MGM Resorts International (MGM) Earnings Call Transcript & Summary

So our lunch keynote is going to be Bill Hornbuckle, President and Chief Executive Officer of MGM Resorts. MGM has long been a sponsor of this conference in all of its various forms. And I actually got asked the other day by my new associate, was is this the biggest one of these conferences you've ever done. And I said, well, in New York, absolutely. But then I think for a second, I was like there was this one time back in Las Vegas in 2010, and there was this epic conference that was held and all because of the sponsorship of MGM and the relationship that we've had over the years. And they've been a huge sponsor of mine pretty much from day 1 as a research analyst. So it means a lot. It's actually been the first year in a couple of years that we've had you back. So a real pleasure to have you here and a lot going on, both globally, here in New York. So excited to hear all about it. So the way it's going to work, we do about 25 minutes where Bill's going to give some prepared remarks, he's got a few slides to walk through and give us an update on the way he sees the world. And then from there, we'll jump into a fireside chat. So Bill, over to you. Thank you for doing this.

Good afternoon, everyone, and thank you, Shaun. So maybe as just a quick intro to myself because I've met many of you, but some of you I haven't. I wanted to talk a little bit about the company, how we view it, frankly, how I view it as the new President and CEO at least since you've all had a chance to recoup after COVID. And there are 5 basic pillars and disciplines. And I think to start this off, I think something that's really relevant is we put the vision and the hospitality in service as a priority and priority 1. We see ourselves as an entertainment company. And I come from 45 years of being with the company. I've been with it -- not with the company in Las Vegas. I've been with the company a little over 25 years. And so I know the nature of it, I know the nature of the people. I've literally had 50 different jobs in this industry. And so when I talk about strong people and strong culture, it comes from a place of being there and having done it. And so frankly, we get credibility with our organization. And so pushing the needle on all of that is exceptionally important to me and to us, and it comes with a couple of basic premises. We consider and we listen to our customers, and we listen often to our employees just about everything. And so the idea of listening to them. I think is essential and fundamental to who and what we are. We're servant leaders. We truly believe that. While we run a big company, we have an amazing opportunity both in Las Vegas and other places in the world. We are there to lead a group of people to do something that's pretty special and pretty unique. We are customer-centric more than we have ever been. It won't surprise any of you that 70% of our top line comes from 30% of our customers. And so we have keenly focused on what we call our Gold plus customers and above, which are basically tied to our rewards program and our high-spend non-gaming individuals where we have special programs. And so we have leaned in that in a big way, particularly in all of our luxury brands. We talk about and we have a vision for gaming as entertainment. You're going to see some numbers in a moment about scale, about the entertainment company we are and the things that we do. But the opportunity and the vision for us, and if you think about this, think about a casino in what it was 75 years ago, think about it today when you walk in. It kind of feels and looks the same when you think about the core product. And so we have a view that through digitization, through the opportunity to broadcast, we can do some things differently. And so when we think about gaming, we think about the notion of entertainment, we literally want to bring it down to that core level, and I'll spend some more time talking about that. We think about operational excellence. I've been with the company, like I said, 25 years. It's not lost on me that about 5 or 6 years ago in the context of margins, we lost our road map. We, post COVID, have gotten very focused. We're down 15% FTEs. We're very focused on margins and what it means to all of you as investors and frankly, to us as stakeholders. And so you'll hear a little bit more about that, but it's a key, key focus of our team going forward and about disciplined capital allocation. You all know we've gone asset light. You all know that we probably sit on about $3.5 billion of cash with additional credit facility that pushes us up to $5 billion. We're proud of the M&A that we have done. When you take the Cosmopolitan deal and you combine it with Mirage and Gold Strike, that was over 40% accretive deal to us on an ROI. So we're proud of the M&A that we've done. We've stayed focused on our balance sheet. We're very focused on free cash going forward, and I'll spend some more time talking about that going forward as well. If you think about what is this -- somebody asked me a question this morning, what are you trying to do? And we talked about -- and you'll hear from Adam later about DraftKings as a pure play in digital sports betting and gaming. We're not a pure play. So what is it that MGM Resorts is trying to do, particularly when it relates to things like the digital space? You can see our footprint. And the idea is to have a balanced portfolio and a balanced approach so that when anyone thinks about gaming as an enterprise and an investment, MGM has to come to the forefront because we have a massive presence in Las Vegas, arguably the capital of gaming. We have an Asia presence in Macau and one that's growing in Japan. We have a regional presence in the United States, it's diversified. And now through LeoVegas and ultimately, our BetMGM platform here in the States, we have a position in digital gaming that ultimately is growing, and we think substantially into the near future. And so you can see the footprint and the idea around omnichannel and what we think it brings us in the long run, we think it's meaningful. And so that's what we're trying to accomplish there. When you think about scale and scope, and these are some of our numbers, a couple of things maybe to point out of interest. We sold over 9 million tickets last year. Other than Live Nation, AEG, that makes us the third largest in the country. So our ability to buy to attract, to get, to motivate, to sponsor in that space is huge. When you think about restaurants, if you go down there in the market reach category, we're the largest multi-concept non-chain F&B operator in the United States. We do over a $1 billion in F&B. We have over 460 restaurants, and most of them all are independent ideas, one after the other. And so we have huge buying power. We have the ability to lean in. When you think about the state of Nevada, we're the state's largest taxpayer. And so we have leverage and sourcing to lean into all of that based on the scale that sits before you there. When you think about the strategic direction we're going, go back to my earlier comments. Obviously, we have 9 core properties in Las Vegas that run the spectrum from luxury down to the legacy properties that speak to the economy segment, whether it's Excalibur or Luxor. We have 7 regional properties, all of which you know, 3 of them really operate like full-scale resorts. When you think about Borgata, when you think about the Beau, when you think about National Harbor. We have a growing presence in Macau. We're now enjoying, you'll see later, about 14% market share. And so we've enjoyed that rebound, and I think exceptionally well. As you know, we have a 50% stake in BetMGM, and we'll speak more extensively about that. And so midterm -- and then you've all heard Chris [indiscernible] was just giving me a hard time about our deal with Marriott, we're really excited by that. We think it's a substantive deal. We've seen what it's done to the Cosmopolitan and for the Cosmopolitan. It was one of the reasons that attracted us to it. And so our ability to leverage into that as we go forward, and that will start in late October with MGM. And by year-end, we'll be fully integrated in a technology platform into that programming we're excited by. Think about the company longer term, you think about Empire City and the growth that will happen here, and I'll talk about that. And you think about MGM Resorts and its 40% ownership in Japan where literally the end of this month, I'm finally going to go sign the limitation agreement and the lease and get that project underway. And I'll tell you more about the timing. And then long-term digital growth. You saw us go international with LeoVegas. We just bought a company called Push gaming. And the idea there is a content provider that can help us push content not only into Leo, potentially into BetMGM and ultimately, the idea of convergence of brick-and-mortar and digital so that we can offer products like game-changing jackpots that stretch across digital and land-based and leverage all of that. And so something like Push gaming helps us accomplish that. In terms of earnings, obviously, you all know the second quarter earnings. I think the message is, particularly as we look at the luxury segment in Las Vegas, it remains strong. Two weeks ago, we had our highest ADR booking week in our history. Now you're leaning into the fourth quarter, you're leaning into Formula 1, which is a unique -- it won't be a one-off event, but a unique event. People are starting to get excited by Super Bowl. We just -- was able to capture the NBA tournament, the special tournament they're going to have the first week of December. So there's a lot of activity driving it. But the bottom line, in the middle of August, ADRs continue to drive Las Vegas. What it means macro for RevPOR in the general economy, I think, time to tell, but the signs that we see are encouraging. We consistently contain the margins. We promised you all 400 to 600 basis points improvement, and we've sustained that. We're going to continue to be highly focused on that. And I think this quarter as well proved it out as we think about the third quarter and ultimately into the fourth, we see that sustaining itself. Regional is kind of a mixed bag. Obviously, this is the place where any downturn in the economy might show the most. And it's an interesting story. We have in places like the Beau Rivage and Borgata to have the best August in their history, just had the best months in their history in August. You have Empire that did not. And you think about that, Well, why? Well, Empire has 90% of its audiences within 15 miles. You look at the 2 properties, and they're destination resorts of which we put people in airplanes and bring them in. So our regional properties don't behave necessarily like other folks' portfolio, but they're interesting onto themselves. They provide us a huge amount of throughput back into Las Vegas, so much so that now we've been able to capture 30% casino mix in Las Vegas, where historically, we've run 20%, because that's been one of the dynamic changes of what's happened to Las Vegas and why that marketplace -- and why we're doing so well there. And then there's the China story. You've all seen it. Look, we were really active and busy during COVID. There are several things we did. We added a bunch of suites that we needed desperately. We're still under suites. We want more, but we added a bunch of suites that have proved accretive. We were able to make a submission to the government that we were the only ones to get additional tables. We picked up 200 tables. We put 150 of them to work already, and we're pushing through to get the other 50 in play. And so we've been able to go from a 9.5% share to just under a 15% share, about 14.5%. And I think it's sustainable. We're now into our third quarter, and we're sustaining it. We've changed the makeup of the way the floor works, and I'll show you that in a moment. And so I think the approach we've taken, our reliance on our own marketing engine, where others have relied on junkets, historcally, has proven effective. And so we're at a different place than we were when we went in, coming out of COVID than when we went in. You can see this interesting statistic for Macau, August for the first time visitation hit 100% of last August of '19. So the market has fully recovered in the context of visitation. We got a head start on it, and you can see on the right what it did to our GGRs. We were, for the second quarter, already at 100%, most leveraged into Cotai, which was underdeveloped as we were going into COVID. We had just started to really ramp that property up, but you can see what happens. Some of those pictures are hard to see. But the essence of it is we took out some of the specialty high-end areas, open them up to the floor, added additional tables and enabled customers to look at each other, bliss is important that they can look at each other, see the tables close to them, and they could walk around. And if they felt the trend, they could move to the next table. And as funny as that sounds, it is working so much so that the entire marketplace now is starting to copy that idea. But we were on it and you can say we've been rewarded by it. The other thing is obviously the push into non-gaming tourism by the government itself. We've committed close to $1 billion between now and next 9.5 years to push into this space. We started several different programs. One of them know was a concert series. This is on the top of the Cotai roof out on a patio we have. We just hosted, this weekend, 5,000 folks, and we're pretty excited by -- 2 weeks ago, excuse me. We're pretty excited by what happened here. And then you can see again the share. And this is in the face of 10,000 additional rooms have opened since the beginning of the year. You had a bunch of rooms opening at Galaxy. You had a bunch of rooms at the Sands opened because they had some labor issues that they finally got their head around. And so we've gone from a place of 9.5% to about 14.5%. And the message is I think it's sustainable. And generally, in Macau, as I think about the next couple of months, other than the typhoon we just all survived successfully, we have not seen a downturn. So if you think about macro, everything you hear, real estate, economy, we have not seen a downturn in Macau. Doesn't mean it won't come. We have yet to see it. We think it's a pretty unique marketplace. And remember, about Macau, there's only 1% penetration of customers into Macau from China. So the marketplace is just massive. Adam will speak more to this. I think he's presenting after our conversation here today. But BetMGM, particularly for the first half of the year, continues to do what it was intended to do. We committed to between $1.8 billion and $2 billion in GGR. It's accomplished that I think most importantly to us, you can see our cohorts maturing. And so in the older markets, we see that we're able to make money, and you've seen that results. We made money in the second quarter. We'll see what happens in the third quarter, but the push in the understanding is next year, we'll be moneymaking. And we, as investors, don't see any substantive reinvestment into the business at scale. And again, I'll leave most of this for Adam to speak to. Talk about midterm growth. Las Vegas, think about macro, This is air traffic and air seats available into Las Vegas. And ever, if you go all the way back to January of '21 and the recovery, we surpassed '19. And as we sit here today in the fall season, we've got 20% more seats than the market's ever had before in its history. And so fundamentally, airlift is there for our programming. Interestingly, a great deal of it is domestic low-end carriers that are value oriented, and it's driving towards at an unprecedented level. And so you can see that. The other thing that's been interesting is we continue as a marketplace to open markets. So in this last quarter, we've opened 3 Lexington Lincoln and San Jose. You can see the international markets that have been announced in the domestic markets that have been announced. And so the point is the marketplace, the seat capacity and the interest continue to grow into Las Vegas. And I think fundamentally, as we think about the future, it's encouraging. The other thing, obviously, F1, you all know about it. I will tell you, rates are about 4x normal. I will tell you, gaming advanced front money credit is at 50% above the highest event in our history, and we've got about 7 weeks to go. So I think [indiscernible] in May weather think about -- now it doesn't mean we're going to win, by the way, it's a weekend anything can happen. But front money and credit were 50% higher than any event in the history of the company, pretty compelling. If you've seen the infrastructure for little bit on any of you have been on the ground there, they put in play. This thing isn't going anywhere. They've got hundreds and hundreds of millions invested in hepatic and start finish line. The track is ready to go. And we literally -- this is in front of Bellagio. We're building this out as we speak. We're going to put in the fountains 12,000 seats. If you have a VIP club, you'll have a lounge, and you'll have an up-deck patio. So pretty exciting stuff. We're all excited by this event. And when it comes to -- did go by one? Allegiant, we're scheduled to have 24-programmed event activity. It's up to 42. This thing continues to marvel. We just finished 2 weekends ago, not Taylor Swift, but Beyonce. And so the programming here I think -- remember this in our backyard, literally 65% -- as a matter of fact you can see them on the bridge, 65% of the people who come to this venue walk. And so we are the south end of the strip. We find that compelling. You've all heard about this. This is literally the location of the A's new stadium. And it's kind of hard to believe in some respects for us. If they put this roof on like they've defined, that will be the backdrop. And so if you look at it from that perspective, that's a better view. And so literally, on those 4 corners, you're going to have MGM; New York, New York; Excaliber, the balance of our properties and the stadium right there. That will drive about 450,000 new visitors a year. And that's being conservative, I think. But if the A's continue to do what they're doing, they don't get a better team, time will tell. We hope we think they will be better. But the additional programming that can happen in that venue, we also find exceptionally compelling. So that's there. And then if you think about it in its totality for a moment, and you just take a step back, and I now begin to call this the golden triangle of sports, you've got Allegiant, you've got T-Mobile, which by the way, the NBA just announced the programming for a mid-season tournament. They're going to bring 8 teams out in the first week into December to T-Mobile. And so every year -- hopefully, every year, we're going to have a mid-season tournament. And you're going to have -- where Tropicana sits the -- ultimately, the A's stadium. So if you think about that in the proximity to who and what we are, you can't but be excited by the activity case that, that all generates. This is more of the same. We continue down the track of both between world-class entertainment and the various venues and the hype, continue to be the home of UFC, continue to support and sponsor the Vegas Golden Knights, who obviously won the cup. And so that continues to be productive, particularly midweek with [ Kane's ] in town. You'll see 5,000, 6,000, 7,000 people sitting in the stands. It's kind of an interesting dynamic. And then ultimately, the Marriott deal I mentioned earlier. We think this deal drives roughly when it stabilizes about 750,000 room nights. If you think of it, the vast majority of these people are redeeming points. So in essence, their room is free. And so what we've seen at the Cosmopolitan is it displaces lower-end business, so they differentiate between what's being charged to the -- ultimately, the Marriott, and a leisure rate. And then the fact that they're there are not paying for room and so everything in their pocket from a RevPAR perspective, rooms, food, beverage, entertainment, simply goes up. It just does. It's the nature of psyche. It's what people have done at the Cosmopolitan. And so if we can stretch this across their 180 million members across our -- particularly our Las Vegas portfolio. But I'll tell you, in Borgata, I think this will be meaningful and maybe even as far as south as Beau, but particularly in Borgata, I think this has some meaning to it. So we're extremely excited by that program. Down the road, but this has now become not a dream but I think a possibility and a real one. Brightline is to have a proposal that literally sits on secretary butititeous desk as we speak. They're looking for up to $3 billion from the government to sponsor this brightline with one from Southern California to Las Vegas. They have the land acquisition. They have all the environmentals in place. They are simply now waiting for this funding to drop. And I've got to think if you go back to by the administration and think about how they've talked about rail and high speed, this is the kind of program that could fit into that very, very squarely. And frankly, I think it's waiting for a political moment for him to say and, oh, by the way, we are doing this. And so we're pretty excited. That's a long-term view. This is probably a 10-year build, but it will greatly impact the viability of both the XXXXXXXXXXXXXXX goes right on the I-15 quarter right down the high I-15 quarter goes right down in the middle of by 15%, principally the whole way. We continue to reinvest for anyone who's been down at Atlantic City. We renamed the Water Tower, the MGM. The Water Club, the MGM Tower. We invested in the rooms, those rooms had become tired. So we reinvested in all of those rooms. We continue to reinvest in places like Bellagio. If I told you the trailing 12 months cash flow, EBITDA in Bellagio was $700 million, you have to believe me. And so it's a meaningful number in an environment we want to protect. So we've redone all of the rooms with the exception of the suites in the main tower, which we are redoing now. We've redone 3 of the restaurants. We've redone the casino. We're working on baccarat. We're adding a couple of amenities. This happens to be a high-end room called the Vault. It's a speak easy. For $50, I'll serve you a cocktail. And we're hoping to make it literally one of the 50th best bars -- I'm not kidding, 50th best bars in the world. But it just -- the ideas we're continuing to reinvest. These are the rooms in the spot tower in Bellagio. The other idea we have, particularly now acquiring Cosmopolitan is the idea of a luxury campus. And so many of you probably haven't been back here because we just opened this. But this is the new corridor. Remember there was this concrete quarter that went between Vdara and the back end of Bellagio. We've just now opened this, and this now teas into the Cosmopolitan as well. And so we figured out how to hard connect to the back end of the building. And now frankly, I'm working on the front end because we now own the sliver of land as well that separated the Cosmopolitan property from the Bellagio property. And so you'll see us come forward with an idea to ultimately push all these things together. So from a customer perspective, they can stay interior and stay on our campus, if you will, on something we want to market collectively as a luxury campus. And then the last one, and this had an impact this year. Our convention business was off. One of the reasons we lost about 100,000 room nights at Mandalay because we were redoing the facility. It is now done. We're finishing up. And so as we think about this fall season conventions and into next year, we have this facility done. It hadn't been done in almost 15 years, so it was time. And so we're excited because it gives us the ability to go doing back-to-back conventions without the space during renovation, we're going to do one at a time. As I think about long-term growth here in New York is one of our opportunities. Good news is 2 weeks ago, we finally got our response back from our first question, which actually starts a program. So we had submitted over 80 questions to the government, the Gaming Commission. They've now responded back, that starts the clock. We then have now made a second submission well by October 6, we need to make a second submission. We've made it, but by October 6, you need to make second submission they will then respond at their choosing and when they choose, but I can't imagine they would have responded to the first not realizing the second wins going to come. It's our hope and belief that we'll have made an RFA submission, the actual submission for a license by end of this year. Then you need localization. So that's really becoming the trick in terms zoning. You need to have zoning and you need localization. I think the Mayor here is trying to get interestingly a revision to the zoning laws, but you cannot do this without local community support. We have local community support. And so you're looking at about a $2 billion extension. That's a large theater, think park theater. That's a 3,500 space parking garage. There's no structured parking currently. We're going to revamp the whole thing. Reskin it, add a couple of restaurants. We'll end up ultimately with about 200-plus table games and about 4,500 slot machines. I'm hoping, and I don't know, that by this time next year, we've been given a license. I think that's a rational and reasonable expectation, but we'll see. And frankly, it'll probably get held up or not by this third license and how quickly that can happen, whether it's here in Manhattan or some other [indiscernible]. Japan, this has been a journey. I was born in Japan, by the way. So I have an affinity for it. I was born in an Air Force space, not I'm Japanese, but I've spent 12 years on this project. Finally, on September 29, I'm supposed to get on an airplane, go to Japan, sign the final 2 agreements, the implementation agreement and the lease for the property. That means we can start in earnest. And to the extent we're able to do that, this will open in 2030. $10 billion project, budget has not changed. Scope has changed, budget has not changed. I won't let the scope -- the budget change. Earnings potential has not changed. We haven't impacted the casino itself. And I think -- if you think about the marketplace, we're probably going to be the only casino for a very long time in Japan. You've got 100 million people, you've got 19 million in Osaka alone. The casino industry there that not the gaming industry, there is $40 billion. Osaka alone is $19 billion of it. Whether you think about pachinko, you think about boats, you think about horse races, we're going to be the only casino. I'm extremely excited about the potential of this. And the kicker is it is closer to Shanghai, Beijing and Northern China cities than Macau. And so if you think about that, our database, who we know what we know, how we do it, we're pretty excited by that opportunity as well. And then ultimately, the UAE. Fascinating opportunity. This is a project that we started back in 2015, long before the dialogue started on casinos in the UAE. The idea this is Porto Island. You're looking at Jumeirah Beach to the right. If I was -- where I am standing, this would be the Burj Al Arab. The hotel looks like a sale. And right to the left of it's Palm Island. This is a 25-acre site that has been created. We're in the ground now with pylons. This is designed to be a hotel-only project initially. You're looking at an Aria and that Bellagio and an MGM. It's about 1,500 keys. We have recently added 150-odd thousand square foot platform, one additional layer to this thing to either be 1 of 2 things, a casino or a retail center. What has to happen here is each ruler will rule whether they want gaming or not, once potentially the country ultimately opines and puts out its regulations, which it appears well positioned. You probably saw some announcements earlier this week about all that my predecessor of hope. And so we're excited by it. We've been on this actually since 15 -- oh, by the way, the owner of this is the ruler of the Emirate, so that helps. A group called LaSalle. It's part of his portfolio and part of his holdings. But we will wait for Dubai. We will wait to hopefully have this become a reality. And we see this as a $3-plus billion market opportunity, and so we'll see. And we think Dubai has 140,000 hotel rooms today, Dubai today is as big as Las Vegas. And so the potential on this longer term, we think, is pretty compelling. That is in the ground as we speak. And then obviously, ultimately, digitally, Adam will talk about BetMGM, a partnership here. You've seen us pushing the LeoVegas and Rest of World. We just bought this company called Push Gaming, which is a content provider, principally around iGaming. And you saw -- and many of you have asked questions this morning about our launch with BetMGM into the U.K. designed, frankly, to test the brand, to understand the value of our brand. We know from an international visitation perspective other than Canada, it's our number one market. And if we're ever going to have a test of the value of our brand, we think this is the place to do it. Shaun, I think that's it. If you want to...

Love to.

For the Q&A.

All right. Perfect Thanks.

I've seen a lot of MGM over the years, but there's some really new material in here, Bill. It's really exciting. So thank you for doing that. We did miss the sizzle reel, like where's the big -- the Katy Perry song or whatever we lead off right like we missed that a little bit. So look, a lot of different places we could start. I want to be and thought on time, but maybe we ended on digital. So let me start with digital and just kind of hit on a couple of things. And obviously, I'm going to keep a lot of the operational, detailed questions for Adam and Gary in a few minutes. But from MGM's perspective, kind of 2 things I wanted to touch on. First, so LeoVegas just launched in the U.K.. And obviously, the European company, you have the rights to the BetMGM brand, but it is also the home market for your JV partner over there. So I'm sure you've thought about that and the strategy behind that. It's also a really competitive market. So just kind of walk us through the thinking there. Is there any signal we should be thinking or not? We know it's a big market. So just help us think through that just from..

No, I -- look, I wouldn't read a signal. We've been clear with Entain partner since day 1 that we have international aspirations. Go back to the strategy around the company and full diversification, making a couple of hundred million dollars in digital, give or take, whatever the number is going to be isn't enough to drive a differentiator on how people might view the company and ultimately maybe change valuations. So we want and need to be a digital player at scale. So we've been clear about that since day 1. We've been clear that BetMGM is for the use -- for U.S. and for Ontario. And so -- and when we launched in did LeoVegas, we let them know that at some point, BetMGM would emerge. As we thought about it and we thought about, well, where can we trial particularly the brand because we think the environment that's been created and the product itself will be great and fine, hopefully better, time will tell. But to your point, it's a huge market with a lot of established players. It's not going to be easy to break into. We really want to test the validation of the brand and see if it's meaningful and see what kind of differentiator. And from there, it may or may not creep to other places, but we thought that would be the best test, if you will. And in a relative scale, while we'll give it a good earnest run, it's not a relative big deal.

And given the competitive landscape there, how much investment are you putting behind that? Is this going to be a big like a substantial amount or are we scaling it for...

We're scaling it for -- we're scaling it from relative to -- look, if we get 3% or 4% share given that marketplace, we'll be happy. That happens. I mean a great start.

Sure. And then look, the other side of this is obviously -- and I know I've asked you about this directly and not all that long ago. But we actually had the pleasure of hosting Entain yesterday. My European colleague spoke with Rob Wood yesterday. And just kind of wanted your -- kind of your current thinking. It's been almost 6 months probably since the last time we kind of directly hit on this. But how do you think about how Entain and MGM work together going forward. We continue to think through this idea of truthfully, this is probably about as balanced as a joint venture can be on the one side, but we also have to marry that with the idea that joint ventures don't -- at some point, one partner seems to kind of win out. So how do you balance that? And where -- just where are we at with the Entain relationship?

So first and foremost, particularly as it relates to BetMGM, it's absolutely in their best interest and our best interest to focus everything we can here. And in fairness to them, they've been doing a very good job of that, and you'll hear from Adam more about product and development because we had gotten behind. And I think you're going to hear some things that are pretty exciting moving forward. And I give them credit because they're basically the technology partner for really focusing and getting some important things accomplished. Look, I heard Rob's comment yesterday. We suffered the same fate. If you start taking the pieces in the parts of our share, we're trading at 5x. So if you get into it, I don't think either of us are getting value for what is inside BetMGM, we're just is not. And so at some point, time to tell, but I like the partnership. I like where we are. I like what it's been designed to accomplish and it's starting to -- it's done it. We got off to a great start. We've got some catching up to do. We're positioned #3 in the market generally overall. And where we go from here, I think is somewhat unlimited, and so I'm excited by that.

Let's kind of move to just broader strategy. It's kind of become a past time to ask you about what do you do with the cash, right? So $2 billion, I think, is the latest number that you put out there. So despite all this just incredible pipeline, investment, you're still in a pretty cash advantaged position. You're also -- your business is obviously extraordinarily cash generative at the moment, too. So that doesn't hurt. So walk us through, is there a remaining strategic pillar? Is there an M&A opportunity? Help us size what that could fit through? And -- or do we -- should we start earmarking this $2 billion for all the beautiful renderings that we just saw and start really thinking about...

So the way to think about it is it's truly excess, even so much so that we've kept -- it's actually $3.5 billion in cash. Our mindset is a $1.5 billion sinking fund just for a rainy day plus our credit facility. So think $3 billion, $2 billion excess cash. Japan, whether UAE we're able to invest, real money time to tell. And ultimately, New York, is all on free cash, cash flows going forward because those investments don't start to happen '24, '25, '26. And so they will pay for themselves. They will be funded from that source. So the $2 billion is truly excess. How we think about digital is the place we've formed. I don't see -- look, there might be some regional opportunities. I don't know of it immediately. Las Vegas is pretty full right now. I think the FTC would have something to say we want it any more. And so I think you can think about it as truly incremental. Think about digital in the near-term sense and go from there.

So if we did think through the digital kind of idea, what capabilities would you be wanting to kind of bolt on to? I mean, I think we think of LeoVegas being a little stronger in the iCasino or iGaming side? Is that -- is there room to bolster in sports betting? Is it more market access thinking more globally?

Putting BetMGM and Entain side, if you look at LeoVegas, it relies on Kambi. So the idea of its own sports betting technology is interesting. We would love to get in the live dealer business in the truest context. I mean there's no reason that MGM Resorts, given its scale at scope, its brand and everything about it. And it's -- it shouldn't be at the forefront of anything to do with live, whether it's -- go back to my thing I said in my strategy, whether it's live dealer, whether it's the idea of celebrity meets live dealer whether it's the idea of a game show that becomes streamed. Think about the price is right becomes a monetized game shell. I mean, there's a lot can be done. We need that technology piece to do that. And then ultimately, with Push, which was kind of that third leg to be able to create content, principally around slots, jackpots and other things that we own, and we exclusively own that we could put on our floor and ultimately then replicate digitally.

So not to get off track too far. But in terms of the relationship with -- between BetMGM or with Entain, could you do other digital things in the U.S.? Or is that sort of...

It's exclusive to that.

Okay. So like LeoVegas has to stay.

Yes.

Let's shift to some of the development stuff. You gave us a couple of, I think, really important increments. One, the New York Casino licensing process, you do have the host agreement piece in place, which is a very -- or a community agreement, I believe, is actually the name in place. It's a hard one to get. But obviously, they already have some -- they already have an operating VLT facility. So timing this time next year what you said?

I and it's a crystal ball, I hope. I can't imagine they would have started the process and then wanting to stop it again. So if that were to play itself out, with the exception of once we then get our RFAs in, which we have 30 days to submit, say by year-end, then they're going to give a reasonable period of time to let other folks get their host city agreements in play. What's reasonable in this marketplace, given the environment, the politics? You all know better than I when I suspect, but I would hope by this time next year. Look, if after 9 months, you can get it in play maybe you can.

The other thing that comes up in New York occasionally is iGaming actually, right? So OSB has been very successful here. It is at a pretty hefty tax rate as we all know. But it's now generating a lot for the state. Is that really a prospect? Or do you think -- I think we've generally heard it as land-based as the priority, maybe someday down the road, but don't hold your breath kind of thing. Like how would you characterize that?

Look, I would put it in that category, I suspect it depends on, frankly, the economy is the need for tax revenues, et cetera, that always has a play in it. As it relates to state in New York, it would be the last thing to go. I mean, basically, everything else has been authorized. So states have taken a view, well, if we've done all of this, why not that. So I think there's signals and signs that would say at some point, possibly, but I wouldn't count on it tomorrow either. I think they have said to us brick-and-mortar and then we'll see. Obviously, we would love it. I think Adam and the team could do a great job here. And obviously, given what we've done in Michigan, in New Jersey where we have dominant share because of brick-and-mortar, it does make a difference.

I don't think I've seen anything in the law like even less by politicians that like all 3 have to get awarded at the same time. But is that -- is it your assumption all feel like it to be awarded?

There isn't anything in the law that been unclear at least. That's our understanding. And that's with the governor and ultimately, frankly, the Chairman of the Commission has said they want to do this collect -- in the collective. We'll see. I will say this though and something to think about if they said, go tomorrow, we couldn't have table games in play for 46 months because everything you saw there, I'm not closing that place to do that. It will be an ongoing business. And so the state will get us $0.5 billion immediately, and we'll be in the table games business fairly quickly.

Switching over to Japan. Obviously, one you've personally been invested in, I've had the unique pleasure of actually hosting you over there at one point, a funny story with Jim that I'll share after this, maybe. Sarah might know it. But talked about September 29, I think, was the possible signing agreement if things hold to stand. But the thing that's most interesting to me is just kind of where we're at with -- once we're there, once that signing is done, are you guys -- is it construction crews and dirt moving? Or -- again, walk us through that next 12 to 24 months.

Yes, it's dirt moving. So this is a man-made island. Yumeshima where this place is. It's about 20 minutes south of downtown Osaka. And the last stop currently on the train is Universal Park now will be the left on the train. And it literally across the street from where they're going to put World Expo. It's a landfill. It was designed and developed to be the home of the 72 Olympics, and they lost to Munich. And so we've got mitigation. We've done some, but we've got significant -- as well as the city. The city is giving us about $800 million to help mitigate the ground, the dirt, and we have to begin pylons. So we think by next spring, we can begin pylons. It's a lot of pylons going on for most of this project. And so we'll be drilling piles better part of '24, early '25. And then you'll begin to see hard construction going up from there forward.

Not to be a construction nerve, but is the depth partially for earthquake. Like what's the [indiscernible] that's actually what you just need to hit bedrock.

We have one of those buildings in line.

So you talked about some of the TAM opportunities there. But you also mentioned the budget sort of in that number that's been floating out there. But there's some press to hit earlier in the week. I'm not sure -- I don't think it was officially from MGM necessarily about that number moving higher maybe by 10% or 15%. So is that real? And more importantly, I think big picture, that number does seem like it dates back to some more of the proposal stage. So how are you offsetting that because there's been some -- I mean, I think inflation is something we all know a little bit about.

So 3 things. We understand the basis of where we're coming from as a company, I think the city center. So I recognize we speak with solid voice on this. We have spent an extensive amount of time rescoping the project. So the original project versus the one you saw is about 20% to 25% less GFA. That's how we got there. We refused to move the budget, and I refused to reduce the size of the casino. So it's complicated, but we got there. Why you see an escalation is it's, in the yen, particularly for our partner. Remember that the yen is trading at 145 or 147, I don't know, some silly number right now that won't have last forever. We've begun to hedge yen already, and we'll continue to do that so we can take advantage of it. And so we still see it as a $10 billion project. Our 40%, $4 billion, our half 50%, $2 billion. That's how we see it. And look, it's a long way away and anything, of course, can happen, but it's not like all of that hasn't to date been put into the formula.

And from a dollars and cents perspective, is there anything big upfront that investors need to be aware of? Like is there $1 billion that needs to go to the it could be pretty pro rata?

Pro rata, but our money goes first. So you'll see our money late '24, '25, '26 going out the door. The way it funds there, we go first. So it's not...

Meaning you ahead of your partner? Or meaning...

No. We ahead of the bank.

You ahead of the bank. Okay. So equity before debt.

Right.

I got somebody who probably likes stuff like that. Yes. So like -- let's talk about the UAE. I mean, this is interesting. It's just -- it's all of a sudden become, I think, a lot more tangible big thing was the appointment of your predecessor. So you kind of glossed over it, but for those of you who didn't see the headlines, Jim Murren, was appointed, I think, Chairman of either a formative regulatory body or...

Gaming Commission.

Yes, effectively of the gaming commission over there. So walk us through a couple of the critical paths of what kind of need to happen to see gaming in this part of the world, I mean this could be a huge change.

Well, reportedly, there's a gaming decree that has been signed but not released. But somewhere in between all of this activity case, I can assure you that wind is not in the ground without a clear understanding. But go back to what I said, each Emirate has the right to do this or not. And so -- and each Emirate has the right to basically design, under the auspices of the commission, its own process. Obviously, what when was anointed and it was over. There may be a similar type process in Abu Dhabi is the other place that actually is express interest, which I find interesting since it's the heart of the government. But the place that's a value, the place it has tourism today that has the infrastructure, has 140,000 hotel rooms, has the massive airport is Dubai. And so we're already there. And so we're going to let it happen around it because the other 3 markets aren't worth talking about anyway. We'll let it happen around us. And hope and believe, particularly with the ruler as our partner that we can push that project forward up to and including gaming. I can't speak to the timing, I don't know. I can speak to the fact that we've issued -- they have issued a China state that authorizes the building of this space.

What are your economics in a project like this? I mean we've been through a few iterations with MGM on sort of nongaming, the brand licensing pieces in China. At the end of the day, they probably didn't contribute as much as maybe even I would have thought back in the day. So what's your stake in this? And then how do you turn this into real economics if you were to get...

So the original stake was it was going to be just the hotel management because we wanted the presence for all the reasons we're talking about, and so we had a little foresight give us that credit. That being said, that's not the economics. So we have told them we'll put equity in or we'll lease the casino in its totality and give us casino business. I don't know that they're going to want to be in the casino business. I don't think that the ruler -- should -- well, can't be a shouldn't he can do anything he wants. It's this country. But the point is, I think at the end of the day, we're going to be leasing the casino. And so we'll get -- what we're not going to do is take our brand, our company, our database, send a $1 billion customers and get it like an 8% or 10% VIC. That didn't happen. So it's got to be a sizable piece of the real gaming business.

Interesting. And then maybe shifting gears to the fundamentals here and just kind of walk you through the core. Las Vegas going through a ton, you've been investing a lot in that business as well. Help us think about -- one of the big things of the whole event here has been leisure normalization, Vegas just isn't seeing it. So help us square this. I mean because as far as we can see, and we've got some forward intel, not as good as MGMs, but not terrible at this point. And things look strong. I mean the rate side, the rate structure looks strong. So is there anything that concerns you keeps you up at night? Do you see any change across customer segments or property types that...

Sarah, why don't you kick it off and then I'll...

Sure. When we look at Las Vegas versus other leisure destinations, one of the benefits that we have as a city and as a company are all of the entertainment events that we have. So post 2020, we now have Allegiant that is fully programming. We've added about 10% of our mix to casino and lessened our reliance on the leisure customer. We have most of our convention business back, but we still have opportunity to bring further convention business back both as the tech companies start coming back and also once we finish the construction that we have going on at Mandalay Bay.

And then we'll keep -- look, it's fascinating. We see luxury we see drive. We see what I mentioned about the average rates earlier. We're not paying attention to general macro economy. And I would remind all of us that during the Great Recession, we still run 82%. So it's about RevPAR. And so even though they have agreed to pay rates going forward for this programming, what they bring with them time to tell. But I got to tell you, as it relates to other noise and issues, we are in really good shape.

It was in July, like not exactly boom times for Vegas. It was the highest gaming revenue month ever. There was some hold -- positive hold that played in there. But how much -- I mean you mentioned 10 percentage points higher casino mix. How much of this is being driven by players spending to a higher level versus just having more players there?

Well, for us, it's having more players there because we're running -- we ran 94%. I think in this July, we ran 95%. So it's not about more people. It's about more players spending. The high end did really well, but it's about more players spending more, and it's that mix shift. And so for us, it's everything from taking advantage of the BetMGM database, the regional database, going deeper into -- frankly, getting more sophisticated on our own and with our digitization and how we approach customers and how we think about them. I think we've done a better job going forward, and we'll continue to improve upon that. But it's at 30% -- those 30% are still holding at a 35% spend -- market spend to get them there. And so it's not like we're over incentivized, and you'd see it in our margins if we were.

That each -- certain individuals are spending more. It's that there are more higher spending individuals in the market.

Yes. And look, we've traded Mirage for Cosmopolitan. I mean there's some uptick.

And maybe 1 quick 1 or 2 quick ones to wrap up. Regionals. -- kind of curious here on more of the network strategy piece for you, Bill. Like you've basically got flagships, I mean, pretty much a dedominant asset in most of the regional markets, I think virtually all that you operate in. Is there a desire at all to expand? I mean, if there's -- we hear about Richmond, we hear about Chicago, possibly North Carolina, like are there places or are you kind of comfortable with the portfolio today? How do you see it as a database engine piece to kind of feeding a bigger and bigger Vegas?

It's an important database. We don't use it the way Pan potentially could leverage it or the way Ceasers leverage it, to be sure. But we don't ignore it. And so it provides 7%, 9% of our casino base comes out of database that originates from regional casinos. That being said, you're right. I mean unless it's a unique one -- the example is Borgata. Borgata, when the market was $5.9 billion, made $200 million $2.7 billion. It still makes $200 million. So we have proven to ourselves to go in, have the market. And so if those places don't exist today, and there's not -- I can't think of 1 off the top of -- maybe 1 or 2, but not many. We do think about places like Texas as a long-term possibility more than North Carolina. I mean, North Carolina is Richmond's 120 miles from National Harbor. So that's not a thing. Georgia someday, but it has to -- it's going to be at that scale.

Okay. Okay. Last question, I have 18 seconds. Can you get me tickets to Formula 1?

I can. It's going to cost, but I can.

Thank you very much. Really appreciate it.

Thank you.

Back, everybody. Sorry for the slightly longer than anticipated break, but we want to make sure we stayed on time for the webcast. So pleasure to kick off -- our next presentation will be with the management team from BetMGM. So to my left is Chief Executive Officer, Adam Greenblatt; and to his left is Gary Deutsch, Chief Financial Officer. So Adam, Gary, pleasure to welcome you. It's first time I've been able to do this here with you.

Thank you for having us. Great to be here.

So huge privilege. We don't get to do too much public-facing stuff, and you get the luxury of technically being private on your own. I think Gary is like maybe wishing he had that luxury, right?

Pleasant is the word I use. Pleasant.

I think you think the opposite, by the way, I think we have 2 public shareholders to support. But anyway.

It's -- that's true, 2 masters. So let's just start at a high level, Adam, maybe -- what we've been kind of starting within the digital landscape is just give us the lay of land. I mean tonight is NFL kickoff, which is pretty exciting for the American. I'm going to guess what the accent, maybe we needed the premier league a couple of weeks ago. But let's just kind of state of the market, how do you kind of frame up growth? And how have things progressed to where we sit today and then we'll take it from there.

Perfect. That's a great intro. So -- I'm more excited now than I can remember being in my role at BetMGM without reservation. And the reason I say that, in fact, it harkens back to the moment where I read one of the industry analysts tweeted that said where there were 2 before, now there were 3. And I feel like the commencement of the football season today marks the -- how we feel internally the relaunch of BetMGM way. You will see -- one of the beautiful things about our business, our sector, is that, as a consumer, you can see, you can test the things that we're telling you. You can download the BetMGM back, try to deposit, try to navigate our sports book, and you will feel the work that we've been doing over the last 9 months. We've acquired Angstrom. And in fact, I want to talk about that later, I'm sure we will. Entain has acquired Angstrom, which will have a massive impact on our sports pricing, our single game offering, our in-play offering. We've done a deal with -- in fact, today, we've announced -- on the gaming side of our business, we announced the launch of the Buffalo games, slot games. This is a global first for online for, I think, without reservation, one of the most popular games in retail slots play. So as you think about BetMGM and one of our core pillars of who we are and how we differentiate ourselves is omnichannel, this represents the perfect intersection between what gamers were doing -- have been doing for 15 years and what we are inviting them to do with us in the future. And so as I look back again at the -- at 2021 when BetMGM took the lead in iGaming from another licensee in New Jersey. And we then asserted ourselves -- now we're the #3 in aggregate position with 17% market share -- as we asserted ourselves from, frankly, nothing that -- I have the same feeling now. I have the feeling of possibility. I feel like I have the sense that the work that, as I say, we've done in product speed and stability; improve navigation; a whole new front-end design system, making things more intuitive; a deeper content offering; more live markets; signature bets, which only are available at BetMGM because of Angstrom, which we must come back to, all of this gives me great excitement for meeting and exceeding the guidance we've given to the market. We've already said the bottom end is $1.8 billion to $2 billion. We, in the first half, did more than half of that from a revenue perspective. We did -- we were profitable in the second quarter. The wind is in our sales. So feeling really good about that. Thank you.

No, it's a really exciting opening. So let's build off that a little bit. Just to frame where BetMGM is actually at, it was something that stuck out to me and I just wanted to get an update on was, I think in our first conversation, I mean, you got to remember that there's big companies involved here, but you are effectively employee #1, I think, of BetMGM. That was the way you framed at me. But always what blew my mind was then it was either a year or maybe it was the second year anniversary, you were up to 500 people already. So what's the number today? Can you give us the quick like annual 1 to a couple hundred to 500, where are we today? How big is the organization?

Our business plan when we formed the joint venture had us capping out at about 220 employees. We're now 2,500 worldwide. So it's a very different business today.

Fascinating. And so there's few different ways we can go. I think one of the -- I kind of want to start with some market kind of viewpoints and structures. One thing that's really been our biggest surprise is we kind of look back on how the market has evolved. So one way is obviously just the size and scope and scale. But another way is this kind of fascinating increase and change in behavior that's led to parlays and hold rates. I'm fascinating to kind of dig into your view on that, a, has it surprised you? And b, how has this played out versus your experience in Europe? Because you bring a unique lens. You actually already know what had happened in a developing market, you were there for it. So yes, this just feels different. So how does it feel for you?

It does feel different, actually. If you look at some of the world markets, the more developed digital markets and certainly the more mature sports markets, there are a very few that are trending the way the U.S. is trending. And so I put my hand up to make way for the truth always is what I say. I didn't anticipate it. But as you look at the U.S. market, it makes sense. Why? And there are 2 principal reasons for it. So one, you have a very developed lottery sector. And of course, with the multi-leg single-game parlays, it's low-stake high win. So it's akin to a lottery product. The difference, however, is that as the better you have a perspective on every leg, you think you know, right? So it's not like just choosing a bunch of numbers and the lottery comes out with what it comes out. You think you have an edge because you have an opinion. And that's one of the attractions of that's the parlay -- if you excuse the pun, from a lottery player to a multiproduct sports player. That's one element of it. The other element, and I tip my head to seasonal on fantasies. U.S. sports players have had 20 years of engaging with an event from a multi-event perspective -- a multi-thing perspective. It's triple, doubles or a number of rebounds or individual player performances and the interaction of those things has been part of the training, right? And so what we're seeing today is just the transport of that training into a new product. So it's an extension of an ingrained way of looking at a sports event.

And with some of your international knowledge, give us a sense of some of the penetration rates we see. Are these -- is it just that the speed of the market in the U.S. has kind of maybe caught up faster than to where the penetration of a parlay, which I believe in the U.K. is accumulator?

Yes.

Yes, right? Is it just the speed with which that's occurred? Or are we kind of in new territory here? Is this like, no, this is a different customer and again, a different behavior? The way you laid it out, again, I like that lottery with edge. It sounds like it's a slightly different behavior, which, again, from an American cultural standpoint, yes, there's always going to be differences.

I think there is -- I think the margin potential in the U.S. exceeds most other markets because of this behavior. I think the recreational nature of multi-leg parlay products bodes well for the industry as we penetrate more deeply into the population. So I'm very bullish on margin potential.

And just to be clear, when you say margin, you're talking bet margin or win margin?

Yes, growth win margin.

Yes. Great. So let's talk about market share, and then this is going to get into some of the things you're working on going into this fall and prospectively. But as we sort of track the industry data, I don't think what I'm going to say is that controversial. On the OSB side, MGM -- BetMGM share has slipped modestly from where it was. So walk us through that? What do you think was there? One thing that we look at is -- and Gary, if you have color on this too, you were probably one of the first to be, I think, pretty promotionally disciplined, and it took time for the market to kind of catch back up on that. So maybe that's one factor. But secondarily to that, yes, what's going on in sort of the product or evolution side that might be doing this? And what are we doing to fix it?

There are 3 things playing into the answer. One, you've heard from Bill in some of the MGM commentary previously, the sports product wasn't where we collectively wanted it to be for the U.S. market. So let me just deal with the 3 and then I'll jump into the detail on each of them. One is product, two is promotional intensity, three is share of voice. So raw dollars spent above the line communicating about the brand, driving acquisition and retention, okay? This year for BetMGM -- so we've always been disciplined, always been disciplined about managing the ROI and our cohorts. That's just the way we are managing our investment in above-the-line spend. We've had a very strong bias from the beginning to be short term, flexible and move to where the money is, move to where the player values are, so high conversion rate, high player value, low CPA. That's the holy grow. That's our business, right? And the way to achieve that, and you heard from one of our competitors earlier about their response to the ESPN deal. Why are they happy that the ESPN deal has happened, because they got out of a high ticket fixed cost commitment that wasn't performing. That's not a place where we want to be. So structurally, we avoid that. So we've always been disciplined. But the push for profitability this year, we needed to tighten the screws and we have done. So that's healthy though. That's a healthy change. The second in terms of product, frankly, we've been working dam hard on improving our product -- frankly, our sports product in every dimension. I've rattled through some of those dimensions. How fast it feels in your hand? What's on the shelf? So market availability. So event availability, how broad is my offering? There are 100-plus games -- college games on a Saturday. Do you cover all of them? Do you cover just the top 20, which is the way you make the most money, right? These are choices that the business has had to make and support operationally that has now been enhanced through the work we've been doing principally within. So more events wider, more markets deeper. And then within those markets, what have you got that special, right? Differentiated things. And then on top of that, what can you do with all of those things on the shelf, i.e., combinability? And availability is the last one. So there's something in our business called suspension times. I don't know if any of the betters that are here, you all know that at certain moments in an event, there's not a price available, right? Why is there no price available because the risk management foundation supporting development of a price, doesn't have an answer, right? Is it based -- if Kelsey gets injured after the first quarter, is the total points expected for the game the same or not? So until it's known whether he can continue to play or not, the price is uncertain, suspension, right? If he is off, what is the repricing -- like where does the price go? It depends on how many minutes have he left, how many minutes are to go, how is the game performing, what is the momentum, right? These are all factors. We have not been as good as we now will be with Angstrom in the past. So availability is the last element of that. So these are all aspects of the sports product that we've been working on that, as I invite all of you -- if you don't have it already, don't know the BetMGM map and see for yourself. We are more than a year ahead of where we were just at the Super Bowl this year.

And if you can do it in New Jersey versus New York, that's better.

You get more value.

If you don't get that, I'll explain to you off-line. So two kind of places I want to go deeper. One is -- and one thing we know you've been working really hard at, and I believe you made a ton of progress on is single app, single wallet. So where are we at with kind of shared wallet across states, all the cross state functionality because that was a rollout that still needed to occur, and I think you're either close or there. So that -- and then let's unpack what exactly the feature said that Angstrom really allows you to do a little bit more deeply, but maybe start with just where the share wallet?

Yes, sure, sure. So we have completed a single account, single wallet migration across all of our digital states in the U.S., Nevada for regulatory reasons. So I can't emphasize the scale of that project. We have through this project moved billions of individual data fields. Tens of millions of individual records applying migration logic to every potential use case. Players started here ended there. Player has 2 accounts. One is dormant. Player has RG limits in that state, but not there. It is -- I heard again -- I heard Eric talking this morning about their single account, single wallet project that's ahead of them. It's anything but trivial. And so we're delighted to have got to the other side of that. Entain has been brilliant on this. We've had hundreds of people supporting this initiative. And to my relief and delight, we haven't hit or missed the beat. Our business has been rock solid through the summer as we've undertaken these 4 phases of migration and -- which is why with kickoff tonight of the NFL season, we're pretty -- I think we're already well placed. The second part of your question was...

Angstrom, so can we just talk a little bit -- this is one that I think maybe it's the across the pond. You kind of glance over when you see the announcement, but I've now had time with Entain yesterday, time with Bill earlier today. And I think -- really it was Rob or -- I think, helped us understand like, no, this is a pretty big deal. So help us kind of get around what capabilities does this provide to you that you didn't have before?

So let me tell you why this is a big deal. So first, what's in the name. So who knows what an Angstrom is. Angstrom is a unit of measurement, which is 10 to the power of minus 10 which is 100 millionth of a centimeter. Why is this relevant Adam? This is just nerd stuff. It's relevant because this is the philosophical underpinning of the way Angstrom builds its models. So they seek to build their models from the most -- the smallest unit, the smallest basis up. And as you know, you build your own models. If you build from the bottom up, every step of the build, the relationships between these -- between the things are understood. And if you apply it to our world, that means the relationships between certain events, certain things happening in a game are understood by the model and therefore, priceable by the model. And not only priceable, they're also combinable. So as you look to the future and our future is infinite combinability to have from a bottom-up basis, every play of every game simulated through a mark of chain, built, player level, bottom-up, all integrated into our and Entain's trading platform. The ability for us to create unique, special, differentiated player exciting. Single-game parlays, Race 2 is the quarter back going to be on fire tonight. So are they going to complete their first 5 passes? We can do that. And this is why Angstrom is exciting. So it's not only product, the range of product offering. We're also targeting sub-500 milliseconds of price availability, which means back to the point about availability. Price is available quickly. Event happens, model does its thing, price back in front of players, which means more bets more often. Better player experience.

Does this effectively allow you? And this is probably a small subset because, again, there's a technology reliability piece and control piece that is not included what I'm asking. But what I'm asking is like just the sort of basic building blocks of in-game betting, creating, and I think we'll -- or more and more we know about sort of the outsourced provider here simple that offering sort of micro betting does allow you to sort of do this in-house and then like I said, customize it? Is it not only a replacement, but then beyond that? Or is that independent? They're going to do markets, you're going to do markets, help us kind of just contextualize it versus a product like that?

Of course. So as I said, the way the models are built at every price that a player sees is built based on simulating every single permutation of play for the rest of the game. And of course, all of the history that supports some of the underpinning assumptions. And so outcome of next play is built into the model. So all of the drive markets will be -- like any of our other markets, all the other drive markets will be available in our platform. So that's to our live project -- to our live product. So we don't think we will need anybody else from a sports pricing and product generation perspective.

That's clear. And then this is an acquisition. So are we closed? And when do we get it if we don't have it now?

So we have -- we've already integrated some of their markets that you -- will be available tonight for the NFL. We -- this infinite combinability and all of their outputs, the deep integration of the Angstrom platform into our own Entain trading platform, that comes end of the quarter -- end of Q4. So during the pre-Super Bowl.

And just to be clear, and I thought this is really interesting, but I think -- if I can summarize what Rob told us, and please correct me if I get anything wrong. But I think what we heard yesterday from Entain was, yes, Angstrom was acquired by Entain technically, but all of the rollout effort is targeted at BetMGM and it's for like the next 12 or 18 months, the foreseeable future, down the line, they're looking forward to being able to roll out to actually Entain's business. Again, I found that fascinating in twofold. One, just the kind of, hey, wait, they acquired this but for you. And then secondarily, showing the priority that they're giving your business and what they're -- and they're putting their own dollars behind that, and that's on their P&L.

Look, I would -- I obviously care and love BetMGM. And so I would look at that comment and say this is -- for me, this is rational capital allocation, and I applaud Rob, for that response. I think that Entain is acting in shareholders' best interest by doing so. This is the biggest game in town by far. There was talk of the maturity -- the size of the U.K. market earlier, it's also mature, right? We have billions of dollars of capital value opportunity ahead of us. And Angstrom is one of the key elements of that. It's a key unlock to gaining meaningful ground. And then that's certainly our ambition, gaining meaningful ground on the incumbent leaders in sports.

So let's switch gears a little bit. I want to talk about competition and maybe sort of wrap promotion in this a little bit, too. But obviously, sort of the -- there's been lots of news in this space, but the big news over the last few weeks was Penn's agreement with ESPN. And so I think I want to put this in a broader context. We also have fanatics out there with PointsBet. We hear and certainly from the U.K. side, I think there's always an year up around Bet365 is making waves in Ohio, what do they want -- what's their next move. So all that translates into competition. So how do you think about it from two perspectives. One, just big picture, how do you think the fall plays out? And are we're taking a step back on sort of the broader sort of profitability implications? And then competitively, how do you react? Do you defend territory and have to throw more dollars to hold serve? Do you competitively let people experiment and see what it works and then come back to you, like what's the strategy?

I think players will always experiment. My expectation is what ESPN bet will launch and will get a ton of samples, but the product experience is the same as it is today. And the impact of that player experience is visible, right? I'm happy to compete against that. The reality is, there have been a series of the parties. And obviously, you already called out the new entrants. And frankly, the rotation has been towards more formidable groups. Having said that, our sector is hard and shouldn't be underestimated. And to gain meaningful ground against the incumbents, I think, will be extremely challenging. I have great respect for all of those organizations, Bet365 and ESPN, great respect for them. But we are doing the business and they are not. And until you are, you don't really have a -- we can speculate as much as we want, I think, to make meaningful ground on the leaders who have been at this for now 5 years. Refining every day, doing their best every day. To come at this from a standing start, you need to both be -- have differentiated assets that are better than those who are participating and have an operational solution, product, people, customer service, risk, compliance, right? That doesn't let your players down. And we've been refining all of those dimensions every day for 5 years. So it's formidable. Sorry, Gary.

Well, as you alluded to earlier, we've been really flexible in how we can handle our budgeting and our marketing. We can pivot very quickly. Lots of stuff into digital. Obviously, we use promotions, we can direct promotions where they go. So we're nimble. We don't have as many fixed commitments as others we believe, and we can direct the spend as needed on a competitive basis as we read the market, too.

Thank you for getting me back on track. The bottom line is we are going to play our game. We've got a strategy that we believe in. We've -- in fact, today, we'll be airing in the second quarter. Jamie Foxx has returned after his health scare. So there's been a lot of already -- a lot of social pickup around it. BetMGM is back and you're going to see us much more forcefully over the coming weeks and months.

And help us put that in perspective, both sort of theoretically and kind of CAC terms. So again, one of the ideas here has been that there was -- I mean, obviously, a huge promotional spend per player, dollar spend per player to acquire customers a year ago. I think a big part of what's allowed for a rebound in valuations in the space has been rationalization of that. Do you think we take a step back? And are you going to have to invest more for this period of time? Do you think that goes up? And more importantly, are you budgeted for that? I mean, is that okay? Is that underwritten?

Gary will kill me if I say we're going to chase that train.

But I mean, it's also sort of the layering mass that has to be considered. So the rewards to which we would grant to new players to work with us -- to be with us is not that different than it's ever been. It's just when you think about the overall snowball of players that have built up, as we've been rolling this business down the hill, the number of players that are on the outer layer of being new and that's in that period of high bonusing is fewer as a percentage of the business. So that brings down the overall metric on a blended basis. Now when we talk about bonus optimization, some of that work has been looking at sort of the long tail and seeing where we've segmented players whose high value, et cetera. And it's been on that work and understanding who isn't really developing from the sampler phase into a long-term bedding phase. But when it comes to how we treat our best players and how we treat the new players, it's very similar to what we've done in building the business.

But really, I think to add to that, your question of are we into a strange market with distortions as a result of the new players phase ahead of us? I think that irrational if there are periods of distortion, just too much value being thrown at players. If we are into that, it will be very, very short-lived. I think the smartness of this organized -- of this group, both from the analyst community and the investor community, I don't think will suffer -- won't suffer fools anymore.

Thank you for sort of tackling that head on. Gary, I want to go a little deeper, I think in the last public comments kind of back in -- I think it was January, February when you guys made some prepared remarks, there's a lot of talk about bonus optimization being a big piece of 2023. So where do we sit in sort of your journey there? And I think you were kind of getting into that in terms of cohorts, layers. One piece of math we've done relatively recently is this is kind of the year where if you've been around in the business and you've been around for 5 years, the majority of customers should be shifting into 24- and 36-month lifetimes, which means your payback should be there on actually more than 50% of your customers. And that's broad for the industry, not specifically for BetMGM. But directionally, yes, so what are the implications of both, sort of your internal strategy and kind of what does that entail? And then secondarily, am I kind of right in terms of my waterfall?

So I think you're right in terms of your waterfall, if you followed the guidance that we've given all along. So it's been progressing. So when we think about how the model, I say that the model is the metric. And when we look at the long-term path towards the 30% plus EBITDA margins, it has a journey of NGR margin at a journey within that of how promotions go. And all along the way, we've been hitting those metrics. So when we think about bonus optimization, it was a lot of what I was saying earlier, which is that we looked at segments and we said, are there players that maybe we could get of sooner or not incent any longer because we can kind of get a read on them. But everything related to the evolution towards the guidance we've given on 36 months to payback on new sports states, that's generally there. Sports has -- I mean, gaming has been faster than the 18 months we've guided. So that's coming along. We see some states like Massachusetts and Ohio that burst out of the gate sooner. So the compression of the negative period of investment has been shortened. And we're at the period of seeing if now that's going to be shortened to the long-term profitability and that seems to be moving directionally correct. But one thing at bonusing. Bonusing optimization has been important to this. But bonusing is a key part of the business, and it's something we've used to great advantage given where our starting point was with customers. And I'd like to just put in perspective. So if you have 2 operators, they each deliver NGR of $1,000 in a month. One had $2,000 of GGR that fell to $1,000 of NGR and another had $1,200 GGR that fell to $1,000 of NGR. Which one is better? Because one could argue that the one who did $2,000 down to $1,000, oh, they burned the money and they could have done more, but you could easily argue that the one when you had $1,200 that are going to $1,000, didn't invest enough in the players and they could have invested more. So the good thing about promotions is it has the ability, if you do them right, to pay themselves back. Now there's tax implications and stuff, as you know. But overall, bonusing is a stimulus as much as it is. It's a cost, but it's a stimulus that can be paid back and it can be self-propagating if it's done right. So don't read high bonusing necessarily as a bad thing.

And to add to that, we are seeing our early states contribution positive. So they are evolving in the way that we had anticipated early dig, then through breakeven and then into contribution positive and they layer on each other.

So carry this through to its nth degree for me, Gary, for a second because one thing I really framed a lot of my thinking over the last kind of 6 months to a year was a relatively simple road map you laid out for sort of why your overall margin structure, and now I'm talking EBITDA margins, not bet margin and not sort of the GGR or NGR relationship, but let's just say your overall profit margin at the company would be better. All other things equal, it was market access through MGM. It was technology subsidization through Entain and now Angstrom, obviously. And then...

Game Royalties, leverage on payment processing relationships, marketing through easier access to customers.

So has anything changed in either your spread to kind of where you think the market is? Or more importantly, the overarching market assumption, be it mix of OSB or iGaming? How do you think about sort of profitability of the business in long term?

It's the same guidance. I mean we're in that area. We think that those -- the guidance on the percentage point advantage we had, I think that's still accurate. This is not to say things aren't fluid in the industry, and there's industry things related to taxes and different things that can change the dynamics for the whole industry. But we think [indiscernible] to our competitors, we still have those same advantages.

And I get this one, so I want to put a spot a little bit, but Ohio did change the tax rate. Historically, in gaming in the U.S., it's pretty rare, actually, right? So Illinois has messed around with tax rates in casino gaming. But obviously, it has been a lot more volatile of an environment more from unregulated to regulate or reregulate in Europe. What do you make at the Ohio development? Is there nervousness that this is going to carry on to lots of other states?

They don't generally let me talk about taxes because I get too irritated. So maybe that's a question for Adam.

We're not seeing any evidence of contagion. Sure, it was an unwelcome change. And we feel actually an unproductive change for the health and vibrance of the regulated versus unregulated markets. But we're not seeing any evidence of contagion.

Great. All right. One minute left. So a quick lightning round. I put you on the spot a little bit of the new entrants out there, Fanatics, ESPN and Bet365, who keeps you up at night and why?

None of those keep me up at night. Those that I'm paying closer attention to are the incumbent leaders. Bet365 is a formidable entity. And that just is what it is.

So 1 year from today, will market share be more consolidated amongst the top 3 or less? And why it can't?

Probably similar, but the market share outside of the top 3, which includes us will be differently configured.

So it's always awkward on the sort of the JV question, and I kind of got chances with your partners. So I'm not going to really go there. But I do care as a business leader, does the JV structure create really any limitation or hindrance to what you're executing on every day? Do you have the investment that you need? How does it kind of impact your role?

I mean we have recent evidence of the investment being there through the acquisition of Angstrom. You heard Bill talking about the relationship with Marriott, which we've also not piggyback, but partnered with them on. We are getting tremendous support. I mean the focus and priority on BetMGM by our shareholders has never been higher. And so for that time, I'm grateful and so the impact on BetMGM is visible.

So just sort of as a student of the industry, 3 years ago, we were all wondering what was going to surprise on the growth side. And it turned out it kind of parlays and the bet margin or the hold rate just be so much bigger. So from here, what's the big thing that investors or people in this room are missing, what's that thing that's going to -- what could be the next thing?

I don't think -- I think we've got -- the things today have a ways to run. I don't think we have anything like the same gaming parlay impact ahead of us. I think we'll see more creativity and innovation, actually, I think, on the iGaming side. We'll see some free-to-play and engagement tools on the sports side and then innovation around game -- game mechanics, game play on the gaming side.

Adam, Gary though we have time for. It's a real pleasure. Thanks for doing for us.

Thank you.

Thanks, Shaun.

Thank you, all.