MGM Resorts sees domestic decline offset by China growth in Q3

MGM Resorts sees domestic decline offset by China growth in Q3

Thursday, November 1, 2018 Posted by News Team
Casino
Operator's chief executive Jim Murren talks up sports betting opportunities and GVC JV

MGM Resorts International has reported a 7% year-on-year increase in revenue for the third quarter of the year, with a decline in revenue from its domestic casino business offset by the strong performance of its Chinese operations. 

Revenue for the three months ended September 30th rose to $3.0bn, despite the company’s domestic casino operations seeing revenue fall 1.6% to $2.2bn. 

“Our third quarter operating performance exceeded our expectations despite the tough year on year comparison, resulting from robust casino business and an exceptionally strong event calendar last year,” MGM Resorts chief executive Jim Murren said. 

This, Murren said, was due in part to a decline in revenue per available room in Las Vegas, with around 120,000 fewer conference delegates travelling to the city during the reporting period. This offset a 1% increase in table game revenue, largely resulting from the opening of the MGM Springfield in Massachusetts, which contributed $42.5m to the domestic total. 

Domestic resorts room revenue was down 5% year-on-year, primarily down to the 3.9% decline in revenue per available room in Las Vegas.

The MGM China business performed strongly during the quarter, with revenue up 37% year-on-year to $606.0m. This was largely due to the opening of the MGM Cotai in February this year, with the venue contributing $171.8m to the $434.3m generated from MGM Macau. VIP table games turnover was up 14% at $9.4bn, with main floor table games drop jumping 46% to $1.9bn. 

Earnings before interest, tax, depreciation and amortisation for the quarter fell 6% to $820.5m, while operating income was down 17% at $410.9m, after total quarterly expenses climbed 12% to $2.7bn. This was due to start-up costs at the MGM Springfield, and disruption to the project to rebrand the Las Vegas Strip-based Monte Carlo as MGM Park, as well as the Las Vegas venues’ non-gaming revenue decline, MGM said.

Net income after finance costs and taxes was $142.9m, down 4% year-on-year. 

Murren said that the MGM expected to see a return to growth in Q4 as a result of stabilising market conditions.

“Looking further out, our growth will be driven by the continued ramp of our newly opened properties along with our disciplined approach to improve our margins throughout our resort portfolio,” he said. “We also are executing on additional targeted growth opportunities in key areas including sports betting and Japan’s upcoming integrated resort market. 

“Our focus on balance sheet strength will help ensure prudent capital allocation and the continued return of capital to shareholders,” Murren explained. “Overall, we remain confident that we will deliver on our 2020 goals.”

Murren also provided an update on the progress of the company’s sports betting joint venture with GVC Holdings. He noted that the venture’s management infrastructure has been put in place with the appointment of Adam Greenblatt as its chief executive, and that hiring was underway and office sites being scouted. 

“We know we picked the right company in GVC,” he said of MGM’s partner. “They are relentless, they're aggressive, they're smart. They feel the way we do about the opportunity in the United States, not only in sports betting, but in the whole interactive platform. 

“They're rooting us on as relates to our league relationships that we're forming. And between the two of us, we've been reaching out in a targeted way to a variety of sports teams, not only within the four major sports, but more broadly globally in other sports as well.”

He added: “I can't overemphasize how exciting we think this is going to be over time for the bricks and mortar business of MGM Resorts as we develop global partnerships, global relationships with customers and cross market to our existing resorts.”

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