China and Las Vegas growth pushes revenue to record $4.38bn at MGM in Q1

For the three months to 31 March, group revenue was 13.2% higher year-on-year. This came as MGM operations in China and Las Vegas more than offset a decline within the Regional business.

Las Vegas remains the primary source of revenue for MGM, despite a slight decline in casino revenue in Q1. However, a 10.0% rise in hotel revenue more than made up for this, pushing revenue to a new quarterly high.

Records were also broken in China, with revenue reaching an all-time high during Q1. MGM has continued to see growth and recovery in China since the withdrawal of all pandemic-related restrictions in early 2023.

As for the Regionals business, which includes the BetMGM joint venture with Entain, it was not so good news. Poor weather across the US during Q1 had a negative impact on revenue. However, when it comes to outlook, the operator is much more upbeat, talking up current growth and future prospects.

“Obviously, when we use the words record first quarter, and if you look at and think about recent reporting, we’re pretty excited and pretty pleased with that,” MGM chief executive and president Bill Hornbuckle said.

“It speaks to our diversity of our business and our four key pillars, Las Vegas, our regional properties, Macau, and we believe ultimately, our digital business.”

MGM targets self-sustaining digital business

Speaking more about the digital segment, Hornbuckle says the end goal for BetMGM is to be self-sustaining, with all products and features being delivered in-house.

There was further growth for BetMGM in Q1 as the brand went live in North Carolina with the Charlotte Motor Speedway. Hornbuckle also talked up success with BetMGM in the UK, while the situation with LeoVegas in Sweden is improving and, as Hornbuckle puts it, is on the rebound.

In addition, this week, BetMGM announced it is launching in the Netherlands as part of its ongoing expansion strategy. 

“There was a whole relicensing procedure there that cost everyone including us, and that was their primary market,” Hornbuckle said. “So, LeoVegas is on the rebound. BetMGM UK, which we spoke about last quarter, is doing exceptionally well. We’ve established a real presence there. And again, something we’re excited by. And then yesterday, saw the first soft launch of BetMGM in the Netherlands. 

“Overall, our digital strategy remains the same. At some point, we want to be self-sustaining with all site features, including producing our own games and our own product.”

Casino revenue tops $2.24bn in Q1

Breaking down the performance in full for Q1, the majority of revenue at MGM came from casino operations across all regions. Here, revenue jumped 19.1% year-on-year to $2.24bn.

Rooms revenue was also 12.7% higher at $956.4m, with food and beverage rising 6.6% to $769.4m. Entertainment, retail and other revenue dipped 1.3% to $404.4m, but MGM also noted $12.2m in reimbursed costs.

Looking at segmental performance, Las Vegas Strip revenue hit $2.26bn, up 3.6%. Casino revenue was marginally lower at $498m, due to lower slots handle and win, but this was helped by a rise in table games handle and subsequent win.

As for hotel revenue in Las Vegas, this was 10.0% higher at $827m in Q1. Occupancy was up from 92.0% to 93.0%, with average daily rate also rising to $277.

Turning to the Regional business, revenue slipped 4.5% to $685m. Table game and slots win were both lower year-on-year, with slots reporting the highest decline. This drop, MGM said, was partially due to poor weather in certain US markets in Q1.

In terms of MGM China, revenue rocketed 71.0% to $1.06bn. This was helped by a 65.8% hike in casino revenue, mainly due to the return to normal operations in the region after Covid-19 measures were removed in January 2023.

Gold Strike Tunica sale impacts bottom line comparables 

Looking at spending in Q1, operating costs were 27.2% higher at $3.90bn. The main outgoing for MGM was casino costs at $1.27bn followed closely by general and administrative spend at $1.19bn.

MGM reported a further $115.0m in non-operating spending, including $110.0m worth of interest expense. As such, this left the group with a pre-tax profit of $343.4m, down 46.8% on last year.

This decline was partially due to the impact of the sale of operations at Gold Strike Tunica Resort in Mississippi to CNE Gaming Holdings in February 2023. The sale generated extra funds for MGM in the corresponding period last year.

Back to Q1 this year and MGM paid $43.7m in income tax and noted an $82.3m loss from non-controlling interests. This resulted in a net profit of $217.5m, down 53.4% from Q1 of 2023, again partly due to the Gold Strike Tunica deal.

As for consolidated adjusted EBITDA, this amounted to $1.23bn. No comparable figure was given.

“In conclusion, you’ve heard me use this word in the past, and I think probably more than any other quarter, it came through in this quarter, the word diversification of our products and diversification of our business,” Hornbuckle said.

“Obviously, Macau did a great deal of lift this quarter. Las Vegas held its own. The regionals are recovering. And the digital business has been fully funded and we’re looking forward to what it can do ultimately down the road.”

Analysts remain “bullish” on MGM

MGM’s Q1 EBITDA was 2% above Macquarie Group analysts’ expectations, with MGM shares currently trading at approximately 5.7x what the group predicts MGM’s 2025 EBITDA to be. Additionally, MGM’s EBITDA for Q1 was 3% above Truist Securities’ expectations and 5% up on Wall Street’s estimates. Net revenues also exceeded Truist and Wall Street predictions.

Macquarie cited MGM’s exposure of 58% in Las Vegas as a key factor in maintaining its “bullish” outlook on the company’s performance. MGM is in possession of more land on the Las Vegas strip than any other operator.

“In Vegas, MGM sits at the global epicenter of sports/entertainment and stands out given its luxury offering,” Macquarie said in its analyst notes.

Additionally, Truist stated MGM China “drove the beat” in MGM expectations, beating Truist’s Q1 EBITDA estimates by 6%. Truist also expects MGM’s land-based operations to continue “steady” growth, with Las Vegas on the upside thanks to its deal with hotel giant Marriott International.

Meanwhile, Macquarie highlighted MGM’s strong balance sheet and its lofty aims of being a global digital leader as reasons for confidence in the company’s future with the business well-placed to grow its digital businesses, as well as in New York and Japan.

Truist maintained its rating of ‘Buy’ for MGM, making no major changes to its estimates with only minor tweaks to its model. Both Truist and Macquarie kept their price target at $58.

However, Macquarie pointed to an unexpectedly high marketing expenditure, as well as the fact it’s becoming more expensive to retain market share in the US, as potential risks for the company to navigate going forward.