MGM Resorts International — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023; unaudited consolidated results. Comparisons are with the three months ended March 31, 2022 unless otherwise noted.
Business context
MGM operates casino resorts and hospitality, entertainment, and online gaming businesses. Reportable segments are Las Vegas Strip Resorts, Regional Operations, and MGM China. All properties were open without COVID-19 operating restrictions at quarter-end; Macau removed its remaining travel restrictions in February 2023.
Financial performance
| Metric | Q1 2023 | Q1 2022 |
|---|---|---|
| Revenue | $3.87 billion | $2.85 billion |
| Operating income | $731 million | $106 million |
| Net income (loss) | $480 million | $(35) million |
| Net income (loss) attributable to MGM | $467 million | $(18) million |
| Diluted earnings (loss) per share | $1.24 | $(0.06) |
| Cash from operating activities | $704 million | $420 million |
| Capital expenditures | $140 million | $102 million |
Revenue grew 36%. The Strip generated $2.18 billion in revenue and $836 million in Adjusted Property EBITDAR, with a 38.4% margin (up from 35.7%). Regional Operations revenue was $946 million; Adjusted Property EBITDAR was $313 million, essentially flat, and its margin fell to 33.1% from 35.2%. MGM China revenue rose 130% to $618 million; Adjusted Property EBITDAR improved to $169 million from a $26 million loss. Adjusted Property EBITDAR is the company’s segment measure, not consolidated GAAP operating income.
Operating income included a $398 million gain on the Gold Strike Tunica sale. Revenue also benefited from The Cosmopolitan’s inclusion and Macau’s reopening; the prior-year comparison was affected by Omicron-related travel and business-volume weakness. The filing attributes higher Strip results in part to The Cosmopolitan, so reported growth is not wholly same-store growth.
Liquidity, debt, and capital allocation
- Cash and cash equivalents were $4.51 billion at March 31, down from $5.91 billion at year-end. Cash flow statement cash, cash equivalents, and restricted cash totaled $4.59 billion.
- Long-term debt, net, was $6.88 billion, including $879 million drawn on MGM China’s first revolving facility. MGM repaid $1.25 billion of 6% notes at maturity and made $586 million of net repayments on MGM China revolving facilities. MGM’s $1.675 billion senior secured revolver and MGM China’s second revolver were undrawn.
- Financing activities used $2.38 billion, including $484 million of share repurchases. The company repurchased about 12 million shares in the quarter. It authorized a new $2.0 billion repurchase plan; about $172 million of additional repurchases followed quarter-end.
- The board suspended ongoing dividends in February 2023, citing the share repurchase plan as its preferred means of returning capital.
- Domestic resort real estate is substantially leased. Operating lease liabilities were $25.2 billion; the company reported $1.7 billion of annual cash rent due over the next 12 months. These obligations are significant alongside debt and other commitments.
Outlook, commentary, and risks
- No consolidated earnings or revenue guidance is provided in the filing. Management expects, for the remainder of 2023, approximately $680–$690 million in domestic capital expenditures and $135–$155 million at MGM China, including estimated concession-related investment. Planned BetMGM contributions are approximately $50 million.
- Management expects $200–$250 million of cash commitments over the rest of 2023 for the Japan venture, subject to change based on venture funding and financing. Osaka’s integrated-resort development plan was certified in April; agreements with Osaka were to be finalized within 90 days of approval.
- Expected cash interest over the next 12 months was approximately $385–$395 million consolidated, including MGM China. Management also reported $1.7 billion of annual cash rent due over that period.
- LeoVegas agreed in April to acquire majority ownership of Push Gaming, subject to regulatory and customary approvals; closing was expected in Q3 2023.
- Key risks include substantial debt, fixed lease payments and landlord-debt guarantees, economic and travel volatility, competition, regulatory and gaming-tax changes, Macau concession risks, foreign-exchange exposure, labor, cyber and operating risks, and execution and funding risks for development projects. A 1% weakening of the Hong Kong dollar against the U.S. dollar was estimated to cause a $28 million foreign-currency transaction loss.
- Management said routine legal proceedings were not expected to have a material adverse effect. The filing reports compliance with applicable credit-facility and lease covenants at March 31, 2023, and no material change to previously disclosed risk factors.
Most important facts for investors to verify
- How much of reported profit and operating-income growth reflects the $398 million Gold Strike gain versus recurring property performance.
- Whether Macau’s post-restriction recovery and the Strip’s hotel and non-gaming strength continue; compare same-store results with reported segment growth.
- Cash availability and debt repayment capacity after buybacks, planned capital spending, interest, and substantial lease commitments.
- Execution, funding, and timing of the Osaka project, MGM China concession investment, and planned digital-gaming acquisition.
- Potential foreign-exchange, concession, regulatory, and lease-guarantee exposure, and whether the board resumes dividends or continues repurchases.