MGM Resorts International — Q1 2021 Form 10-Q
Business context and reporting period
Unaudited results cover the three months ended March 31, 2021, compared with Q1 2020. MGM operates casino resorts in Las Vegas, regional U.S. markets and Macau, alongside investments including MGM Growth Properties (MGP), CityCenter and BetMGM. The quarter remained materially affected by COVID-19 restrictions, closures and reduced travel.
Financial performance
| Metric | Q1 2021 | Q1 2020 |
|---|---|---|
| Revenue | $1.648 billion | $2.253 billion |
| Operating income (loss) | $(247) million | $1.251 billion |
| Net income (loss) | $(336) million | $675 million |
| Net income (loss) attributable to MGM | $(332) million | $807 million |
| Diluted EPS | $(0.69) | $1.64 |
| Cash used in operating activities | $88 million | $423 million |
| Cash and cash equivalents at quarter-end | $6.172 billion | $5.102 billion at Dec. 31, 2020 |
Revenue fell 27% year over year. Casino revenue increased to $1.099 billion from $1.054 billion, but rooms, food and beverage, and entertainment/retail/other declined substantially. The prior-year operating result included a $1.492 billion gain on REIT transactions related to the Mandalay Bay and MGM Grand Las Vegas real-estate transaction; there was no comparable gain in Q1 2021. Q1 2021 also included $26 million of net property transaction expense.
Revenue by segment was $545 million for Las Vegas Strip Resorts (down 52%), $711 million for Regional Operations (down 2%) and $296 million for MGM China (up 9%). Adjusted Property EBITDAR was $108 million for the Strip, $242 million for Regional Operations and $5 million for MGM China. Strip Adjusted Property EBITDAR margin declined to 19.8% from 23.6%; Regional Operations margin rose to 34.0% from 20.9%. Consolidated Adjusted EBITDAR was $218 million; the filing’s presented summary does not provide a clear comparable Q1 2020 value.
Liquidity, debt and cash flow
Operating cash use improved to $88 million from $423 million, while investing activities used $155 million, versus $2.363 billion of cash provided in Q1 2020, which included $2.456 billion of proceeds from the prior-year real-estate transaction. Financing activities provided $1.313 billion. Cash increased by $1.070 billion during the quarter.
At March 31, 2021, long-term debt, net of discounts and issuance costs, was $13.245 billion; principal indebtedness was approximately $13.4 billion. No debt matured before 2022. Cash was $6.2 billion, including $1.1 billion at MGM China. The $1.5 billion MGM revolving facility and $400 million MGM China second revolver were undrawn; $903 million was drawn on MGM China’s first revolver and approximately $1 million on the Operating Partnership facility. Operating lease liabilities totaled $8.422 billion, a significant fixed obligation in addition to debt.
Q1 financing included MGM China’s $750 million issuance of 4.75% senior notes due 2027 and $133 million of net additional borrowing on its first revolver. MGM China used the note proceeds in April to partially repay its revolver and for general corporate purposes. MGM also received approximately $1.2 billion from an MGP Operating Partnership unit redemption and MGP share issuance; these transactions eliminate in MGM’s consolidated accounts. MGM repurchased $119 million of its shares during the quarter.
Outlook, commentary and risks
Management said business volumes improved as some restrictions eased late in the quarter, but revenues remained significantly below historical levels. The filing gives no formal earnings or revenue guidance. It estimates remaining-2021 capital expenditures of $340–$360 million domestically and $80–$90 million at MGM China; expected cash interest over the next 12 months is approximately $735–$740 million consolidated. Annual rent payments were approximately $843 million under the MGP master lease, $250 million for Bellagio and $298 million for the Mandalay Bay/MGM Grand Las Vegas lease, subject to escalators.
COVID-19 could continue to affect demand, travel, amenities, operating capacity and cash flows; further closures or restrictions remained possible, and management could not estimate when demand or pricing would return to pre-pandemic levels. Macau visitation remained constrained by travel and entry rules. Other significant exposures include substantial debt and lease commitments, guarantees of venture debt, gaming regulation and concession renewal risk, interest rates, foreign exchange and competition. A 1% weakening of the Hong Kong dollar against the U.S. dollar was estimated to cause a $28 million foreign-currency transaction loss.
The company extended financial covenant relief on its senior credit facility through the specified 2022 trigger, with a minimum monthly liquidity test of $1.0 billion during the relief period. MGM China also received waivers of specified leverage and interest coverage covenants through Q4 2022. The company reported compliance with applicable covenants at March 31, 2021. Management stated that disclosure controls were effective and that there were no material changes in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Whether customer demand, travel and property operating capacity continue to recover, particularly on the Las Vegas Strip and in Macau.
- Whether liquidity and covenant compliance remain adequate as debt service, rent and capital spending obligations continue.
- How MGM China’s revolver repayment, debt maturities and gaming subconcession extension develop.
- Whether planned capital expenditures and share repurchases proceed as described, and the effect of ongoing investments in BetMGM.
- The potential exposure under the Bellagio and MGP BREIT Venture debt guarantees and the impact of lease escalators.
- Whether future results are comparable to Q1 2020, given that the prior period included the $1.492 billion REIT transaction gain and different pandemic-related operating conditions.