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Chinese restrictions slow MGM Resorts recovery in Q3


MGM Resorts saw its regional US properties begin to recover from their novel coronavirus (Covid-19) shut-down in the third quarter, though continuing restrictions in Macau meant revenue remained down significantly year-on-year. 

Revenue was down 66.0% at $1.13bn for the quarter ended 30 September, a period that saw all MGM Resorts properties reopened by the period end.

The biggest contributor to the Q3 total was the operator’s regional US casinos, which MGM has previously picked out as the first to recover from the Covid-19 lockdown. These properties, comprising eight venues in seven states, generated revenue of $556.8m. 

This, however was down 40.4% year-on-year, with the MGM Springfield in Massachusetts, Borgata in New Jersey, Michigan’s MGM Grand Detroit and Empire City in New York only open for part of the reporting period. State restrictions on customer numbers and reduced gaming contributions also contributed to revenue decline.

The revenue decline from MGM’s ten Las Vegas properties was steeper, falling 68.1% to $481.4m. Again this was due to social distancing measures in the properties, while the Vdara, Mirage and Park MGM only welcomed back customers for part of the three-month period. 

The biggest decline was seen in Macau, where visitation was significantly reduced by travel restrictions to the Special Administrative Region. 

Guangdong province did not resume issuing tourist visas to Macau until August 26, while the rest of mainland China only followed from September 23. As such, revenue from the operator’s properties in Macau was down 93.6% at $46.9m.  

The operator did add that results across all three regions represented a quarter-on-quarter improvement from the three months to 30 June, a period where the majority of its properties remained either closed or only just reopened. 

MGM recorded a further $40.8m in revenue from management fees and other operations, down 69.6%. 

Looking at revenue breakdown by activity, gaming accounted for more than half of the Q3 total, though at $690.2m, this was down 58.5% from the prior year. Revenue from hotel rooms declined 70.5% to $175.5m, while food and beverage’s contribution declined 77.5% to $126.3m. 

Entertainment and retail revenue fell to $101.6m, while reimbursed costs declined to $32.3m. 

Turning to outgoings for the quarter, total expenses declined 47.2% to $1.64bn, with a rise in general and administrative costs offset by declines across all operating units. Earnings before interest, tax, depreciation, amortisation and rent (EBITDAR), meanwhile, swung to a $48.8m loss for the quarter. 

“The third quarter offered signs of stability and recovery driven by strength at our US regional operations,” MGM chief executive Bill Hornbuckle said. “We saw sequential improvement in all our markets and several of our regional properties delivered quarterly Adjusted Property EBITDAR records.” 

After expenses, plus $20.6m in additional income from unconsolidated affiliates, MGM Resorts posted an operating loss of $495.2m, compared to a $238.4m profit in the prior year. Once financial expenses totalling $183.5m (down 23.4%) were factored in, the operator’s pre-tax loss widened significantly to $678.7m. 

However the business recorded a $76.7m income tax benefit, and a $67.2m gain from non-controlling interests, for a net loss of $534.7m, compared to a $37.1m loss in the prior year.

Chief financial officer and treasurer Corey Sanders noted that the business’ domestic liquidity, excluding MGM Growth Partners and MGM China, remained “substantial” at $4.5bn. This was strengthened by the issuance of $750m in senior notes to further fortify its financial position. 

As of 30 September the operator had total liquidity of $7.8m, comprising $4.59bn in cash and cash equivalents and $3.17bn available through revolving credit facilities. 

Looking ahead, Hornbuckle said the business remains “focused on responding to the pandemic with effective health and safety protocols”. 

“We have modified our operating model to adapt to the current environment and we are executing on our long-term growth initiatives, particularly in US sports betting and iGaming, where BetMGM has gained significant momentum,” he added.

That brand, operated through a 50-50 joint venture with GVC Holdings, is live in eight states, which it expects to expand to 11 by the year-end, with market access in 20. It is now one of the top three brands in each live market, MGM noted, and expects net revenue to reach $150 to $160m for 2020, revised upwards from its original $130m projection. 

This growth comes amid efforts to refine its acquisition strategy, leveraging MGM’s M Life Rewards database of 34m customers, and partnerships with the likes of Yahoo Sports and Buffalo Wild Wings.