Q2 MGM earnings driven by US land-based casinos

2022 Q2 MGM Earnings
Image: Shutterstock

The health of the Las Vegas Strip helped pad bottom lines for MGM Resorts in Q2, according to the latest MGM earnings report. The company posted $3.3 billion in consolidated net revenues, up 44% from $2.3 billion for the same period in 2021. Those numbers were buoyed by the acquisition of Las Vegas property The Cosmopolitan, but also reflect the gains across the Las Vegas tourism industry.

“Our second quarter results were outstanding, representing the best ever Adjusted Property EBITDAR quarter at the Company’s Las Vegas Strip Resorts and best second quarter Adjusted Property EBITDAR at our Regional Operations driven by consistent strong demand from the leisure consumer and a return from our convention customers,” said Bill Hornbuckle, Chief Executive Officer and President of MGM Resorts International. 

“We announced several important portfolio changes during the quarter, with the acquisition of the operations of The Cosmopolitan of Las Vegas and the announcement of the sale of Gold Strike Tunica.  We look to the future with optimism, as our convention and event calendar for the next year remain notably strong and BetMGM continues to be a market leader with a roadmap for growth. We remain focused on achieving our vision to be the world’s premier gaming entertainment company.”

Adjusted EBITDAR for the company was $920 million for the quarter. Net income amounted to $1.78 billion.

Vegas business core to MGM’s Q2 success

In addition to the acquisition of The Cosmopolitan, the completion of the lease-back agreement with VICI helped boost cash flow for MGM. Casino revenue came in at $499 million compared to $351 in 2021. Slots win was up 42% YoY, while table games win nearly doubled at $330 million vs. $173 million.

Vegas success compensated for lackluster numbers out of Macau, where the business continues to be hampered by COVID-19 closures, including another one just this month. Gaming revenue in Macau was $121 million, down 55% from $271 million during the Q2 2021. The property had 14% of the total Macau market share.

Regional casinos experienced minimal growth YoY, but nonetheless held strong. Convention traffic is fully back on track since the start of the pandemic.

Looking ahead, Hornbuckle and the team expected large numbers from Vegas in the next year, particularly given the strength of the calendar in the coming months.

“Las Vegas is now truly a powerhouse sports destination with the Golden Knights and Raiders calling Las Vegas home. Looking ahead in ’23, the city will host the Sweet 16 and Elite 8 rounds of the NCAA Men’s Tournament and our first ever Formula One race, and then in early February of 2024 will play host to the Super Bowl,” he said. “When you put it all together. The business case is incredibly compelling for continued growth and momentum in our business.”

BetMGM continues to post losses and gain market share

The joint venture between MGM Resorts and Entain, BetMGM, had another negative quarter with MGM accruing $71 million in losses. This is down from the almost $92 million dropped in Q1 of this year but up from the $46 million lost in Q2 2021.

Net revenues for the project in the first half of 2022 amounted to $608 million, an uptick of 70% from H1 of 2021. Q3 is a slow sports season, but the onset of football has the company still comfortable with projected annual revenue of $1.3 billion.

The numbers do seem to line up with BetMGM’s announcement it would be pulling back in New York after Q1. Meanwhile, on the online casino side, the company has introduced a live dealer studio and expanded content partnerships to include White Hat Studios, Wizard Gaming, and Fantasma Games, to name a few.

By comparison, Caesars Digital reported more than $100 million in net income losses for Q2 but did make major strides on the income front, with $152 million compared to $86 million for the same period last year. Both companies announced plans to scale back in New York and a more deliberate approach to marketing spend, and leadership affirmed that on the call Wednesday.

“We’re continuing to pull down some of our marketing spend while share continues to be important, particularly in new markets. We’re getting smarter and smarter and smarter about how we do this. And so we feel comfortable as we think about 23 and beyond our ability to make money in this business is within our grasp,” Hornbuckle said.

What isn’t reflected on the balance sheet is BetMGM’s market share is market share, which came up several times over the course of the call.

“MGM committed 21% in share in the active markets in both us sports betting and gaming, which puts us in the number two position, but MGM is the clear leader in igaming, having reached 29% market share in May,” Hornbuckle noted in his opening comments. Market consensus is FanDuel is tops at overall market share.

Looking ahead: Focus on NY casino, not Entain acquisition

BetMGM’s path to profitability is so promising to the company that MGM Resorts bought back $1.1 billion in stock (roughly 8% of common shares and 32.4 million shares in total).

We’ve been aggressively repurchasing our shares over the past 18 months because of the value we see at current trading multiples,” MGM Resorts CFO Jonathan Halkyard explained.

As for whether or not MGM would once again try to buy out Entain’s half of BetMGM or acquire Entain altogether, Hornbuckle was very clear:

“You can’t buy what’s not for sale. We remain keenly focused on BetMGM. We’d like more of it. We have a great partnership with them. That business is working well because of what we ultimately all provide our IP, our database, their technology. And so there are other ways to skin a cat and, potentially, we may have to seek those, and it is what it is. But, obviously, we continue to follow the math and we understand it intimately. But for now, we have no story there.”

Where the company is focused on putting money is in its downstate New York casino, Empire City, which is located in Yonkers.

“We’re hopeful that New York will solicit applications by the end of the year for one of three additional casino licenses. We are eager to respond and expand our existing property and Empire City, which is less than 15 miles from Manhattan with an attractive footprint for development and growth. If we do receive a license, we look forward to working with the state of New York, Yonkers, and our surrounding jurisdictions to drive jobs and economic growth to that region,” Hornbuckle said.