Good afternoon, and welcome to the MGM Resorts International Third Quarter 2022 earnings conference call. Joining the call from the company today are Bill Hornbuckle, Chief Executive Officer and President; Corey Sanders, Chief Operating Officer; Jonathan Halkyard, Chief Financial Officer and Treasurer; Hubert Wang, President and Chief Operating Officer of MGM China; and Andrew Chapman, Director of Investor Relations. [Operator Instructions] Please note this conference is being recorded. Now, I would like to turn the call over to Andrew Chapman.

Andrew Chapman - Director of Investor Relations

Good afternoon, and welcome to the MGM Resorts International Third Quarter 2022 earnings call. This call is being broadcast live on the internet at investors.mgmresorts.com. We've 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 laws. Actual results may differ materially from those 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 in 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.

William J. Hornbuckle - Chief Executive Officer and President

Thank you, Andrew, and Thank you all for joining us this afternoon. I'm pleased to report another phenomenal quarter of financial results driven by our domestic business with the Las Vegas Strip setting a new record for revenues and adjusted property EBITDAR. These results come on the heels of a record-setting quarter in Las Vegas - or second quarter in Las Vegas and our regions. Also, the Cosmopolitan of Las Vegas had one of its best quarters in its first full quarter of operation under MGM Resorts leadership and continues to outperform our initial expectations. We continue to see further opportunity with the Cosmopolitan as we look to integrate our reward system and improve physical connection to our sister properties. Net-net, 2022 is shaping up to be a record year for many of resorts and we believe a fundamental change in people's perception of travel and the value that it brings to their lives in Las Vegas and MGM Resorts is benefiting this emerging theme.

I want to thank our employees again for the tremendous efforts they put forward to achieve these outstanding results. We know that our guests are experiencing greater satisfaction in their stays as measured by our internal net promoter scores, which continued to exceed our projections, as well as our TripAdvisor rankings which have improved significantly across our portfolio in the last year. Put all together, and MGM continues to make great progress towards our long-term vision, which is to be the world's premier gaming and entertainment company. We've achieved this vision by remaining laser focused on that strategic plan.

Let me hit some of the highlights of the quarter and then Jonathan will dig into the results in more detail. First off, I'm pleased to share that we've completed our acquisition of LeoVegas in September. This important acquisition represents the first step of an aggressive expansion in international and online gaming for MGM. I'd like to again a welcome Gustaf Hagman and the team. And we also recently announced the addition of Gary Fritz as our President of Interactive. Gary will lead our broader digital strategy both here in the US and internationally, of which LeoVegas is a significant part.

Staying with digital for a moment, we remain bullish on BetMGM which continues to build on success every quarter. In the third quarter BetMGM launched in Kansas representing its 24th market to-date and the 8th new market we have added since November of last year. Looking forward, we will add Massachusetts, Ohio and Maryland to our online sports-betting portfolio. And MGM remains the clear leader in iGaming with a 29% market share, and BetMGM commenced 22% share in active markets when combining US sports-betting and iGaming. As we get to halfway point of the NFL season, we're encouraged by the preliminary metrics. Reinvestment has remained within our expectations and market appear to be acting more rationally. As BetMGM shared in May at its Investor Day, our strategy to focus on profitability by allocating spend to geographies with the highest ROI and targeting bonusing. We believe this is being executed exceptionally well.

Our investment in BetMGM and LeoVegas will allow us to continue to drive our omnichannel strategy, a key competitive advantage that over time allows us to generate incremental earnings between our brick-and-mortar and our online channels. Early results of this strategy have been positive with a strong acquisition story as well as the creation of brand's stickiness. Of the players who play in both channels, we've seen a younger customer in fact almost 90% of the BetMGM omnichannel customers who visit Vegas are younger than 50, and over 50% are under the age of 35. Overall, customers who play online at our properties have increased engagement and our lower-cost per acquisition which reflects the operating leverage we can and will drive into the future.

Now I'd like to talk about the integrated resorts development opportunities we have. A New York State point the majority of the Gaming Facility Location Board members in October and we anticipate the state to issue the casinos RFA by early-January. We are developing a compelling proposal and we look forward to submitting it in the coming months. Beyond the United States, MGM and our development partner Orix along with the city of Osaka submitted our area development plan to the government of Japan in April, and we are optimistic that we'll receive certification in the near future. I recently visited our development site and we and the Oryx team couldn't be more excited by the opportunity to bring a fully integrated resort to Japan.

Turning to Macau, we officially submitted our application for new concession in September, and we remain committed to supporting Macau's continued development as a world-class tourism and leisure destination. We aim to support the Macau government in achieving its diversification goals and we'll continue to invest in the innovative projects and programs that help the region flourish. The Macau government is in the process of reviewing each of the concessionaires proposals and we expect a decision to be made by year end.

Let me close by making some high-level comments on the current state of business and our future outlook. Business is exceptionally strong right now in Las Vegas at MGM Resorts and we see the market remaining exceptionally hot [Phonetic]. In particular, we are seeing outsized strength in our luxury resorts where pricing remains robust, in fact, October was our highest month ever in terms of hotel revenue. As you look at the convention segment, which has the longest lead-time and gives us visibility into the future, our convention room mix is pacing in our goal of 19% with increased ADRs year-over-year. Our outlook continues to be positive and we are flexing our operations to take full advantage of the demand we are experiencing in the marketplace.

Programming also remains an exceptional story with further - which further solidifies Las Vegas as the nation's top sports destination. We will host the men's NCAA West regional for Sweet Sixteen and Elite Eight rounds at T-Mobile in March, and Formula One as you know was selected the weekend of November 16th next year that was the first-ever Las Vegas race on the Strip. That weekend happens to be one of the slowest historic weekends of the year for us ahead of Thanksgiving. We'll open our hotel calendar tomorrow for those states and expect an exceptional demand based on our studies of other host cities. We believe the prime positioning of our properties will allow us to fully capture the benefits of this exciting race.

So right now, we have reasons to be optimistic as we look ahead. That said, we're not blind to the overall macroeconomic conditions, and we remain keenly aware of the impact of inflation and the concerns of a potential recession. We continue to stay alert and are actively monitoring our business and indications of a slowdown. Our operations teams have become incredibly nimble over the last few years, and are prepared to quickly adjust our business to the changing demand trends if they occur. In the meantime, we'll continue to look for opportunities to drive organic growth in our core businesses, select key capital investments in our properties, and through our MGM Rewards program. MGM Rewards continues to deliver on our promise to provide more compelling benefits to all of our members. In fact since we launched a new program we have seen a greater proportion of direct bookings from MGM Rewards members and an increased tier progression particularly for our Gold Plus players. With that, I'll turn this over to Jonathan to discuss more details of the quarter. Jonathan?

Jonathan Halkyard - Chief Financial Officer

Thanks very much, Bill. Let me start my remarks by also welcoming Gustaf and the over 900 LeoVegas employees to MGM Resorts. No doubt the future of LeoVegas is bright, and I'm confident this enterprise will serve as a meaningful contributor of talent and earnings to our company. I'd also like to echo Bill's comments and thank all of our employees for the second straight quarter of record results. Our people are the best in the business and they demonstrate that every day with the care they show for our guests.

Mow let's discuss our third quarter results in some detail. Our consolidated third quarter net revenues were $3.4 billion, an increase of 26% compared to 2021 despite the 70% revenue decline at MGM China due to closures and other COVID related limitations. On the Las Vegas Strip, topline demand was strong with same-store net revenues increasing 18% and same-store Adjusted Property EBITDAR up 8%. Occupancy was a major driver of the improvement year-over-year, reaching 93% for the quarter, the highest it's been since the start of the pandemic, an improvement - and an improvement of over 1,000 basis-points year-over-year. The key driver of the occupancy gain is midweek demand which is returning to more normal levels as conventions and groups return. The value proposition of our group business supports our pricing power in Las Vegas. ADR hit a record $227 in the third quarter, an increase of 26% year-over-year.

We continuously work to optimize the hotel mix in our business. Over the past two years, we've increased the effectiveness of our casino marketing and loyalty programs to drive the casino and direct high-rate transient business mix up by several percentage points each, and this has helped offset the decrease in the convention mix that we experienced in 2020 and 2021. Now, as our convention mix returns we're generally displacing less profitable, but still important leisure business. This convention business comes at a higher average rate typically between $30 to $40 higher and brings with it higher margin catering spend.

Our third quarter regional net revenues grew 5%, while adjusted property EBITDAR declined 8%. During the quarter, our highest daily worth casino segment remained our best performing, with the greatest increase in both rated days and theoretical win. Our casino customers aged 65 and above grew again this quarter as compared to last year and 2019, but it still hasn't reached the visitation frequency pre-pandemic. Our local and cross-property efforts will continue to address these important segments to drive further growth.

Adjusted Property EBITDAR margins were 33%, a decrease of approximately 450 basis-points compared to the third quarter last year. This margin result is consistent with our prior commentary, and as the market stabilize we expect to maintain 400 basis-points to 600 basis-points of margin improvement versus 2019. We've increased our employee head count by the low dip double-digits. During 2021 we faced a difficult hiring environment and had a number of outlet closures. But we are now fully staffed, fully open, and have returned to the service levels for which we are known. In Macau, adjusted property EBITDAR was a loss of $70 million in the third quarter of 2022 due to property closures and COVID-19 related policies limiting visitation to the market.

On BetMGM, the growth and continued improvement we are seeing in this business is overwhelmingly positive. Our 50% share of the losses in the third quarter narrowed to $24 million, which is reported as a part of the unconsolidated affiliates line of our adjusted EBITDAR calculation. This brings our year-to-date loss to $186 million and we remain comfortable with our guidance for $225 million contribution for the year. Net revenues associated with BetMGM operations were $400 million this quarter, exhibiting and approximately 90% year-over-year growth from the third quarter last year led by the continued strength in iGaming and new markets as well as disciplined reinvestment within sports-betting by the management team. Through the first-nine months of the year, BetMGM's revenue associated with operations have surpassed $1 billion, which puts them well on track to achieve their target of over $1.3 billion this year. Looking forward, improved design and functionality of the BetMGM app, launch of a single wallet and omnichannel growth will be the tailwinds behind future growth of their business and its impact to MGM as we look to reach profitability during 2023.

Our third quarter corporate expense including share-based compensation was $117 million which included $9 million of transaction costs related mostly to LeoVegas. We do expect corporate expense to remain elevated in the fourth quarter due mostly to transaction costs related to the Mirage sale. We're strategically investing our corporate resources in growth areas including improvements to our IT infrastructure, enhanced digital offerings, and our IR development efforts in Japan and New York.

And finally, our capital allocation priorities are as follows: First, we'll maintain a strong balance sheet with adequate liquidity. Second, we'll invest where we have clear advantages, exercising prudence and measuring prospective returns for our shareholders. And finally, we'll return cash to our shareholders. These priorities are manifest in our major allocation decisions this year. We bolstered our liquidity through the closing of the VG transaction and the announced sales of the Mirage and Goldstrike. We acquired the Cosmopolitan of Las Vegas which strengthened our portfolio. We're making strategic capital deployments into improving our existing product with room remodels across three of our major properties, and an announced refresh of the Mandalay Bay Convention Center to shore up our long term Group market share.

We returned cash to our shareholders through share repurchases. During the third quarter, we repurchased 10 million shares for $307 million. From the beginning of 2021 through yesterday, we've repurchased $115 million shares for $4.4 billion or 32% of our market cap. This activity brings our share count down to 384 million shares. Last quarter, I made the case for the attractive valuation of our shares, and I feel even more strongly now. With market-leading domestic operations driving record results, leases limited to 2% or 3% escalation for the next ten years, embedded cash flow growth in BetMGM and MGM China, and about $11 per share in cash, I think our stock trades at pretty attractive levels. We plan to continue to buy back stock through our authorized program, and moving forward we will also continue to invest our capital in growth projects such as New York and Japan as well as strategic M&A. With that, Bill, back to you.

William J. Hornbuckle - Chief Executive Officer and President

Thanks, Jonathan. We believe we've accomplished a great deal year-to-date and are optimistic about our path forward. What we are doing is working. Our existing operations continue to grow as evidenced by another record quarter in Las Vegas with a positive outlook thinking about October and beyond. Our balance sheet is in a position of strength as we have more than $6 billion in domestic liquidity with almost no net-debt. But MGM is firing on all cylinders demonstrating tremendous growth and remains on track to achieve profitability during 2023. We also expect further global digital growth with LeoVegas, MGM China and Macau market are showing some productive signals and we believe we are well positioned with respect to licensing renewals. Also New York and Japan represent future development growth opportunities for our company. I would again like to thank our employees for their continued hard work and commitment to our company. And with that, we'll open this up for questions, operator.

Question & Answers

Operator

We will now begin the question-and-answer session. [Operator Instructions] And our first question will come from Joe Greff with JPMorgan. Please go ahead.

Joe Greff - JPMorgan - Analyst

Good afternoon, everybody. Bill, Jonathan, whoever wants to take this question,. I was hoping you could just talk a little bit more about where you do have visibility into next year, the group and convention business in Las Vegas. What percentage of your anticipated room nights are on the books right now, and at what price is that relative to this year or if you want to look at it in relation to 2019?

William J. Hornbuckle - Chief Executive Officer and President

Sure, let me kick it off and I'll probably turn it over to both my colleagues here. So we're targeting as I mentioned in my comments, 19% market mix. A couple of things. We've been as high as 2021. We've got about 100,000 room nights off-line. We're doing a Mandalay Bay complete remodel, which is undertaken and underway and it's been highly well received. We were able to preview it recently through IMAX. We've taken 100,000 room nights off of weekends. Given the strength with weekends, we're very positive on our ability to drive higher rated business, particularly through leisure and casino ultimately. ADRs in the mid-single digits. And then Corey, if you want to talk, I think, a little bit on the percent…

Corey Sanders - Chief Operating Officer

Yeah, we usually are about 80% on the books right now. I think we feel pretty good on where we are. In addition to that, we also are looking at where we place convention. In the past, we had a lot of convention room nights on weekends. So we strategically think we can do better cash flow by not placing some of that business on week night. So you'll probably see our mix come down a little because of that also.

Joe Greff - JPMorgan - Analyst

Great. Thank you. And then with respect to New York can you just remind us the scope of the all-in investment, the timing of the spend and anticipated timeline to complete once you start, once you get approval?

William J. Hornbuckle - Chief Executive Officer and President

So you said New York, correct?

Joe Greff - JPMorgan - Analyst

New York, yeah.

William J. Hornbuckle - Chief Executive Officer and President

Yeah, yeah. So hopefully we hear something - obviously, we get this RFA request. They have a 90-day window to issue it, which means by January 1. There's some debate over if they can issue all three licenses at once, or if they will issue all three at once or they'll go independent of that. But we're hoping for '23 in terms of being awarded a license. If you factor in the licensing fee and the initial expansion, we're looking at about a $2 billion to $2.2 billion investment, which given - let's just say it takes till the end of '23, so probably the spend on that is going to be between $24 million and $25 million.

Joe Greff - JPMorgan - Analyst

Thank you.

Operator

Our next question will come from Carlo Santarelli with Deutsche Bank. Please go ahead.

Carlo Santarelli - Deutsche Bank - Analyst

Hey, everyone, good afternoon. Jonathan, you provided a lot of color on kind of the mix and you guys just hit on the group pace for next year. But what was - how do you think about kind of the target of casino? What is casino running at this year as a percentage of room nights, and what is kind of the target next year within the 19% group and obviously trying to pull out of FIT and some of the OTA channels, things like that?

Jonathan Halkyard - Chief Financial Officer

I'll just - I'll make a couple of comments and then certainly invite Corey to comment as well. The casino room mix be in the high 20s to low 30%, it's pretty stable. A lot of our work recently has been around yielding the casino even more effectively particularly during midweek. The casino business was very strong for us in terms of room nights a year ago as I noted in my comments, but that has since that and some of the leisure business has been overtaken profitably by group business. The other thing I'd mention which is important is our direct bookings through our proprietary channels are up about 11% this quarter versus a year ago. And that's at nearly 3 times the rate of the growth of our overall web bookings. So this is one of the areas in which our MGM Rewards program and the improvements we've made to that as well as other marketing efforts have really helped drive the leisure business even through our proprietary channels.

Corey Sanders - Chief Operating Officer

Jonathan, I agree. I mean, we've got our casino room nights about where we want them, making sure that we have the most profitable customers on the weekend there. The goal would be as this group business comes back to shift it really out of the package business, our lowest rate of business.

Carlo Santarelli - Deutsche Bank - Analyst

Great. Thank you both. And then if I could - just one follow-up. Jonathan, I know you mentioned the project for regional was kind of to remain 400 basis points to 600 basis points north of 2019 for that segment. With respect to Vegas and acknowledging a lot of moving parts with Cosmopolitan coming in city center being consolidated, start to [Indecipherable] going out if we're going back to 2019, and then obviously, Mirage going out later this year. On an apples-to-apples basis relative to '19, do you guys have a similar kind of target range in mind?

Jonathan Halkyard - Chief Financial Officer

I actually think we can do better than that in Las Vegas in part for a number of the reasons you mentioned, which is of course some of the changes we've made to the portfolio here or will have prospectively with the sale of the Mirage, but also just increasing effectiveness in driving demand and yielding, I'd feel comfortable that the margins will stabilize at increments higher than that that I described for the regional properties.

Carlo Santarelli - Deutsche Bank - Analyst

Okay, is it safe to say it's kind of 400 to 600 operational plus the mix influence of those kind of four assets coming in and out?

Jonathan Halkyard - Chief Financial Officer

At a minimum I would say, yes.

Carlo Santarelli - Deutsche Bank - Analyst

Okay.

Jonathan Halkyard - Chief Financial Officer

Yeah, at a minimum.

Carlo Santarelli - Deutsche Bank - Analyst

It's helpful. Great, thank you very much.

Jonathan Halkyard - Chief Financial Officer

Okay.

Operator

Our next question will come from Shaun Kelley with Bank of America. Please go ahead.

Shaun Kelley - Bank of America - Analyst

Hi, good afternoon, everyone. Just wanted to ask a little bit about mix and margins, specifically maybe sticking with Las Vegas for a moment. It looks like continued pretty strong sequential growth on the casino side. And Jonathan, I know this has been an area where you've probably been expecting things to be at some point maybe settle back into more normal behaviors but it just still seems like it's really robust. So could you just give us a little bit more color about the dynamic there, what you saw in the quarter and how you see that trending both sort of market wise and then things you might be doing for market share because again, that does look strong relative to the market.

Jonathan Halkyard - Chief Financial Officer

Yeah, I - the margin performance is of course a number of dynamics going into it, but one of the most important has been our ability to yield on the room demand here. And we've seen it not only in our luxury properties but also more recently in our other properties here in Las Vegas. So I would say the main contributor to it has been the strength in the hotel yielding. We have grown our labor in both the regional markets and in Las Vegas in the past quarter. And we've done that intentionally. It's been reflected in our NPS scores and what our customers are telling us about their experience here. But it's also had some impact on margin, one that we intended and hopefully we've signaled pretty clearly in the past. And that's really important because it is all about growing long-term market share for - profitable market share for our businesses here in Las Vegas. And we think that those customer service scores and the retention associated with those customers are going to help us get there.

Corey Sanders - Chief Operating Officer

And Shaun, what I would add on the casino side, every weekend here is just a major weekend with events between Allegiant, the three major showrooms here, the arenas. That demand, we don't really see slowing down. And probably the piece that is still missing but we're starting to see some of this come back is the Far East play. We've seen some groups from Hong Kong. We've had intentions from groups from Singapore that wanted to come back. So I think we're pretty optimistic on what we see in the casino front in Las Vegas.

William J. Hornbuckle - Chief Executive Officer and President

And Shaun, maybe final, just some color. It was kind of interesting to me last night. Elton John was here on a Tuesday night, he put 50,000 plus in Allegiant Stadium. The south end of the strip is absolutely benefiting. We thought Allegiant could do like 40 events. I think it's going to do that in more. And if you think about the nature of people saying, that's like 100 days a year that people have visitation to Las Vegas driving a huge activity case, particularly at the south end of the strip which is obviously core to that neighborhood. And so we're pretty excited by it. We think it underlines a foundation that just puts us at a different place than we've ever been historically. So that's one of the reasons I think we've seen this ADR growth has been amazingly substantiated throughout the company. This particular month in October, Excalibur Luxor had great months.

Shaun Kelley - Bank of America - Analyst

Thank you very much.

Operator

Our next question will come from David Katz with Jefferies. Please go ahead.

David Katz - Jefferies - Analyst

All right. Afternoon folks. Thanks for taking my questions. In the past I can recall, Jonathan, you're giving out some [Technical Issues] and land-based MGM and MGM Rewards players. Are you able to talk about any of those this time?

William J. Hornbuckle - Chief Executive Officer and President

It's actually Bill, David. I'll take part of that. Look, it continues. The idea of omnichannel is still very strong. First and foremost, MGM Rewards has just surpassed 40 million folks in our database. We get about 40 - the key driver to that has been BetMGM. And so we are just supplying close to 40% of our new customer base. The inverse of that is we're supplying BetMGM with about 15% of its customers. And then we've seen - and I know you've heard some other industry numbers on folks that have come in omnichannel spend. We've seen that number double in the last year between what happened in the third quarter of '21 versus the third quarter of '22 in terms of activity. So there's nothing to indicate we're not extremely positive by that opportunity in the channel that brings us and the overall nature of it. And interestingly, we're excited to continue to project that into LeoVegas and some of the things we want to do internationally over time. And so overall, it's working exceptionally well.

David Katz - Jefferies - Analyst

Understood. And my follow-up question was going to be about LeoVegas. And if you could just be a bit more specific about what capabilities it brings you that may be transferable or helpful within the United States or North America.

William J. Hornbuckle - Chief Executive Officer and President

Well, to be clear, within North - within United States and North America, of note Canada and Ontario province to be specific, that is the domain of BetMGM. And so that - all of that activity case would remain with that JV and that partnership. Leo Vegas was an opportunity to open up rest of the world. And so while relatively small, its scale to some, it's probably going to be about $50 million in cash flow. We love the team. We love the operating environment it has, the system it has. It's got a full slate of iGaming opportunities. Sweden is the benchmark, about 35% of its business comes from there. But we've got a sports betting product. So it's got all of the tools. We look to add on to it with live dealer. We're looking at a studio increment that could be added on to this thing. And so we see it as a cornerstone to grow rest of world. If we think about places like Brazil which has that activity and talking more and more about sports betting, and hopefully and potentially casino gaming. We just see that as a leading opportunity for us and a vehicle to do that.

David Katz - Jefferies - Analyst

Okay, thank you very much.

Operator

Our next question will come from Dan Politzer with Wells Fargo. Please go ahead.

Dan Politzer - Wells Fargo Securities - Analyst

Hey, good afternoon, everyone. Jon, you gave some detail on how you think about valuation for your stock. I think you called out the $11 per share of cash on the balance sheet. How do you think about the [Indecipherable] here given you have the $4.4 billion of cash, $1 billion - one-sixth of liquidity. What do you think is the normalized cash balance that you feel comfortable with given the macro and some of your rent and capex obligations.

Jonathan Halkyard - Chief Financial Officer

Yeah, there is about $400 million or so that's required in so-called working capital and our cages et-cetera, and we have established as a financial policy that we will have $1.5 billion available to us in addition to our revolving credit which is approximately $1.5 billion. So that's the way we think about it, $1.5 billion would be considered our minimum cash.

Dan Politzer - Wells Fargo Securities - Analyst

Got it. And then just as my follow-up on Vegas. Some of your competitors have called out one-offs in the quarter such as utilities. Was there anything there that you'd call out or that you saw on your side?

Jonathan Halkyard - Chief Financial Officer

No. Not in the third quarter. We - our utilities are largely bought through the - our energy cost is largely bought through the end of 2023. So we didn't suffer any meaningful increase there. In fact, the opposite is that we continue our energy efficiency programs, have had a slight decline in usage. But no, there's really nothing unusual in Vegas. In the regions, there were a couple of unusual items. There was some minor hold impacts in the third quarter, about 60 basis points. And we also had some hurricane proceeds in the prior year quarter, about 80 basis points. Most of the rest of it was labor increases when we look quarter-over-quarter, but we did probably have 1.5 points of unusual margin items in the regions in the third quarter.

Dan Politzer - Wells Fargo Securities - Analyst

Got it. Thanks so much.

Operator

Our next question will come from Chad Beynon with Macquarie. Please go-ahead.

Chad Beynon - Macquarie Research - Analyst

Hi, good afternoon, and thanks for taking my question. Bill, Jonathan, I know you mentioned that I guess, firstly, BetMGM is coming in better than the $1.3 billion revenue projection, and you're still on track on the losses for the year. You did mention that you still expect to achieve profitability in '23 at some point. But given that everything is coming in better than expected. California, there's not going to be a big launch in '23. Just given the maturation of the markets where you currently offer your product, are there reasons why you might not be able to hit that goal potentially earlier if hold is as expected? Thanks.

William J. Hornbuckle - Chief Executive Officer and President

Look, Chad, I wouldn't go so far as to change our projections and our prediction that by third - this time next year we should be in a profitable scenario. So I want to stay on point on that. You know the new markets we've indicated we're opening up we think we have real opportunity there. We're doing some very interesting one and the only kinds of things in the iGaming marketplace where we have integrated jackpots at our omnichannel that will stretch across our casinos as well as the digital channels. And so we've got two or three products coming out that are going to be exclusive, and we're excited by. And I think you all know iGaming is the lion's share of the NGR in this whole universe, actually. And so - but no, I don't want to get ahead of ourselves. We continue to invest in the business. We want to see it grow. We like the positioning we have, both from iGaming in particular and ultimately in sports betting. And so it will take some investments. Point on California is well taken. But we're not going to get ahead of ourselves right now.

Chad Beynon - Macquarie Research - Analyst

Okay, thanks. And then with respect to the 0 COVID policy in China and kind of where things stand right now, has anything changed in terms of your expectation of when this picket could or should turn back on? And then if not, how should we think about the current burn rate in that market? Thanks.

William J. Hornbuckle - Chief Executive Officer and President

I'll let Zhi [Phonetic] chime in here in a moment. I would say this because obviously we all got the message of zero tolerance, and it was demonstrated this week in Shanghai and ultimately at our own Cotai property and Zhi can speak to that. Also, at the other side of the coin is they've opened up every province. All 31 provinces now are accessible to do e-Visas which is convenient and timely. And so we're encouraged by the signal, and really what it means for Macau. Macau is obviously an SAR, but it is obviously considered part of broader China in every way, shape or form. And so the support, I think it's trying to give it. By doing that, I think, is meaningful to us. And hopefully over time can get us to a different place. I'm not going to project when that time is. It's just been, as we all know, so many curves in this road. But I don't know Zhi if you want to talk any more sentiment that - and particularly maybe talk about where you are with the lockdown.

Zhi Qi Wang - President and Chief Operating Officer

Yes. Thanks, Bill, and thanks, Chad, for your question. The policy that recently loosened up the e-Visa application and also the group visa application for entire nation to Macau, I think that's definitely a long-term positive. Short term, we probably will still - it's a gradual ramp-up process, and maybe with fluctuation between due to the dynamic zero COVID policy in place. So I think that just to give you an example, in Macau, recently, there have been in some cases. So we have seen the measures to border crossing has been tightened. And there are cases - there was one case, single case in MGM Cotai, and we had to shut down the operation for three days, and we just reopened end of quarantine yesterday and will reopen today. So these types of things could happen from time to time if the policy is still in place. But overall, I think over the long run, it's a positive. In terms of your question on the bond rate for us, I think that we're looking at opex of about USD1.5 million a day in that range.

Chad Beynon - Macquarie Research - Analyst

Great, and thank you very much, appreciate it.

Operator

Our next question will come from Robin Farley with UBS. Please go ahead.

Robin Farley - UBS - Analyst

Great, thanks. I know you talked a little bit about some of the factors with the regional margin being down with labor costs and things. I'm just curious if you're seeing anything in terms of marketing your promotions in the regional markets, just given that you mentioned that gaming revenue was pretty much flat and the growth was coming from non-gaming if that is starting to lead to anything promotional. Thanks.

Corey Sanders - Chief Operating Officer

Hi, Robin, it's Corey. I think in general, in most of our regions we're seeing some reasonable reinvestments. Atlantic City, we saw a little bit of a ramp - that market is a tough market right now. But in general, our reinvestments have stayed pretty consistent. As we add some of these amenities, which our players have been asking for, that component of those comps will go against that gaming revenue which would give it a reason why it'd be flat, but you would see profitability in other departments in the regional areas.

Robin Farley - UBS - Analyst

Okay, thank you. And just for the follow-up, I'm curious if you're seeing anything different in terms of demand at your Vegas resorts in terms of the more premium properties versus the properties that are sort of more broad market? Are you seeing any difference in demand trends there? Thanks.

William J. Hornbuckle - Chief Executive Officer and President

Look, I think we've said it in our general comments, Robin, although again October for some of our legacy properties was a bit surprising in the context of affirmative. Part of it was probably due to the programming I mentioned earlier. But generally speaking, our ability to yield up is tied to luxury. It's tied to average rates at places like Aria, Cosmopolitan and Bellagio. It's tied to fine dining, it's tied to the entertainment experiences that may be a Bruno Mars or something of that ilk. And so we just have not seen a slowdown in that fact to the contrary. And so it doesn't mean - we're not eyes wide open on what may happen here. But to date and through October, the phenom of what's happened in Las Vegas particularly for our higher-end properties continues, and we're pretty excited by all of that.

Robin Farley - UBS - Analyst

Okay great, thank you, very much.

Operator

Our next question will come from John DeCree with CBRE. Please go ahead.

John DeCree - CBRE - Analyst

Hi, everyone, thank you for taking my questions. Maybe one more on Las Vegas about your Convention group bookings, maybe a bigger picture question. As you look forward to 2023, and we've got the big ones in 1Q, maybe Corey, are you seeing attendance or bookings per the big events get back closer to 2019 levels or when you start to see pacing, is it more driven by more events? I guess, we have a lot of conversations are those big events going to see similar attendance as 2019? Or might they be smaller and then you guys can kind of grow overall attendance through various sales to other departments. So curious if you have any visibility on that yet.

Corey Sanders - Chief Operating Officer

Yes. I think the answer is yes to all of them actually. The bigger events that are still coming in, depending on the type of industry, you'll see attendance reach the levels that they were before, especially if they're more domestic, they have an international component, maybe not. But we're also seeing a lot of smaller groups and medium-sized groups come in and book also. So the business is definitely dynamic right now from that perspective. We're seeing a lot of demand for that business, where we're seeing a lot of demand for that business in the year for the year also.

John DeCree - CBRE - Analyst

Got it. Thanks, Corey. And Jonathan maybe a housekeeping one. In the press release, there was a little over $1 billion amortization charge, I think related to sub concession in Macau. I think we've maybe talked about this last quarter, but we've got a couple of questions. Could you remind us on the accounting of that and what's that for?

Jonathan Halkyard - Chief Financial Officer

Yeah, when MGM went to a majority position in MGM China in 2011, we recorded through the purchase accounting an intangible related to the concession. We've been amortizing that intangible to between 2031 and 2038. When the law was released back in June, we together with our outside auditing firm, Deloitte, we came to the conclusion that it's a new concession that we'll be beginning post December. So the existing concession on which the intangible was based, we needed to amortize that towards the end of its life or by the end of its life which is this year. So we took a relatively small amortization charge in the second quarter and then we're taking the remainder in the third and the fourth quarter. And so that's what that is.

John DeCree - CBRE - Analyst

Got it, understood. Thanks for that clarity. Thanks, everyone.

Operator

Our next question will come from Barry Jonas with Truist Securities. Please go ahead.

Barry Jonas - Truist Securities - Analyst

Great. Thank you. Just a follow-up on the strip margin in the quarter. There was a call out in the 10-Q for higher advertising costs. Are we now at a more normal level there or could that line item fluctuate a little bit going forward?

Corey Sanders - Chief Operating Officer

Yeah, it's higher than '21 because '21, we cut back a little, but it's lower than we were spending in 2019.

Barry Jonas - Truist Securities - Analyst

Got it, okay. And then just wanted to…

Corey Sanders - Chief Operating Officer

Yeah, it's probably a new normal of where we feel pretty comfortable plus or minus on - going forward in the future also.

Barry Jonas - Truist Securities - Analyst

Okay, that's great. Just as a follow-up, I wanted to ask about some of the partnerships and sponsorships that BetMGM has made. Wondering if you think some of the lower ROI deals could roll off over the next few years and maybe help drive profitability for BetMGM, if possible, maybe walk us through the setup there.

William J. Hornbuckle - Chief Executive Officer and President

So Barry, this is Bill. The answer is yes. We go into different markets, we try different things. Some of them are access deals. You need a partner and a sponsor to help you get state, et cetera. and get ultimately licensed, and in some cases even get legislation through in terms of motivating the cost from the get-go. Some of them have been very profitable, some of them have been not as. The team knows exactly the CPA cost per market and it allocates certain percentages to what those sponsorships may feel like. But there's clearly an opportunity going forward. Those deals range anywhere from a single year up to five years. It just depends on market and depends on who and what they are. But yes, I think as we get all smarter about this, we all build a customer base that begins to plateau at a reasonable level, you'll see everyone get including us, most notably more efficient at that.

Barry Jonas - Truist Securities - Analyst

Great, thank you so much.

Operator

Our next question will come from Stephen Grambling with Morgan Stanley. Please go ahead.

Stephen Grambling - Morgan Stanley - Analyst

Hey, thanks. In the deck, you did mention investing in advanced marketing and physical/digital experiences which I think is associated with the loyalty program. As you ramped up to around, I think you said 44 million members and continue to invest in engagement, how are you thinking about monetization opportunities or partnerships to fund reinvestment or even make the loyalty program a profit center?

William J. Hornbuckle - Chief Executive Officer and President

Look, we have several different opportunities, whether it's around our existing partnership with Hyatt and expanding it. We just actually did something with BetMGM with Carnival that we'd like to bring into MGM Rewards over time as well. And so there are - we obviously have a deal with Marriott at the Cosmopolitan of Las Vegas. And so we'll continue to push on that. And obviously we have something now to trade at 44 million members that are active. There's a real opportunity to go back and forth on that. As we've opened up, remember, the whole essence behind MGM Rewards versus MLive was we've opened up for rewarding all spend, not just gaming spend. And so it's introduced a different set of customers to us. It's introduced a higher-end retail customer. I think that gets expanded by things like F1 and some other things that are coming to town. And so we've got a whole team structured and focused on doing exactly that. And we'll begin - we're going to hit our first full year here coming up. We'll begin to give you some metrics here going forward about where we've been and where we're at. But some of the initial indicators are pretty affirmative - very affirmative actually. So, the general thinking.

Stephen Grambling - Morgan Stanley - Analyst

Sounds good, that's helpful, thanks. One other unrelated follow-up. The market in Canada on the online side is a bit opaque at this point. I guess, what are you seeing in that market for BetMGM in terms of how it's ramping versus the US and how it might evolve from here?

William J. Hornbuckle - Chief Executive Officer and President

Surprisingly well. And why I say that is obviously, that's been a market that's “gray market” in Ontario of note for a decade or so and maybe more. And our ability - they don't actually publish per share. So we can't have exact things, but I know what we're doing. We've done exceptionally well. I think part of it is our Ontario/Detroit database, and we've had exposure to those customers for 20 years. And so we have taken real share. And if we're not leading, we're damn close in the context of iGaming of note. And we have a real position in place with sports betting, we were fortunate enough to get Wayne Gretzky on board early. And he's just iconic. And so we feel really good about what's happened there, and surprisingly so, which gives us a great deal of confidence in a highly competitive market before we entered.

Stephen Grambling - Morgan Stanley - Analyst

The great one, thank you.

Operator

Our last question will come from Ben Chaiken with Credit Suisse. Please go ahead.

Benjamin Chaiken - Credit Suisse - Analyst

Hey, how's it going? Sorry if I missed it. Just taking another swing at Vegas margins. Revenue and EBITDA improved kind of regardless of how you cut it. With this in mind, if we think about the sequential margin compression in Vegas 2Q to 3Q, how much of this is a mix dynamic, so adding lower margin revenues as you called out? And how much of this is sequential margin compression on the existing business from headcount, for example, which you also called out. If that didn't make sense, I can try it differently. Thanks.

Jonathan Halkyard - Chief Financial Officer

No, that's all right. It's - this is Jonathan. It is mostly having to do with mix, and to a minor extent some addition of labor. It's almost impossible to overstate how much - I know your question was around sequential, but year-over-year and sequential, just the volume of activity has increased here, and that's required some additional labor resources. We've also opened some final outlets that had been closed over the past year or two. So it's really both of those dynamics which have caused that.

Benjamin Chaiken - Credit Suisse - Analyst

Got you. And then just to squeeze one more in. There seems to be - I think you've highlighted a few times, but there seems to be a disconnect in your valuation. You've got the lease liability on the balance sheet and then you've got kind of the EBITDAR multiple discount. With this in mind, I guess, just kind of like high level, is the OpCo structure do you think still the most desirable strategy, or would you ever consider a pivot from the asset like structure, if that's an appropriate way to phrase it?

Jonathan Halkyard - Chief Financial Officer

I think it is absolutely the right strategy. I - the valuation considerations aside for a moment, I love this capital structure. It's a perpetual capital structure with escalations of 2% to 3% over the next ten years. It is the one that we do not have to refinance. And when I look at what we've been able to accomplish on our M&A agenda, it's probably not too difficult to tease out that the Cosmopolitan and ARIA did nearly $300 million of EBITDAR during the third quarter. And these are businesses that when you look at what we paid to acquire them are sub 6 times EBITDA multiples. And at the same time, we've sold the Mirage and the Gold Strike at 17 and 11times multiples respectively. So there's clear valuation disconnect going on here. But when I look at the capital structure, the combination of it and its cost with what I think is our operating leverage in these other businesses with the demand dynamics we've described and the fact that really our regional cross-property efforts are just getting started to the Cosmopolitan integration is still very early in this whole event backdrop, I just think it's a fantastic opportunity for value creation. So I wouldn't change it.

Benjamin Chaiken - Credit Suisse - Analyst

That's very helpful. Thank you.

Operator

Ladies and gentlemen this concludes our question and answer session. I would like to turn the conference back over to Bill Hornbuckle for any closing remarks.

William J. Hornbuckle - Chief Executive Officer and President

Thank you, operator, and thank you all for your attendance and obviously your interest. Just some highlight comments again. We feel obviously very strong and excited by our business here in Las Vegas. You continue to see the strength in the growth. Again, we think there's been a couple of fundamental changes both in the context of the customer mix, the opportunity and the desire to want to come to a place like Las Vegas and our position with the asset changes of Mirage for Cosmopolitan and some of the other things we do. And we just really like where we are in Las Vegas. Macau, despite all of its trials and tribulations, in the month of October did $450 million of GGR. So annualize that and think about that marketplace and its potential long term. We have a great deal of safe in Macau long term. And I think we're really well positioned to get relicensed and are confident that we'll do so by year-end..

You heard obviously the success in BetMGM. It's absolutely tracking in the right direction. And we're equally, if not more excited, ultimately for MGM Resorts, for LeoVegas, and our push into rest of world with that vehicle leading the way. I think most relevant is Jonathan's point about our balance sheet. The liquidity is amazing. It gives us two things. If we should go into a more significant downturn, obviously we've got the resources to sustain and ultimately enough resources to also be opportunistic. And so the opportunity that balance sheet presents for us we think is very compelling and very exciting as we think about the next couple of years. We are keenly focused on margins, I can assure you. We are at a place - we said they would come back to where they are. We want to do more work and we will continue to do - they will not go backwards from this point. You have a commitment on that. And I think there's some room for enhancement in a couple of places, Las Vegas and potentially a couple of regional properties despite the one-off opportunities and things that hit us.

The rent is compelling. The 2% to 3% versus open - the cost of what's going on right now in the marketplace. And ultimately, our growth pipeline with New York and Japan around the Horizon - we love that - both of those opportunities for obvious reasons. And so I think we're well positioned in both of those places to take advantage of that as well. And then ultimately, to the colleagues at the table and all of our team, I couldn't be happier with the crew and how it's performing. So thank you all, and appreciate you joining us today. Have a great night.

Operator

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MGM RESORTS INTERNATIONAL

Q3 2022

Earnings Transcript

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