MGM Resorts International (MGM) — Q4 2018 Earnings Call Transcript

Well, thank you, Cole, and good afternoon and welcome everyone to the MGM Resorts International fourth quarter and full-year 2018 earnings call. This call is being broadcast live on the Internet at investors.mgmresorts.com, and we have furnished our press release on Form 8-K to the SEC this afternoon as well. On this call, we will make forward-looking statements under the Safe Harbor provisions of the federal securities laws. Actual results may differ materially from those contemplated in these statements. Additional information concerning factors that could cause actual results to materially differ from these forward-looking statements is contained in today's press release and in our periodic filings with the SEC. Except as required by law, we undertake no obligation to update these statements as a result of new information, updates, or otherwise. During the call, we will also discuss non-GAAP financial measures and talk about our performance. You can find the reconciliation to GAAP financial measures in our press release, which is also available on our website. Finally, this presentation is being recorded. And with that, I'll now turn it over to Jim.

Well, thank you, Dan, and good afternoon, everyone. We had a good fourth quarter and end to the year, coming in above our guidance here in Las Vegas. On a consolidated basis, our fourth quarter revenues grew 18% year-over-year and our adjusted EBITDA grew 21% excluding certain one-time benefits. Here in Las Vegas, our strong fourth quarter was driven by selectively leveraging our casino database and a healthy convention business that improved intra-quarter. We delivered revenue growth of 6% and RevPAR growth of over 8%. We grew EBITDA by 15% or 8% if you exclude one-time benefits, despite holding at the low end of our table games range. Our fourth quarter margins increased 220 basis points during the quarter or by 50 basis points after that same adjustment. This was the best fourth quarter in Las Vegas since 2007. We have many of the premier assets across the United States, and our regional properties performed well in the fourth quarter with revenues up 18% and EBITDA up by 32%. We set fourth-quarter revenue and EBITDA records at MGM Grand Detroit, MGM National Harbor, Beau Rivage, and Gold Strike Tunica. In Macau, the overall gaming market grew by 9%. MGM China's revenues grew by 33% and EBITDA was up 11% as we gained market share in the fourth quarter. Grant will be available during the Q&A course to answer any questions that you may have. Now I want to spend a few minutes on our MGM 2020 plan, which we announced last month. As you know, a couple of years ago, when we implemented our profit growth plan, we underwent an organizational transformation that resulted in key centralized business functions to create best practices across our resort portfolio. This platform is established now and running, and we can now leverage the centralized functions. MGM 2020 will be rolled out in phases. We announced Phase 1 on January 3, and with the help of outside consultants, we will implement comprehensive organizational changes as we find more efficient ways to operate. As announced, we expect Phase 1 to realize $200 million in annualized EBITDA uplift by the end of 2020. Half of that will be labor savings, 25% from sourcing, and the remaining 25% from revenue optimization. Phase 2 is centered on the company reallocating a portion of our annual CapEx budget to technology investments. We expect these investments to increase our revenues through a customer-centric strategy, driven by data, digital, and loyalty capabilities. We expect this will yield an additional $100 million in EBITDA by the end of 2021. Through MGM 2020, we are investing in our business to drive long-term growth. As we saw with PGP, we expect to see financial benefits building. And in this case, into the back half of 2019. Accordingly, we expect to realize a third of the initial $200 million of EBITDA by the end of this year, with approximately two-thirds of that coming from our Las Vegas properties. We spent a lot of time on this. We talked about it last May during our Investor Day. We made it official in January. We have the full internal team focused on this effort. We have a strong sense of the numbers. We know how we will achieve those numbers, and you will hear more about our progress in the near future. Turning to this year, we believe we are positioned well here in Las Vegas with better citywide convention expectations as well as our own bookings. We are also excited about the entertainment calendar, bolstered by great programming at Park Theater, featuring, of course, Lady Gaga, who sells out every single night. Our business fundamentals are solid. However, we will maintain a level of caution as we navigate through broader market volatility, the rising cost environment, trade tensions, and the resulting concerns on global growth. That said, we believe, based on what we're seeing today that the consensus for Las Vegas strip EBITDA for the full-year 2019 seems reasonable. As I mentioned earlier, we're making good progress on MGM 2020. We will incur some costs in the front end before we start to see the financial benefits, as I said, in the second half of this year. We are excited to have Park MGM and NoMad fully open. We view this property just like a brand-new opening and expect a normal ramp-up period over the next couple of years. As you know, we're making important investments in sports and entertainment that we believe will reap future benefits. Our regional properties are off to a solid start this year. The addition of Empire City in New York and the soon-to-be-acquired Northfield Park in Ohio further cements our leadership in the Northeast and enhances our cross-marketing efforts across our entire portfolio. Macau is the number one gaming market in the world, but we all know it can be volatile. Therefore, our focus there is on increasing our market share as now all the amenities in Cotai become fully available. We're pleased that our VIP junket areas are open, the Mansion high-end Casino is now operational, and the mansion, which is stunning, will soon be receiving guests. And as we look into 2019 and beyond, we are committed to our long-term strategy and our goals remain intact. Our 5-year capital cycle is now complete, and we will reap the benefits of these investments in National Harbor, Cotai, Springfield, and Park MGM. Today we are reaffirming our consolidated free cash flow per share target of $3.50 in 2020. Our project MGM 2020 gives us increased confidence in our ability to hit those targets even in light of a more uncertain macro environment. We continue to be focused on a fortified balance sheet with targeted consolidated net leverage of 3x to 4x by year-end 2020. Over the past two decades, MGM has developed and assembled our industry's most successful portfolio of premier real estate in the United States. During that time, we've executed on strategies to highlight this value and have been focused on unlocking long-term value for our shareholders. And this will continue. Our management team and the recently announced ad hoc committee remain committed to exploring and executing a real estate strategy that is most optimal for MGM Resorts, one that supports our goals of enhancing free cash flow per share, maximizing the value of our own real estate, preserving the company's financial flexibility, and creating sustainable shareholder value. Lastly, while the company is focused on targeted growth opportunities such as sports betting and Japan's IR, we will continue to return any excess cash to shareholders in the form of share buybacks and dividends. In fact, we returned $1.5 billion to shareholders through buybacks and dividends in 2018. This afternoon, we just announced another increase to our dividend. So now let's turn it back over for Q&A.

Good afternoon, everyone. Thank you for taking my questions. Jim, it's great to hear you discuss the momentum, not only on the Strip but also in regionals and Macau. My first question is more strategic in nature. It relates to the ad hoc committee of the Board that was established last month. Can you discuss in general terms what is being evaluated? Is the committee and the Board exploring options they previously considered but passed on due to timing or circumstances? Is there a new openness to real estate transactions that wasn't there before? How significant are tax considerations today compared to the past? Additionally, how central is MGP in the committee's evaluation? Lastly, what is the timeline for when you expect this committee to present its recommendations to the Board, and when would the Board look to act on those recommendations? I realize I’ve covered a lot here.

Yes, thanks. I'll start by emphasizing that we've always prioritized the best interests of our shareholders and sought to create strategic value. This focus has shaped our approach for quite some time. The establishment of the UPREIT with MGP reflects our belief in creating value and introducing a new security in the triple net sector, which has proven successful, initially going public at $21 a share and now around $30. We maintain our commitment to MGP's growth and expect it to surpass its peers within the broader triple net sector. This growth is possible because MGP can engage in transactions with MGM, unlike many others, and has successfully executed third-party transactions since going public. As MGP expands, we anticipate a decline in MGM Resorts' interest, not because we wish to sell operating units, but due to MGP's anticipated growth. The ad hoc committee was formed to enhance focus on the opportunities MGM Resorts believes it has in assembling unique real estate assets. We have an advantage over other companies in the U.S. by evaluating how to maximize value on a property-by-property basis. The committee has already met multiple times and is in discussions with bankers, concentrating on this mission. This team, which includes real estate and shareholder experts, will collaborate with management and the full board to share their insights. The board members have been instrumental in shaping our strategic objectives. While this process is exciting, it is also complex, and we are committed to getting it right for the future. I won't preempt the ad hoc committee by providing a timeline since it was established on January 24. However, I can assure you they are focused, experienced, and will receive professional guidance while working closely with the entire board and management. We are enthusiastic about the remarkable opportunities we have, more so than any other company in our industry, and we will have more updates in the coming months and quarters.

Thank you for your thoughts. I think my follow-up question was already taken.

Thanks, Joe.

Hi, everyone. So Jim, you talked about the probable strength in the group outlook for Las Vegas in 2019. And according to the LVCVA data, it looks like first quarter is strong, second quarter's growth is even stronger. How do you compare that to what you see on your books so far? And if you could give us some color by quarter.

I will turn that over to Corey on the convention side.

Yes, I think our convention business has been solid throughout the year. We have a lot booked already, and we are seeing improvement in each quarter compared to last year. The first quarter will be our strongest, as it typically is, but the other quarters are looking good as well.

Okay. And Jim, just a follow-up on that. The question inquiring minds want to know is that do you have any bid for giving some indication of what RevPAR in the first quarter might look like?

Nice try, Harry. Dan, you want to give a view on what we think about in terms of that kind of guidance?

Well, sir, I will. Thanks, Harry for the question. Clearly we've been, Aaron, Cathy, and myself, the whole team here have been talking to a lot of you all, both on the buy side and the sell side, and really, as you all know we’ve been seeking that counsel and that guidance and that input for quite some time. There is one real common thread that really came through in most of those conversations, which was really getting to the longer-term vision story and goals that we're trying to achieve and attain here from a company standpoint. So we're going to continue to give you a lot of color. Obviously, Corey just gave you a lot of color around the convention business. We're going to continue to give you a lot of insight into the baseline business and what we're seeing. But getting into kind of quarterly specifics has not worked out too well for us. So we are going to continue to focus on the long-term, as you will get a chance to go through the deck that we posted, which has a lot of information in it. You will see that we are reaffirming our 2020 $3.50 per share free cash flow guidance as well as some of our EBITDA targets in 2020. Obviously, Jim commented on the consensus numbers for the year and we feel like it's the investment community a lot of good data points to be aligned with management and what we’re trying to achieve here.

Thank you for that. And my second question, I wanted to shift to Macau, a real quick question for Grant. Grant, you had very strong revenue growth up 33%. EBITDA growth was shy of that. Would that do more to mix, more VIP mix? And as we look ahead, how would you expect that flow-through to look as we get into the back half of this year, particularly when the Mansion opens?

Yes, the margin is in line with our expectations. However, there was a mix effect, especially with the introduction of junkets in Cotai. Now that we are stabilizing our operations in Cotai, managing costs is crucial. Looking ahead, we are focused on finalizing everything. We are excited to bring the Mansion onboard and start generating from those assets. As a result, I feel very positive about building momentum. We are also encouraged to see stabilization and new business opportunities in Macau. As I have mentioned before, we see this as a two-property strategy and aim to emphasize the importance of each property. We are confident in our ability to improve margins and are maintaining our guidance, looking toward mid to upper 20s in margin performance.

Okay, Grant. Terrific. Thanks very much, guys.

Thanks, Harry.

Hi. Good afternoon, everyone. Just going to the slide deck and some of the longer-term goals that you guys provided, I believe, you did mention that for the Las Vegas strip on an adjusted property basis, you're now expecting to see 32% to 33% margin in 2020. Could you maybe at a high level give us what your sort of backdrop or assumptions would be to necessarily attain that? I know a piece of it clearly has to be the 2020 plan where a lot of those savings will come from the Las Vegas operations. But so what you need maybe from a top line perspective to actually achieve that, or do you think you can get there even in a fairly kind of low or benign top line environment?

Hey, Shaun, it's Dan here. I will start, and if anyone else has anything to add. When we consider MGM 2020, it plays a crucial role in our strategy and reaching our target numbers. It certainly boosts our confidence in achieving our EBITDA margin target. We're operating under the assumption that the market will remain relatively stable, seeing low single-digit revenue growth, while focusing on elements within our control regarding margins. We will continue to employ the strategies that have worked for us before regarding cost management. Additionally, as demonstrated in the fourth quarter, our team did an excellent job of increasing our rates and attracting the most profitable customers to our rooms, and we plan to maintain this approach going forward. In terms of revenue, we don't anticipate a significant increase, but we expect to maintain the current level.

That's perfect and helpful, Dan. Thanks. My follow-up is on the 2020 plan. With about one-third of the expected contribution occurring this year, will the total contribution be net of the investments made in the first half? As we look ahead to 2020, will some of these upfront investments, which I mainly think are consulting costs, eventually fade away? I’m curious if these expenses are not part of the ongoing run rate; please help us understand these two aspects.

Yes, certainly. The two goals for both Phase 1 and Phase 2 account for the expenses we need to initiate those phases. As we evaluate it, there will be both operational and capital costs involved. In our capital expenditures this year, we anticipate around $75 million in additional spending for the technology projects we are pursuing. These investments will also be associated with a return. Therefore, it is net, and we will strive to be as transparent as possible in presenting this information over the upcoming quarters to ensure you have all the necessary figures for your analysis.

You are right, it will burn off as we go throughout the year into next year.

Great. Thanks very much, everyone.

Thanks, Shaun.

Hi. Good afternoon and thanks. So, Jim and Dan, in the past you guys have said, as you were over the past few quarters reflecting upon your guidance conundrum, you’ve said that you guys don’t do such a great job with guiding out past one quarter, the quarter that you're in. So can you just help us understand the confidence in the full-year EBITDA guidance you gave us in your prepared remarks?

Well, I think, a couple of things. I think one is, I necessarily wouldn't hang my head on that being official guidance. What we are looking at is obviously the current estimates that are out there. And again, they seem reasonable from that perspective in looking at the 2019 period.

Also, instead of not a good job, we take half of the baccarat business in this market. We are bigger than our top two competitors combined. We have over 42,000 hotel rooms, but it is a market that's very dynamic. We are trying to give color, but recognizing the fact that this is not a global company in the sense of spreading all of our assets all around the world, we are giving you very specific color as to Las Vegas, and I don't think anyone does a better job than us. I think it's been a dynamic market.

I'm just using words you guys have used …

Yes.

I wanted to follow up with the committee regarding the evaluation of your real estate portfolio. I understand that we are in the early stages, and this information may change over time. I'm trying to fully understand the process of assessing your real estate portfolio, which consists of three wholly-owned assets on the Strip and your joint venture in CityCenter, while noting that Springfield is already accounted for. From my analytical standpoint, I'm curious about the potential benefits of selling these assets beyond possibly issuing a special dividend or reserving the cash for capital expenditures in Japan, especially since your balance sheet is expected to reach optimal levels even without those actions. Can you clarify what evaluating your real estate portfolio entails, considering there is not much real estate left?

Sure. Well, we don’t have a lot of assets left, but we've a tremendous amount of real estate value. I'm sitting in a building that's worth billions right now.

Oh yes, you have those two, right? And that could generate exactly, but it's just kind of, I guess, what I'm really trying to get at is how could that be strategically beneficial for your valuation and the longer-term shareholders, beyond perhaps a special dividend or something like that?

Thank you. This is the question we are currently addressing as management and the full board. We established this committee to focus on evaluating our complex decisions that impact our balance sheet, tax basis of assets, and growth forecasts. Given the expertise among our board members, particularly in real estate, who have generously offered their time, I believe it is advantageous for us to enhance our thinking and deepen our knowledge regarding our next steps. I want to clarify that the ad hoc committee shares the same strategic goals as the entire board and management, aimed at reducing our leverage, improving our free cash flow, and generating the cash we plan to allocate to shareholders while adhering to our leverage targets. You are correct that we currently own only a few assets outright. We have a valuable joint venture that we intend to strategically manage in the future. The committee will assess all of our properties and ideas with outside advisers. I am optimistic about this process, as it enables management to collaborate with a skilled team, ensuring our shareholders are informed about what maximizes value for them. This initiative demonstrates our commitment to leveraging our exceptional portfolio, both in terms of what we own outright and through MGP, as well as how we evaluate these entities and our joint ventures to enhance value. That is the primary reason for setting up the committee. They have already convened, consulted with bankers, and are highly focused, and I am pleased with their output thus far.

Thank you. That’s super helpful. And Grant, just quickly, any early comments on Chinese New Year?

For us, the most encouraging aspect is the Chinese New Year. This year marks our second celebration, as we recently had our anniversary and completed our first year, which was quite strong for us. There has been a lot of traffic in the city, likely driven by the bridge. While we have not seen significant increases in gaming revenue, we are observing that the duration of play is extending. We are currently well into the 10th day, and play—especially in the upper market—looks quite positive. I expect this holiday period has been good for us, building on our performance from the fourth quarter. Overall, the city appears solid with high foot traffic, but I do not anticipate major spikes in gross gaming revenue. I would like to reiterate previous comments: during these significant holiday seasons, we are clearly attracting a lot of visitors to the city, though it seems more likely that these are leisure visitors rather than solely gaming-focused ones.

I should mention Chinese New Year here in Las Vegas, anticipating the question. We highlighted this in our presentation. Last year, we had a very high hold percentage, but we are not maintaining that level right now. Some players did not come to the United States due to the government shutdown and other logistical issues. We lost some groups to locations like Sydney and London, and we can attribute that to our government. However, we still have a strong presence in town. Last year, we accounted for 49% of the entire baccarat business in Las Vegas. I believe we have a good understanding of the situation, but I would say that we are going to fall short of what we earned last year for Chinese New Year due to the overall decline and fewer customers in town.

Thanks a lot.

Hello everyone, good afternoon. Maybe Corey can address this best. Regarding the mix for 2019, I recall that last year or rather in 2018, you made a significant effort to increase your casino occupied room nights. As you look towards 2019, it seems your in-house and citywide group is expected to improve, so I would anticipate that increase slightly. Is the goal to continue growing what I believe is a mid-to-higher teens casino base at present?

Yes. We continuously analyze the market and our competitors. There are opportunities to expand our customer base, particularly since our gross profit per room night is higher compared to some other segments. We are focusing on both conventions and enhancing our transient and casino offerings. One challenge we currently face is in the leisure segment, particularly with land-only options, as we see customers choosing to travel to Europe and other destinations. However, by expanding our casino database, we can potentially mitigate some of the losses in those areas. Overall, we believe there are still opportunities for growth, and we aim to increase our profitability as a company.

Great. And Corey, just to kind of follow-up on what you said. One of your competitors earlier this earnings season referred to Las Vegas as a marketers market, and I’m assuming that that’s kind of dovetails with what you just noted on the leisure business. Are you guys seeing any kind of heightened promotional activity in Las Vegas around that leisure business?

Look, I don't think it's any different than what it has been. When you don’t have a base of convention or other events happening in town, that segment has always been very competitive. I don’t see much of a difference in the offers going out there. They are always pretty rich, and the amount of I’m seeing actually they seem a little lower this year, than what was happening in the third quarter.

Great. That’s helpful. Thank you, guys.

Thanks, Carlo.

Hi. So there's a lot of focus from investors on your Strip margins, and seeing progress there. Considering that your margin is up every quarter in 2019, does that make sense, or based on your previous comments, should they more hockey-stick in the second half '19 and into 2020? Thanks.

Hey, Tom, it's Dan. I think, obviously, factoring the comments we made around Chinese New Year's and hold, we did hold pretty high in the first few quarters last year, more towards the high-end of that range, so that always impacts. When we do our modeling, we are using kind of midpoint of our range kind of numbers. So that’s going to impact a part of that margin. But you're correct in that, as MGM 2020 begins to ramp up in the back half of the year, that’s going to help the margins in terms of third and fourth quarter from that perspective, as well as some of the burning off of some of the expenses of the upfront cost for the initiatives.

And the ramp up of Park MGM and our convention business.

Helpful. And then just on the topic of ramping, can you give any incremental color on how you see Springfield performing today, and how do you think that probably is going to ramp, and the other properties that are ramping right now? Thank you.

Sure. Do you want to go with that? We both know. I was just there. Oh gosh, it's a beautiful property and great. Unbelievable feedback we get from customers, from the gaming commission in Massachusetts, from the elected officials, and our food and beverage operations are ahead of target. Our hotel business is ahead of target. Our gaming business is slower but ramping. We actually saw the almost exact same thing at National Harbor, as we built into a brand new market for us. We expect that, given the quality of the assets and the people working there and the word-of-mouth marketing, we are going to be a little more tactical in marketing, and reminding people that we are there, particularly leading up to a competitor in Everett, that's opening up in the second half of this year. But we view its operating future very much the same as what we’ve seen on a different scale, with a smaller investment up there than at National Harbor, but what we are seeing in our other new properties.

Helpful. Thank you.

Thanks.

Thanks, Tom.

Hey, I guess first a follow-up on the real estate and ad hoc committee. You mentioned reducing leverage in response to another question as a first kind of priority, and thinking about monetizing real estate. How would you think about the appropriate leverage ratio for an asset light OpCo relative to one with underlying real estate?

I think that’s going to be part of what the committee does. As we evaluate the asset intensity of MGM Resorts and understanding the fact that MGP is a triple net and MGM Resorts is and always will be responsible for the capital that we continue to invest into those properties, which has been very successful. We are going to make sure that MGM Resorts' balance sheet meets the objectives that we’ve laid out and is as durable as possible. I think we've made this very clear before. We are not going to be in a situation we found ourselves back in '08 on the eve of a global recession. We are going to be more conservatively postured. We are increasingly aware of what’s going on around the world. Global trade tensions, slowdown, RevPAR declines, and reductions of RevPAR guidance at hotel companies. We are going to take all that on board with an eye toward making sure that we have that strong balance sheet that we are delivering on the beacon, that is $3.50 of free cash flow in 2020, and anything that we do with our real estate portfolio or what we own of MGP will have to fit very squarely within those strategies.

That’s clear. And maybe changing directions a little bit, we are seeing more news drilling out of Japan on the integrated resort side. Can you just provide whatever color you can on how you are thinking about the opportunity, including the next key milestones and any evolution on your expectations?

We’ve made significant progress in Japan, having been there longer than any other company. The government is currently exploring best practices globally for implementing an effective RFP process and regulatory framework. We have a substantial presence in both Tokyo and Osaka, and we recently opened a new office in Osaka. We have committed to the Mayor and Governor of Osaka that we will focus our resources in that area first. The government has indicated that they expect to release rules and policies around July-August of 2019, and we anticipate that Osaka's RFP will follow shortly thereafter. We believe an operator will be chosen by early 2020. The next step for Osaka, or any other location, is to engage with the central government. We expect Osaka to be one of the three concessions granted, but the central government will ultimately select Osaka and its operator, likely 12 to 18 months after Osaka chooses its operator. Osaka aims to have an integrated resort open by 2025 for the World Expo. We've been very active in the region, which is why our CEO is currently in Japan. We are focusing our efforts on developing consortium partners, exciting programming, and preparing for the RFP submission. We know it will be a competitive process, but we believe those who are well-prepared and have a strong strategy will have the best chance of success, and I'm optimistic about MGM's position.

That’s great. One last quick one, if I could. Just can you give us any sense for how forward trends are unfolding at Park MGM as we get past the renovations? And has anything changed in your expectations for how this property returns will ultimately shake out? Thanks.

We had a busy fourth quarter at Park MGM with several new elements launching, including food and beverage venues, a nightclub, and Lady Gaga's residency. Everything is progressing as planned, and we are still in the early stages, just a couple of months in, but we remain focused on meeting our return on investment goals and are confident we will achieve them. The property is now fully operational; Eataly has opened and is generating impressive daily revenue, while the other restaurants are also performing well. All shows are selling out, and the average daily rate is increasing significantly at both Park MGM and NoMad. We are transitioning customers from the old Monte Carlo to Park MGM and NoMad, which is part of the ramp-up process. However, our customer satisfaction scores are exceptionally high, indicating the property's appeal. Corey, do you have anything to add?

Yes. The other thing, getting that front door has been a big plus and we are seeing the casino numbers we were hoping to see at this stage in the game. As Jim mentioned, the food and beverage numbers are where we expected, as are the hotel numbers. Just transitioning that customer, which we think will take some time, but the acceptance of the property has been amazing and all you have to do is walk through there on any event night and just see what potential for that property is.

Here is an amazing thing. I don't know if we've talked about this. Before we built the Park, before we built the plaza in T-Mobile, the traffic counts on the east side of the Strip were profoundly higher than they were on the west side. Now it's completely the opposite to the point that the county is building a bridge so that people stop trying to run across from the east side to the west side. I don't know when that bridge is going to be done, but it's underway right now. That's really the last element. It's not in our control, that's a county project. But to give you a sense of the traffic flow is now on the west side of the Strip as a result of T-Mobile, the Park, the improvements to New York, and obviously the improvements to Park MGM.

The Bridge is supposed to be done around summer.

The Bridge this summer.

That’s helpful. Thanks. Best of luck this year.

Thank you.

Thank you, Stephen.

Good afternoon everyone. Thanks for taking my question. Just one for me, Jim. Wanted to get your thoughts on the sports betting industry. You’ve been very deliberate and quick in choosing your partners' sports league, your technology partner and GVC, and it seems like we had a little bit of a roadblock with the latest opinion from the DOJ, that seems aimed at inhibiting the industry. I was wondering if you had an initial view on the path forward? And I guess more specifically, has it changed MGM's thinking at all in the near-term or is it still full throttle on the interactive and sports betting side for your company?

The recent communication from the DOJ is quite confusing and suggests that Powerball, as it currently operates in 44 states, may no longer be legal. We believe this opinion is poorly constructed and not enforceable, and I don’t think anyone in the gaming or sports betting industries disagrees. Regarding our strategy, we are enthusiastic and proud of our progress. We've emphasized the importance of having our own adaptable and scalable technology, which we recognized we needed to develop rather than purchase. This led to successful negotiations and a joint venture with GVC, which has proved beneficial for both MGM and GVC. They are expanding their operations and building their team, which confirms that our decision was sound from both a technology standpoint and for obtaining crucial in-game betting analytics. Additionally, we aimed to cultivate strong, trusted relationships with customers. Before pursuing other initiatives, we proactively engaged with select leagues, which has opened up valuable opportunities. For instance, the NBA partnership will enhance summer league events in our area, increasing attendance and interest. Furthermore, our deal with MLB has led to exciting opportunities in Japan, where MGM is supporting MLB roadshow events as teams prepare for games. Our relationship with the NHL, alongside our investment in the Golden Knights, has also fostered beneficial connections. These partnerships at various levels, including engaging with the Alliance of American Football, have yielded promising technology opportunities. However, the state-by-state rollout of sports betting has been frustratingly slow and inconsistent, with varying levels of implementation across states. Our sports betting app is performing well, and even our newer sportsbooks are meeting or exceeding expectations. The competition is fierce, with several savvy companies in this space, and while we appreciate the ingenuity of the Caesars-Turner deal, MGM plans to explore similar avenues. In our view, sports betting represents a broader opportunity beyond just placing bets on games. We see it as an interactive experience, which is why we intend to focus on social games and digital initiatives as we advance our strategies for 2020 and beyond.

That’s really helpful. Thanks for all that color, Jim. I appreciate that. And just one smaller-tailed question on sports, if I could. You gave a little commentary about Chinese New Year. I think we are pretty close to overlapping with Super Bowl. But wondering if you had some comments on how your properties felt during that event this year?

Thank you for bringing that up. We had a successful Super Bowl at MGM Resorts. While we could have earned more with different outcomes, it highlights the advantages of having substantial liquidity and a strong volume of betting on the game. Our performance this year surpassed last year's profitability on the game. However, we faced challenges this year because the Super Bowl coincided closely with Chinese New Year, unlike last year when they were about a week and a half apart. This overlap created difficulties for our high-end room offerings and overall activity. Additionally, some people chose not to travel to the United States for various reasons. Nonetheless, it was a good Super Bowl, and our earnings exceeded those from last year.

Thanks, Jim. I appreciate the questions and color, and congratulations again on the fourth quarter.

Thank you.

And Cole, can we please have the last question?

Thank you. Most of my questions have been addressed. I have a couple of quick ones. First, what was the convention mix for 2018? I know you mentioned some things about 2019, but do you have an idea of what the convention mix will be? Also, last year during your Analyst Day, you discussed potential future capital projects, including reorienting the MGM Grand property to be more open to the Strip. Do you have any time frame for that project, or are such capital projects on hold while your Board committee explores different real estate options? Thank you.

Hi, Robin. It's Corey. For 2018, we ended up a little under 18%, and for this year, we expect to exceed that amount. Regarding the project at MGM, these types of projects typically take time to refine and develop. We believe there is an opportunity with the West Wing, as we are planning, identifying the right product and mix, and observing developments at Park MGM alongside other investment income. We think this period allows us to carefully consider what could be successful there. We are continuing our planning and will share more updates as we have them.

I would also add that our overall annualized CapEx number has remained unchanged. Any potential projects we've discussed are included in that number, so there will be no additional capital expenditures beyond that. Regarding the Grand, it illustrates the options available to us. We have the flexibility to evaluate our position; sometimes we may consider our options for an extended period without making changes because the market conditions or our capital strategies have shifted. Currently, we are not in a rush to make decisions about that project. What we should emphasize over the coming quarters is that the capital we will allocate within our set limits will focus more on technology than in the past. We plan to prioritize the combination of capital and operating expenses related to our digital ventures in 2020. If executed properly, we believe there are ample resources, and our external consultants concur with this assessment. This is akin to launching a new property without the associated responsibilities and ongoing capital demands. We are seeing increased potential for capital investments now that we are pleased with our portfolio and our strong position in Las Vegas, especially since we have completed major projects that enhance our free cash flow. We aim to evaluate all opportunities through the lens of return on investment, particularly concerning capital spent on technology that can significantly improve our margins. The answer to that is affirmative.

Okay, great. Thank you very much.

Thanks, Robin.

Thank you for joining us today. We had a strong finish to a challenging year with significant achievements, including the openings of Cotai, Springfield, and Park MGM, as well as record profits in many of our regional operations. We discussed PGP, which helps us strategize for 2020 and reinforces our confidence in reaching our profit targets. Our investments in sports and technology are expected to drive exciting long-term growth for the company. We anticipate being a leader in the interactive space, and our development cycle is complete. Our new resorts will generate more free cash flow, which we plan to utilize to meet our net leverage targets and return to shareholders. Our free cash flow target of $3.50 per share for 2020 is central to our strategy, and we are determined to achieve it. We believe we are in an excellent position to succeed in Japan. Thank you again for being with us, and we are open to your questions.