Operator News
US – MGM’s revenues up by ten per cent in 2019 amid Coronavirus warnings for 2020
By Phil - 17 February 2020
MGM Resorts saw its revenue increase by four per cent in the fourth quarter of the year to $3.2bn with full year revenues, net revenues increasing by ten per cent to $12.9bn in 2019, although it warned of ‘several headwinds’ that would restrict revenue growth in 2020.
Consolidated operating income increased to $3bn compared to $336m in the prior year quarter. The current year quarter included a $2.7bn gain related to the Bellagio real estate transaction but also saw a decrease in tables games revenues driven by Far East baccarat at the company’s domestic resorts and the inclusion of $24m in insurance proceeds in the prior year quarter. Excluding Circus Circus Las Vegas, which was sold in December 2019, and the impact of the insurance proceeds, consolidated Adjusted EBITDAR increased three per cent compared to the prior year quarter. Revenues in Las Vegas were up by four per cent to $1.4bn whilst regional was up by 15 per cent and included $50m in net revenues from Empire City Casino, which was acquired on January 29, 2019, and $68m in net revenues from MGM Northfield Park’s operations, which was acquired from MGP on April 1, 2019.
“We are proud of the progress we made during 2019 as we took important steps to evolve our organization,” said Jim Murren, now the outgoing Chairman and CEO of MGM Resorts. “However, our fourth quarter results were below our expectations, primarily due to lower than expected hold, weakness in Far East baccarat, and certain one-time items. All other dimensions of our business in Las Vegas performed on or ahead of plan. For full year 2019, we generated strong consolidated net revenue and Adjusted EBITDAR, which increased 10% and 6%, respectively, year over year. We are also executing on our stated MGM 2020 plan, which is realising material cost savings and revenue enhancements and transforming the way we operate to position MGM Resorts for future growth and long-term value creation. Finally, we were pleased to return more than $1.3bn to shareholders in the form of dividends and buybacks in 2019.”
“During the year, our team made meaningful strides in implementing our asset-light strategy to optimise our portfolio, strengthen our balance sheet and enhance free cash flow. This strategy is best positioning MGM Resorts for the future by providing the flexibility to invest in higher return growth opportunities. Following the monetisation of the real estate of Bellagio and the sale of Circus Circus Las Vegas, we continued our momentum into the first quarter of 2020 with our announcement to monetise the real estate of MGM Grand Las Vegas. Our previously announced transactions are expected to provide total net cash proceeds to MGM Resorts of $8.2bn, a portion of which we used to retire $3.1bn of debt in the fourth quarter. We remain committed to reducing our net domestic financial leverage, excluding MGP, to approximately 1 time by year end 2020. We will have one of the strongest balance sheets in our industry and also the strongest in our recent history. Furthermore, with the expected launch of a modified Dutch auction tender offer tomorrow, we expect to continue to return value to shareholders on an efficient and expedited basis.”
Mr. Murren concluded: “Looking ahead, we remain focused on monetizing our remaining owned real estate assets, which we expect will allow us to invest into high growth initiatives such as Japan and sports, as well as continue to further fortify our balance sheet and return capital to shareholders.”
MGM Resorts expects several headwinds in calendar year 2020, certain of which the Company believes are unpredictable within an appropriate range of accuracy. As a result of the increased volatility in our business due to coronavirus as well as the market-wide weakness in Far East baccarat in Las Vegas, MGM Resorts believes it is appropriate to withdraw its fiscal 2020 full year financial targets. The company’s Macau casinos are currently closed.
“We have made significant changes as a company since 2018, when we announced our financial targets. We have advanced our transition to a more asset light business model and are successfully continuing to execute on our MGM 2020 plan,” said Corey Sanders, Chief Financial Officer and Treasurer of MGM Resorts. “While we are encouraged with the long-term outlook in most of our key segments, and are especially pleased with our underlying domestic business performance, we believe it is appropriate to withdraw our 2020 financial targets. Notwithstanding this decision, we are committed to growing free cash flow and Adjusted EBITDAR, moderating our capital expenditures and reducing the number of shares outstanding. The repurchase announced today is evidence of our continued confidence in our overall business and strategy, and we continue to believe in the value potential of MGM Resorts as we navigate the current environment.”
