, reliance on travel and gaming demand, labor costs, credit collection, regulatory and concession risks in Macau, cyber and technology disruptions, and exposure to interest, currency, and equity-market movements. MGM cited a $28 million loss impact from a 1% adverse currency change and a $47 million earnings impact from a 10% decline in quoted equity prices.
- Management said routine legal proceedings were not expected to have a material adverse effect. MGM China’s concession is subject to government termination or redemption provisions and renewal uncertainty; the filing also describes debt shortfall guarantees tied to the Bellagio and Mandalay Bay/MGM Grand Las Vegas landlords.
Important facts for investors to verify
- How much of reported revenue and segment recovery in Macau is sustained, and how results compare after accounting for prior-year travel restrictions.
- Whether labor-cost pressure and weaker Q2 EBITDAR margins in Las Vegas and Regional Operations persist.
- The cash-flow and earnings burden of leases, including the $25.2 billion operating lease liability and $1.7 billion of next-12-month cash rent.
- Debt repayment and refinancing needs, MGM China facility utilization and covenant status after waivers expire, and the company’s capacity to fund planned capital spending and development commitments.
- The pace and price of future share repurchases relative to liquidity needs, and whether dividends remain suspended.
- Progress, approvals, funding, and expected commitments for Osaka and Push Gaming, and any changes to Macau concession conditions.