MGM Resorts International (MGM) Earnings Call Transcript & Summary

Good afternoon, and welcome to the MGM Resorts International Second Quarter 202 Earnings Conference Call. Joining the call from the company today are Bill Hornbuckle, Chief Executive Officer and President; Ayesha Molino, Chief Operating Officer; Jonathan Halkyard, Chief Financial Officer; Gary Fritz, Chief Commercial Officer and President of MGM Digital; Kenneth Feng, Chief Executive Officer of MGM China Holdings; and Howard Wang, Vice President, Investor Relations. [Operator Instructions] In fairness to all participants, please limit yourself to one question and one follow up. Please note, this conference is being recorded. Now I would like to turn the call over to Howard Wang. Please go ahead.

Thanks. Welcome to the MGM Resorts International Second Quarter 2026 Earnings Call. This call is being broadcast live on the Internet at investors.mgmresorts.com, and we have also furnished our press release on Form 8-K to the SEC. On this call, we will make forward-looking statements under the safe harbor provisions of the federal securities law. Actual results may differ materially from these contemplated in these statements. Additional information concerning factors that could cause actual results to differ from these forward-looking statements is contained in today's press release and in our periodic filings with the SEC. Except as required by law, we undertake no obligation to update these statements as a result of new information or otherwise. During the call, we will also discuss non-GAAP financial measures when talking about our performance. You can find the reconciliation to GAAP financial measures in our press release and investor presentation, which are available on our website. Finally, this presentation is being recorded. I will now turn it over to Bill Hornbuckle.

Thank you, Howard, and thanks to everyone for joining today's call. Before we review the second quarter results, I want to provide a brief update on the status of the offer we received from People Incorporated. Since reviewing the offer, our Board of Directors has formed a special committee composed of independent directors with no affiliation or association with Barry Diller, People Inc. or the proposed transaction. This committee continues to evaluate the proposed transaction in consultation with independent outside advisers. I'm confident our Board will pursue the course of action that's in the best interest of the company and our shareholders. I don't have anything more to share at this time, and Jonathan and I are not able to answer any questions during the Q&A on this topic. Now turning to our results. We are pleased to report that solid fundamentals and business momentum we saw at the start of the year carried forward into the second quarter. The company delivered record second quarter consolidated net revenue, driven by a second consecutive quarter of year-over-year revenue growth from our Las Vegas Strip Resorts, all-time best regional operations same-store quarterly revenue and a 20% year-over-year revenue growth at MGM Digital. Revenue for Las Vegas was bolstered by a solid underlying base of group and convention business at MGM Resorts and aided by strong attendance at events around town, ranging from BTS to UFC to a deep playoff running in the Stanley Cup by our very own Vegas Golden Knights. Our group and convention business picked up where it left off in Q1, delivering a 20% room mix in Q2 and keeping us on pace for this market segment to represent a 20% of the room mix for the full year. We drove demand from a diverse customer mix that included technology and hospitality corporate groups as well as top B2B trade shows and professional association meetings, leading to the highest second quarter convention ADR and catering and banquet revenue in our history. Our all-inclusive experience in Las Vegas has also sustained solid momentum since launch four months ago. At the end of the quarter, nearly half of the guests booked this offer were first-time visitors to MGM. The initiative has supported occupancies and forward bookings at Luxor and Excalibur and importantly, turned the value narrative into a positive story. We are constantly creating new experiences for our customers that leverage and highlight the MGM Resorts Las Vegas Strip portfolio. One example is the Players Era basketball tournament taking place across two weeks this November at Michelob ULTRA Arena in Mandalay Bay and the T-Mobile Arena. 24 top collegiate basketball programs from multiple conferences, including four of the last five national championship winning programs will play in a bracket style tournament with all games televised on the ESPN family of networks. To deliver a world-class experience for teams and for fans, Las Vegas stands unmatched and MGM is proud to offer the ultimate stage. From the all-inclusive experiences to the players a tournament, the spectrum of experiences we have created aligns with prevailing consumer trends, bridging the more deliberate spending patterns of value-conscious guests with a broadening demand for our premium live experiences. Las Vegas has become the world stage for premier hospitality and entertainment and MGM is helping to lead the way. We are elevating our commitment to luxury by retouching and reimagining every element of the customer experience, including the convention and public areas within the Bellagio. Room remodels for ARIA and The Cosmopolitan are also on the horizon, building upon our already upgraded suites, villas and high-end gaming areas. We will strategically invest our growth capital into designing creative and inspiring concepts that expand the very definition of luxury, and we're excited to share more details on this vision in the near future. Our regional operations continued their solid performance in the second quarter, resulting in an all-time best revenue quarter on a same-store basis. We continue to invest targeted capital throughout our regional portfolio, which between now and the end of the year will include enhancing our premium lounge offerings at both Beau Rivage and Borgata as well as a room remodel beginning at Borgata. We continue to see benefits from the recent upgrades and improvements in high-limit gaming areas, which drove record 2-quarter revenues at Borgata and an all-time record quarterly revenue at the Beau. Both were major contributors to all-time same-store record quarterly casino revenues and slot win in the regionals this quarter. At MGM China, we continued to outperform the market in the second quarter while maintaining solid market share of 16.4%, a sequential increase of a full percentage point. While the World Cup temporarily impacted June volumes in Macau, this was a transitory event rather than a secular shift. Our confidence is reinforced by the immediate and encouraging rebound in volumes observed post tournament throughout the month of July. At our BetMGM North America Ventures, Adam and Gary Deutsch reported second quarter results yesterday. Our second quarter performance keeps us well positioned to meet our full year guidance and our business continues to grow. Remember, over 2/3 of net revenue comes from iGaming, which continues to drive overall growth. In our sports business, despite the unrestrained spending and legally burdened predictive market participants, we are still growing. We are also excited about our recent launch in Alberta, where early performance indicates reflect tangible benefits of our omnichannel presence. I'd note that of the first 8,500 deposits we recorded in Alberta, almost 1,000 had prior relationships with the MGM. MGM Digital reported double-digit revenue growth again this quarter and continues to make progress towards profitability in our underlying businesses. We successfully launched our in-house sports book in Sweden ahead of the World Cup, which drove record high player activity. We have seen great traction with our products, which have led to phenomenal growth in both BetMGM branded services internationally. In Brazil, the environment continues to be dynamic and fluid, but we remain bullish on the long-term opportunity. Turning to Osaka. Our construction continues to reach milestones on a timely basis as we advance towards the 2030 opening. The underground work is progressing nicely with over 60% of foundation piles completed. Above ground, the property's main structure is taking shape with ongoing concrete placement and structural steel fabrication. We remain on time and on budget as the only licensee in Japan for what we consider the greatest greenfield opportunity in the world. In closing, MGM Resorts delivered a strong first half of the year, which should come as no surprise considering the enterprise achieved record-breaking 2Q results on our NPS scores. Again, I want to thank every one of our team members for their tremendous daily efforts that drove the record Net Promoter Scores. We are excited as we look forward to the second half of the year as our business is positioned for continued positive momentum, driven by a solid base of group and convention business at MGM Resorts, particularly led by the tech sector. This is further complemented by an expanded sports and entertainment events calendar taking place citywide that represents an increased number of events compared to that of the third quarter last year. I'll now pass it over to Jonathan to provide some additional details on our performance before we open it up for questions.

Thanks, Bill. And I also want to express my appreciation to the entire MGM team for their continued focus, hard work and daily commitment to operational excellence. In Las Vegas, we grew both net revenue and segment adjusted EBITDAR in the second quarter on a year-over-year basis. This year, EBITDAR is up $25 million at our Strip Resorts, and the main driver was a recovery at the MGM Grand, which was the beneficiary of the newly remodeled room inventory and a hold benefit. As we look to the third quarter, while the booking window remains short, we continue to see solid group and convention calendars alongside growth in the city's event calendar. The regional operations second quarter results reflected all-time record quarterly revenues on a same-store basis. In fact, several of our properties delivered record revenue results during the quarter, including Empire City, which grew GGR in June despite new competition in the state. Results for the quarter reflect less than one month of operations from Northfield Park due to the transaction closing in late April. So, on a same-store basis, slot handle and slot win increased 4% and 3%, respectively. At MGM China, volumes and earnings were solid in April and May. And while we saw a dip in volumes coinciding with the World Cup activity in June, trends have since rebounded. Our capital investment program, highlighted by the recent suite conversions and renovated premium gaming areas continues to yield strong results. Over the past year, we successfully debuted the ultra-luxury Alpha Villas at MGM Macau, expanded our premium mass offerings with 50,000 square feet of high-end gaming space and recently unveiled newly renovated suites at MGM Cotai this past April. Looking ahead, we have commenced design work on approximately 100 suites at MGM Macau as part of our ongoing commitment to staying ahead of the evolving consumer tastes and preferences. Our BetMGM North America venture continues generating steady growth as we continue leaning into our areas of strength and focus on efficient operations. We have embedded call options around new state iGaming regulation and currently are more optimistic than we've been in a while as we see increased legislative activity in states like Virginia, Maryland and Indiana. Our best-in-class iGaming segment grew 8% in the second quarter. And over the course of the first half of 2026, handle per active grew 7%, while NGR per active grew 9%. Our online sports strategy continued its focus on player management and disciplined acquisition, resulting in growth per handle -- growth of handle per active and NGR per active of 18% and 17%, respectively, during the first half of 2026. MGM Digital drove healthy growth in net revenues of 20% in the second quarter and reported segment adjusted EBITDAR losses of $31 million. We continue to build brand awareness while focusing on disciplined growth. 2027 is setting up for favorable operating leverage in the LeoVegas and BetMGM branded businesses that will finance growth in Brazil, where we're seeing encouraging data points in first-time deposits, active players and NGR. And as we continue calibrating in Brazil, we're expecting full year EBITDA losses at MGM Digital to be less than last year. In Japan, we're expecting our funding commitment for the second half of the year to be approximately $125 million to $175 million. To date, we have spent approximately $600 million, and we remain on track to deploy approximately $1 billion in each of '27 and '28, which we will then have fully completed our capital commitments. The project remains on time and on budget for a fall 2030 opening. During the quarter, we bought back about 4.3 million shares for $164 million. And over the last five years, we've decreased our share count by nearly 50%. I'll turn it back to Bill.

Thanks, Jonathan. Before taking questions, it's worth emphasizing that Las Vegas is stabilizing and growing as evidenced by this quarter's improvements in both revenue and EBITDAR and the continued of premier sports and entertainment events has only reinforced our focus on deploying capital towards our luxury offerings to drive medium- to long-term growth. Our regional operations continue to deliver robust results, marked by record-breaking performances and an exceptional guest response to our targeted capital investments. Macau has bounced back nicely in July while maintaining mid-teen share throughout the temporary disruption caused by the World Cup and digital continues to grow and MGM Osaka forges ahead with its 2030 opening, which has me, despite my many years in this company and this industry, pleased to say our future has never looked brighter. With that, operator, we'll open it up for some questions.

We'll now begin the question-and-answer session. [Operator Instructions] Our first question today comes from Dan Politzer with JPMorgan.

I wanted to first start with Las Vegas and the health in the underlying market there. It does seem like, Bill, based on your comments that it's getting better. But maybe if you could walk us through the second quarter and the cadence and how it progressed and maybe give us a glimpse into July as we really start to face some of those easier comparisons. And then obviously, tie in with any of the recent initiatives, how those are maybe helping out?

Yes. Thanks, Dan, for the question, and we'll do. And then Ayesha, you can help me pile on top here. Look, I think the second quarter, as we reflect back, April and May were strong. May was exceptionally strong, driven by events and other activity. In April, we had our $10 million baccarat tournament, which was extremely successful. June was more challenged. I think it's the summer heat picked up and we got into the real throes of summer. July, on the other hand, has been good. And so I think we've seen ups and downs in summer. And frankly, I think we'll continue to see so as we think about the third quarter and beyond. But again, healthy group business helped the quarter, great events, which we continue to see throughout the course of the year. And overall, I think the packages helped Excalibur, Luxor stabilize occupancies and somewhat ADRs, and so as we think about three and four, we like what we see in the third quarter. We got some work to do in the fourth quarter.

I thought it was a good response. So I'm happy. I think just turning kind of more broadly to kind of the value of the stock, right? I think, Jonathan, you mentioned MGM has bought back about 50% of its shares in the past five years. I think the average price is probably around $40 or so. The stock is sitting here today at $46. So how do you think about the current value of your stock here and the attractiveness given some of the longer-term value drivers that you've talked about such as Osaka?

Yes, I think your math is about right in terms of what the price has been over the past several years and our share repurchases. We have -- we bought back fewer shares in this past quarter, only about $164 million worth at about, I would say, about $37 a share or thereabouts. So, of course, we think that, that's been a good use of capital. As it relates to the current value of the stock, we've gone through this on a number of prior quarters in terms of the sum of the parts valuation. And our view, given the current trends really hasn't changed from that.

The next question is from Barry Jonas with Truist Securities.

Just wanted to dig in a little more on strip trends, record group and convention bookings in the quarter, but RevPAR is still down a little. So anything you can call out, whether that's specific properties? Or is it still sort of the kind of lower-end leisure driving that softness? And I guess related to that, do you see a path to return to growth in RevPAR sometime this year?

This is Ayesha. I just want to highlight again what Bill noted in his script in his previous comment. We have seen growth in overall Las Vegas revenue as well as EBITDAR. And so we're pleased with what we're seeing there. In terms of RevPAR, I just note that, that's -- it is a noncash metric. Overall, I think we continue to see really strong strength in the luxury segment. As we've noted, the lower end of the segment, particularly Luxor and Excalibur, those do remain challenged, but we've been deploying offers such as the all-inclusive, we've seen positive reaction to that. So, overall, I think we're seeing real health in the group segment. We're seeing real health in the luxury segment. And then we're seeing sort of a continued but relatively stabilized trend at the lower end.

Got it. That's helpful. And then I guess just maybe one on regionals. You've seen what the Sphere has done in Vegas. Just curious how much of an impact do you think a Sphere can do for National Harbor when it opens?

Barry, Bill. So they're projecting 2.5 million visitors, which seems about right. I think it's about a 6,500-seat facility when it's all said and done. I know they're finalizing plans, so I don't want to get ahead of them. But that's the visitation that's being contemplated which is significant. And so whether those are new customers, I think many of them will be for us, and they'll come from farther away just to see it. And we've seen that, obviously, in Las Vegas. So we expect to capture our fair share of that and then some, given that it is literally on our doorstep. And I think they'll use much of our parking facility, which places them in the midst of our casino environment. So we're pretty excited by all of it.

The next question is from Shaun Kelley with Bank of America.

I want to start with a CapEx-related question. I think a couple of times both in the prepared remarks and throughout mentioned about investing further in the luxury side of the portfolio. So, just curious, I mean, for Jonathan or Bill, whoever wants to take it, does this stay within your sort of normal growth capital bounds? Are there any sort of larger projects or larger ideas that you might have that may push kind of around those kind of those levels that you've been sticking to in the last couple of years? Or just how should we think about sort of that -- those comments and sort of what you're thinking about really 2027 and beyond?

I think, Shaun, a great way to think about it is generally, yes, although particularly here at Bellagio, we're thinking about more villas potentially because we only have eight to draw from eight to nine whatever it is, I think it's eight. And so we're thinking about more villas. Our convention and meeting space, as I mentioned in my prepared comments, needs some work. We have seen tremendous success with activation of Lakeside with Carbone Riviera. And so we're going to look to continue on that theme. But I think you could think about it at least for today in the context of where we are. And if we add to that, we understand what the consequence to that, but we think we'd only add to that if we thought it was going to pay a real dividend.

Shaun, it's Jonathan. One of the ways I also think about it, and I think this is probably pretty useful in terms of modeling is that we can do quite a lot of work and improvement within our existing footprint in that level of CapEx that we've been spending in the last three or four years. To the extent that we expand the footprint, we add capacity, we add square footage to our portfolio here in Las Vegas, then it would likely be additive to that base level of CapEx. As an example, we did, as you know, a very large room renovation to the MGM Grand. We're contemplating one later this year, beginning at Aria. Both of those projects have been and will be done within that basic level of CapEx that we've spent the last few years. But if we did something beyond that to add capacity, it would likely be above.

And Shaun, maybe just as a more global thesis, Las Vegas is our home. Las Vegas is the epicenter of gaming in many respects. It's not going anywhere, and there's no -- I don't think anything immediately is going to come even close to competing with it. So we believe in it's not only midterm but long-term future. And so we want to continue to invest aggressively where it makes sense and luxury experiences -- sorry, items are down that lane.

Perfect. And then just maybe a quick one on just the MGM Digital on sort of the international piece, non-BetMGM. But just help us think through the inflection in that business. There was a little bit there saying, obviously, losses equal to or a little less than last year for this year. But is there a bigger sort of J-curve or inflection in 2027? It sounded like we were maybe headed in that direction, but you said something about funding, helping to start self-fund maybe some of those investments in Brazil. So if you could just elaborate on that a little bit.

Yes, sure. It's Gary. Well spotted. Yes, I think that's right. The way you should think about MGM Digital, we basically have the European LeoVegas operated portfolio, LeoVegas branded business and the BetMGM branded business in Europe. That business is setting up, as Jonathan remarked, in '27 for significant operating leverage and likely substantial levels of profitability. And then we can use that to -- at our discretion to finance the remaining growth investments in the portfolio, which are largely dominated by Brazil in terms of what we have line of sight on. So we do think there will be the ability to self-fund in part the ongoing investments in Brazil and a few other geographies around the world. The exact nature of how much will be self-funded completely, we're working out through the budgeting process that we're in for '27, but we do anticipate some degree of self-financing from the core LeoVegas business.

The next question is from David Katz with Jefferies.

I wanted to just go back to the all-inclusive offerings. I think the term you may have used is supported in reference to Luxor and Excalibur. I'd love just a little more color on whether that's -- we would classify that as upward momentum. And all of this in the context of some of the prior questions around some of the sort of lower half or lower quartile properties within the portfolio and how they're doing.

Yes. I'll kick it off and turn it over to Ayesha. I mean we've booked well over 30,000 room nights on it. It absolutely has helped us stabilize occupancy. And again, I think I commented earlier, the narrative around Las Vegas not providing value and everyone getting beat up on that. We think -- we don't think we know it's helped. We followed it closely through social media and otherwise. And it's a great value at the end of the day is the bottom line. Ayesha, I don't know if you want any more color.

Just a couple of other notes. I mean a couple of things that have been interesting to us. What we've seen is a lot of interest and demand from the customers, particularly around the weekends. And so they've actually been purchasing the package at slightly higher rates, which has been accretive. And from that perspective, we've also been really happy with the margin profile that we've been realizing from that package. So all in all, in terms of the gross room nights booked plus the change in narrative plus the margin, we think it's been healthy.

Excellent. And as my follow-up, with respect to Park MGM, I think you also indicated a strategy there toward locals. I'd love a little more color about that, which is just interesting.

Yes, sure. We think that property, in particular, has appeal to locals for a couple of reasons. First, there's the obvious proximity to T-Mobile as well as Dolby within its footprint and the non-smoking aspect of it is unique in our portfolio. We also do know that for that property, in particular, much of our high-end play is locals play. And so from that perspective, we've just been taking a look at how to expand its appeal to our local demographic, particularly over the summer. So we've been doing a host of different things, including looking at sort of F&B, F&B offers for locals as well as parking offers for locals even up to and including locals free-play offers. And so it's really just a focused attempt of demand generation within that demographic.

The next question is from John DeCree with [ CBRE ].

Bill, Jonathan, I wanted to ask about your view on kind of the thesis that customers are staying closer to home, and that might be one of the reasons we're seeing some strength in the regionals relative to leisure in Las Vegas and record revenue quarter on a same-store basis and seeing a little bit of stability in the leisure business in Vegas. How much do you kind of subscribe to that consumer theory and do you look at this as like a zero-sum equation? Or as Vegas starts to recover, do you think the kind of trajectory in the regional is sustainable? So can consumers kind of do both Vegas and regionals as you look across the database?

Ayesha can speak maybe to the database transfer. I would say this, Las Vegas is still down on international travel. And while we're picking up some additional seats, particularly as you look at a place like Canada, we're off considerably. And so it needs to continue to focus on that. And then obviously, particularly in the summer, Southern California is a major drive market. Our driving traffic hits over 50% generally of how people get here, principally driven again by that market. And so since we don't have a regional casino in California as much as we'd love one, I think it's somewhat limited. I don't know, Ayesha, if you have a specific view.

Look, if I take a look at visitor volume year-over-year to Las Vegas, I mean, there are puts and takes month by month. But overall, the trends -- there isn't a significant departure in overall trend line. I do note that -- and we're happy about this, our regionals are healthy, and we're seeing consistent visitation among our highest frequency regional visitors, and we're seeing consistent play among the top demographics there. I don't know that I'd say there's a one-to-one trade-off. I don't really think of it that way. I think that as sort of the overall macroeconomic environment continues to stabilize, particularly in Southern California. And as Bill noted, with international travel, I think we have every reason to be optimistic about Vegas.