MGM Resorts International (MGM) — Q2 2020 Earnings Call Transcript

Thank you. This call is being broadcast live on the Internet at investors.mgmresorts.com, and we’ve also furnished our press release on Form 8-K to the SEC. 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 in our filings with the SEC. Except as required by law, we undertake no obligation to update these statements as a result of new information or otherwise. During the call, we will also discuss non-GAAP financial measures in talking about our performance. You can find the reconciliations to GAAP financial measures in our press release and investor presentation, which are available on our website. Finally, the presentation is being recorded. I’ll now turn it over to Bill Hornbuckle.

Thanks, Jim. Thank you all for joining us today. I hope you and your families are safe and well. On the heels of our announcement yesterday, I am pleased and honored to be addressing you as the CEO and president of MGM Resorts. I'd particularly like to thank Paul Salem, our Chairman and the entire board of directors for placing their confidence in me and in our entire management team. This is a vote for them – for not only them, but also myself. They have stepped up during an incredibly challenging time. Our ability to reopen, remain operational and provide world-class experiences is a tribute to our dedicated workforce, engaged Board of Directors, civic leaders across the nation, and a sincere commitment to health and safety by all of us in MGM Resorts and the broader gaming industry. While we are proud of the role we play in helping to restore economic stability to the people and communities that depend on us, we know the public health crisis is far from over. Therefore, we continue to evolve our Seven-Point Safety Plan and our overall response to varying infection rates, including mandating masks at all of our domestic properties, and continuing to manage hotel occupancies and facility capacity. We're committed to learning from each new opening and from each new operational challenge we face. We are focused on implementing our MGM 2020 plan as our revised operating model and remain diligent in effecting and managing costs. We are proactively engaged with local governments, regulators, and public health experts acting as an informed and sought-after voice in conversations about public health and safety trends, restrictions, and protocols as they continue to change and evolve. And we remain focused on ensuring we maintain a strong balance sheet and an operating strategy designed to maximize cash flow despite these very difficult times. Necessarily, our focus is on operating with diligence and restoring stability in the short term. But for many of the reasons I just noted, and more detail we'll get into in a moment, I accepted the role of CEO believing our long-term outlook remains positive and that our future is strong. Our strategy remains unchanged with a discipline focused on operations and execution of targeted growth. With that, let's talk about the quarter and the state of the business. In the second quarter, we opened nine domestic properties and we have subsequently reopened five more. Today we have a total of 14 properties from our 18 if you count the radar at the start of the pandemic. Domestic properties that opened in the second quarter generated positive EBITDAR faster than expected and we saw significant growth in our domestic margins driven by optimizing our business to serve higher quality customers given the pent-up demand, primarily in our casino market side, leveraging our MGM 2020 plan and operating model work to manage costs and discipline. And we remain selective in keeping lower-margin amenities closed. In Las Vegas, revenues of reopened properties declined 50% year-over-year, adjusted property EBITDAR declined 44% and our margins increased roughly 450 basis points over the same period. Despite the lack of conventions, shows, concerts, and sporting events, we leveraged the M life database to drive better than expected demand in quality casino customers. We also had a higher than normal table games hold, which positively impacted our Strip adjusted property EBITDAR by approximately $8 million in the quarter. The transit and wholesale leisure business also performed better than expected as we entered the summer pool season, and as expected driving traffic levels are recovering faster than flying. Looking at the regional operations, second quarter revenues at reopened properties declined 31% year-over-year, and during that period, they were open. Adjusted property EBITDAR was down 14%, but margins increased approximately 880 basis points during that same period. Original operations include large integrated resort properties like those in Las Vegas, which rely on air travel, and lodgers like Beau Rivage and Borgata drive markets which are naturally performing better. During the period, they were open, our drive to regional markets grew EBITDAR by 18% with margin improvement of over 1,400 basis points. We have been encouraged by the dedication of our teams to create high-quality experiences for our guests that they can enjoy and believe our messaging is resonating well in all of our marketplaces. We are diligently focused on managing costs while continuing to do everything necessary to ensure the health and well-being of our guests and our employees. Through closures, we reduced 85% of our operating expenses. And as we reopen, we are managing variable labor to closely match demand. We have also identified certain expenses and amenities that we believe we can eliminate as they are not essential to guest satisfaction or demand. As such, we believe we can reduce our overall domestic operating and corporate costs by approximately $450 million, compared with the 2019 levels. These savings are a combination of the MGM 2020 initiatives that were put in place at the end of 2019. As you heard and remember, yielded tangible results in January and February before the nationwide shutdown, as well as new initiatives that were adopted in a post-COVID world as part of our revised operating model. Therefore, we believe when demand returns, we'll be a much stronger company. In the near term, many of these cost savings will be partially offset by approximately $100 million of annual health and safety expenses for a period of time. Further, as we mentioned last quarter, we remain disciplined on capital spend and have deferred or permanently reduced our domestic CapEx by 50% this year to approximately $200 million. Liquidity is of utmost importance, especially in current times, and we continue to take steps to further bolster our already strong liquidity position. During the second quarter, MGM Resorts, MGM, China, and MGP collectively raised $2.45 billion in the debt capital markets. As of June 30, MGM had over $8 billion of consolidated liquidity and $4.8 billion at our domestic operations, excluding MGM China and MGP. Our current stake in MGP is 57%. In addition to our strong liquidity, we also have the right to have MGP redeem an additional $700 million of OP units under our current agreement for cash. Finally, we anticipated about $270 million of monthly cash outflows while our properties were closed. We did a little better than that in April and May, with our properties beginning to reopen in June, we significantly reduced the cash burn rate, although it remains negative. Turning to our longer-term domestic outlook, all of our Las Vegas properties are open with the exception of Mirage, Park MGM, Nomad, and six of the eight regional properties have opened. We just announced that MGM Grand Detroit will open to the public on August 7, with VIP guests coming in a couple of days before and Empire City, as you presumably know, will be the last to open out of our regionals. Currently, in Las Vegas, COVID-related headlines continue to have a meaningful impact on booking trends and cancellations. Candidly, our visibility is limited to booking windows that are currently less than a week. We're seeing slower occupancies on the weekdays, and we're offsetting this on the weekends with demand where the demand is far more robust. All of our reopened Las Vegas properties are burning less cash and with the exception of Mandalay Bay are currently EBITDAR positive. However, we continue to believe that material recovery will be dependent on the return of conventions, entertainment, and significant air travel. We continue to see strong results in July at all of our regional properties and our drive-to properties continue to show EBITDAR growth and margin improvement, and our integrated resort properties are ramping up. We're encouraged by the relative stability and demand that we have seen thus far. The current situation, however, is fluid; further openings of our Las Vegas resorts, as well as amenities across our domestic properties, will continue to be based on expectations for demand and maximizing cash flow while balancing the needs of our guests, our employees, local regulators, and other significant stakeholders. Despite the current challenges, there are two important assurances. First, we absolutely believe the fundamentals of our business and industry have not changed and will ultimately recover. And second, our cost-saving efforts are yielding tangible and visible results. Taken together, this means we're poised to emerge from a crisis as a stronger, more efficient, and sustainable company. Moving on to BetMGM, we're focused on targeting growth opportunities. We're excited to announce that just a few weeks ago, MGM and GVC have committed to an additional $250 million of capital in support of our sports betting vertical BetMGM. This brings our total capital commitment to $450 million and demonstrates our continued commitment to positioning BetMGM as a leader in sports betting and iGaming. BetMGM is a business that was created from scratch and is now showing strong momentum. Evidence of this can be seen in what we've been able to achieve in New Jersey, where BetMGM has gained market share and significant growth in iGaming revenues. Driven by this success, BetMGM is now on track to generate over $130 million of net revenues this year. We have secured access in 19 states, are live in seven states, and expect to be live in 11 by year-end. We also feel that our omni-channel experience is unmatched and a significant competitive advantage in this space. BetMGM offers a consistent experience through its web, mobile, and desktop platforms, as well as at all of our U.S. land-based resorts, a clear differentiating factor nobody else can claim. The new BetMGM app officially started to roll out last fall in New Jersey and launched in Las Vegas and Michigan right before the shutdown in March. Equally as important, we believe BetMGM will allow us to more frequently engage with our guests and drive deeper loyalty to the MGM brand. To that end, BetMGM achieved a major milestone last week. We integrated our M life customer loyalty program with the BetMGM platform. Players will now be able to view their M life Tier status and Tier credits over time and ultimately redeem credits for MGM experiences beyond sports betting and iGaming. In addition, through our 34 million M life database, we also believe we have the right partners to drive efficient customer acquisition players, professional sports leagues and partnerships, as well as exclusive deals with Buffalo Wild Wings and Yahoo Sports. In fact, we just launched into Yahoo's 64 million monthly active users last week. We made a lot of progress, but there's a lot more to be done. Since launching, we've begun – we have become convinced that the market opportunity is larger and will develop more rapidly in the U.S. We believe that we have the assets to be a long-term winner in this space and we are focused on execution to unlock true value. We continue to believe strongly that this is the largest growth opportunity in U.S. gaming. Having covered the U.S., let's spend a few moments on Macau. While MGM China properties were opened in the second quarter, the Macau market continued to experience significant year-over-year declines driven by border and travel restrictions, driving second-quarter market-wide GGR down 96% and visitation nearly down 100%. A couple of weeks ago, the 14-day mandatory quarantine between Guangdong and Macau was lifted to certain major cities within Guangdong and yesterday, it was extended to the entire province. Today, we heard that Mainland China was resuming the issuance of visas with the exception of tourist visas starting on August 12. These are initial steps in an encouraging direction. However, Hong Kong's borders remain shut and the IBS and tour visa programs have not yet restarted, which we believe is necessary for a meaningful recovery. MGM China's monthly cash outflow is currently about $65 million a month, and with $1.5 billion of liquidity, they have over 22 months of buffer in the near revenue scenario. We continue to believe that this market can recover quickly once the current restrictions are lifted. We have an experienced leadership team who is ready when that time comes. Speaking of leadership, we recently announced the departure of Grant Bowie as CEO of MGM China. Grant was with the company for over 12 years and the industry for longer, and he had deep experience and knowledge in the marketplace. While he is no longer involved in the day-to-day, he's on retainer to help us with key strategic opportunities over the next couple of years. We've had a seamless transition with Joint Presidents both Hubert Wang and Kenneth Feng, taking on new leadership roles last year as COO and CFO respectively in preparation for this development. The MGM China team is in great hands; Pansy as Co-chair and I as Chair will continue to be deeply involved, providing additional continuity and strategic leadership. In closing, our long-term outlook remains fundamentally unchanged. I draw confidence from five key advantages. One, the strong MGM 2020 plan implemented even before COVID and our revised operating model work has created $450 million in permanent cost savings to our business, meaning when we recover from this crisis, we will be a stronger company. Two, our proven ability to learn quickly and adapt swiftly. Our skilled and sophisticated operators have affirmed this during the crisis. Three, the high quality of our assets and our market leadership across the U.S., where we have a significant presence. Four and maybe most notably, our people, who despite extraordinary stress and hardship, have shown up to deliver safe, welcoming and entertaining experiences for our guests. Finally, an amazingly strong balance sheet will help us weather the storm. Furthermore, while we are currently focused on day-to-day operations, we continue to make progress in our key growth opportunities, developing BetMGM as a leader in U.S. sports betting and iGaming, expanding our footprint in Macau, and relicensing and developing a world-class integrated resort in Osaka with our partner Orix, which we remain excited about and committed to. For these reasons and many more, I was proud to lead MGM Resorts through this period of uncertainty towards a more promising future. With that, we'll be happy to take your questions. Thank you.

Good afternoon, everybody. Bill, congratulations.

Thank you, Joe.

And unsurprising.

Thank you.

Hopeful and surprising, maybe. Is that my first question; my follow-up questions relate to Las Vegas. I'm estimating that the reopened Las Vegas Strip properties in June generated about $50 million of EBITDAR, with margins of about 33%. Are these five properties ramping run rate EBITDAR higher or lower in July and have the three newly reopened properties had any kind of cannibalization impact and are they generating positive EBITDAR? I heard your comment about Mandalay Bay and then I have a follow-up.

Yeah, let me start it off and then obviously Corey can pick up with some limited detail. Look Joe, obviously there was a great deal of pent-up demand leading into June. And so we saw it. And then I think you all saw and heard, clearly the national news that impacted the Southwest and Las Vegas. And so we were off to a strong start. Our casino segment responded well, about a third of our market mix was casino. There was pent-up demand there. And so we got off to a really good start clearly here in Las Vegas and regionally as well, at least on those properties we've had open. July stabilized for lack of a better word. We have not seen, nor would we have opened because we took into consideration as we opened each property, what the cannibalization would be and so we believed as we opened each property that we'd be net benefit cash, we get more people back to work and then ultimately in the long run that would serve us well. Corey, I don’t know if you want to answer any of the specifics.

No, just going into a little bit in July, Joe, as a reminder, we held pretty well in June, which helped not only the EBIT and the margin. As Bill mentioned, the color is on the weekdays, reeking out some profit in some places while others were burning less cash and the weekends continued to perform the way that they performed in June. So all in all, I think Las Vegas is challenging. But the trends in July are a little bit less than they were in June because of the hold. But I think we're seeing some pretty strong demand in our limited capacity on the weekends.

Just on the pace or the rate of Strip property reopening, I'll be happy to see them open, but the pace seemed—I don’t know if 'hurried' is the right word, but at an accelerated level that kind of surprised us. Why wasn't there a more measured staggering or spread of property openings? And maybe I'll help you answer that question. What is the difference between keeping the say core Strip property closed and opening it with limited demand in terms of daily OpEx run rate levels?

Well, I guess at 40,000 feet sticking to what we said earlier, the only place not making cash flow positive is Mandalay. So collectively we've made the right decisions. Remembering there are a series of protocols throughout all of our properties regionally, most notably Las Vegas, that tie us to social distancing, how many people are allowed in the gaming positions or at the gaming table. The pool has been a big restrictor in terms of an amenity that people want and frankly need, especially in a summertime resort environment. And so we were answering to demand. We're running roughly 30% midweek and 50% on weekends and we believe overall—and we've proven it to date, we can continue to make a profit at that; but remember, there are a lot of protocols put on us. If you go into a restaurant, it's at 50% capacity at best case, and so it is about—you can only get so much in so far with the restrictions we have on us and frankly, we thought it was important to keep the brands alive and keep people motivated and excited to come to Las Vegas.

And Joe, what I would add is as we approach this because of the way we approached it, getting all the cost out of the organization right away, we've been able to staff based on demand and to Bill's point, we are able to burn less cash even at low occupancies on the weekdays. So from an MGM perspective, we think we're increasing our EBITDAR by having these properties open, even though we may not be making a ton of profit on the weekdays.

That was great. Thank you very much, guys.

Thanks, Joe.

Good afternoon. Just focusing on sports betting and iGaming, you highlighted your impressive share in iGaming and our numbers that you've been taking share in sports betting too. I'm curious if you can just talk about some of the initiatives that drove the higher share. I mean, you mentioned you launched M life, but that was relatively recent, but can you just talk about more of the things you've been doing? Thank you.

Look, like any large-scale organizations, we were large scale, GVC just getting the business to operate was its first hurdle. Then getting it oriented, particularly on the sports side to U.S. customers, U.S. betting behaviors was an education. And then candidly understanding what it was going to take to win the market and win the day was just that, more marketing, more dollars, more commitment to it. So we got aggressive and frankly, we're going to continue to be aggressive. We think there are three or four key winners in this space and we intend to be one of them. Hence the reason for the doubling down if you will, with additional investment both from GVC and ourselves. And it's hard to catch up when you're behind in a market like New Jersey. We have viable and significant competitors. But our brands do stand for something and the fact that people can come on, do a loyalty experience and ultimately translate it into a brick-and-mortar real experience is a key differentiator that I think long-term is going to pay dividends. So we’ve simply turned it up and gotten aggressive. Because of COVID iGaming, it's paid off. We're gaining share in sports; I think we're up, I mean, to count ping pong sports, but we're up to 7%. We have high hopes for Michigan and some of the other states we've just launched in.

Helpful color and then on the brick-and-mortar side, and maybe specifically around Vegas, what do you see in terms of customers coming back? I would expect you haven't had the properties open that much, but the experiences fundamentally changed for the time being. Are you still seeing people come back at the same rate?

When you say the same rate. I mean, look, the average customer, remember Las Vegas comes like 1.2 times a year, our average M life customer comes in between three and five. So the cycle's been too early to tell. We've seen some repeat. But again, remember my comment earlier, the booking cycle is literally five or six days. Some are motivated by a promotion, particularly the casino marketing, those that are near and dear to their heart and some are motivated by news or not as the case may be. So frankly, Tom, it’s just too early to tell, I think.

Got you, thanks.

Thanks, Tom.

Thanks. Two follow-ups, first on sports and iGaming, as you look at the growth in New Jersey both before and after COVID. How would you characterize the customer demographic of iGaming and how much is incremental versus your existing brick-and-mortar customer and does that iGaming customer differ from sports betting customers?

I'll take a first shot at that. Look, there is clearly some overlap between our customer database and what the iGaming market was. I just told you, we just integrated M life. So it wasn't like it was an extensive M life integration. So those were self-defined customers that were motivated by the promotion and the activity case around the market. We can and will do, I think a much better job gaining them. There is overlap; 20% to 30% I think of iGamers or sports bettors and vice versa, give or take. I think you'll see a lot of that convergence as we go forward. The ability to equally promote and give rewards against both activity cases I think we'll grow that and scale the convergence back and forth. It's only – obviously, we've only had Borgata open a couple of weeks, but I can tell you two weeks ago was our best iGaming week after Borgata opened in our history. I can tell you that as a point.

Great, and as a follow-up on Las Vegas, perhaps I missed this. But can you just talk a little bit more about what you're seeing on the group side? And maybe even what would normally be the group percentage at this point of the year in June and July versus as we're looking at 3Q, 4Q?

Well, let me give you the macro and then Corey can get into the specifics. Look, we've launched just over two million group room nights; 83% give or take have been in 2020. As you probably heard, CES trickled into the first quarter. And so we're losing some activity in the first quarter. The flip side of that, and why I am fundamentally solid on our business is that we've only lost two groups of substance beyond the first quarter of next year. What groups are saying and what they're doing is they're hanging in as long as they possibly can. Fundamentally, they want to come back. They understand this experience; they want and need it. I think we're ideally positioned given our scale with that, like 3.7 million square feet of space to spread groups out and create meaningful opportunities for them as they think about coming back. But in the short-term, it's going to be challenging. Corey, the numbers.

Yeah, in the second quarter and third quarter, this is an area where Las Vegas has done a really good job over the last three years, and we were able to get our mix up in the high teens. Pre you know what, three, four years ago that used to be a low high single-digit, low double-digit occupancy percentage. So the summer is usually not as much on the convention side as we would expect to see in the fourth quarter.

Got it helpful. Best of luck into the back half. Thanks so much.

Hi, good afternoon, everyone, and congratulations Bill. So I just wanted to ask you about the Vegas margin piece a little bit more. So specifically, it sounds like there was clearly some hold benefit in the quarter, so when we look at the 450 basis points of improvement that you saw, could you help us split out just for the operating piece that was open what maybe the hold impact on that was? And then probably much more importantly, can we just talk a little bit about kind of your thoughts on perhaps when things do normalize and stabilize out, probably several years from here is that 450 basis points sustainable for Vegas? Or how much of that do you kind of think sticks when you think through some of the initiatives that you've made, the complexing of the property presidents, et cetera?

Let me take the second one first, and I'll turn the first one back over to Corey. Look, we think the 450 million we talked about earlier in my prepared comments is sustainable and we think it's real. It's a combination of about half of it comes—a little less than half carryover from 2020; part of it is the restructuring of the organization that we did during COVID, and part of it is just other margin increase programs in terms of amenities and things we've consciously made a decision to candidly never go back to, just a keen focus on the broader pieces of our business. So the 450 is sustainable. You may recall we'd spoken about margins that were historically over 30%. So it means—in terms of how we looked at 2020, initially before this all hit. So I'd like to think we can improve on that with the 450. But I think to your comment, we've got a long way to go before we get back to ‘19 levels. So Corey?

Yeah. So, of the 450 we would be up about 100 basis points on hold. Just as a reminder, our biggest impact is on the hotel side and that is a very high-margin business that will always impact our hold. But as we look forward in the future, as Bill mentioned, with the 450 of savings in there, that should be equal to 4.5% of basis points and put that to where we were in the past in ’19 and I think you'll see margins that are exceeding what we had even before 2019.

Great, Corey. And that sort of builds on the Vegas follow-up, which is really, a portion of the 2020 plan was obviously in process throughout 2019. I think some significant run rates had been hit by the third and fourth quarters, if I recall correctly, though, obviously, has changed over the last six months. But is a portion of the 160 sort of like already in the base, if you will, or can we look at that 450 million I'm speaking to as basically entirely incremental to where we started 2020?

It's all incremental, though the run rate did not include this 160. A lot of these initiatives were implemented in the third or fourth quarter last year, including some of the things we talked about: robot bars, cashiering, a lot of the components that we started really seeing the benefits in January and February. As Bill mentioned, the remaining amount, the corporate expense, the flattening of the properties, the operational processes, all that work was done while we were closed and working with our portfolio presidents and our properties and our CLEs on how fast they were able to move and how quickly we’re able to identify those areas. We feel really comfortable about the number.

And Shaun, maybe a little more color: COVID pushed us quickly into the digital world, frankly, faster than we would have otherwise gotten there. So today, 25% to 30% of our market mix is—our customers are checking in digitally; they never come by the front desk. Their iPhone is basically their room key. And that is before business and corporate America shows up. And so obviously, there's a greater—we believe a greater likelihood they'll even use that. That is an experience. It's seamless; you don't have to wait in a line. It's effective. It's working. We're now launching literally this week, the same thing for menus and ordering food, all digitized—you have to make a phone call. This is helping us get really efficient and effective in many of the operating things that we've done. Our basis will improve; that 450 we think is very, very real.

Thank you, everyone.

Hi, thank you so much. I will add to the list of folks who are congratulating you Bill.

Thank you, Felicia.

Sure. So looking at the 450 basis point improvement that you saw on the Strip and then AED on the regional, Corey, just wondering, is that a good metric to use as we're trying to figure out what your monthly OpEx is today in both of those areas?

I think, to look at it from that, there are so many variables, and obviously, the high quality of customers, the pent-up demand, the revenue side, I think is something obviously we can't control as much as the cost. We're really comfortable with where our labor components are. We have brought back less than 50% of our employees based on what we're allowed to do, and I'm not sure we'll see a change in that anytime in the near future. So just as a reminder, and Bill said this in his opening remarks, we took out 85% of our costs. We're running about $20 million a day in payroll or in total cost where actually when we were closed, we were running about $3 million a day. Payroll is our biggest expense being under 50%, I think you guys could probably do some work there and get to a number.

Okay. Thank you. And then just, Hubert, get you going here.

Hi, Felicia.

How are you? So there was an announcement today that China confronted that the visas were going to be issued to Guangdong residents for business travel and families, not tourists. So just wondering how you're viewing that announcement? And do you think it's a good leading indicator for the IVS? And also, is it fair to assume that people who have a business visa could potentially be visiting the casinos?

Yeah, so let's go back a little bit just to see what has happened since mid-July this year. First of all, in July, the quarantine was lifted for these cities. And then, yes, the quarantine was lifted for the entire Guangdong Province. The news came out also that non-tourist visas will be issued on August 12. You can see a pattern that every two weeks there are some new developments and loosening of the border restrictions. These are magic steps, I believe, towards IVS resumption in the end, and we believe that this will happen sometime in mid-September, or could be even a little bit earlier if you go by the two-week intervals, maybe starting with Guangdong Province. In terms of business impact, those people with business visas prior to COVID-19 or when they obtain the business visa, yes, they will be able to travel to Macau. When they return, they won't be subject to quarantine. This will be helpful to our business.

Okay, that's a very helpful overview. Appreciate it.

Hey, guys, thank you and Bill congratulations.

Thanks, Carlo.

Just a quick housekeeping one and I'm not sure Corey if you have this information, but for your Las Vegas operations, could you quantify what the negative EBITDAR was for the period of April and May prior to the opening?

You know what, Carlo, we'll come back to you on it. Give Cathy and Jim a call; I think we'll be able to get to those numbers.

Got it, thank you. I'll do that and just holistically with respect to kind of the invited guests and things like that that you started with and then kind of opening to a broader subset. If you guys could kind of just talk about what you're seeing kind of post that really opening period that you kind of focused on your better M life customers and what you're seeing maybe more recently as we moved into July or four weeks from specific property opening and whether or not there's a meaningful bifurcation of the trend that you're seeing in the regional assets versus your Las Vegas assets.

Let me kick it off, Carlo. The regional assets remain strong. The biggest restrictor, I use National Harbor as the example, where we're doing exceptionally well since opening is the number of gaming positions; it’s the restrictions around what the government has placed on us in terms of gaming positions, things that you can do, etc., the number of units that are actually open on the floor, the RevPARs, if you will, and more applicable I think here in Las Vegas are up like 25%. Back to the regionals, they remain strong and consistent, particularly in places like Tunica, Ohio, National Harbor where there's real drive in places like the Beau and Atlantic City. It’s too early to tell. In Atlantic City, there are very difficult restrictions where you have to literally eat outside. The first three days we were open to rain; that was a pleasurable experience. But even at the Beau, we're just now getting back into our summer air program. You know, air is critical to feed that market in that property. But the pure driving properties are doing exceptionally well here. It's been consistent. Yes, the tampering a couple of weeks ago of news around increasing COVID cases and the whole Southwest going red, if you will, every time you turned on CNN has been a challenge, but not really in that segment. It's more about leisure coming and going, and again, like I said, it’s a short-term window even for casino customers, but we've seen a lot of high-end action. I mean, you heard the number for even for June. We continue to see that mostly through the weekends.

Understood. Thank you very much, guys.

Thanks, Carlo.

Thanks for taking my question and congratulations, Bill.

Thank you.

Speaking on Las Vegas, you touched on the convention market in 2020 actually holding in quite strong or 2021 on there. So how should we think about the entertainment, the residencies, or those types of events? How quickly can these be reprogrammed once we get a vaccine and airlift is sufficient? Thanks.

Yeah. Well, once we get to an environment where we can fill a better part of 50% of those venues, and that's really up to the government more than anything. We have an opportunity. Using 'O' as the most significant example, we've been looking at how long would it take to gear it up and it's between three and four weeks. The great news is the vast majority of those performers still reside in Southern Nevada. They've not left the community because candidly, there's not a lot of places for them to go in this world. Everyone’s hanging in there waiting. Obviously, in Cirque’s case, they're going through a bankruptcy. In every case, everyone we've talked to who are that we're seeking to control that company, recognizing and understanding that Las Vegas is basically the foundation of that company. We have high hopes for Cirque. Some of our smaller shows are easier. The comedians could be back in a week or so. Some of the larger events, of course, whether it's sporting, T-Mobile, etc., you can't necessarily do it at 50%. We’re going to have to wait, I think, unless the artists themselves are prepared to do different economics, and to date they have not. You're going to likely wait to see a full recovery for T-Mobile to host 20,000 people for your favorite artist.

Thank you. And then on I guess, medium-term regional gaming margin expectations, a lot of your competitors are massively reducing labor and marketing starting from a fresh sheet of paper. I think you guys were right around 27%, 28% pre-COVID. Do you have an updated view on kind of where this could go if revenues are close to normal, just a different level of expense expectations?

Yeah, I think—this is Corey. Obviously, we have observed the same types of trends and we would expect some of these costs not to come back, and they are part of the numbers we’ve given you as the cost savings. I think the bigger—the cost structure I think is pretty predictable. I think it's the revenue structure and the top line on how strong that could remain given the CARES Act is going to—the unemployment is actually going to go away. I think you had a pent-up demand where some of your players who used to come weekly had a big wallet. To see how that fulfills and how long that lasts, that's going to be the important thing to determine what the margins are going to be at those properties.

Thank you.

Hi, everyone, and I’ll join in, congratulations, Bill.

Thank you, John.

I'm glad to maybe Bill get your—a little bit more update, if any, on Japan, kind of near-term, medium-term milestones. Obviously, a lot has gotten brushed to the side a little bit as we all deal with the pandemic, but wondering if you could give us a little bit more information on kind of what you're looking for over the next couple of months as it relates to moving forward in Osaka.

Sure. I think as everybody knows on the phone, we have a really great partnership we formed after a lot of hard work for many years with Orix. At the end of the day, we'll have between a 40% and 45% stake in that operation. We see over the next couple of months—we were prepared by the end of July, which was the latest deadline to submit an RFP. That process has been stopped. We don't have an extension date yet, but we believe that it will be delayed presumably to the first part of next year; officially, we don't know that yet, but that's the presumption. We are ready to submit either way. As you know, there's a great deal of things to be worked out there, and we’ll only make this investment if we think it's going to be prudent, if we think it's going to pay the kind of returns that it needs, and to meet our expectations. So there's a long way to go. We love where we're sitting. We love the opportunity in Osaka; we love our partner in Orix; we like that we're not fully all in on this investment. We like the fact that there's probably going to be a delay and the reopening of some of the conversations that will hopefully make this a better investment for anybody interested in it, most notably us.

Thanks, Bill. That's helpful. And if I could bring one back to Las Vegas, maybe a little bit abstract, but I'll take a shot at it. When you talk, Corey, to group and meeting planners and they look ahead, you've indicated that particularly outside of 1Q of next year, demand is holding up and attrition has been eliminated. What do they need to see—what are they telling you? Level of comfort? I mean, what are they looking for to get going again? And maybe the direct question is beyond cancellations, are you still seeing people book long routes a year, two years out for larger events? Has that business kind of continued to go? Or I mean, planners are really looking forward to getting back to, I guess, what are they telling you—kind of what are they thinking about as they think about planning the next couple of meetings ahead? Is there kind of any insight you could offer into kind of the customer behavior on the event planning side would be helpful.

Yeah, I could tell you this definitively: over half of the groups have rebooked for future dates. So of the two million room nights I mentioned, many of them have asked to rebook. The ultimate desire to want to come back is in fact in play, whether it's an extension in 24, whether it's let's go earlier next year versus later this year. There is an appetite to do that. They have become very comfortable generally speaking with the safety protocols that Las Vegas has put in place. Our team has been extensively involved with national organizations around with meeting planners, MPI and others around what's required, what's needed, what's necessary, and what are people thinking about, and what the companies are thinking about to make sure the experience is safe. Obviously, a lot of it has to do with just the incidence of COVID cases, getting that back under control, opening up the airline inventory—not as much about will it be ultimately safe when I get there in the environment we've created. We think we've managed to convince customers that once you get here it will be. It's frankly our ability to get them here and our ability to host them at scale. Right now, we're restricted to no more than 50 people. But again, it's—I think the predominant reason I have long-term fundamental belief that we're going to be fine. That group which is really the only window we have into the future has been very promising and very deliberate about wanting to stay engaged. Anyone who sells products, most notably, and it happens often in Las Vegas, whether CES or corporate America that comes here, we got to get in front of people to sell product. You think about the tech companies we host, you think about the trade shows that come to Las Vegas and our company at Mandalay. It's not all; a vast majority of it is about sales. You've got to do that one-on-one. They are anxious to return to that to grow their own revenues.

The other thing I'd add, John, look, I think it's individually these groups are trying to figure out how to do this. Just this week you heard CES canceled, but on the same day, CEMA, who’s supposed to be in here in November is saying they want to be here. They are hoping to be here, and it will all be about the COVID test numbers. Not that we think it's going to be great over the next few quarters. There are opportunities where you'll see some groups meeting. We have to add our first group, although be it small at Luxor today on, but I think people are dying to get back in meeting, but they want to do it in a safe and in the right environment.

Just to set the stage; I mean, look, we think the first half of the year is going to be hampered. Obviously, the first quarter is, then you run into summer, so it's going to take probably a full year from now before we get back into real mode. Group business takes time—if it hadn't pre-booked, it takes time to rebook. So we don't—we're optimistic, but we want to be realistic with you all.

Bill and Corey thanks. I think I didn’t articulate my question that well, but you certainly answered it. Thank you.

Thank you.

Hey, first off congrats, Bill. I guess I'd start with you in your new permanent role. Are there any new maybe longer-term philosophical or strategic changes you'd evaluate; maybe it could be the composition of the property portfolio or anything else worth highlighting.

I’ll tell you some of the operating principles and sum up how we're thinking about both short, mid, and longer term. First and foremost, it's ensuring that we're extremely disciplined. We got a little less than, frankly, at times, we saw ourselves in things that maybe didn't matter as much to the ultimate bottom line, which took time, energy, and manpower. Being disciplined is incredibly important. Being laser-focused on our expenses. We have heard you loud and clear, although I haven't been on this speaker as much, sat in this room for the last couple years and heard you loud and clear on margins. Being laser-focused on that and being transparent about where we are. I think those are some operating disciplines that hopefully we can deliver to all of you. In terms of the longer-term, you heard us say it: sports betting is a push now; it's not even midterm. We're in a board call today for several hours about where we go on what we do, how we’re investing, how aggressive we are going to be, and where we’re going to do it. The governmental affairs and push, if you will, to open up additional marketplaces where we see optimism in the long-term – short and long-term actually. My other bigger push, and that’s why I'm so focused on Japan and ultimately, Macau, its growth and its relicensing is to put this company in a place where it's extremely well balanced, where half of our revenues, give or take, are coming from Asia, where 30%, 35% are coming from Las Vegas in the balance or regional, where irrespective of what's happening in the world, we probably have—and hopefully—have the most balanced portfolio there is. We're not really in the M&A mode right now. We're still asset-light; we believe in that original strategy. The world has changed. Of course we will look at that and all things that are tied to that over the long – over the next and pending year, give or take. But I think longer-term, Asia is a big push. Now, it's about sports betting. And really the key thing for us to do is to not only survive this year, but learn from it and structure an organization that's really prepared to take advantage of what it's created over so many years of hard work.

Great, that's really helpful. And then maybe just diving deeper into the margin. Is it possible to give some examples of those lower value amenities that might not come back? I know non-gaming is such a big part of your business, so—and competitors have talked about stuff like buffets, but I guess that's more in the regional markets where the mix is different. Any examples I think might be helpful.

Well, look, I think buffets, not only in the regions, but I think in Las Vegas, does every property have to have a buffet? Does every property have to have full room service? We think we will look to see do we have too many slot machines? Are the floors too big based on the fact that they were built a long time ago? There are a lot of opportunities in all these areas that we think now's the time to really zone in on it; now's the time to experiment and try things. The risk of failing is more than outweighed by the benefits of what we could learn. We look for some more opportunities that hopefully we'll be able to talk to you about in the future quarters.

Great, thank you so much.

Great, thanks. I know that you talked a bit about group already, but can you talk a little bit about—you said limited cancellations after Q1; does that mean Q1 group is itself mostly cancelled? Then the second question is with a lot of your properties open for going on two months. When do you expect that 50-person limit might be revisited? Thanks.

Well, let me work backwards. The governor has gone from a three-phase approach, where we were opened in the second phase, meaning here in Nevada, not the regionals. The third phase was going to be the lift, among many things, the 50 cap for gathering. He's now broken that down and he's going to take it day by day; you've probably heard. If you go back a couple weeks ago, we're in the high teens to 20% testing ratio of COVID to positive cases. That number has come down dramatically over the last 10 days, thankfully, and so now we're down at an average down to about 35%, a seven-day positivity rate of about 8.5%. He will look closely at that. He'll look closely at deaths and more importantly, he'll look at ICU beds and what's going on in the hospitals. The good news in both those cases have been relatively stable, because it's got to make sure the environment here is capable of handling what comes its way in terms of COVID and people who need ventilators, etc. That's what's on his mind. He put it off until September, so you won't—I don't think he'll say anything in August in terms of gatherings, it’s my general view. I had the opportunity to talk to him often; he's very transparent. I think post that we’ll begin to hopefully get somewhere. We had originally talked about 50% or up to 750 people, is the next step. If we can get our prevalence rate back down to single—low single digits, maybe we can get back on that conversation. But interim, I think we're six weeks, four to six weeks away from a real conversation there and with some real success, if you will, and driving down these rates. As it relates to the first quarter, the cancellations have begun to seep into there, for sure. Again, the benchmark is now CES, which will be a meaningful miss. Every week that goes by a meeting planner has to ask themselves, is the time, energy and money I'm going to spend in advance of something that may or may not happen worth it? Not that do I want to go or not. To the extent we can get some rulings in the next four or six weeks, that'll help slow that conversation. And right now we're in the middle of that quarter. If it goes on another month, it may go to the end of that quarter. And so the story goes.

Okay, great. Thanks very much. Thanks.

We'll take the last question.

Hi, good afternoon, everyone. Congrats, Bill, and very much enjoyed you sharing your time and attention.

Thank you.

I just wanted to—you’ve given out quite a bit of information. I just wanted to hear you contemplate the notion of certain properties that may remain closed. Could we be in a situation where the portfolio is partially opened for an extended period of time? How have you thought about the range of contingencies that are out there given just how fluid this whole situation has been?

Look, with any intent, we have no intent of retreading unless, God forbid we run into a problem. So let's start with that basic assumption. After Michigan opens on the 5th or 7th for public, it will be down to Empire. You guys know the New York story better than I do. The governor's very cautious, but I have to think and believe post-Labor Day we’ll have a very earnest if not before conversation around that. That's a huge taxpayer given the way that's structured for the state, and we all know the state coffers in this challenging environment. As it relates to Las Vegas, remembering we're down two properties, Mirage is important to us. It's an amazing brand. Holy smokes, I opened it back in 1989, God forbid. The reality is particularly midweek unless we see an increase in demand. I'm not worried about Labor Day because the numbers you’re looking at fit quite well for there. We were taking reservations through August. We've moved it now to August 27, and that's Park MGM, Nomad, and Mirage. We’ll see in a couple weeks how we feel about that again. We know Labor Day will be fine, but I do want to understand how people are thinking about school, no school; is summer travel going to extend itself into September? By the way, September is probably the prettiest month of the year here, particularly for the pool and resort experience. If kids aren't back in school, it would just be an extended summer. We just don't know yet. It’s not our intent though to keep them closed forever; obviously, Park MGM was a building brand and a new brand. We might take a look at Nomad first and then maybe the bounce of the property, but we just don't know. I can't imagine—it could be, so I’ll be careful what I say here—an environment where they're closed for the balance of the year; that I will say, and hopefully, we can get there sooner.

And I think a lot of it is going to be based on COVID numbers because the bookings we're seeing in Las Vegas, the gross bookings are fairly consistent; they've been pretty decent. It's when we see the demand start suffering is when COVID numbers spike up, and we start seeing some cancellations. When those numbers are down, the cancellations are reduced, and we start seeing some additional rooms picking up. If we could keep the COVID numbers down, things start flowing in a positive way, and hopefully, we could get these properties open. We want to get employees back to work and get the Strip going to where it needs to be.

All right, and if I can ask one very short follow-up Bill, in response to your thoughtful vision of balancing the company just a bit more, could that potentially include divesting some domestic assets entirely?

Look, everything's on the table; everything's off it. There's no discussion around that at this point. We want to get through this immediate crisis. We'll take a broader perspective on what's best for—where we are with liquidity, the balance sheet at that time, and where the industry is going or has gone. Of course, we're not going to rule anything out, but it's certainly not an expectation that we would offer up a property or properties today.

Understood. Thank you very much and good night.

Okay, thank you all.

Thank you.