MGM Resorts International Reports Second Quarter Financial And Operating Results

"Our second quarter came in better than we expected and we made significant progress to capitalize on future growth opportunities in sports betting and Japan," said Jim Murren, Chairman and CEO of MGM Resorts International. "Earlier this week, we announced major alliances with GVC, Boyd Gaming and the NBA to cement our leadership position in the developing sports betting market in the U.S. Further, the recent passage of Japan's Integrated Resort Implementation Act is another historic milestone, and we believe we are well positioned in that market."

Said Mr. Murren, "We believe our continued focus on maximizing our margins, the near-term completion of our development pipeline, and our ability to accretively sell assets to MGM Growth Properties, will further accelerate our free cash flow generation.  We are confident that we will continue to execute on our long-term strategies and deliver value to our shareholders, as evidenced by the nearly $600 million in share repurchases we made during the quarter."

Second Quarter 2018 Financial Highlights:

• Diluted earnings per share for the second quarter of $0.21, compared to diluted earnings per share of $0.36 in the prior year quarter;


• Net revenues increased 3% over the prior year quarter at the Company's domestic resorts to $2.2 billion. Excluding Park MGM, net revenues increased 4% compared to the prior year quarter;


• REVPAR⁽¹⁾ increased 2.8% compared to the prior year quarter at the Company's Las Vegas Strip resorts;


• Operating income of $449 million at the Company's domestic resorts, compared to $520 million in the prior year quarter, which benefited from $41 million related to the NV Energy exit fee modification and $36 million related to the Borgata property tax settlement;


• Net income attributable to MGM Resorts of $124 million, compared to $210 million in the prior year quarter;


• Domestic resorts Adjusted Property EBITDA⁽²⁾ of $626 million, a 5% decrease compared to $657 million in the prior year quarter, which benefited from the $36 million Borgata property tax settlement. Excluding Park MGM, Adjusted Property EBITDA decreased 2% compared to the prior year quarter;


• Operating margin of 20.7% in the current quarter at the Company's domestic resorts, a 394 basis point decrease compared to the prior year quarter;


• Adjusted Property EBITDA margin of 28.9% in the current quarter at the Company's domestic resorts, a 227 basis point decrease compared to the prior year quarter, and a 183 basis point decrease compared to the prior year quarter excluding Park MGM;


• MGM China operating income of $46 million in both the current and the prior year quarters and Adjusted Property EBITDA of $120 million, up slightly compared to the prior year quarter, primarily as a result of the ramp-up phase of operations at MGM Cotai and lower win percentages for both main floor and VIP table games compared to the prior year quarter;


• CityCenter operating income from resort operations of $76 million and Adjusted EBITDA from resort operations of $131 million, a 25% increase in Adjusted EBITDA from resort operations compared to the prior year quarter;


• Distributed $65 million via the Company's quarterly dividend of $0.12 per share; and


• Repurchased $595 million of the Company's common shares in the second quarter.

Certain Items Affecting Second Quarter Results

The following table lists certain other items that affect the comparability of the current and prior year quarterly results (approximate EPS impact shown, net of tax, per share; negative amounts represent charges to income):

Domestic Resorts

Casino revenue for the second quarter of 2018 increased 8% compared to the prior year quarter, due primarily to a 14% increase in table games win primarily driven by the Company's Las Vegas Strip resorts and a 5% increase in slots win, primarily driven by an increase in slots volume at the Company's other domestic resorts.

The following table shows key gaming statistics for the Company's Las Vegas Strip resorts:

The following table shows key gaming statistics for the Company's other domestic resorts:

Domestic resorts rooms revenue increased 1% compared to the prior year quarter due primarily to a 2.8% increase in REVPAR at the Company's Las Vegas Strip resorts.

The following table shows key hotel statistics for the Company's Las Vegas Strip resorts:

Operating income at the Company's domestic resorts was $449 million for the second quarter of 2018 and was negatively impacted by disruption related to the repositioning and rebranding at Park MGM. Operating income in the prior year quarter was $520 million, which benefited from $36 million related to Borgata's share of a property tax settlement from Atlantic City, as well as $41 million related to a modification of the 2016 NV Energy exit fee. Domestic Resorts Adjusted Property EBITDA decreased 5% to $626 million in the second quarter of 2018. Excluding Park MGM, Adjusted Property EBITDA decreased 2% compared to the prior year quarter.

Mr Murren continued, "Our Las Vegas Strip resorts benefited in the prior year third quarter from a stronger citywide convention base, two major boxing events and a higher than normal table games hold. The difficult comparison in citywide convention attendees has resulted in a more negative than anticipated hotel mix shift creating short-term competitive rate pressure in the current year third quarter. In addition, the transition of Park MGM continues to create short-term headwinds but is on track to complete its transformation by the end of this year."

As a result of these factors, the Company expects third quarter net revenues at its Las Vegas Strip resorts to be lower by approximately 8% to 10%, with REVPAR down 5% to 7%. The Company also expects Las Vegas Strip Adjusted Property EBITDA margins to be approximately 28%, or around 29% excluding Park MGM.

The Company expects its full year 2018 net revenues and REVPAR at its Las Vegas Strip resorts to decrease by a low single digit percentage, and an Adjusted Property EBITDA margin of approximately 29%, or around 30% excluding Park MGM.

Corporate Expense

Corporate expense, including share-based compensation for corporate employees was $103 million in the second quarter of 2018, an increase of $24 million compared to the prior year quarter, due primarily to an increase in corporate brand campaign expenses of $9 million and the inclusion of MGM China corporate expenses of $5 million. Certain expenses incurred by MGM China are now classified as part of the Company's corporate expense in 2018. Prior to 2018, such expenses had been classified within general and administrative expense.

MGM China

Key second quarter results for MGM China include:

• Net revenues of $561 million, a 32% increase compared to the prior year quarter. The current quarter benefited from the opening of MGM Cotai on February 13, 2018, which contributed $185 million of net revenues;


• Main floor table games win increased 42% compared to the prior year quarter due to the opening of MGM Cotai;


• VIP table games win decreased 7% compared to the prior year quarter due primarily to a decrease in the VIP win percentage to 2.3% in the current quarter partially offset by a 19% increase in turnover predominantly at MGM Macau;


• Operating income was $46 million in both the current and the prior year quarters;


• Adjusted Property EBITDA increased 1% to $120 million compared to $119 million in the prior year quarter. The current quarter included $10 million of license fee expense compared to $8 million in the prior year quarter; and


• Operating margin was 8.3% in the current year quarter, and Adjusted Property EBITDA margin was 21.4% in the current quarter compared to 28.0% in the prior year quarter, due primarily to the ramp-up phase of operations at MGM Cotai and lower win percentages for both main floor and VIP table games compared to the prior year quarter.

The following table shows key gaming statistics for MGM China:

MGM China paid the previously announced $47 million final 2017 dividend in June 2018, of which $26 million was received by MGM Resorts.

Unconsolidated Affiliates

The following table summarizes information related to the Company's share of income from unconsolidated affiliates:

Key second quarter results for CityCenter Holdings, LLC ("CityCenter") include the following (see schedules accompanying this release for further detail on CityCenter's second quarter results):

• Net revenues were $344 million, a 13% increase compared to the prior year quarter, due primarily to increase in casino and non-casino revenues;


• Aria's table games win increased 20%, due to an 11% increase in table games drop and an increase in table games hold percentage to 29.1% in the current quarter compared to 26.8% in the prior year quarter;


• Aria's slots win increased 12%, due primarily to a 10% increase in volume compared to the prior year quarter;


• REVPAR at Aria increased 5% compared to the prior year quarter to $238;


• REVPAR at Vdara increased 5% compared to the prior year quarter to $193;


• Operating income from resort operations was $76 million compared to operating income of $60 million in the prior year quarter; and


• Adjusted EBITDA from resort operations was $131 million, a 25% increase compared to the prior year quarter.

In May 2018, CityCenter paid a $400 million dividend, of which MGM Resorts received its 50% share, or $200 million.

MGM Growth Properties

During the second quarter of 2018, the Company made rent payments to MGM Growth Properties Operating Partnership LP (the "MGP Operating Partnership") in the amount of $193 million and received distributions of $82 million from the MGP Operating Partnership. On June 15, 2018, the Board of Directors of MGP Growth Properties LLC ("MGP") approved a quarterly dividend of $0.43 per Class A share (based on a $1.72 dividend on an annualized basis) totaling $30 million and representing a 2.4% increase over the prior annual dividend rate, which was paid on July 16, 2018 to holders of record on June 29, 2018. The Company concurrently received an $84 million distribution attributable to its ownership of MGP Operating Partnership units.

On July 6, 2018, MGP completed the previously announced acquisition of the Hard Rock Rocksino Northfield Park for approximately $1.06 billion. MGP funded the acquisition with cash on hand and borrowings under the MGP Operating Partnership senior secured credit facility.

MGM Resorts Dividend and Share Repurchases

On August 2, 2018, the Company's Board of Directors approved a quarterly dividend of $0.12 per share totaling approximately $65 million. The dividend will be payable on September 14, 2018 to holders of record on September 10, 2018.

In May 2018, MGM Resorts completed its $1.0 billion share repurchase program and announced a new $2 billion share repurchase program. During the quarter MGM Resorts repurchased approximately 19 million shares of its common stock at an average price of $31.30 per share for an aggregate amount of $595 million. Approximately $1.7 billion remains under the new $2 billion share repurchase program. All shares repurchased under the Company's program have been retired.

Financial Position

The Company's cash balance at June 30, 2018 was $1.3 billion, which included $448 million at MGM China and $290 million at the MGP Operating Partnership. At June 30, 2018, the Company had $13.6 billion of principal amount of indebtedness outstanding, including $231 million outstanding under its $1.5 billion senior secured credit facility, $2.1 billion outstanding under the $3.6 billion MGP Operating Partnership senior secured credit facility and $2.1 billion outstanding under the $3.0 billion MGM China credit facility.

In June 2018, the Company issued $1 billion in aggregate principal amount of 5.750% senior notes due 2025 for net proceeds of $986 million.

"We are gratified by the continued support of the investment community which allowed us to upsize our most recent offering to $1 billion," said Dan D'Arrigo, Executive Vice President and Chief Financial Officer of MGM Resorts. "We remain committed to achieving our consolidated net leverage target of 3 to 4 times through continued growth of our cash flows."

Conference Call Details

MGM Resorts will host a conference call at 8:30 a.m. Eastern Time today which will include a brief discussion of these results followed by a question and answer period. The call will be accessible via the Internet through http://investors.mgmresorts.com/investors/events-and-presentations/ or by calling 1-888-317-6003 for domestic callers and 1-412-317-6061 for international callers. The conference call access code is 2828989. A replay of the call will be available through Thursday, August 9, 2018. The replay may be accessed by dialing 1-877-344-7529 or 1-412-317-0088. The replay access code is 10121912. The call will be archived at http://investors.mgmresorts.com. In addition, MGM Resorts will post supplemental slides today on its website at http://investors.mgmresorts.com for reference during the earnings call.

1. REVPAR is hotel revenue per available room.


2. "Adjusted EBITDA" is earnings before interest and other non-operating income (expense), taxes, depreciation and amortization, preopening and start-up expenses, NV energy exit expense, and property transactions, net. "Adjusted Property EBITDA" is Adjusted EBITDA before corporate expense and stock compensation expense, which are not allocated to each property. "Adjusted Property EBITDA margin" is Adjusted Property EBITDA divided by net revenues. Adjusted EBITDA information is presented solely as a supplemental disclosure to reported GAAP measures because management believes these measures are 1) widely used measures of operating performance in the gaming industry, and 2) a principal basis for valuation of gaming companies.

Management believes that while items excluded from Adjusted EBITDA, Adjusted Property EBITDA, and Adjusted Property EBITDA margin may be recurring in nature and should not be disregarded in evaluation of the Company's earnings performance, it is useful to exclude such items when analyzing current results and trends compared to other periods because these items can vary significantly depending on specific underlying transactions or events that may not be comparable between the periods being presented. Also, management believes excluded items may not relate specifically to current operating trends or be indicative of future results. For example, preopening and start-up expenses will be significantly different in periods when the Company is developing and constructing a major expansion project and will depend on where the current period lies within the development cycle, as well as the size and scope of the project(s). Property transactions, net includes normal recurring disposals, gains and losses on sales of assets related to specific assets within the Company's resorts, but also includes gains or losses on sales of an entire operating resort or a group of resorts and impairment charges on entire asset groups or investments in unconsolidated affiliates, which may not be comparable period over period. In addition, capital allocation, tax planning, financing and stock compensation awards are all managed at the corporate level. Therefore, management uses Adjusted Property EBITDA as the primary measure of the Company's operating resorts' performance.

Adjusted EBITDA, Adjusted Property EBITDA, and Adjusted Property EBITDA margin should not be construed as alternatives to operating income or net income, as indicators of our performance; or as alternatives to cash flows from operating activities, as measures of liquidity; or as any other measure determined in accordance with generally accepted accounting principles. We have significant uses of cash flows, including capital expenditures, interest payments, taxes and debt principal repayments, which are not reflected in Adjusted EBITDA, Adjusted Property EBITDA, or Adjusted Property EBITDA margin. Also, other companies in the gaming and hospitality industries that report Adjusted EBITDA, Adjusted Property EBITDA, or Adjusted Property EBITDA margin information may calculate Adjusted EBITDA or Adjusted Property EBITDA in a different manner.

Reconciliations of GAAP net income (loss) to Adjusted EBITDA and GAAP operating income (loss) to Adjusted Property EBITDA are included in the financial schedules in this release.

The Company does not provide reconciliations of Adjusted EBITDA, Adjusted Property EBITDA, or Adjusted Property EBITDA margin to net income on a forward-looking basis because the Company is unable to forecast the amount or significance of certain items required to develop meaningful comparable GAAP financial measures without unreasonable efforts. These items include gains or losses on sale or consolidation transactions, accelerated depreciation, impairment charges, gains or losses on retirement of debt and variations in effective tax rate, which are difficult to predict and estimate and are primarily dependent on future events, but which are excluded from the Company's calculations of Adjusted EBITDA, Adjusted Property EBITDA, and Adjusted Property EBITDA margin.