MGM Resorts’ revenue fell 29.1% to $2.25bn for the first quarter of 2019 due to the effects of the novel coronavirus (Covid-19), but the operator’s profits skyrocketed due to sales of two of its properties.
Bill Hornbuckle, who has served as acting chief executive and president of MGM Resorts since Jim Murren stepped down after the operator announced its 2019 results, said the business had been doing well before the impact of the virus was felt.
“The year started strong with results ahead of expectations, however the COVID-19 pandemic resulted in the closure of our properties which had a material negative impact on our first quarter results,” Hornbuckle said.
Casino continued to make up around half of the operator’s overall revenue in Q1, at $1.05bn, however this total fell 35.4% year-on-year.
Revenue from rooms, meanwhile, fell 24.6% to $434.0m. Food and beverage revenue fell 24.8% to $396.7m an entertainment and retail revenue declined 21.6% to $269.9m. Reimbursed costs fell 13.4% to $98.2m.
In terms of geographic breakdown of revenue, MGM’s Las Vegas Strip resorts brought in $1.13bn, down 20.7%. The operator’s regional operations across the rest of the US were the least affected by the virus and resulting shutdowns, bringing in $725.7m, down 9.8%.
The operator’s MGM China Resorts – such as those in Macau, which closed all casinos for most of February and March and has seen low traffic due to travel restrictions since reopening – took in only $271.9m, down 63.0%.
Management and other operations brought in revenue of $121.5m, down 43.3%.
At the Las Vegas Strip resorts, $841m was staked on table games, down 13%, from which the house took $193.4m, and $2.46bn at slot machines, down 19%, producing revenue of $231.0m. This resulted in a 15% revenue decline from gaming on the Strip.
Rooms revenue on the Strip, meanwhile, fell 23%. Excluding Circus Circus, which was sold in the fourth quarter of 2019, Las Vegas Strip hotel revenue increased 3% for the first two months of the year before Covid-19 hit March revenues.
MGM’s expenses also declined, but more slowly than costs, by 11.1% to $2.53bn, meaning costs exceeded revenue.
Casino was the largest expense, at $628,7m, but costs in this area fell 30.4%.Food and beverage expenses fell 15.1% to $339.6m, while entertainment and retail income fell 18.2% to $199.1m.
General and administrative costs increased by 9.3% to $574.2m while corporate expenses grew 11.1% to $143.8m. Property transaction costs came to $55.0m, more than six times the expenditure in this area in 2019. Depreciation and amortisation costs, meanwhile, came to $318.3m.
After accounting for the $98.2m of reimbursed costs, MGM would have made an operating loss of $454.2m before accounting for property sales.
However, the business made $1.49bn through its decision to sell the MGM Grand and Mandalay Bay properties. The operator formed a joint venture with Blackstone Real Estate Income Trust, which lease the properties back to a subsidiary of MGM Resorts.
The sale follows MGM’s decision to sell the Bellagio and Circus Circus venues in October 2019 as it moves to a less asset-heavy business model.
As a result of this and following $35.7m in income from unconsolidated affiliates, the business made an operating profit of $1.25bn, up 237.8%.
After paying $157.1m in interest expense, $32.6m in non-operating costs from unconsolidated affiliates and $124.6m in other costs, MGM made a pre-tax profit of $936.8m, up 580.3%.
The operator paid $262.3m in income taxes for net income of $674.5m, more than ten times 2019’s net income.
After accounting for a $132.4m loss attributable to noncontrolling interests, a $806.9m profit was attributable to MGM, more than 25 times the profit attributed to the operator for the first quarter of 2019.
Hornbuckle said the timeline for the reopening of its US venues remains unclear.
“It is still premature to predict the opening dates of our domestic properties. In the meantime, we are collaborating with public health officials, experts in epidemiology and biosafety, and both state and federal government to come up with a set of protocols that will help deliver a safe, secure environment for our employees and guests,” he said.
“We are aggressively managing our cash outflows and strengthening our liquidity position to make certain that despite a lack of revenue, we are able to advance our longer term strategic initiatives such as a new integrated resort in Japan, growing our business in Macau, and establishing a leading presence in sports betting and online gaming.”