Casino owner MGM Resorts reported a net loss in Q3 despite strong local results in the U.S. and some bad play by VIP gamblers in their Macau properties.
MGM reported net income of $3.31b on Wednesday in the three months ending September 30, up 9% from last year’s same period. Adjusted profits increased 14% to $814 m, but in Q3 2018 MGM reported a net loss of $37 m compared to a gain of $143 m.
MGM blamed the net loss for a non-cash depreciation of $219 m in conjunction with its recent landmark sale of the land below its Bellagio and Circus Circus assets in Las Vegas. Wednesday, the company stated that it planned to pull off a similar deal for its MGM Grand assets before the end of this year, part of the new asset light ethos of MGM.
MGM’s revenue from Vegas Strip rose 4% to $1.5b, no thanks to casino operations, which posted revenue down 3%. The slot machines did their best to goose the numbers but “ongoing weakness in Far East baccarat volumes led to both fall and win declines in the gaming table.
US local operations fared better, rising 20 percent to $935 million, mainly due to revenues from New York’s Empire City Casino (acquired in January), Ohio’s Northfield Park (acquired in April) and MGM Springfield’s full quarter contributions in Massachusetts (opened 24 Aug 2018). The properties in New York and Ohio accounted for $116 m of the $158 m that was up in Q3 for the local group.
MGM’s share of the MGM China joint venture posted revenue up 22 percent to $738 m as the VIP gain increased 0.5 percentage points to 3.7 percent, which offset an 8 percent decrease in VIP turnover, although that was less extreme than the Q3 trend in the wider Macau market and VIP revenue fell 5 percent year-on-year. The table decreased by 13% in the more competitive mass market segment, while the mass win rate rose by 5.5 points to 23.6%, pushing mass revenue up 47%.
The location of MGM Cotai finally launched all its high-roller facilities, including The Mansion Villas and the “ultra-luxury” gaming zone adjacent to Mansion One, which is exclusive to gamblers offering only’ premium mass’ MGM Cotai added 25 new tables during Q3, raising the property’s revenue to $364 m and accounting for $80 m of the adjusted earnings of MGM China’s $182 m.
While MGM consistently identifies sports betting as one of its key areas of future growth, Wednesday’s earnings call did not mention Tuesday’s announcement of a sports betting agreement between Yahoo Sports and MGM’s Roar Digital joint venture with GVC Holdings. Maybe that was a way to avoid follow-up questions about how spectacularly the BetMGM service has been in New Jersey to date.
As for the cost-cutting plan for MGM 2020, the company said the majority of restructuring costs – mainly severance pay for rank-and-file workers and accelerated stock compensation for senior employees – was incurred in H1 and the benefits will now start to roll in.