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MGM looks to diversify operations following difficult 2020

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MGM Resorts lost $1.03bn in 2020 as revenue fell 60.0% to $5.16bn, while chief executive Bill Hornuckle said it would continue efforts to expand its igaming activities after opting against a firm bid for Entain.

Of its $5.16bn in revenue, MGM made the majority – $2.87bn – from casino operations, though this figure represented a 54.9% year-on-year decline.

Rooms brought in $830.4m, down 65.3%, while food and beverage revenue was down 67.6% to $696.0m and entertainment, retail and other revenue dropped 64.9% to $519.0m.

MGM made a further $244.9m in reimbursed costs, 43.9% less than in 2019.

The operator’s Las Vegas Strip resorts continued to be its main source of revenue, despite the properties’ contribution falling 61.5% to $2.25bn.

Its regional US operations were much more resilient, but revenue still fell 44.6% to $1.97bn.

MGM China saw the steepest drop in revenue amid particularly strict travel restrictions, with revenue down 77.4%, roughly in line with the overall decline in the Macau gaming market in 2020.

Management and other operations brought in revenue of $292.4m, down 52.3%.

MGM’s revenue included $178m from its BetMGM online joint venture with Entain, ahead of its target of $150m-$160m, which itself was adjusted upwards from $130m. The ownership of the joint venture is split 50/50 between the operators.

MGM’s expenses for the year, meanwhile, were down 35.6% but were higher than MGM’s revenue at $5.85bn.

Casino costs fell 53.0% to $1.70bn, while room costs were down to $419.2m, food and beverage expenses declined to $674.1m and entertainment, retail and other costs came to $412.7m.

Other costs included $2.12bn in general and administrative costs and $1.20bn in depreciation and amortisation, though MGM also made $1.49bn from real estate transactions, relating to the sale of its MGM Grand and Mandalay Bay properties on the Las Vegas Strip to private equity business the Blackstone Group.

As a result of this and $42.9m in income from unconsolidated affiliates in which MGM owns a stake, MGM made an operating loss of $642.4m, after having posted a $3.94bn operating profit in 2019.

While BetMGM’s revenue rapidly grew, it also made an operating loss of $124m, meaning MGM’s share of the loss came to $62m. MGM said this reflected the “start-up nature of the business” and high marketing costs.

MGM paid a further $676.4m in interest expenses, plus $103.3m in costs related to unconsolidated affiliates and $89.4m in other costs for a pre-tax loss of $1.51bn.

After $191.6m in tax benefits, MGM made a net loss of $1.32bn, compared to $2.85bn in profit a year prior.

Accounting for losses attributable to noncontrolling interests, MGM’s final net loss was $1.03bn, down from a $2.05bn profit in 2019.

Looking just at the fourth quarter, revenue was down 53.2% to $1.49bn, with casino revenue down 40.9% to $963.8m. 

Regional operations were the largest source of revenue at $595.4m, down 33.9%, while Las Vegas Strip revenue dropped 66.7% to $479.8m. MGM China revenue was down 58.1% but this was a significant improvement over the prior two quarters, while management and other revenue came to $113.6m.

Expenses totalled $1.85bn for a $363.6m operating loss. After non-operating costs of $199.3m, MGM’s pre-tax loss was $562.9m. After taxes and noncontrolling interests, MGM made a loss of $447.6m. THis compared to a $2.01bn loss in Q4 of 2019, though that figure was inflated by sales of the Bellagio and Circus Circus properties to Blackstone that quarter.

Bill Hornbuckle, chief executive officer and president of MGM Resorts International, said that despite the difficult year, he was confident that the operator would bounce back.

“We remain confident in the long-term recovery of our business,” Hornbuckle said. “We have strengthened our operational foundation through cost efficiencies that position us for sustainable growth, as solutions to the public health crisis accelerate and restrictions continue to ease.”

Hornbuckle added that BetMGM would be a major part of this recovery plan.

“We are engaged on pandemic response while staying focused on the future,” Hornbuckle said. “This includes maintaining a strong balance sheet to seize opportunities and continuing to drive BetMGM, our US sports betting and iGaming venture. BetMGM gained significant market share throughout 2020 while successfully launching in seven new states. 

“We expect to be in 20 markets by the end of the year, and are very pleased with the January launches in Iowa, Michigan, and Virginia.”

Hornbuckle said the joint venture brought in $44m in January 2021 revenue alone.

Besides these launches, January also saw MGM propose an offer to acquire Entain in an all-share deal worth around $11.00bn (£8.11bn/€8.97bn). However, Entertain argued the bid  “significantly undervalue[d]” its business and MGM ultimately chose to withdraw rather than submit another offer.

Hornbuckle said that while the deal had fallen through, MGM still aimed to diversify its revenues and that it wanted to be a larger part of the online market, which he said was “where the industry is”.

“It is MGM’s intent to play in this space on a substantive and significant level on a global basis,” he said.

MGM also appointed former Caesars chief financial officer Jonathan Halkyard as CFO and treasurer last month. Halkyard said he was excited to play a major role in MGM’s recovery from the pandemic.

“I’m thrilled to play a role in the recovery and long-term growth of one of the most iconic global gaming entertainment brands,” Halkyard said. “We remain focused on executing our strategic plan to drive margin expansion, deliver profitable growth and maximize shareholder value.”