MGM Resorts International has become the latest casino operator to record the financial effect of the current crises after conceding that the company has entered the year with high expectations for expansion.
Asserting that the company will continue to adopt a wide variety of measures to improve the company’s long-term future prospects, with it “premature” to address possible reopening dates at its currently shutdown portfolio of properties in the US and Macau.
Consolidated net income in the first quarter decreased 29 percent to $2.25 billion (2019: $3.17 billion), largely driven by the aforementioned temporary suspended casino operations and continuing travel restrictions resulting in a 63 percent decrease in net income at MGM China.
Consolidated operating revenue and net profit hit $1.3 billion and $807 million generated by a $1.5 billion benefit attributable to MGM Grand Las Vegas and Mandalay Bay sales, as adjusted EBITDA fell 61 percent to $295 million (2019: $748 million).
Bill Hornbuckle, acting CEO and president of MGM Resorts said: “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. 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.
“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. With premier assets in most of the markets in which we operate, we are confident we will emerge from the crisis in a strong position.”
Documenting success across its three reporting divisions, MGM saw sales drop 21 percent to $1.13 billion in Las Vegas strip resorts (2019: $1.42 billion). With the exception of Circus Circus Las Vegas, which was sold in December 2019, net sales dropped by 17% compared to the quarter of the previous year.
Net sales for US regional organisations declined by 10 percent to $725.6 million (2019: $803.9 million) relative to the previous year’s quarter, with MGM China’s aforementioned decline of 63 percent, finishing at $271.8 million (2019: $734.2).
Paul Salem, chairman of MGM Resorts added: “During this unprecedented crisis MGM Resorts maintains a strong liquidity position. We have benefited from the Bellagio, MGM Grand Las Vegas, and Circus Circus Las Vegas real estate transactions, which generated approximately $6.9bn of cash.
“In addition to $4.6bn of cash on the balance sheet as of March 31, 2020, excluding MGP and MGM China and adjusted for the recent bond offering, the Company also has access to $1.4bn of additional liquidity upon the redemption of its operating partnership units in MGP. Furthermore, we have recently cut our dividend to maintain maximum flexibility and allow us to continue to invest in our business.
“As I have watched Bill and the team move swiftly to address the challenges of the COVID-19 crisis, I have tremendous confidence in their ability to manage the company through these challenging times.
“I look forward to working with management and the rest of the board of directors to create long term shareholder value by executing on our key strategic initiatives and increasing returns on investment through disciplined capital allocation.”