MGM CEO talks up ‘pipeline’ of global growth opportunities amid Q3 success

MGM posted record consolidated revenue of $4.18 billion (£3.22 billion/€3.85 billion) in Q3, up 5.3% from last year. The group reported growth across all segments, but it was the MGM China business that drove growth during the quarter.

Net revenue in Macau reached an all-time high, which in turn allowed MGM to announce a special dividend for the region. On top of this, revenue also grew across MGM’s Las Vegas and Regionals businesses, while the BetMGM digital venture with Entain saw profitability again.

While MGM remains on a largely upward trajectory, Hornbuckle (pictured) said the group is seeking to build on this success. He notes progress with expansion plans in several markets around the world, with ongoing initiatives set to drive long-term growth.

Where is MGM looking to grow?

During Q3, MGM entered a strategic venture with the Grupo Globo, Latin America’s largest media group based in Brazil. Hornbuckle told analysts during the 30 October Q3 earnings call BetMGM would launch in Brazil in January, pending licence approval.

“This venture is meaningful as it allows us to leverage MGM’s LeoVegas technology and gain access to 70 million people providing invaluable insights into Brazil’s consumer market,” Hornbuckle said. “This aligns with a broader strategy to expand our digital footprint globally and tap into emerging markets.”

On the interactive arm, which falls under its LeoVegas business, Hornbuckle said he did not anticipate anymore capital to be put into the business, or acquisitions to be made, in the short-term. The company closed a deal to acquire Tipico’s US betting platform on 24 June to drive its LatAm ambitions and insource its betting technology.

“We don’t anticipate any more acquisitions as it relates to MGM Interactive in-house, we call it, which is a LeoVegas arm. Look, we have three markets under launch right now, UK, Netherlands, and soon to be Brazil. I think by the late part of next year, all of that will manifest itself,” Hornbuckle told analysts.

As for digital performance, MGM did not state specific figures for this area of its business. CFO Halkyard did, however, offer some insight during the group’s earnings call, setting out how he was “encouraged” by its Q3 performance.

“During Q3, we achieved profitability again, record igaming results, and a 70% increase in first-time depositors while stabilising market share,” he said.

New York and UAE developments moving, but slowly

Looking at its expanding retail estate, MGM continues to advance its zoning requirements for the planned venue in New York. Hornbuckle said the group plans to submit its request for applications towards the middle or late next year.

Into the Middle East and the United Arab Emirates, Hornbuckle said MGM also continues to monitor the situation. The group last month applied for a licence in the region, while it also has a property under development. However, Hornbuckle said there is scope for more work.

“There’s obviously a couple other opportunities that will probably come forward,” he said. “We love our position in Porto Island. That has started in earnest and construction is now starting to come out of the ground, so we’ll see ultimately once the decrees come out by Emirate, who wants to do what. But we’re keenly focused on it, and I would particularly love it, obviously, if it had gaming.”

Building on Macau success with greater Asia presence

As for Asia, Hornbuckle highlighted progress with the Osaka casino project in Japan. Last month, MGM reportedly forfeited its right to withdraw from the initiative, suggesting it is fully committed to moving ahead.

“We’re making significant progress in Osaka, aiming to complete ground preparation starting main construction in the middle of next year,” Hornbuckle said.

There is also potential for expansion into Thailand, with this having proved a hot topic during recent earnings calls. Hornbuckle said during the Q3 call he had recently made his third trip to the country to scope out opportunities for MGM.

“We’ll continue to monitor it,” Hornbuckle said. “We’ve said we’re going to do it in concert with MGM China. It’s working its way through the legislation; ultimately hopefully through their parliament. We hope by early next year something will be announced.

“We like what we hear to date in terms of tax and investment ratios that we hear. Obviously, it’s a great place to build relatively cheaply as compared to other markets. The cost of doing business there is extremely low. So, from an operating margin perspective, we love the opportunity it could bring. But I think we’re still a long way away from getting to the finish line.”

Speaking broadly on the initiatives, Hornbuckle said this will fuel future growth, diversifying MGM’s geographic reach and earning sources.

“With a strong pipeline of initiatives spanning short, medium and long-term, we’re well-positioned to sustain growth and drive future success all while returning cash to shareholders,” he said.

China the highlight during quarter of growth at MGM

As for current operations, MGM’s continuing success in China is clear to see. For the third quarter, revenue from the MGM China segment increased 14.4% to $929.5 million, mainly due to the removal of all remaining Covid-19 measures in Q1 of last year.

Revenue was higher across all areas within the MGM China business, with casino the main money-maker at $800.2 million, up 12.1%. In addition to this, adjusted property EBITDAR hit an all-time high, while MGM’s market share in Macau was 15%.

While growth in China is impressive, MGM’s Las Vegas Strip Resorts business remains by far its primary revenue source. For Q3, revenue topped $2.13 billion, up 1.3% year-on-year, despite a 12.8% drop in casino gaming revenue.

MGM noted that during Q3, the Las Vegas properties segment benefited from $37.0 million in business interruption proceeds, related to the cybersecurity incident a year ago.

“We grew month-to-month during the quarter with many of our key metrics demonstrating strength, including a 3% increase in ADR, an occupancy increase of 250 basis points, and 4% growth in slot handle,” chief financial officer Jonathan Halkyard said.

Also in the US, the Regionals business generated $692.6 million in revenue, a rise of 2.1%. In contrast to the Las Vegas segment, casino drove this growth, with gaming revenue up 2.1%.

Across the MGM group, total casino revenue increased 3.4% to $2.12 billion, rooms revenue was up 6.8% to $883.6 million, food and beverage revenue grew 8.1% to $755.3 million, and entertainment, retail and other revenue also grew 6.7% to $411.6 million. An additional $11.9 million was noted in reimbursed costs.

Net profit climbs to $184.6 million

On the subject of expenses, total operating costs were 6.9% higher at $3.88 billion in Q3. After including $8.0 million in income from unconsolidated affiliates, this left an operating profit of $314.9 million, down 14.9% year-on-year.

However, after including non-operating costs and income, pre-tax profit was $296.7 million, some 32.1% more than last year.

After paying $52.6 million in income tax and taking off $59.6 million in profit attributable to noncontrolling interest, this resulted in a net profit of $184.6 million. This is 14.6% ahead of last year.

In addition, adjusted EBITDAR for the quarter hit $1.14 billion, with no comparable figure for last year.

“Overall, we’re exceptionally well diversified and we’re very optimistic about both our near, long, near, mid and long-term,” Hornbuckle concluded.