MGM Resorts International posted its strongest U.S. financial performance since the Great Recession for the second quarter, it announced Thursday morning, though these figures were in part hampered by the company’s ongoing struggles in Macau.
MGM reported that its adjusted property EBITDA – earnings before interest, taxes, depreciation and amortization – surpassed $500 million for the first time since the financial crisis of 2008 and that its margins of 30.4 percent were the highest since 2007.
The company also reported an increase in earnings per share from $0.17 in the prior year quarter to $0.83, and in operating income – to $769 million – that more than doubled last year’s mark.
The numbers were bolstered by the sale of the The Shops at Crystals, which reaped a $406 million boost to operating income and added $0.57 in earnings per share, and a successful Profit Growth Plan that contributed more than $70 million in total EBITDA growth.
“I am incredibly proud of the concerted effort of our talented executive teams and employees that produced our most profitable quarter in eight years at our domestic resorts,” said Jim Murren, Chairman & CEO of MGM Resorts.
“Our Profit Growth Plan drove our domestic resorts Adjusted Property EBITDA to grow an impressive 12% and Adjusted Property EBITDA margins to improve by over 350 basis points, despite a record-breaking May last year,” Murren added.
Ongoing problems in Macau, however, continue to be a thorn in MGM’s side. MGM China net revenues fell below conservative estimates to $452 million after posting $557 million for the prior year quarter, a decline of nearly 20 percent. Operating income and adjusted EBITDA for MGM China also fell by 11 percent and 10 percent, respectively.
A driving factor in this was a 33 percent decrease in revenue from VIP table games – attributable China’s slowing economy, an ongoing corruption purge and restrictions on junket operators.
MGM’s $1.413 billion in revenues from its Las Vegas Strip properties also fell below estimates, though it asserts that its overall position in Nevada remains strong.
These factors saw the company’s overall revenues for the quarter fall to $2.27 billion from $2.39 billion in 2015 – a roughly five percent decline, though these numbers are difficult to gauge for comparison purposes because the second quarter of 2015 featured major attractions – including the Floyd Merriweather vs. Manny Pacquiao fight and Rock in Rio concerts – at MGM properties in Las Vegas.
On a conference call with analysts, Murren pointed to the acquisition of the Borgata in Atlantic City, the opening of the National Harbor property in December and the $3 billion Cotai casino resort in Macau in 2017 as indicators that the company is well-positioned for future growth and to become an investment grade company.
Industry analysts expressed similar optimism over the company’s strengthening position, both in the U.S. and globally.
“On the positive side, the transactions around Borgata are a positive for MGM shares given the gain on the sale and the closure of a competitor in the Atlantic City market,” wrote David Katz and Brian Davis of the Telsey Group.
“We were impressed with the company’s ability to generate notable EBITDA growth despite a flat revenue environment,” said Chad Beynon of Macquarie Capital.
MGM Growth Properties, the company’s REIT, also reported a net income of $7 million – or $0.12 per share – for the second quarter.
“After completing our highly successful initial public offering, our Company is off to a great start,” said James Stewart, CEO of MGM Growth Properties. “The acquisition of the real property of Borgata Hotel Casino & Spa was a significant first step in executing on our strategy and we look forward to further growing our portfolio of high quality assets.”
