MGM Resorts International (MGM) — Q3 2022 Earnings Call Transcript

Good afternoon, and welcome to the MGM Resorts International’s third quarter 2022 earnings call. This call is being broadcast live on the internet at investors.mgmresorts.com. 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 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 of the 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, Andrew, and thank you all for joining us this afternoon. I'm pleased to report another phenomenal quarter of financial results driven by our domestic business, with the Las Vegas Strip setting a new record for revenues and adjusted property EBITDAR. These results come on the heels of a record-setting quarter in Las Vegas and our regions. Also, the Cosmopolitan Las Vegas had one of its best quarters in its first fourth quarter of operation under MGM Resorts leadership and continues to outperform our initial expectations. We continue to see further opportunity with the Cosmopolitan as we look to integrate our reward system and improve physical connection to our sister properties. Overall, 2022 is shaping up to be a record year for many resorts, and we believe that a fundamental change in people's perception of travel and the value that brings to their lives in Las Vegas and MGM Resorts is benefiting this emerging theme. I want to thank our employees again for the tremendous efforts they put forward to achieve these outstanding results. We know that our guests are experiencing greater satisfaction in their stays, as measured by our internal Net Promoter Scores, which continue to exceed our projections, as well as our TripAdvisor rankings, which have improved significantly across our portfolio in the last year. Altogether, MGM continues to make great progress towards our long-term vision, which is to be the world's premier gaming and entertainment company. We've achieved this vision by remaining laser-focused on that strategic plan. Let me hit some of the highlights of the quarter and then Jonathan will dig into the results in more detail. First off, I'm pleased to share that we've completed our acquisition of LeoVegas in September. This important acquisition represents the first step of an aggressive expansion in international and online gaming for MGM. I'd like to again welcome Gustaf Hagman and the team. We also recently announced the addition of Gary Fritz as our President of Interactive. Gary will lead our broader digital strategy, both here and in the U.S. internationally, of which LeoVegas is a significant part. Staying with digital for a moment, we remain optimistic about BetMGM, which continues to build on its success every quarter. In the third quarter, BetMGM launched in Kansas, marking its 24th market to date, and the eighth new market we've added since November of last year. Looking forward, we'll add Massachusetts, Ohio, and Maryland to our online sports betting portfolio. MGM remains the clear leader in iGaming with a 29% market share, while BetMGM has a 22% share in active markets when combining U.S. sports betting and iGaming. As we hit the halfway point of the NFL season, we're encouraged by the preliminary metrics; reinvestment has remained within our expectations, and markets appear to be operating more rationally. As BetMGM shared in May at its Investor Day, our strategy focuses on profitability by allocating spend to regions with the highest return on investment and targeting bonuses. We believe this is being executed exceptionally well. Our investments in BetMGM and LeoVegas will allow us to continue to drive our omnichannel strategy, which is a key competitive advantage that will generate incremental earnings between brick-and-mortar and our online channels over time. Early results of this strategy have been positive, showing strong customer acquisition as well as brand loyalty. Customers who engage with both channels tend to be younger; nearly 90% of BetMGM omnichannel customers visiting Las Vegas are under 50, and over 50% are younger than 35. Overall, customers who play online at our properties have shown increased engagement, and our lower cost per acquisition reflects the operating leverage we can and will pursue in the future. Now I'd like to discuss the integrated resorts development opportunities we have. In New York State, we appointed the majority of the Gaming Facility Location Board members in October and expect the State to issue the casinos RFA by early January. We're developing a compelling proposal and look forward to submitting it in the coming months. Beyond the United States, MGM and our development partner, Orix, along with the City of Osaka, submitted our area development plan to the Government of Japan in April. We are optimistic about receiving certification soon. I recently visited our development site, and we and the Orix team are extremely excited about the opportunity to bring a fully integrated resort to Japan. Turning to Macau, we officially submitted our application for a new concession in September and remain committed to supporting Macau's development as a world-class tourism and leisure destination. We aim to assist the Macau government in achieving its diversification goals and will continue to invest in innovative projects and programs that help the region thrive. The Macau government is reviewing each concessioner's proposals, and we anticipate favorable decisions by year-end. Let me conclude with some high-level comments on the current state of business and our future outlook. Business is exceptionally strong now in Las Vegas at MGM Resorts, and we see the market remaining very robust. In particular, we are witnessing significant strength in our luxury resorts, where pricing remains healthy. In fact, October was our highest month ever for hotel revenue. Looking at the convention segment, which has the longest lead time and offers us visibility into the future, our convention room mix is on track with our goal of 19%, showing increased average daily rates year-over-year. Our outlook remains positive, and we're adjusting our operations to fully capitalize on the demand we're experiencing in the marketplace. Programming also tells a strong story, further establishing Las Vegas as the nation's top sports destination. We will host the men's NCAA West Regional Suite 16 and Elite 8 rounds at T-Mobile in March. Additionally, Formula One has selected the weekend of November 16 next year for the first-ever Las Vegas race on the strip. This weekend typically sees low traffic historically before Thanksgiving, and we will make hotel bookings available tomorrow for those dates, expecting exceptional demand based on our studies of other host cities. We believe the strategic positioning of our properties will allow us to maximize the benefits of this exciting race. At this moment, we have reasons to be optimistic as we look ahead. However, we're also aware of the broader macroeconomic conditions. We remain mindful of the impact of inflation and the potential for recession. We continue to stay vigilant and actively monitor our business and any signs of a slowdown. Our operations teams have become nimble over the last few years and are prepared to swiftly adapt our business to changing demand trends should they arise. In the meantime, we'll continue seeking opportunities for organic growth in our core business through selected key capital investments in our properties and via our MGM Rewards program. MGM Rewards continues to fulfill our promise to provide more compelling benefits to all members. Since launching the new program, we've seen a greater portion of our direct bookings come from MGM Rewards members and increased tier progression, especially among our Gold Plus players. With that, I'll turn this over to Jonathan to discuss more details of the quarter.

Thanks very much, Bill. Let me start my remarks by also welcoming Gustaf and the over 900 LeoVegas employees to MGM Resorts. No doubt the future of LeoVegas is bright, and I'm confident this enterprise will serve as a meaningful contributor of talent and earnings to our company. I'd also like to echo Bill's comments and thank all of our employees for the second straight quarter of record results. Our people are the best in the business and they demonstrate that every day with the care they show for our guests. Now let's discuss our third quarter results in some detail. Our consolidated third quarter net revenues were $3.4 billion, an increase of 26% compared to 2021, despite the 70% revenue decline at MGM China due to closures and other COVID-related limitations. On the Las Vegas Strip, top-line demand was strong with same-store net revenues increasing 18% and same-store adjusted property EBITDAR up 8%. Occupancy was a major driver of the improvement year-over-year, reaching 93% for the quarter, the highest it's been since the start of the pandemic and an improvement of over 1,000 basis points year-over-year. The key driver of the occupancy gain is midweek demand, which is returning to more normal levels as conventions and groups return. The value proposition of our group business supports our pricing power in Las Vegas. ADR had a record $227 in the third quarter, an increase of 26% year-over-year. We continuously work to optimize the hotel mix in our business. Over the past two years, we've increased the effectiveness of our casino marketing and loyalty programs to drive the casino and direct high-rate transient business mix up by several percentage points each. And this has helped offset the decrease in convention mix that we experienced in 2020 and 2021. Now as our convention mix returns, we're generally displacing less profitable, but still important leisure business; this convention business comes at a higher average rate, typically between $30 to $40 higher and brings with it higher margin catering spend. Our third quarter regional net revenues grew 5% while adjusted property EBITDAR declined 8%. During the quarter, our highest daily rewards casino segment remained our best performing with the greatest increase in both rated days and theoretical win. Our casino customers aged 65 and above grew again this quarter compared to last year and 2019, but it still hasn't reached the visitation frequency pre-pandemic. Our local and cross-property efforts will continue to address these important segments to drive further growth. Adjusted property EBITDAR margins were 33%, a decrease of approximately 450 basis points compared to the third quarter last year. This margin result is consistent with our prior commentary, and as the market stabilized, we expect to maintain 400 to 600 basis points of margin improvement versus 2019. We've increased our employee headcount by low double digits. During 2021, we faced a difficult hiring environment and had a number of outlet closures, but we're now fully staffed, fully open, and have returned to the service levels for which we are known. In Macau, adjusted property EBITDAR was a loss of $70 million in the third quarter of 2022 due to property closures and COVID-19 related policies limiting visitation to the market. On BetMGM, the growth and continued improvement we are seeing in this business is overwhelmingly positive. Our 50% share of the losses in the third quarter narrowed to $24 million, which is reported as a part of the unconsolidated affiliate line of our adjusted EBITDAR calculation. This brings our year-to-date loss to $186 million, and we remain comfortable with our guidance for a $225 million contribution for the year. Net revenues associated with BetMGM operations were $400 million this quarter, exhibiting approximately 90% year-over-year growth from the third quarter last year, led by the continued strength in iGaming and new markets as well as disciplined reinvestment within sports betting by the management team. Through the first nine months of the year, BetMGM's revenue associated with operations have surpassed a billion dollars, which puts them well on track to achieve their target of over $1.3 billion this year. Looking forward, improved design and functionality of the BetMGM app, launch of a single wallet, and omnichannel growth are the tailwinds behind future growth of their business and its impact on MGM as we look to reach profitability during 2023. Our third-quarter corporate expense, including share-based compensation, was $117 million, which included $9 million of transaction costs related mostly to LeoVegas. We do expect corporate expenses to remain elevated in the fourth quarter due mostly to transaction costs related to the Mirage sale. We're strategically investing our corporate resources in growth areas, including improvements to our IT infrastructure, enhanced digital offerings, and our IR development efforts in Japan and New York. And finally, our capital allocation priorities are as follows: first, we'll maintain a strong balance sheet with adequate liquidity; second, we’ll invest where we have clear advantages, exercising prudence and measuring prospective returns for our shareholders; and finally, we'll return cash to our shareholders. These priorities are manifest in our major allocation decisions this year. We bolstered our liquidity through the closing of the VICI transaction and the announced sales of the Mirage and Goldstrike. We acquired the Cosmopolitan of Las Vegas, which strengthened our portfolio, are making strategic capital deployments into improving our existing product with room remodels across three of our major properties, and an announced refresh of the Mandalay Bay Convention Center to shore up our long-term group market share. We returned cash to our shareholders through share repurchases. During the third quarter, we repurchased 10 million shares for $307 million. From the beginning of 2021 through yesterday, we repurchased 115 million shares for $4.4 billion or 32% of our market cap. This activity brings our share count down to 384 million shares. Last quarter, I made the case for the attractive valuation of our shares. I feel even more strongly now, with market-leading domestic operations driving record results, leases limited to 2% or 3% escalation for the next 10 years, embedded cash flow growth in BetMGM and MGM China, and about $11 per share in cash, I think our stock trades at pretty attractive levels. We plan to continue to buy back stock through our authorized program. Moving forward, we will also continue to invest our capital in growth projects such as New York, Japan, as well as strategic M&A. With that, Bill, back to you.

Thanks, Jonathan. We believe we've accomplished a great deal year-to-date. I'm optimistic about our path forward. What we are doing is working. Our existing operations continue to grow as evidenced by another record quarter in Las Vegas, with a positive outlook thinking about October and beyond. Our balance sheet is in a position of strength as we have more than $6 billion in domestic liquidity with almost no net debt. But MGM is firing on all cylinders, demonstrating tremendous growth and remains on track to achieve profitability during 2023. We also expect further global digital growth with LeoVegas, and MGM China and Macau markets are showing some productive signals. We believe we're well positioned in respect to licensing renewals. Also, New York and Japan represent future development growth opportunities for our company. I would again like to thank our employees for the continued hard work and commitment to our company. And with that, we'll open this up for questions, operator.

Good afternoon, everybody. Bill, Jonathan, whoever wants to take this question. I was hoping you could just talk a little bit more about where you do have visibility into next year, the group and convention business in Las Vegas. What percentage of your anticipated room nights are on the books right now? And at what price is that relative to this year or if you want to look at it in relation to 2019?

Sure. Let me kick it off and I'll probably turn it over to both of my colleagues here. So we're targeting, as I mentioned in my comments, a 19% market mix. A couple of things. We've been as high as 2021. We've got about 100,000 room nights offline. We're doing a Mandalay Bay complete remodel, which is undertaken and underway, and it's been highly well received. We were able to preview it recently through IMAX. We've taken 100,000 room nights off of weekends. Given the strength with weekends, we're very positive on our ability to drive higher-rated business, particularly through leisure and casino ultimately. ADRs in the mid-single digits.

Yes, we usually are about 80% on the books right now. I think we feel pretty good on where we are. In addition to that, we also are looking at where we place convention. So in the past, we had a lot of convention room nights on weekends. So we strategically think we could do better cash flow by not placing some of that business on weeknights. So you'll probably see our mix come down a little because of that also.

Great, thank you. And then with respect to your case, remind us the scope of the all-in investment, the timing of the spend and anticipated timeline to complete once you start - once you get approval.

Joe, you said New York, correct?

New York, yes.

Yes, we are hoping to hear something regarding the RFA request, which has a 90-day timeframe for issuance, meaning we expect to have news by January 1. There’s some uncertainty about whether they will issue all three licenses simultaneously or separately. We are optimistic about receiving a license in 2023. If we consider the licensing fee and the initial expansion, we anticipate an investment of about $2 billion to $2.2 billion. Assuming everything takes until the end of 2023, we expect the spending to occur between 2024 and 2025.

Thank you.

Hey, everyone, good afternoon. Jonathan, you provided a lot of color on kind of a mix, and you guys just hit on the group pace for next year. But what was - how do you think about kind of the target of casino? What is casino running at this year as a percentage of room nights? And what is kind of the target next year within the 19% group and obviously trying to pull out of FIT and some of the OTA channels, things like that?

I'll make a couple of comments and then invite Corey to share his thoughts as well. The casino room mix is expected to be in the high 20s to low 30s percent, which is quite stable. We have been focusing on improving casino yields, especially during midweek. Our casino business performed strongly in terms of room nights compared to a year ago, but it has since been profitably overtaken by group business along with some leisure business. Additionally, our direct bookings through proprietary channels have increased about 11% this quarter compared to last year, which is nearly three times the overall growth rate of our web bookings. This growth is attributed to our MGM Rewards program and the enhancements we've made, along with other marketing strategies that have effectively boosted leisure business through our proprietary channels.

Jonathan, I agree. I mean we got our casino room nights about where we want them, making sure that we have the most profitable customers on the weekend there. The goal would be, as this group business comes back, to shift it really at the package business, our lowest rated business.

Great. Thank you both. And then if I could just one follow up, Jonathan, I know you've mentioned the target for regionals was kind of to remain 400 basis points to 600 basis points north of 2019 for that segment. With respect to Vegas and acknowledging a lot of moving parts with Cosmopolitan coming in, City Center being consolidated, Circus Circus going out, if we're going back to 2019, and then obviously, Mirage going out later this year. On an apples-to-apples basis, relative to 2019, do you guys have a similar kind of target range in mind?

I actually think we can do better than that in Las Vegas, in part for a number of the reasons you mentioned, which is, of course, some of the changes we've made to the portfolio here or we'll have prospectively with the sale of the Mirage, but also just increasing effectiveness in driving demand and yielding. I feel comfortable that the margins will stabilize at increments higher than that I described for the regional properties.

Okay, is it safe to say it's kind of 400 to 600 operational plus the big influence of those kinds of four assets coming in and out?

At a minimum, I would say yes, at a minimum.

Hi, good afternoon, everyone. Just wanted to ask a little bit about mix and margins, specifically maybe sticking with Las Vegas for a moment. It looks like continued pretty strong sequential growth on the casino side. And Jonathan, I know this has been an area where you've probably been expecting things to be at some point, maybe settle back into more normal behaviors, but it just still seems like it's really robust. So could you just give us a little bit more color about the dynamic there, what you saw in the quarter and how you see that trending both sort of market-wise and then things you might be doing for market share because, again, that does look strong relative to the market?

Yes. The margin performance is, of course, a number of dynamics going into it, but one of the most important has been our ability to yield on the room demand here. We've seen it not only in our luxury properties but also more recently in our other properties here in Las Vegas. So I would say the main contributor to it has been the strength in the hotel yielding. We have grown our labor in both the regional markets and in Las Vegas in the past quarter, and we've done that intentionally. It's been reflected in our NPS scores and what our customers are telling us about their experience here. But it's also had some impact on margin, one that we intended and hopefully, we've signaled pretty clearly in the past. And that's really important because it is all about growing long-term market share for profitable market share for our businesses here in Las Vegas. And we think that those customer service scores and the retention associated with those customers are going to help us get there.

And Shaun, what I would add on the casino side, every weekend here is just a major weekend with events between Allegiant, the three major showrooms here, the arenas that demand, we don't really see slowing down. And probably the piece still missing, but we're starting to see some of this come back is the Far East play. We've seen some groups from Hong Kong. We've had intentions from groups from Singapore that wanted to come back. So I think we're pretty optimistic on what we see in the casino front in Las Vegas.

And Shaun, maybe final, just some color. It was kind of interesting to me last night. Elton John was here on a Tuesday night, he put 50,000 plus in Allegiant Stadium; the south end of the strip is absolutely benefiting. We thought Allegiant could do like 40 events. I think it's going to do that in more. And if you think about the nature of people saying, that's like 100 days a year that people have visitation to Las Vegas driving huge activity, particularly at the south end of the strip, which is obviously core to that neighborhood. So we're pretty excited by it. We think it underlines a foundation that just puts us at a different place than we've ever been historically. So that's one of the reasons I think we've seen this ADR growth has been amazingly substantiated throughout the company. This particular month in October, Excalibur and Luxor had great months.

Good afternoon, folks. Thanks for taking my questions. In the past, I can recall, Jonathan, you're giving out some and land-based MGM and MGM Rewards players. Are you able to talk about any of those this time?

It's Bill speaking, David. I'll address part of that. The concept of omnichannel remains very robust. First and foremost, MGM Rewards has now exceeded 40 million individuals in our database, with BetMGM being a key driver of that, contributing nearly 40% of our new customer base. Conversely, we provide BetMGM with about 15% of its customers. Additionally, we've observed some impressive growth in omnichannel spending, which has doubled over the past year when comparing the third quarter of 2021 to the third quarter of 2022. This clearly indicates our strong optimism regarding this opportunity and the overall channel. We're particularly eager to expand this into LeoVegas and other international initiatives in the future. Overall, this strategy is performing exceptionally well.

Understood. And my follow-up question was going to be about LeoVegas. And if you could just be a bit more specific about what capabilities it brings you that may be transferable or helpful within the United States or North.

To clarify, in the United States and specifically in North America, particularly in Canada and Ontario, BetMGM operates within that market. All related activities will remain with that joint venture and partnership. LeoVegas presents an opportunity to expand our presence globally. Although it may be relatively small, it is projected to generate around $50 million in cash flow. We value the team and the operational environment it offers, as well as its comprehensive range of iGaming options. Sweden serves as a benchmark, with approximately 35% of its business originating from there. Furthermore, we have a sports betting product, which provides us with all the necessary tools. We plan to enhance it with a live dealer feature and are considering adding a studio to this offering. We envision it as a foundational element for our growth in international markets. In terms of potential, we see a significant opportunity in places like Brazil, where discussions about sports betting and possibly casino gaming are increasing, making it an attractive avenue for us.

Hey, good afternoon everyone. Jon, you gave some detail on how you think about valuation for your stock. I think you called out the $11 per share of cash on the balance sheet. How do you think about the dilution here given you have the $4.4 billion of cash, $1 billion and one sixth of liquidity? What do you think is the normalized cash balance that you feel comfortable with, given the macro and some of your rent and CapEx obligations?

There's about $400 million or so that's required in so-called working capital and our cages, etcetera. And we have established a financial policy that we will have $1.5 billion available to us in addition to our revolving credit, which is approximately $1.5 billion. So that's the way we think about it. $1.5 million would be considered our minimum cash.

Got it. And then just as my follow-up on Vegas. Some of your competitors have called out one-offs in the quarter such as utilities. Was there anything there that you'd call out or that you saw on your side?

No, not in the third quarter. Our utilities are primarily secured through the end of 2023, so we did not experience any significant increase in energy costs. In fact, we continue to see a slight decline in usage due to our energy efficiency programs. There’s nothing unusual in Vegas; however, in the regions, there were a couple of atypical items. We encountered some minor hold impacts in the third quarter, around 60 basis points, along with hurricane proceeds from the previous year’s quarter, approximately 80 basis points. Most of the other changes were related to labor increases when comparing quarter-over-quarter, but we did identify about 1.5 points of unusual margin items in the regions during the third quarter.

Hi, good afternoon, thanks for taking my question. Bill, Jonathan, I know you mentioned that, I guess, BetMGM is coming in better than the $1.3 billion revenue projection. And you're still on track on the losses for the year. You did mention that you still expect to achieve profitability in 2023 at some point. But given that everything is coming in better than expected. California, there's not going to be a big launch in 2023. Just given the maturation of the markets where you currently offer your product, are there reasons why you might not be able to hit that goal potentially earlier if hold is as expected? Thanks.

I wouldn’t say we need to change our projections or the expectation that by this time next year we should be profitable. I want to emphasize that. We believe there are real opportunities in the new markets we’re opening. We're implementing unique features in the iGaming marketplace with integrated jackpots that will connect our casinos and digital channels. We have two or three exclusive products in development, and we’re excited about them. iGaming represents a significant portion of our NGR overall. However, I don’t want to jump ahead. We are committed to investing in the business and want to see it grow. We are pleased with our position in iGaming and eventually in sports betting. It will require some investments. The points about California are noted, but we’re not focusing on sales right now.

Okay, thanks. And then with respect to the zero COVID policy in China and kind of where things stand right now. Has anything changed in terms of your expectation of when this picket could or should turn back on? And then if not, how should we think about the current burn rate in that market? Thanks.

I'll let Hubert chime in here in a moment. I would say this because obviously, we all got the message of zero tolerance, and it was demonstrated this week in Shanghai and ultimately at our own Cotai property; and Hubert can speak to that. Also, at the other side of the coin is they've opened up every province. All 31 provinces now are accessible to do eVisa, which is convenient and timely. So we're encouraged by the signal and really what it means for Macau. Macau is obviously an SAR, but it is obviously considered part of broader China in every way shape performance. So the support, I think it's trying to give it. By doing that, I think is meaningful to us. And hopefully, over time can get us to a different place. I'm not going to project when that time is. It's just been, as we all know, so many curves in this road.

Thank you, Bill and Chad, for your question. The recent relaxation of the eVisa and group visa application processes for Macau is certainly a positive development in the long run. In the short term, we will likely experience a gradual ramp-up, which may vary due to the current zero COVID policy. For instance, there have been recent cases in Macau that led to tightened border crossing measures. Specifically, there was one case at MGM Cotai that necessitated a three-day shutdown of operations, which we just reopened yesterday after quarantining, with plans to resume full operations today. Such occurrences may continue as long as the policy remains in effect. However, overall, I believe this will be beneficial in the long run. Regarding your question about our burn rate, we anticipate an operational expenditure of approximately USD 1.5 million per day in that range.

Thank you.

Great, thanks. I know you talked a little bit about some of the factors with the regional margin being down with labor costs and things. I'm just curious if you're seeing anything in terms of marketing your promotions in the regional markets, just given that you mentioned that gaming revenue was pretty much flat, and the growth was coming from non-gaming; if that is starting to lead to anything promotional. Thanks.

Hi Robin, it's Corey. Overall, in most of our regions, we are experiencing reasonable reinvestments. In Atlantic City, we noticed some improvement, although that market is currently challenging. Generally, our reinvestments have remained consistent. As we introduce some of these amenities that our players have requested, that portion of the benefits will affect gaming revenue, which could explain why it remains steady, while you may observe profitability in other areas within the regional markets.

Okay, thank you. And just for the follow-up, I'm curious if you're seeing anything different in terms of demand at your Vegas resorts in terms of the more premium properties versus the properties that are sort of more broad market. Are you seeing any difference in demand trends there? Thanks.

I think we've mentioned this in our previous comments, Robin. October was somewhat surprising for some of our legacy properties, likely due to the programming I referenced earlier. Overall, our ability to increase revenue is closely linked to luxury offerings, average rates at properties like Aria, Casapalca, and Bellagio, fine dining, and entertainment experiences such as performances by Bruno Mars. We haven't observed any slowdown; in fact, the opposite is true. While we remain aware of potential changes ahead, the trends we've seen in Las Vegas, especially for our high-end properties, continue to be promising, and we are quite excited about it.

Hi, everyone, thank you for taking my questions. Maybe one more in Las Vegas about your convention group bookings, maybe a bigger picture question. As you look forward to 2023, and we've got the big ones in Q1, maybe Corey, are you seeing attendance or bookings per the big events get back closer to 2019 levels? Or when you start to see pacing, is it more driven by more events? I guess we have a lot of conversations. Are those big events going to see similar attendance as 2019? Or might they be smaller and then you guys can kind of grow overall attendance through various sales to other departments? So curious if you have any visibility on that yet?

Yes. I think the answer is yes to all of them actually. The bigger events that are still coming in, depending on the type of industry, you'll see attendance reach the levels that they were before, especially if they're more domestic they have an international component, maybe not. But we're also seeing a lot of smaller groups and medium-sized groups come in and book also. So the business is definitely dynamic right now from that perspective. We're seeing a lot of demand for that business for the year also.

Yes. When MGM went to a majority position in MGM China in 2011, we recorded through the purchase accounting an intangible related to the concession. We've been amortizing that intangible between 2031 and 2038. When the law was released back in June, we, together with our outside auditing firm, Deloitte, came to the conclusion that it's a new concession that we'll be beginning post December. So the existing concession on which the intangible was based, we needed to amortize that towards the end of its life, which is this year. So we took a relatively small amortization charge in the second quarter, and then we're taking the remainder in the third and the fourth quarter. And so that's what that is.

Great, thank you. Just a follow-up on the strip margin in the quarter. There was a call out in the 10-Q for higher advertising costs. Are we now at a more normal level there? Or could that line item fluctuate a little bit going forward?

Yes. It's higher than 2021 because 2021, we cut back a little, but it's lower than we were spending in 2019.

Got it. Okay. And then just...

It's probably a new normal of where we feel pretty comfortable, plus or minus going forward in the future also.

Hey thanks. In the deck, you did mention investing in advanced marketing and physical/digital experiences, I think, associated with the loyalty program. As you ramped up to around, I think you said 44 million members and continue to invest in engagement, how are you thinking about monetization opportunities or partnerships to fund reinvestment or even make the loyalty program a profit center?

We have several opportunities, including expanding our existing partnership with Hyatt. We recently collaborated with BetMGM and Carnival, which we plan to incorporate into MGM Rewards over time. Additionally, we have a deal with Marriott at the Cosmopolitan of Las Vegas, and we will continue to pursue that. Currently, we have 44 million active members, which presents a significant opportunity for interaction. It's important to remember that MGM Rewards differs from MLive in that we reward all types of spending, not just gaming. This approach has attracted a different clientele, including higher-end retail customers. This shift will be further enhanced by events like F1 and other upcoming attractions. We have a dedicated team working on these initiatives, and as we approach our first full year, we will start sharing metrics regarding our progress. The early indicators look very promising overall.

Sounds good. That's helpful. One other unrelated follow-up. The market in Canada on the online side is a bit opaque at this point. I guess, what are you seeing in that market for BetMGM in terms of how it's ramping versus the U.S. and how it might evolve from here?

Surprisingly well. This market has been significant in Ontario for about a decade or more. Although they don't provide exact per-share figures, I am aware of our performance. We have done exceptionally well, and I believe a part of this success comes from our established Ontario/Detroit database and our long-term relationship with those customers. We have gained substantial market share, and whether we are leading or close to it in the iGaming sector is notable. Our position in sports betting is strong, and we were fortunate to have Wang-Getsky join us early on, which has been crucial. Overall, we are very pleased with our progress, especially considering the competitive landscape we entered.

Hey, how’s it going? Sorry if I missed it. Just taking another swing at Vegas margins. Revenue and EBITDA improved kind of regardless of how you cut it. With this in mind, if we think about the sequential margin compression in Vegas, Q2 to Q3, how much of this is a mix dynamic; adding lower margin revenues as you called out? And how much of this is sequential margin compression on the existing business from headcount, for example, which you also called out. If that didn't make sense. I can try it differently. Thanks.

No, that's all right. This is Jonathan. It is mostly related to the mix and, to a lesser extent, some additional labor. I can't emphasize enough how significant this is. I know your question was about the sequential changes, but looking at both year-over-year and sequentially, the volume of activity has increased here, necessitating some additional labor resources. We've also reopened some final outlets that had been closed over the past year or two. So it's really both of these factors that have contributed to this situation. I believe this is definitely the right strategy. Setting aside valuation considerations for a moment, I really appreciate this capital structure. It is a perpetual capital structure with increases of 2% to 3% over the next decade. We will not need to refinance it. When I consider what we have achieved with our M&A efforts, it’s clear that the Cosmopolitan and ARIA generated nearly $300 million in EBITDA during the third quarter. The acquisition costs for these properties were at sub-6x EBITDA multiples. Meanwhile, we sold the Mirage and the Gold Strike at 17x and 11x multiples respectively. There is a significant valuation discrepancy here. Analyzing our capital structure, its cost, and considering the operational leverage in our other businesses, along with the demand dynamics we have discussed, it's evident that our regional cross-property efforts are just beginning. The integration of the Cosmopolitan is still in its early stages amid all these developments. I see this as a tremendous opportunity for value creation, and I wouldn’t make any changes.

Thank you for joining us today. We're very enthusiastic about our business in Las Vegas. We're seeing strong growth, influenced by changes in customer demographics and increased interest in visiting Las Vegas, along with our strategic changes including the transition from Mirage to Cosmopolitan. We have a positive outlook on our position in Las Vegas. In Macau, despite facing challenges, we recorded $450 million in gross gaming revenue in October, which highlights the market's long-term potential. We're confident in our ability to secure relicensing by year-end. BetMGM is performing well, and we're excited about the potential of MGM Resorts with LeoVegas as we expand into other global markets. Our strong balance sheet provides us both stability during downturns and opportunities for growth. We're committed to maintaining and improving our margins, and we believe there’s potential for further enhancement in Las Vegas and some regional properties. Our growth pipeline in New York and Japan is very promising, and we feel well-prepared to take advantage of these opportunities. Lastly, I want to express my appreciation for our team's hard work and dedication. Thank you all for your time, and have a great night.