MGM Resorts International (NYSE:MGM) Q4 2020 Earnings Highlights
Bill Hornbuckle, CEO:
“…At MGM, our long-term vision is clear and differentiated. Our goal is simple: to be the premier omnichannel gaming, hospitality and entertainment company in the world. We will achieve this vision by investing in the development of our people, providing fun and inspiring entertainment experiences for our guests, delivering operational excellence at every level and allocating our capital to drive the highest returns for our shareholders.
During the quarter, we made progress on each of these fronts. As the pandemic unfolded over the past year, we had to take the unfortunate steps of furloughing many of our employees to match business levels. As the business begins to recover and operating restrictions abate, we expect to continue remobilizing our fantastic teams, rehiring and retraining them in order to serve our guests. Over the course of this year, we will do the same with our industry-leading entertainers across all of our properties.
Our BetMGM sports betting and iGaming venture is growing at a historic rate, enabled by what I believe is digital gaming’s most talented management and technology development teams. I believe our people are truly the best in this new industry. Operational excellence is a mantra here. Beginning in late 2019, we refined our operating model, increasing spans of control and simplifying organizational layers to accelerate decision-making, bringing us all closer to our guests and to reducing costs.
These moves are already paying off. Our program of $450 million in domestic cost savings helped drive margin improvement, especially at our regional properties in the fourth quarter, and we should achieve the full target when business demands return to our 2019 levels. And finally, we are focused on being disciplined allocators of capital, always driven by the goal of creating value for our shareholders. In the first and second quarter of 2020 in the early days of the pandemic, it was critical to create and sustain a liquidity cushion for the company, with the top line still under pressure and the travel climate a bit uncertain, our fortified balance sheet is essential to protect equity value while enabling MGM to be aggressive when identifying opportunities to invest for growth.
And invest for growth, we have. Even as we’ve been managing through the crisis before us, we have kept an unwavering focus on the future and particularly on several attractive ROI growth opportunities that align to our long-term vision. Along with our partners, Entain, we have invested in BetMGM, and we have seen it emerge as a leader in the U.S. sports betting and iGaming business.
We’ve launched an extensive room remodel program here at Bellagio, slated to be done this summer. And we’re taking steps to expand the company’s digital capacities and strengthen our omnichannel strategy globally. And we have been laying the groundwork for growing our presence in Asia to the Japan IR opportunity and additional investments in Macau. With that, let’s focus on, obviously, the fourth quarter’s results.
Our consolidated fourth-quarter 2020 revenues were $1.5 billion, incrementally better than our third quarter by $1.1 billion. Our fourth quarter adjusted EBITDAR has improved sequentially to a positive $97 million this quarter. Our full-year 2020 revenues were $5.2 billion, about 40% of 2019 levels. And our full-year 2020 adjusted EBITDAR loss was approximately $148 million.
The operating dynamics in Las Vegas and our regional properties were, however, quite different in the fourth quarter. Let’s start with Las Vegas. Our fourth quarter Las Vegas Strip revenues were $480 million, about flat from the third quarter. However, our Strip’s property EBITDAR was $54 million, up from $15 million in the third quarter driven almost entirely by October and the first half of November.
The fourth quarter started relatively strong here in Las Vegas with hotel occupancies of about 46% during October. And in fact, October was our strongest month since the beginning of the pandemic, but public health concerns dampened visitation over the course of the quarter, and this has obviously continued at least ’til now through February. Our fourth-quarter hotel occupancy finished at 38% with weekends running at 52% and midweek at 31%. Our M life loyalty members continue to drive visitation with our casino segment contributing to total room nights improving by about 13 points over the last year.
And our casino customers and new M life member sign-ups also continue to skew toward higher worth and younger customers during this quarter. It’s our belief these headwinds will continue into the near term with current Nevada gathering guidelines in effect. And public health sentiment, where it is, we expect midweek business will be challenged throughout the first quarter. In this demand environment, we have remained flexible to minimize our cash usage and ultimately maximize our portfoliowide profitability.
In the fourth quarter, we closed our hotel towers at Mandalay Bay and Park MGM during the midweek. And in early January, we also announced the full closure of Mirage during the midweek. We remain diligent in closely aligning labor needs to demand. The good news is the approved vaccines appear highly effective for vulnerable populations, and we are monitoring the rollout closely.
As the burden of our healthcare system eases, gathering, travel restrictions are being lifted. Assuming that most of the population is willing to resume normal activity, which we certainly saw glimpses of last summer, then we believe the demand for travel and visitation in Las Vegas could be robust later in the year. In fact, our gross bookings in January was the strongest since the start of the pandemic, and guests are increasingly booking 90-plus days out. I’m also looking forward to the coming pool season with much optimism.
While the return of the larger groups will ultimately depend on the easing of gathering guidelines and other factors, we remain bullish on the long-term demand. We still have significant rooms on the books for the third quarter and have more on the fourth quarter than we had at this time last year. Both 2022 and 2023 are approximately one on pace compared with prior years. And it’s interesting the LVCVA recently conducted a survey which indicated that 91% of those surveys missed the face-to-face nature of meetings, and the majority were also just simply burned out from virtual meetings.
The survey also indicated that business travelers believe Las Vegas is more prepared than other leading business destinations to safely host in-person events. Data points like these tell me that the fundamental drivers of Las Vegas as a tourism and meeting destination remain firmly intact. We remain bullish in its proven ability to drive demand and believe the markets return to pre-pandemic levels over time. Now let’s move on to our regional performance.
Our regional operations performed exceptionally well in the fourth quarter despite being subject to a series of operating restrictions. Our fourth-quarter regional operations revenues were $595 million, up 7% sequentially versus the third quarter. And adjusted property EBITDAR was up 9% sequentially from the third quarter to $159 million. As in Las Vegas, we are highly encouraged that our performance was led by a higher level of casino spend by a younger demographic.
Gaming volumes were approximately 70% of last year’s fourth quarter, but our regional properties delivered 129 basis points year-over-year EBITDAR margin growth to 27%. We achieved this despite the statewide restrictions, including the full closure of Detroit for a month as well as the week-long exposure in extended hurricane repairs at the Beau Rivage. Adjusting for these headwinds and other state-by-state restrictions, we expect our margins for the quarter would have been up 580 basis points year over year. These continued cost improvements, predominantly in labor and marketing efficiency, are largely sustainable.
I expect continued strong regional margins as revenues return toward our 2019 levels. Finally, I know we are all encouraged by the states lifting operating mandates over the past couple of weeks. No doubt, this will enable our properties to serve greater numbers of guests and expect these guests will lead the recovery in our system. Now I’d like to spend a few minutes on BetMGM.
The sports betting and iGaming market is one of the largest and most exciting growth opportunities in the U.S.A. today, and BetMGM is emerging as a long-term leader. BetMGM began 2020 in just three markets and has ended the year with 10. It is now currently live in 12 states, and we expect to be in 20 states by the end of 2021 with access to approximately 40% of the U.S.
adult population. As each state rolls out, MGM is securing a leading market share position. In the fourth quarter, BetMGM’s market share was 17% in its retail and online markets and 19% if you exclude Pennsylvania, which were only open for part of December. This is a testament to BetMGM’s successful execution and strong management teams as it continues to enter new states on day one — on day one and gained share in its existing markets.
Consider the venture’s entry into Michigan just a couple of weeks ago. We had a fully operational iGaming and online sports betting offering on day one and prelaunch registration efforts to build momentum into go live day. Between December and January, BetMGM registered 138,000 new customers. In the first 10 days of launch, BetMGM generated $13 million in GGR.
That’s especially impressive is that our iGaming GGR per day in January was higher than in New Jersey, where BetMGM is the No. 1 operator. Michigan is a market where we knew we had the right format to win. We have an MGM branded retail presence with a loyal customer base.
The ability to go live on day one with both iGaming and sports betting, a compelling product, an attractive target and an attractive target demographic. While it’s still very early, we’re extremely pleased with these results thus far. Our leadership positions have proven sustainable. BetMGM was the No.
1 iGaming operator in the U.S. in the fourth quarter, and we expect to continue growing our market share. On the sports wagering side, BetMGM delivered impressive online sports betting results in two of its newest markets, Colorado and Tennessee. In the fourth quarter, BetMGM had market shares of 31% and 34%, respectively.
These share gains led to $178 million of net gaming revenues associated with BetMGM in 2020, well above its target of $150 million. And in fact, in the fourth quarter, BetMGM’s net revenues doubled the previous quarter. The convergence between BetMGM and M life has been monumental. In the fourth quarter, 17% of BetMGM sign-ups have come from MGM, and 39% of the new M life sign-ups have come from Bet MGM.
BetMGM’s key competitive advantage is its ability to lever MGM’s destinations our broad-based experiential offerings and our M life loyalty program as efficient and effective customer acquisition tools. Once engaged, we know that omnichannel customers have vastly greater value to our company than single-channel customers. And again, while we’re still in this in the early days in Michigan, we are already proving this out. We are currently seeing customer acquisition costs below the $200 range.
In 2021, we and our partners, Entain, expect new revenue associated with BetMGM to grow well over 100%. In fact, preliminary estimates of January’s net gaming revenues associated with BetMGM operations was $44 million. On Super Bowl Sunday, the number of online bets placed with BetMGM was 11 times last year’s online bets, and the online handle was 17 times last year’s handle. That is why we remain aligned on investing aggressively to fund the growth of this business, and we expect to continue doing so this year in pursuit of this market opportunity….”