MGM Resorts issued an earnings update amid the Covid-19 pandemic, reporting that revenue has declined for the first two months of 2020, but net income increased more than 500-fold because of the sale of the MGM Grand and Mandalay Bay venues.
The pandemic has led to the closure of all commercial casinos in the United States this month as well as all casinos in Macau for 15 days of February.
The operator saw revenue drop 10% year-on-year over the first two months of 2020, primarily due to the closure of casinos and general slowdown of customers in Macau. This closure prompted MGM to decline to issue an earnings guidance for 2020 with its 2019 results.
Earnings before interest, tax, depreciation, amortisation and restructuring (EBITDAR) increased 24%, or 27% of Circus Circus, which was sold in December 2019, is removed from 2019’s figures.
EBITDAR from regional operations across the rest of the US increased 42%, or 26% when its 2019 acquisitions of Empire City Casino and MGM Northfield Park are excluded from 2020’s figures.
Net income rose from $27m in the first two months of 2019 to approximately $1.3bn in 2020.
This increase was driven mostly by its decision to sell the MGM Grand and Mandalay Bay Resorts and form a joint venture with Blackstone Real Estate Income Trust, which lease the properties back to a subsidiary of MGM Resorts. MGM made around $1.5bn before tax from this deal.
The operator has around $3.9bn in cash in operating cash and cash investment to support its liquidity while its casinos are closed.
“At MGM Resorts, we are committed to doing our part to mitigate the spread of COVID-19, including the closure of our properties across the United States,” said Bill Hornbuckle, who was named acting CEO and president of MGM Resorts last week. “While this will undoubtedly have a significant negative effect on our business in the near term, we are well-positioned to emerge from the current crisis in light of our strong liquidity position and valuable asset portfolio.
“With the continued execution of the MGM 2020 plan, as well as the implementation of aggressive cost savings initiatives, we believe the Company will be able to manage its expenses while navigating this unprecedented event. We are currently making very difficult decisions but believe these will be in the best interest of the Company long term.”
Hornbuckle replaces Jim Murren, who last month announced that he was to step down from the role, bringing to an end almost 12 years in charge of the operator. He has since been appointed by Nevada Governor Steve Sisolak to lead the state’s Covid-19 Response and Recovery Task Force.
For 2019, the operator’s full-year revenue increased 9.6% to $12.90bn, while profits were bouyed by the sale of the Bellagio Hotel and Casino. However, Murren described MGM’s fourth quarter as “below expectations.”