Casino giant MGM Resorts International reported a net loss of $1 billion in 2020 due to business disruption from the COVID-19 pandemic. Its U.S. gaming portfolio was closed for parts of the year and operated under various capacity limitations and health safety guidelines when the properties were open.
The loss, the company said, could have been worse.
MGM Resorts reported a $1.5 billion gain related to the sale and leaseback of the MGM Grand Las Vegas and Mandalay Bay to a real estate investment trust in January. In 2019, MGM’s net income of $2 billion included a $2.7 billion gain related to the sale and leaseback of Bellagio to a REIT.
Bill Hornbuckle, CEO of MGM Resorts International
Total company revenues in 2020 declined 60% to almost $5.2 billion.
MGM CEO Bill Hornbuckle said Wednesday he is ready for the company to turn the page on 2020 but admitted some pandemic-related business issues may linger into the first few months of the year.
In Macau, upcoming Chinese New Year visitation may be muted due to government restrictions. In Las Vegas, Hornbuckle is hopeful Nevada Gov. Steve Sisolak may announce a relaxing of certain COVID-19 restrictions that have been in place since the end of November.
He suggested Nevada’s occupancy limitations will ease in March back to October levels. Hornbuckle suggested occupancy rates could be boosted by the NCAA’s March Madness basketball tournament and other Spring events, such as the opening of pool season.
A return of midweek occupancy would allow the company to fully reopen Park MGM, Mandalay Bay, and The Mirage to seven days a week operations. Hornbuckle said the large meetings and conventions business may not return the second half of the year.
“October was our strongest month since reopening (casinos in Nevada in June),” Hornbuckle said. “Public health concerns dampened visitation over the course of the fourth quarter and this has continued into February. We remain confident in the long-term recovery of our business.”
During the fourth quarter, MGM Resorts saw revenues decrease 53.1% to just under $1.5 billion, which included a 66.4% revenue decline at the company’s Las Vegas properties, a drop of 33.8% in the regional markets, and a 58.1% decline from MGM’s two Macau casinos.
BetMGM has 17% of the U.S. sports betting market
Hornbuckle spent much of an hour-long fourth quarter conference call touting BetMGM, providing a bullish outlook on the company’s sports betting provider which it owns in a 50-50 joint venture with United Kingdom-based Entain PLC.
BetMGM screenshot
Hornbuckle said the business had “gained significant market share throughout 2020,” including launching in seven new states. BetMGM is now operating retail and/or mobile sports betting in 12 states, including two that began in January. MGM said BetMGM has a current market share of 17%, including a 25% market share in New Jersey, 34% in Tennessee, and 31% in Colorado.
BetMGM had total net revenues of $178 million during 2020 but recorded a net loss due to start-up and heightened marketing costs when entering new states. MGM’s 50% share of the net loss was $62 million.
MGM expects BetMGM’s net revenues will grow “well over 100%” in 2021 and already saw net revenues of $44 million in January. Hornbuckle said BetMGM expects to be operating in 20 markets by the end of the year with access to roughly 40% of the U.S. adult population.
Truist Securities gaming analyst Barry Jonas told investors that BetMGM has emerged as an online sports betting and igaming market leader with continued growth.
“Management notes strong convergence between BetMGM and the M life rewards program as 17% of BetMGM’s signups have come from M life and 39% of new M life signups have come from BetMGM,” Jonas said. “These omni-channel customers have increased value versus single-channel customers.”
Prior to MGM’s earnings announcement, MGM Resorts board member Keith Meister appeared on CNBC Wednesday and touted the company’s prospects, especially its partnership in BetMGM.
“I am massively bullish on the potential opportunity for BetMGM,” Meister said. “Over time, as investors realize the potential for BetMGM, I think that’s a very misvalued asset inside of MGM.”
Last April, when MGM’s stock price was down, Meister, through his Corvex Management hedge fund, spent more than $18.6 million to acquire 1.6 million shares of the company’s stock at prices ranging from $10.60 to $12.35 per share. Corvex now owns 22.5 million shares of MGM.
Toward the end of the conference call, BetMGM CEO Adam Greenblatt said the outage the sports betting system experienced during Super Bowl LV on Sunday was only in Nevada and was caused “by human error.” He said the company’s “software works” and the matter had been addressed.
Entain offer
In January, MGM Resorts withdrew from an effort to acquire Entain. An $11 billion proposal by MGM Resorts was rejected by Entain as being undervalued.
MGM said it decided not to submit a revised proposal or firm offer for Entain, “after careful consideration and having reflected on the limited recent engagement between the respective companies regarding MGM’s rejected all-stock proposal.”
Hornbuckle said he was somewhat limited on what he could say about the offer for Entain, but said the move showed MGM’s “intent to play in this space and have a significant presence” globally.
“This is where the industry is going and we are going to be a larger part of it,” Hornbuckle said.
MGM Resorts had more than $5.1 billion in cash on its balance sheet at the end of 2020 and total debt of $12.5 billion. The company still owns 56% of MGM Growth Properties and made rent payments of $207 million to the REIT during the quarter. MGM, in turn, received $84 million from the REIT.
Shares of MGM Resorts, traded on the New York Stock Exchange, closed Wednesday at $36.47, up 65 cents or 1.81%. The shares were down more than 2%, however, in after-hours trading.
Howard Stutz is the executive editor of CDC Gaming. He can be reached at hstutz@cdcgaming.com. Follow @howardstutz on Twitter.
