MGM Resorts International (MGM) — Q3 2021 Earnings Call Transcript

Thank you, Chad. This call is being broadcast live on the Internet at investors.mgmresorts.com, and we have also furnished our press release on Form 8-K to the SEC. On this call, we'll 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 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 or otherwise. During the call, we will also discuss non-GAAP financial measures in talking about our performance. You can find the reconciliation to GAAP financial measures in our press release and investor presentation, which are available on our website. Finally, this presentation is being recorded. I will now turn it over to Bill Hornbuckle.

Thank you, Cathy and thank you all for joining us today. Well, we delivered another quarter of strong domestic results with our Las Vegas Strip and regional segments reaching all-time adjusted property EBITDA records in the third quarter. I remain in awe of what our talented teams have accomplished this year given the ongoing COVID pandemic. We are emerging as a stronger company, with a sharpened focus on operational efficiencies and providing the best experiences for our guests as we carry up the vision to become the world's premier gaming entertainment company. I continue to express my sincere pride and gratitude for the tremendous effort of our employees who are the foundation upon which we built our strategic plan and long-term vision. As a reminder, our strategic plan consists of the following four key elements: investing in our people and planet, providing unique experiences for guests by leveraging data-driven consumer insights and digital capabilities, delivering operational excellence at every level, and allocating our capital responsibly to yield high returns to our shareholders. In our last earnings call, we discussed the meaningful steps our company had taken to simplify our story and monetize our real estate. We have reached a number of milestones in this regard. In August, we announced a transaction with VICI and MGP to redeem the majority of our operating partnership units and deconsolidate MGP within our financial reporting structure. In September, we acquired the other 50% interest in CityCenter, monetizing its underlying real estate and are now proud owners of 100% of its operations. In October, we monetized MGM Springfield's underlying real estate as well. And these transactions grant us the financial flexibility to take front-footed actions to invest in our core business and maximize growth and pursue opportunities that align with our long-term vision. For example, this quarter, we announced an agreement to acquire the operations of the Cosmopolitan in Las Vegas, a high-quality result with enviable product offerings, strong brand awareness, and a complementary customer base, making it an ideal addition to our Las Vegas Strip portfolio. We also believe that the synergies we have identified are highly achievable. We are incredibly excited to welcome the Cosmopolitan team to the MGM Resorts family pending the transaction closing next year. Now, I've mentioned in the past that we are happy with the amount of exposure we currently have in Las Vegas. As such, we're currently in the early stages of a process to sell the operations of the Mirage. Doing so will allow us to maintain our existing Las Vegas exposure while focusing on the complementary and diverse nature of our offerings in our hometown. I spent the early part of my career at Mirage, having been part of that team's opening at the property in 1989. It's a historic property with great brand recognition and a strong, loyal customer following. The campus also sits on approximately 77 acres that provides attractive development opportunities to capture significant amounts of foot traffic. Mirage has served well over the years, and we're certain it will remain a success with a new operator in the future. Importantly, I want to thank our valued team members at The Mirage. They are an integral part of what makes that property so special, and I know they will remain strong ambassadors of the brand during this transition. We also remain keen on diversifying our business and further expanding our operations globally. To that end, in September, we announced that our MGM Orix consortium had achieved a milestone in Japan, having been selected as Osaka's partner to build and operate a world-class integrated resort. We are now working with Oryx in the city to submit an area development plan to the central government in the coming months and are hopeful and confident that we'll be awarded a license next year. Outside of Japan, we will continue to study key U.S. regional markets of significance. This includes the commercial gaming license in New York, for which we believe MGM is well-positioned given our existing operations at Empire City. Moving onto BetMGM. Our sports betting and iGaming venture continues to build on its success every quarter. In the third quarter, BetMGM launched in three new states: Arizona, South Dakota, and Wyoming. Within a short 9-day period, BetMGM is now live in 16 markets and is well on its way to 20 by the end of the first quarter of 2022. In the three months ending August, BetMGM commanded a 23% share nationwide in both U.S. sports betting and iGaming. In the month of August, we believe BetMGM was competing for first place driven by iGaming in which BetMGM remains the clear leader with a 32% market share. We're in the middle of the NFL season, and the market remains competitive. However, the team has performed exceptionally well, focusing on ROI and positive marketing spend, and we are encouraged to see early signs of a more rational environment as the season progresses. But MGM's continued momentum through this year has been extraordinary, and we expect full-year 2021 net revenues associated with BetMGM will be in excess of $800 million. Finally, when we think about our opportunities for organic growth in our core business, we have a great network of premier properties across the U.S. that we believe we can better leverage to drive customer choice, increase loyalty, and maximize wallet share over time. For example, we recently launched a new tailgating experience at Mandalay for events at Allegiant Stadium. We've hosted Bruno Mars and Lady Gaga's concerts at Park MGM and completed our room remodels of Bellagio's main tower, as well as the Pyramid at Luxor, with additional remodels ongoing at Aria suites and villas. We also continue to focus on targeting strategies that draw on our competitive advantage to acquire and drive sustainable growth from high-value customers in our business. Over the years, we'll invest in customer experiences and products and services to execute these strategies, which will be enabled by advanced marketing practices and enhanced physical and digital experiences. Before I turn it over to Jonathan to discuss our third quarter results, I'd like to make some high-level comments on our current trends and our future outlook. I must say it's simply great to be in Las Vegas right now. We've kicked off the quarter exceptionally strong, anchored by a great Fourth of July holiday, better than pre-pandemic casino spending levels, and pent-up demand for the city's wide-scale entertainment relaunch, drawing large crowds to town, especially on the weekends. While the Delta variant impacted our group business during the quarter, we have been able to offset it with leisure and casino customers. With cases on the downswing, we have quickly built momentum into October, and the level of demand in the marketplace, especially on weekends, has simply been incredible. October will be another all-time record month. Groups are still coming to town. We have a healthy amount of group room nights on the books through the rest of the year. Looking ahead, we feel optimistic about our group business, anchored by the back half of this year and what's already on the books for 2023 and 2024. With the relaunch of large-scale entertainment in July, these offerings drive visitation to Las Vegas. Allegiant Stadium brings fans to the Strip for events, and we've had some of the best weekends around these events. The Raiders estimate that roughly 60% of tickets are sold to out-of-state fans. When the majority of the 50,000 to 60,000 people walk to and from Allegiant Stadium over the bridge between Mandalay Bay and Luxor, we are seeing significant broad-based uplift at both properties on event days and even more so on Raiders games. We're also taking our future in our own hands with a fantastic lineup of events across our venues, which have been met with great enthusiasm. Whether it was the McGregor fight at T-Mobile, which by the way produced our second-highest single-day table games win in the Company's history, or the debut of our new America's Got Talent show at Luxor this week, we continue to demonstrate that the city and MGM Resorts is a leading destination for exceptional entertainment. Turning to our regional properties, as I mentioned earlier, our regional operations delivered another all-time record EBITDA and margin quarter, driven by continued strength in our rated gaming spend levels as we yield to our higher net-worth customers. With the easing of statewide restrictions, we have begun to strategically reintroduce entertainment and F&B at all of our regional properties, and I'm gratified that our customers can once again enjoy the quality experience for which MGM is known. On the cost side, our team continues to focus on productivity across labor, player reinvestment, and other streamlining initiatives. This gives us great confidence in our ability to sustain strong margins as we head into 2022. I'll conclude with some final thoughts on Macau. The market continues to operate well below pre-pandemic levels as varying forms of travel restrictions have limited visitation to the region. The obvious catalyst in Macau's recovery is a sustained resumption of frictionless travel between Macau, Hong Kong, and Mainland China, which heavily relies on higher vaccination rates that will take some time. When the market does rebound more meaningfully, we believe MGM China is well-positioned given its strength in premium mass. Macau remains an important part of our business, and we have high conviction in the future success of this region. We will continue to work with the government, and we are highly confident in ultimately getting our license renewed. Ongoing discussions with the government give us a greater confidence in our belief that the process will be both judicious and fair. We look forward to further promoting the long-term development of Macau's gaming industry and supporting the government's tourism and diversification goals for the region. With that, I'll turn it over to Jonathan to discuss the details before some final comments and questions.

Thanks very much, Bill. I certainly join Bill in expressing gratitude to our entire team for outstanding results this quarter. What a difference in performance and momentum as we have moved through the course of the year. And now with only 60 days until the start of 2022, I could not be more excited about our prospects for the year ahead, and it's all due to the heroic efforts of our thousands of colleagues here at MGM Resorts. Now let's talk about our third quarter results in some detail. Our consolidated third quarter net revenues were $2.7 billion, a 19% sequential improvement over our second quarter results. Our net income attributable to MGM Resorts was $1.4 billion, driven by a $1.6 billion net gain from the consolidation of CityCenter. Our third quarter adjusted EBITDA improved sequentially to $765 million, led once again by our domestic operations. Twelve of our 18 domestic properties achieved either all-time or third quarter EBITDA records, and 15 achieved either all-time or third quarter margin records. This performance was driven by strong leisure, transient, and domestic casino demand. We have demonstrated our ability to improve and expand our operations while maintaining cost discipline, all against the backdrop of ramping non-gaming revenues and a stabilizing workforce. Our Las Vegas Strip net revenues were $1.4 billion, just 8% below the third quarter of 2019. Adjusted property EBITDA for the Strip was $535 million, 21% above the third quarter of 2019. Hold had a $20 million positive impact on our EBITDA this quarter, so hold-adjusted Strip EBITDA was approximately $514 million. Our Strip margins were 39% in the third quarter, a 943 basis point improvement over the third quarter of 2019 and a slight decline on a sequential basis over the second quarter of 2021. This was driven by effective casino marketing efforts and continued cost discipline across the business. The availability of labor also improved sequentially each month in the third quarter, and our payroll per FTE remained in line with the third quarter of 2019. We continued to attract strong casino demand and drive healthy performance in the third quarter. Here are a few data points: third quarter Strip casino room nights were 27% greater than in the third quarter of 2019. Casino revenues per casino room night were up 10% above the third quarter of 2019. Not surprisingly, our slot handle was an all-time quarterly record. All of this translated into third quarter casino revenues increasing to 26% above the third quarter of 2019, contributing 31% of our total Strip revenues in the third quarter, compared to our casino revenue mix of 22% back in 2019. Our Strip hotel occupancy was 82% in the third quarter, improving from 77% in the second quarter. For the first time since reopening, the third quarter's room rates ran higher than pre-pandemic levels, with ADR 10% above that of the third quarter of 2019, or 5% when we exclude Circus Circus. We finished a strong October with occupancy of 92%, the highest since reopening. While we expect November and December to be strong, these will also typically follow seasonal slowdowns as we head into the holidays. As we ramped staffing and our non-gaming revenues increasingly become larger contributors to our overall business, I expect margins to come in a bit in our Las Vegas operations. Our customers demand and are willing to pay for the breadth of offerings we provide here at MGM Resorts. While healthy margins are an important feature of our business model and financial health, we are focused on growing our absolute EBITDA dollars, a goal well supported by future upside from the recovery in group events and international visitation. We expect our margins to stabilize well above pre-pandemic levels resulting from our efficiency and cost-saving efforts. Finally, it's important to note that we closed the CityCenter transactions towards the end of the quarter, and as a result, we started consolidating CityCenter within our Las Vegas Strip results beginning on September 27th. Our third quarter Strip numbers include four days of Aria and Vidara's results. Led by Anton Nikodemus and his team, the CityCenter joint venture reported quarter-to-date ended September 26th adjusted EBITDA of approximately $120 million with 40% margins. Had CityCenter been consolidated for the full quarter, our Las Vegas Strip EBITDA would have been approximately 22% higher than what we reported in the third quarter. Its magnitude and growth potential makes CityCenter a difference maker for us financially. Our third quarter regional net revenues were $925 million, just 1% below that of the third quarter in 2019. We delivered adjusted property EBITDA of $348 million, which was 29% above 2019 levels and 9% above what we achieved in the second quarter of 2021. Our regional casino business further strengthened in the third quarter with our slots and table games volumes improving sequentially by 6% and 11% respectively from the second quarter this year. We measure rated players spend levels through theoretical win or theo, per day net of promotions. Our net theo per day for our rated customers reached record levels in the third quarter, led by our younger demographic despite fewer trips compared to their visitation pre-COVID. Unlike the younger crowd, visitation and spend from our demographic aged 65 and older has not yet fully recovered, but we're encouraged by the resiliency in this segment's demand, especially through the Delta variant outbreak. Our third quarter regional margins of 38% were another all-time record, growing 886 basis points over the third quarter of 2019. While our strong EBITDA margin has benefited from elevated casino spend, it importantly also validates the great work that our teams have put into maximizing the effectiveness of our operating model and rethinking how we run our business. Disciplined customer reinvestment is a key component of this, where we track marketing efficiency across all of our properties against specific goals. With the return of more non-gaming amenities, we'll continue to exercise prudence in our marketing reinvestment strategies, taking a test-and-learn approach to ensure intended returns on any increases in reinvestment. We're also rightsizing labor in the near-term, which has had a favorable impact on our margins, but it's also caused capacity constraints in certain segments of our operations. Overall, I believe our regional margins will stabilize well above 2019 levels. Moving on to BetMGM, our 50% share of BetMGM's losses in the third quarter amounted to $49 million, which is reported as a part of the unconsolidated affiliates line of our adjusted EBITDA calculation. Net revenues associated with BetMGM operations were $227 million in the quarter, exhibiting 17% sequential growth from the second quarter led by the continued strength in iGaming. This was partially offset by heavier customer acquisition and reactivation spend from BetMGM's successful Arizona launch and the return of football, resulting in September first-time deposits growing to over five times that of September 2020. We know that an omni-channel customer is worth more than a single-channel customer. We're particularly excited about the mutually beneficial advantages of our omni-channel strategy with BetMGM, and we remain its top partner for driving new players. In the third quarter, 16% of BetMGM's new players were attributed to MGM, meaning they were active with MGM in the last 12 months. This percentage has remained in a relatively stable range while BetMGM has significantly broadened its reach, illustrating our ability to continually optimize the conversion of M life members to BetMGM. The BetMGM team previously disclosed during their April Investor Day that MGM-sourced players have much lower customer acquisition costs and over five times the marketing ROI compared to non-MGM sourced players. What's also encouraging is that in New Jersey, our most mature market, based upon preliminary data, we found that MGM-sourced omni-customers are spending more on property at Borgata than they did when they were exclusively land-based, and clearly the benefit goes both ways. In the third quarter, 42% of our new M life sign-ups have come from BetMGM, which plays a crucial role in our database expansion, a database which currently stands at over 37 million members. Finally, in Macau, third quarter market-wide gross gaming revenues sequentially declined 26% from the second quarter and were 27% of the third quarter 2019. MGM China's third quarter results were also sequentially lower from the second quarter with net revenues of $289 million and adjusted property EBITDA of $7 million. Hold-adjusted EBITDA was a $2 million loss. While the latest hurdle surrounding local outbreaks in Macau negatively impacted travel in September and most of October, the situation has now largely been contained. With quarantine-free travel having resumed on October 19th, the market has seen daily visitation rebound from less than 1,000 in the first 18 days to over 26,000 for the remainder of the month. Our third quarter corporate expense, excluding share-based compensation, was $105 million, which included approximately $18 million of transaction costs for both MGM and MGP. We expect that our net corporate expense will run at a similar level in the fourth quarter, heavily driven by our ramping Japan efforts, as well as our investments in IT and digital. In the near term, we also expect to incur incremental costs related to our recently announced transactions. We believe repurchasing our shares is an attractive use of capital. In the third quarter, we repurchased 17.2 million shares for $687 million, and we purchased an additional 1.8 million shares for $80 million in the fourth quarter through today. That's $1.1 billion of share repurchases year-to-date, or approximately 5% of our market cap, since March. Over the past few months, we announced some significant deals that simplify our corporate structure, further bolster our liquidity position, and advance our vision to be the world's premier gaming entertainment company. We closed the CityCenter transactions in the third quarter. In October, we closed the MGM Springfield transaction for cash proceeds of $400 million. Our transaction with VICI is on track to close in the first half of next year, subject to regulatory approvals, at which point we will bring in an additional $4.4 billion in proceeds. In September, we announced an agreement to acquire the operations of the Cosmopolitan of Las Vegas for $1.625 billion. This represents a multiple of approximately 8 times adjusted EBITDA inclusive of expected operational synergies and revenue growth opportunities that we have identified. The transaction is expected to close in the first half of next year, subject to regulatory approvals. As of September 30th, our liquidity position, excluding MGM China and MGP, was $6.4 billion, or $9.6 billion when adjusted for the Springfield, VICI, and Cosmopolitan transactions. Our approach to capital allocation is critical, and our approach to capital allocation will be as follows: first, we'll maintain a strong balance sheet with adequate liquidity; second, we'll return cash to our shareholders; and finally, when assessing potential growth opportunities, we'll invest where we have clear advantages and we'll exercise discipline in measuring prospective returns for our shareholders. With that, I'll turn it back to Bill for his closing remarks.

Thanks, Jonathan. I apologize for the time and the comments, but as you can all tell, we have a lot going on. I'm proud to say I think we've accomplished a great deal in the past year. And I'm very proud of our entire team, and I'm enthusiastic and optimistic about our path forward. We've taken actions to simplify our corporate structure and monetize our real estate. We're maximizing our profits in our core domestic business and are reinvesting in the company for long-term success. As it relates to Macau, we're confident in the eventual recovery in the region, and we believe we are well-positioned with respect to license renewals. We're excited by the diversification that both BetMGM and Japan bring to our ultimate business. As you can tell, our liquidity position is very strong, and we remain focused and disciplined in the allocation of our capital to drive long-term shareholder value. Again, I'd like to close by thanking all of our employees once again for their commitment and dedication to this company. I believe we have literally the best team in the business, and I'm excited about what we will further accomplish in the future together. With that, we will take your questions.

Good afternoon, everyone. Thank you for allowing me to ask my question. Jonathan, Bill, I would like to discuss the capital allocation strategy you mentioned during the call, especially the aspect of returning cash to shareholders. Could you perhaps explain it by considering the near-term, medium-term, and long-term perspectives? In the near-term, with the additional cash coming in, including 500 to 600 million from Mirage, you have more flexibility. In the long-term, there's Japan, but that may not significantly contribute every year. Then in the medium-term, there are various external growth opportunities. With this broader view in mind, how do you approach the timing of capital returns? Also, Jonathan, regarding the share repurchases you mentioned for October, has that process paused or is it still in progress?

Thanks, Joe. I will offer a few thoughts. First of all, the real estate monetizations that we have undertaken recently, and I would include the MGP transaction in that category broadly, really is the completion of a strategy that the company began 4 or 5 years ago. I think when originally conceived, the idea was that we would be monetizing that real estate, returning the cash to shareholders. To address the question directly, the completion of that strategy, freeing up that cash will likely entail some accelerated return of that capital to shareholders as we've been doing this year. That's, I think, a different matter from the longer-term plan for return of capital to shareholders, which will be driven really out of free cash flow of the business, whereas in the shorter term, it's really driven more by these asset transactions we've undertaken. Just finally, as it relates to October, we’ve been disciplined in regular repurchases of our shares, but we certainly moderate depending upon where we see the share price to a certain extent. So we remain active because we believe that the share price is still attractively valuing the company. But we do moderate our purchases from time to time.

And Joe, just maybe additional color. Look, through COVID and obviously the great recession, we've got some deferred maintenance, so there are a couple of projects we're going to do here regarding rooms and catching up. Not a massive amount of capital in relative terms, but real money. We are just getting started in the digital world. You understand what we've done today, and as we continue to think about expanding that business with partners or with others, that'll take some capital. Clearly, it's a space in which we want to be progressive and dominant, both domestically and potentially on a global basis. I think that will take some cash. Japan, you're right, is down the road; it's probably not until 2024 and beyond. New York, hopefully, they'll start earlier, I'm hoping in 2023. We've given ourselves an opportunity to deploy some cash there and start to grow that business. We see it as a unique opportunity sitting on 97 acres, 15 miles from downtown Manhattan. We can't help but think we could do more there. Those are some of the immediate things that I think lie ahead, and then obviously, we'll wait and see.

Great. Thank you.

Hi. Evening, everyone. Thanks for taking my questions. I wanted to, again, go back to some of the capital allocation and pick number 3 on the list, Jonathan, which I think was external investments in a disciplined way where you feel you have a clear advantage. Given all of the prospective events around your partner, BetMGM, I just wanted to see if there are any updated thoughts or perspectives that you can share with respect to your end-to-end partnership with them.

Thank you for the question, David. I am very intentional about the order of those priorities because I believe that returning cash to shareholders is our main focus when it comes to making growth capital investments, as it is the shareholders' money. So that is a key benchmark we set for ourselves. As for the second part of your question, I will defer to Bill.

Thank you. David, there is certainly a lot of excitement in the market. We had some insight into the experiences that DraftKings and Entain recently went through. Only time will reveal how that will unfold, if it unfolds at all. We value our partnership and believe we are managing it well. Whether they would be effective partners in our day-to-day operations is still uncertain. We aim to expand our domestic efforts, and whether we will pursue more international opportunities with or without them remains to be seen. For now, we will monitor the marketplace for a bit longer.

Perfect. And as my follow-up, just one detail. With respect to the fourth quarter, particularly in Las Vegas, it sounds like October has gotten off to a very strong start. But any helpful thoughts around what a new normal for the fourth quarter could be? We would normally think it might be a little bit softer than 3Q, with some holidays. But just the puts and takes in review would be really helpful.

I'll add a couple, David; it's Jonathan. One is certainly that we are now consolidating the operations of CityCenter. As I pointed out in my prepared remarks, that's a material addition to our consolidated earnings for the quarter. The other thing I would add is that mid-week occupancy in Las Vegas has really found solid footing. Where we have had some near-term cancellations in group business, it has been filled, in many cases, more than filled with transient and gaming demand. All that is against what is normally just a softening of overall business levels as we get into late November into December. I don't think this year will be any different. But we feel very good right now with the start of the fourth quarter, and we do have some of those catalysts that I mentioned.

David, it's Corey. What I would also add is that traditionally, pre-Thanksgiving to right about the week before Christmas is traditionally slow. We, similar to last year, are seeing some pretty good pickup during the Thanksgiving period. This is unlike any other third and fourth quarter, and so it's hard to say what the new norm would be, but we're pretty optimistic about the pickup we're seeing, especially mid-week. Weekends are strong, with robust ADR pickup. Remember, we've got the programming every other weekend — for example, this weekend you've got the Rolling Stones at Allegiant. That's a 50,000-seater, so programming just looks great.

Okay. Thank you very much.

Thanks. On BetMGM, couldn't help but notice that you took out the billion-dollar revenue guide for next year because you're already breaking $800 million this year. Any updated thinking around next year?

At this point, no. But we'll, I'm sure, introduce a revised estimate for 2022 during our fourth quarter call.

Okay. A follow-up on BetMGM. There are some news reports out that you're one of the winning operators in New York. Can you just help us think about how you're going to operate in that market with such a high tax rate?

Well, look, I can assure you we want to be competitive. It's probably going to end up at 50%. Time will tell, but I think that's what we're all contemplating: 9 or 10 operators, give or take. Going into it, I'm happy we have a property there. The omni-channel thing we talked about is relevant and real. We understand it because we're in New Jersey; it's one of the more expensive media markets in the world. But I will tell you it is the largest market we will launch into to date with our M life database. Obviously, we haven't launched in Southern California or California, so as a database, this is a significant way to think about this, and we'll be there day one, which is also critical. I think we'll get off to a great start. Time will tell how much money can be made. Again, for us, it's an omni-channel play, it's a brand play, and we're going to have a huge presence there.

Thank you.

Hey, good afternoon, everyone. Thanks for taking my questions. So first on BetMGM. In terms of the value there, we all see the same level valuations for sports betting and iGaming operators. Now that you're competing, arguably for the top spot here in terms of overall share, do you think you're getting full value for it in your stock? If not, how do you think about some of the levers that you might pull to maybe unlock that full value?

Well, the answer is no. If I look at DraftKings and others as a multiple, obviously it's complicated inside a huge company and a huge story, and we have a JV that's not in the context of basic structure. It's not pure in terms of value creation, so we understand all of that. I think as you look forward though, we've had enough exposure and experience to understand a couple of things. BetMGM is here to stay. It'll be a dominant player in this space. We can argue every day what's really relevant to us are two things: we dominate in iGaming, principally based on the heels of who and what we are. I think the BetMGM folks put up a great gaming product. We've seen our branded products work exceptionally well. We have a huge database to lean into, and ultimately, we will have a huge reward mechanism with the omni-channel idea of coming to Las Vegas for some of our regional properties to enjoy themselves with a great retail footprint. We are in obvious places, but next year in Arizona at the Cardinal Stadium, we're going to have a presence. We're literally opening as we speak in that stadium a betting shop, and so we're going to be in other places. We have an opportunity with Illinois freeing up to get into Illinois, hopefully by March or April of next year. No, obviously, we think there could be more value accretive to it. It is complicated, but we know we have a serious bet; we know we have a serious play, and we're continuing to invest. Hopefully, wisely. I'd like to think we've been a little bit more prudent and judicious than others. But it's not for the ill of heart, as we know, and I still think we'll see more consolidation over time, which I think ultimately will be accretive to the players that remain.

Got it. Thanks. For my follow-up, in terms of BetMGM for the revenue guidance, I think you said $800 million in the deck, which would imply something like a sequential decrease versus 3Q. Is there anything to read into there in terms of seasonality or maybe increased promotions from competitors that might pressure your iGaming revenues?

It's $800 million plus, by the way; notice there's a little plus sign in that deck. So we didn't go backwards; to the contrary, no, it's motivated and growing in the right direction. I think you've heard Jonathan year-over-year, five times more in terms of first-time deposits in September. We like the trajectory of the business. Arizona is off to a massive start for us, and obviously, we've got some other states yet to come here. No, we don't want to give a real number because we are truly studying it because we want to hold ourselves accountable to it. By the fourth quarter, though, we will be ready with that.

Understood. Thanks so much for all the help.

Hey, good afternoon, everyone. I wanted to touch on a couple of other areas. Since we've covered a lot of ground on BetMGM, maybe I was wondering, two specifically would be, Jonathan, was your comment on the margin outlook in Las Vegas. Could you give a little bit more color on how you expect that to maybe trend sequentially as we move into '22? That'd be really helpful. And then my follow-up would be if you could just talk a little bit more about the sale of The Mirage. How specifically do you identify that property as maybe the right one out of the portfolio to look for options for?

Sure. I'll address the first and maybe pass the second one on to Bill. As it relates to Las Vegas margins, the margin's about 39% this quarter. They do benefit from the higher intensity of gaming revenue that we have. As we introduce more non-gaming revenue and offerings to the system, that's going on literally during the month of November with a number of our entertainment offerings opening here. We certainly anticipate more groups and, therefore, more catering and banquet revenue. We'll be making a trade, and a very profitable trade over time of customers as lower worth gaming customers are yielded in favor of group customers as we go into 2022. Now, that's a good trade for us; that group customer will generate revenue per occupied room 80% higher than a leisure customer or lower-rated gaming customer. They will do so at a slightly lower margin, and that's the effect that I was trying to describe in my remarks. Back in 2019, we had margins in the high twenties, and of course, now we're in the high thirties. I expect that with the proper mix of business, we will be well above those margins back in 2019, meeting our profit improvement goal of $450 million across the enterprise. But believe me, we have learned a lot about ways to do our business differently over the past nine months, and we don't intend on backtracking there to carry that better margin performance even against a more normalized mix of business.

And then on The Mirage, if you think about our portfolio particularly here in Las Vegas, there are no better bones. It's a center of the Strip. It was built to last, and it has. There are 77 acres, much of which is really undeveloped in the context of what could be there. As we look at capital allocation and the notion of diversification, we have enough of Las Vegas. We look at the marketplace right now, obviously, we're buying and selling at the same time, so we understand the marketplace. We all heard Tom read yesterday; we agree. We think there is an opportune time, and that we think this might be the moment to sell an asset in Las Vegas. It became, for us, the obvious one as we think about our portfolio, going forward, and capital allocation. We take no discredit to what's been done there; it's an amazing property, and I'm excited for somebody to come in and make it their marquee property. I think between the villas that are there, the access to the real estate, its general location, I think the right owner could do a lot, but it just felt pretty far down in the spectrum of how much capital we'd allocate to it in any given period of time in the near future. So, we took a strategic decision to sell it.

Thank you very much.

Hi. Good afternoon. Thanks for taking my question. I wanted to go back on BetMGM. Just from a product or tech standpoint, we've seen a lot of new features and just different products that have rolled out. Is there anything from a same-day parlay, live dealer, or social features that you currently aren't offering that others are, to help with retention? If not, is there anything on the come that will help you keep your customer base as others are pretty aggressive with marketing? Thanks.

I mean, fair question, Chad. I mean, all of the above. We have just launched with Evolution some product out of New Jersey, and we are doing the same in Michigan with Live dealer. We think it's an integral part of the business and something that people are leaning more and more into, and we will be there. Same with same-day parlay. We've got a bunch of product work and revisions. We didn't want to do it in the middle of football season; as we tried to do some couple things last year, it got us in a little bit of trouble. We'll continue to evolve. The great part about the relationship with Entain is there are literally 3,500 people in the technology who are focused primarily on ours. Adam and their whole team, and Matt and the company, have about 8 or 9 things: shared wallet, all kinds of things that will change that dynamic and continue to develop that product as a priority because it will be part of the race over the next couple of years in terms of getting and sustaining and retaining customers.

Okay. Thanks. And then separately regarding some comments you made before about the hub-and-spoke approach, owning and operating some premier assets around the country outside of Las Vegas that you can feed into Vegas. Does the acquisition of CityCenter and Cosmo and the disposition of Mirage change how you're thinking about that given that your properties will just skew more luxury pro forma?

No, not really. I think I understood the nature of the question is whether as we skew up the spectrum, will the regional property be able to feed that? I would still suggest with Excalibur, Luxor, and New York to a certain degree, Park and to a certain degree MGM. Remember, we've got 40,000 rooms in Las Vegas to fill. What is clear and differentiating between us and Caesars is our casino marketing share is 100 basis points behind theirs in terms of market mix. So, no, I think there's room and opportunity for both simultaneously.

Thanks, Bill. Appreciate it.

Yes. Thank you for taking the call. Two questions. First, can you talk a little bit about whether you've seen a recovery in Macau post-Golden Week with COVID cases now coming down? And secondly, also on Macau, can you talk a little bit about where we are with the concession process now that the public consultation period has ended? What happens next, and where do you see this going?

Sure. Thank you, Jon, for your question. The travel restrictions were lifted in October of 2019, and right after that, we saw business start to ramp up. Right now, the travel requirement is NAT test within 48 hours, so we have seen the key indicators on the business side going back to the early part of September and, in some cases, even stronger going back to July, depending on which segment you're looking at. Overall speaking, I think that's on the rise. We also anticipate that by the middle of November, we will probably get back to a higher level than July level, if everything remains calm in China and in Macau, with no serious outbreak. Regarding concession progress, I think I'll look to Bill for that question.

Yeah, Jon, I think just to put a capstone on Hubert's comment, we've gone from losing money to making a little bit of money again. We've shifted back into the black, and as long as we don't hit yet another instance of COVID, we'll hopefully stay there and grow from that. Obviously, we've submitted on the 29th, like all the other concessionaires and many other people in the community, answers to the nine core questions that were asked. We had an opportunity to brief that with the government. They'll now continue their public consultation process. I suspect that will go on for another 30 days or so; that's obviously up to their discretion when to end that and form some of their own opinions. Whether this all gets done in time for June, we don't know yet because there are some steps that they still have to publicly go through with LegCo. I feel good about what was said. I feel good that we had an opportunity to air some of our concerns and that they were heard and listened to. I think, given the environment and what's at stake, the process has been progressive. We've been there like everyone else for 20 years. They've been fair to us to date as we have to them. I think we've been good to the community and vice versa. Hopefully, we continue on; whether this gets done by June, I just don't know. There are some complications around several of the issues, as you know, so time will tell.

Hi, thanks. My first question is just really a follow-up on BetMGM. What is the current split of the $227 million in revenues between iGaming and sports betting? As you noted, omni-channel customers tend to be more valuable. How do you strategically align incentives between managers of your physical assets and those at BetMGM to ensure you maximize total value?

I'm not going to disclose the exact split for competitive reasons, but I can say it is strongly weighted towards iGaming, which indicates the long-term success of our model. One of the main reasons iGaming is performing so well is due to the quality of our product and the excellent work done by the team in customer relationship management. A key aspect of our strategy is enhancing our customer outreach by understanding their preferences in terms of game types, activity cycles, and personalizing their experiences. We have collaborative hosting teams at both BetMGM and MGM. For instance, we have a Vice President of Marketing solely focused on connecting marketing efforts with BetMGM customers, from the sign-up process at Aria to ensuring that our top customers receive exceptional service. We are coordinating efficiently, though we still need to improve the back-end loyalty system for a seamless experience. Currently, through tier credits, customers can access a wide range of options. We are heavily invested in iGaming and feel optimistic about its future. We plan to continue developing our offerings, which include branded products, in-house creations, and licenses with major brands. Overall, our performance is strong.

Thank you for the question. We'll be updating that next year as we get closer to the closure of the MGP transaction. Clearly, to provide that metric right now would be to provide guidance into 2022 consolidated EBITDA, and we're not going to do that yet. Regarding the question around leverage for the business, I do think that on a lease-adjusted basis, this business can comfortably sustain 4 to 5 times leverage. That's adjusting our lease expense at 8 times the rent, which is the convention of observers of the Company. Given the Company's diversification both geographically as well as by business segment, that we can sustain that level of leverage. But as we get closer to the closure of these transactions, we will update where those measures are.

Great. Thanks. I wanted to go back to BetMGM for a moment. During the quarter, Bill, I think you mentioned publicly the potential to buy out your joint venture partner. How should we think about whether that would be a better outcome for you than having the joint venture with them? Would you essentially use those technological capabilities if you were to buy out the other half of the joint venture?

Thanks, Robin. Look, obviously, a great deal of commentary, speculation, and editorialization back and forth over the last 45 days. We would not do this without a technology. This is a technology-based enterprise at the end of the day. That becomes a key point of what to do and how we think about our future. Given the environment that was being described, there was potentially an opportunity to walk away with technology, which would have been interesting. We were prepared to do it if the other parties could get to the finish line or decide to get to the finish line. The details weren't all worked out, but time will tell whether that ultimately gets to that place. For now though, again, let's go back to where we were: we're content and happy with our business, how it's progressing. We wouldn't do it without a technology platform to be sure, and right now, I'm not anxious to do it. I like where we are developing the business. I like the fact that we only share half of this development cost. It's a progressive and aggressive environment, as we know. I still think we'll see more consolidation over time, which I think ultimately will be accretive to the players that remain.

Okay. Great. That's helpful. Thanks. And if I could ask a follow-up on the margin topic. I think you mentioned last quarter that you thought you would keep about half of the margin improvement when things stabilize. I may not be remembering that right, but is that — I don't think I heard you say that today. I'm wondering if you're thinking higher than that or lower than that when you think about that stabilization.

Yeah, that's a fair estimate. It's really difficult to anticipate right now, given the way in which the business mix ultimately levels out, but that's not a bad estimate.

That's similar to what your thought was?

Yes. Our view of the way that our margins evolve has really not changed in the past quarter.

Okay. Great. Thank you very much.

Thank you, operator. Thank you all again. I know on the East Coast it's late. Obviously, we've had a stellar quarter. Again, I couldn't be prouder of the team. Things are motivated and moving at MGM. We've got a lot up in the air, including the announcement of The Mirage, which we informed the team about a half-hour before this call. We'll try to continue to be as transparent about that process as we can going forward. But we're excited about our future. I believe Macau will stabilize. I believe we're in a good position there. We have a partnership in Osaka, and it's hard to imagine that Osaka does not become one of the three designated locations. But again, we will see what happens by the middle of next year. I'm excited about the operating environment we've created. COVID has taught us a lot. We have figured out how to do things with less and do them productively. There are still a couple of short places; we need to fill some staff and open up operations. But overall, I’m excited by where we are and what lays ahead, frankly excited about our future. Obviously, we've got a great deal of liquidity and the potential to put that to work for our shareholders, like this company hasn't had in a very, very long time. I think for all of us, it's pretty exciting news. Again, thank you for your time.