I think we're on. Yeah. Thanks everybody for joining. Next panel up, we have MGM. We're thrilled to have CEO and CFO today, Bill Hornbuckle, Jonathan Halkyard. We're in Vegas. It feels lively. As you kind of look out at the business, you know, do you wanna give us kind of a high-level update on what you're seeing kind of day-to-day now that we're here, kinda?
Sure.
Kind of been living it?
Yeah. I think this theme is carried itself through some of the other comments I read from yesterday from both Tom and the folks here at Wynn. Our high-end business continues to perform and perform well. I think this quarter has been progressively better. January, February, March, obviously, we just had CONEXPO go through here and very successfully. We're excited by the trends we see in both of those parts of our business. We had a nice Super Bowl. We had a great Chinese New Year here. We feel good about that. I think we have second half of the year, with the exception of leisure, which I'll speak to in a second. You know, we have a soft second half of the year. I think the general, everybody did, us in particular.
I think the opportunity to show growth ultimately in 2026 is very real and meaningful, and I think we'll see that from us as our expectation. We've got a lot of programming coming in in April and May, throughout the summer, both short and long-term programming that we think is gonna be exciting for the destination. Leisure's a little different. Although we've seen some green shoots lately, it's too early to tell if it's shifted back to where it was.
Mm-hmm.
Obviously, we own Excalibur and Luxor at the value end of the chain, and we continue to see softness there. We are aggressively going out, trying to do something about it through programming. You'll see us announce something in a couple of weeks we think will be meaningful in that respect. We're excited for that to see where it goes. I think the market and us got caught flat-footed last summer, you know, 'cause things were fine, and then in May, suddenly they weren't. You know, we're gonna respond to that aggressively. I think you'll see a lot of programming not only from us, but the community and the convention authority. It's gonna launch something special in April that'll carry its way through the summer.
I think you'll see a lot of fireworks around here over the summer.
Nice.
We're excited by that. I think, you know, generally tone is affirmative as we particularly go further into the year. First quarter is as expected generally. I don't know, Jonathan, anything to add to that? I feel pretty good generally.
Yeah. I would just say the business is pretty much performing the way that we expected it to, and the same could be said for the regions. The other thing I'd add maybe is there's, you know, been some speculation about what the impact of some stimulative tax policy might have on our customer base. Certainly we have seen that in the past when that's happened. We really haven't seen much yet. I would expect if we do, it'll probably be in our regional markets first. You know, we will see. It's not really in our plans, but wouldn't be surprised if that's a tailwind for us as we get into the second quarter.
As you think about kind of the first quarter, you know, and then we'll get to the kinda second quarter and kinda cadence of the year. You had this January where industry-wide RevPAR was up, I wanna say 4.5%. Visitation still down, but I think it was only down a couple percent. How are you seeing that or are you seeing that kinda sequential improvement flow through to your business? And if so, where is it showing up across your portfolio?
High-end of note, luxury of note, and the further you go down the spectrum, the softer it gets. I'll remind everybody, Luxor, Excalibur by way of example, I think is like 6% of our overall EBITDA. While we're focused and we're concerned longer term that we wanna stay, you know, pushing that and promoting that business, it's not, you know, the end of the world. I think if you go to the other end of the spectrum, whether it's high-end activity cases around Giancana and Carbone Riviera, things that we've just created that are off the charts, by the way, you literally, that business continues to boom. You know, we came off of a strong first quarter last year in gaming. I think Super Bowl performed well.
I think Chinese New Year's performed better this year here locally, domestically. You know, the expectations we've had for the year going into particularly the second half have not changed. Group business continues to do well. Our C&B, our catering and banquet business continues to perform actually a little better than we anticipated. We haven't seen spend pull back there, to the contrary. You know, the expectation we've had, we still hold.
The programming that, you know, it sounds like it's going to be picking up. Can you maybe expand on that? Is that, you know, focused towards a different type of customer, or is it kind of broad-based? What is going to be like the messaging or, you know, objective there?
Well, I think there's a couple things to say. You know, the visitor profile just came out for Las Vegas. We've all heard this messaging over the course of the last year through social media, you know, where Las Vegas isn't the Las Vegas it used to be and all of that. No, it's not the Las Vegas it used to be. It is the new Las Vegas that I would say is providing better value for experiences than it's ever provided before in its history. To the extent you can do things here that are experiential, whether it's through sports and all the sports activity, whether it's ultimately another Super Bowl in 2029 or Formula 1, all of that has changed the marketplace forever, and I think that's a good thing.
Is there still value to be had here? Absolutely. I mean, the idea that someone can come in here on a package and, you know, for a couple hundred dollars, get room, food, theater, and attraction, is very real and very much alive still in Las Vegas. That narrative, I think, has been way overplayed. I don't aspire to it or believe in it or wanna support it at all. To the contrary. Las Vegas has changed. We're a center of activity around special events, and so they matter. Whether it's WWE, as funny as that may sound, brings 60,000 people to Allegiant, whether it's what's the country guy's name? Waller. Morgan Wallen. Thank you, Ayesha.
By the way, for those of you who haven't met, that is Ayesha Khanna Molino, our new Chief Operating Officer, so, Aisha. It depends on the activity case. You know, we have whether it's Final Four coming up. We are after another Super Bowl. We have the Grand Prix. I don't know that there's a change. I think there's more of programming of that ilk that brings in different segments at different times. The Bruno Mars' of the world who will come back here now in the stadium kicking off his tour, we're fortunate to have him as part of our family. His tour was the largest selling tour on Live Nation in the last couple years including Taylor Swift, by the way, in terms of day one performance.
You know, I don't know that it's changed. I think there's more activity than there's been historically, though. It's obviously a pretty fluid geopolitical landscape. How do you think about any impacts or things that you're monitoring as it relates to your business? Look, I think one thing that has dynamically changed, and we have focused on this. I'm also chair of U.S. Travel is international travel. International travel for Las Vegas historically has been in the mid-teens. That's fallen to 9% or 10%. Canada's off appreciably. I think that's our key focus market, particularly in the winter months, like right now. We need to aggressively go back after that in a welcoming message that America's open for business, et cetera, et cetera.
What was a $50 billion surplus has turned into a $70 billion deficit for the country, and Las Vegas is a big piece of that in that context. I think there's some of that. By the way, it's not the current administration. This all goes all the way back to 2016. The deficit started to go the other way. You know, whether it was Trump administration one, Biden administration, or Trump administration two, our ability to pay attention to that segment and treat it properly, we need to do a better job collectively at that. It's not just Las Vegas, but I think the country as a whole. The other impacts that we're watching relates to our supply chain.
We don't see, nor do we foresee any impact to our supply chain from what's going on right now, and the other is energy prices. You know, I think many in this room in the past have tried to draw correlations between the price at the pump and gaming revenue and we have never seen that correlation. Also in terms of our energy prices, they're largely fixed and as people have probably seen, almost wholly reliant now on solar power here in Las Vegas. We really don't have exposure as a company to volatility in energy prices, other than affecting, as Bill said, maybe, you know, aggregate demand or air travel.
You know, just while we're on the kind of broader topic and the different things happening in the Middle East and the region, I mean, you guys have a deal there, obviously non-gaming. How are you thinking about that opportunity? Where do you sit today? Are there, I guess, have there been interruptions in terms of the construction or? I find it fascinating. There was a one-day interruption. A company called China State is actually building the property on behalf of Wasl, our partner, and they're back on the site. So the answer is no, and we think about it long term. Obviously we believe, as I think everyone believes, there'll be resolve in the region and safety in the region. We're excited by it longer.
To go longer term now, it's a complex. It's probably over $2 billion. It's not our project, so it's on behalf of the Wasl that's to do the construction of it and the capital of it. But it is a platform for a casino someday. Time will tell. The ruler there will have the jurisdiction of if and when. But the ruler also, their company is owned by Wasl. The owner of the property is ultimately the ruler's company. Longer term, we're excited by particularly where the airport is and where it's going. We think Dubai is the marketplace there. We're comfortable just having a management agreement to manage something we think is a real brand extender for now, and we'll see.
Can we talk about the kinda longer term supply-demand dynamic in Las Vegas? You've seen a couple new properties come into the market over the last, you know, five or so years. You have another giant guitar that's coming up very quickly. How do you think about the next few years in terms of the supply and demand dynamic in this market? Well, I would remind everybody, at least as it relates to our business, you know, Fontainebleau and Resorts World have not hurt us in any way, shape. Actually, we grew through that, through those openings, if you will. The Hard Rock now Mirage, the vast majority of those rooms were already in the market, now we're moving them.
You could arguably say 3,000, 3,750 odd keys or whatever it is, are coming back. Look, Hard Rock are serious competitors. We deal with them in New Jersey. We know what they do in Florida. They have a meaningful database. I think, Jim and his crew and Joe Lupo over there are good competitors, and we're gonna get ready for it. We're not taking it lightly, I can assure you. They're gonna have a 5,000-seat theater, which I'm sure will directly go after the kinds of things we do at, Park MGM. We're thinking about it already every day, what to do, how to think about it, recognizing the kinds of things they've done historically.
Again, we've got caught, frankly, four or five years ago, flat-footed in New Jersey. We've learned by it, and we've now gained back our share and then some. I think we understand how they play. I guess between now and then, you have some big, you know, CapEx investments across the Strip that you're making and some of your, you know, it sounds like more of your high-end properties. Can you just give us an update on kind of where we stand and what maybe you're most excited about there?
Yeah. The recent CapEx projects we've done have been largely around high-end gaming, high-limit slot areas, high limit table areas in properties like the Bellagio, the MGM Grand, ARIA. We're now doing it at Cosmopolitan. I think we've been very diligent in updating our room product. We did MGM Grand last year. We'll start the ARIA at the end of this year. Bill mentioned some of our very successful recent investments in the F&B category. I think, though, the most promising and larger scale growth capital opportunity for us is to improve circulation between the key parts of our luxury campus, Bellagio, ARIA, and Cosmopolitan.
These are three massive properties that together do, you know, call it $1.8 billion-$2 billion in EBITDA, and they were built to compete in a way with each other. Now they're under our umbrella. Our customers love that choice. They have different offerings. Capital investments that increase the connectivity of those businesses in a way that really customers will value, I think is going to be something we're looking at in the next couple of years.
Product offering around entertainment, nightlife at scale, making sure we're competitive. Obviously, we watch what happens, particularly in this building, and they do a very good job with that, and we want some of that back. To be really specific.
If you think about kinda that medium-term outlook, right? You guys have seen the headlines. We've all seen them. I mean, to the extent that there's an evolving ownership landscape on the Strip, does that impact you? You know, it's Tilman or Icahn or whoever.
No. Look, I mean, Mr. Fertitta was gonna come anyways, and arguably, and he's already kind of here in some respects. No, not really. I would say one thing, though. It's kind of fascinating to us. If you do the math that's been applied to that transaction and say it transacts for, call it whatever the number is today, or call it $35, and you put that same math to our company, we're like $60+ a share. That math I like a lot. But I'm not. You know, I don't know that it changes the landscape. What you've heard calling for is let's bring back some independent entrepreneurs who run with individualized properties. Think about Phil Ruffin, what he's done with Treasure Island and/or Circus Circus, for that matter.
That transaction wouldn't change the landscape in my mind because it doesn't do exactly that.
Okay.
I don't know if you think of it differently, but I don't.
Competitively, not really.
Okay. Can we pivot to Macau?
Sure.
I mean, we're past Chinese New Year. I don't know. We've gotten the GGR numbers we saw for the full month, and we can combine them and look at them a lot of different ways. How would you for, you know, in terms of your properties and portfolio there kinda-
Sure. Yeah. Volume, great. Last year, the first quarter, the luck gods were with us. Not as much this year would be my take on it. What's important, the volumes are great, and continue to grow. I think the expectations we've set for the market for the year particularly are on track, and then some. I think at the top line, we're all outperforming that. Market remains competitive. I don't think that's news to anybody here. I don't know if there's anything dramatically gonna change this year, you know, in a context of competition. I think it's more of the same. It's a dog fight.
For us, we have assets we've put in play mid-season last year, so we'll get the full benefit of a full year, whether it's the Alpha Club in Macau or a lot of the villas and suite products we brought in. We open up, I think it's starting next month, 124 new, what I call workhorse suites in Cotai. We've converted three floors to just suites and clearly like this business, but particularly there, premium mass, but premium of note has really made a difference. We're pushing hard into that. You know, we've enjoyed a 15% or so share, and I think over time, we'll continue to do that. I don't think the market changes much in that context.
It's long been promotional. It continues to evolve. Where are you seeing that promotionality in terms of your customer? Is it more going after the high end? Is it kind of that premium mass? I just say that because you've seen in the last six months or four or five months, VIP has been growing a lot faster than the mass segment.
It's both. You know, we're a good example of this. We're converting spaces today that used to be junket because we still have old junket spaces left over into whether VIP and/or premium mass spots for us. Look, we've seen VIP itself, although I will tell you, of our 10 biggest customers there, six or seven of them are considered in premium mass.
Mm-hmm.
The other three or four are VIP, just like the way they want to deal and play the game. It's mostly an individual decision in many instances. I don't see that changing greatly. I just don't. I think Macau is on a pretty steady path now for the next year or two in the context of the shape of the market, the scale of the market, and how it's being catered to and addressed. You know, we all are under the obligation to put more money into these non-gaming assets, and so it'll be interesting to see how that gets manifested over the next couple of years. But I don't think the dynamic of how we're doing the marketing, casino marketing of note is gonna change.
Dan, I think it's also important to point out while, you know, the competitive landscape for our properties in Macau is really important, and they've been executing well. What's equally important is our relationship, MGM Resorts, with that company. We own 56% of MGM China. This is a business that has an absolutely rock solid balance sheet, pretty low leverage, and great free cash flow generation. In particular, we raised our branding fees payable to MGM Resorts to a market rate. It was a pretty material increase a few months ago. Also the dividend flow that we get from MGM China. Together, those, you know, roughly $250 million a year of, we think, very reliable cash flow for our shareholders.
That with, you know, minor increases or, you know, decreases in performance, those are very solid cash flows for our shareholders.
Bill, you alluded to the kind of the market share where you're at now. It's roughly double pre-COVID. I think part of that was some of the suite product that came online. I mean, how do you think about the incremental non-gaming investments, the competitive market and, you know, maybe the opportunity to further increase that share? Do you feel like that's just given how far you've come?
Yeah. I don't know that we'd go much higher than where we are given the scale of the company. I think. Look, we're going to continue to try, I can assure you. But, you know, I think it'd be realistic in some respects. The market dynamic of what we all. For example, our company committed to, I'm gonna make up a number, I'm not far off, $2.3 billion of incremental OPEX and CapEx into this non-gaming initiatives over the course of 10 years. We're about 35% into that spend. We've brought on a show and a theater. We brought on a black box.
Museum.
We brought in a museum, which has been highly successful in terms of foot traffic and well-regarded in the context of the government and what the kinds of things we've done there. We are all getting to a point and we have underwritten and sponsored many activities, sports and otherwise, throughout the community and some community initiatives, as have others. We happen to be leading the pack in some respects in that. That said, how we then spend the next money, particularly given our scale and scope and footprint, is a bit more challenged. We're gonna have a lot of conversations around that with the government of how to make it effective and efficient or more effective and efficient. I don't know. I think go back to the core question.
I think the market share we see in the mid-teens% is fair and I see the market continuing to grow. I'll go back to that. I mean, remember, this is a market that was at $45 billion, you know, had aspirations to be in the 60s at one point, and we currently sit in the low 30s. I think there's more controlled, rational market growth because the government, I think, will be very focused on that. That said, I still see growth in that market.
Okay. Maybe pivoting to BetMGM and on the digital side, I mean, that certainly has been a bright spot for the company. First, I guess on the direct side, right? I think you've talked about up to $1 billion in investment. How do you think about that return over time? I guess, where are we along that trajectory?
I mean, the return's been phenomenal. We, you know, our company has invested about $625 million since inception in this venture, and Entain the same amount. Last year, we received dividends of $130 million. We expect more dividends this year. We've built a business that has, depending upon the state, you know, high single digit up to, you know, 15% or so market share in OSB, and then, you know, over 20% in iGaming. I think everybody knows those numbers and growing very nicely. We are now recapturing our investment and built a business that, you know, is worth billions of dollars in our view.
I can't think of a better investment, and I've looked at a few of them in this space, where that amount of value creation and return of capital has been as quick. Not to mention the amount of investment that we made to build this business is probably a fraction of what others have made.
I mean, it feels like this is, you know, there's $ billions there. We look at the market cap. We look at your company. I mean, right now, I think you've turned on the dividends, so that's flowing. I guess longer term, you know, is there a path to kind of extracting more value?
Well, you know, of course, we believe. I think it's pretty clear that the value in BetMGM is not reflected in our stock price, whether one looks at. One can look no further than Rush Street Gaming or some of the other public companies and those multiples. When we apply that to the performance that we report at BetMGM, it's clearly not there in our valuation. You know, we will do our level best through disclosure and the rest to make the value in that venture evident to our shareholders. Hopefully, our shareholders over time get rewarded for that.
I do think there could come a point where if they're not being rewarded for it through our share price, I mean, we'd be compelled to look for other ways to monetize or make clear the value of that business, because, again, we think that it's a venture that's worth $ billions right now, both for us and for Entain.
I think, and we've said this historically, on its current path, it's a business that's gonna do $500-something million in cash flow a year, cash rate by the end of next year, we believe. Time to tell. There's a lot going on in place in the markets. All that being said, we firmly believe that. That's with the existing, you know, we've got Alberta to go and a couple of other things to open up. If iGaming continues to open up over time, and we believe it will, that then puts another whole ratchet into all of that for everybody, including, and particularly including us. We can get iGaming to go in a few more states.
Yeah. How do you feel about the regulatory landscape there in terms of the opportunity for iGaming and legalization? You know, obviously you had Virginia feels.
Yeah, I mean, look, there are two or three or four states that I think it's rational to think in the next two to three years will be on board. Look, remember what's happening in this industry. We're generating over 65% of our bottom line in our BetMGM business on three states, really. Although there are six states and we're in five, it's really Michigan, Pennsylvania, and New Jersey. Add a Virginia, add Illinois. I'm not giving lead into which state, but add, you know, add a couple of meaningful states. Three of them are literally 60% of our business today. The kind of numbers we're talking about with a $3 billion top line. You know, the opportunity, while they may be small in the context of three or four states, is massive when you think about it in retrospect.
Do you feel like on the flip side, the uncertainty on the regulatory landscape where we sit with prediction markets, you know, yourselves and some of your brick-and-mortar peers kind of are on the sidelines. I mean, how do you think about this evolving over time? You know, if we do have regulatory certainty, you know, is this an area where you could potentially enter? Then I guess aside from that, if we're in this kind of murkiness period, and there's
Yeah
additional competing products that come to market.
Well, to be clear on the company's position, I think we've been clear about this. We see it as illegal sports betting today, catering to minors in many jurisdictions, by the way. We think, and several states, led by Nevada and Massachusetts, have spoken out on that and told us, "You can't participate, or you put your license in jeopardy." I think we'll see that message continue to go into other states as we talk about regulatory environments, and political environments. Legally, there are 11 attorneys general pushing up against this right now hard. The rulings have been favorable recently. I think this ends up with two or three jurisdictions or two or three outcomes.
It ends up in the Supreme Court. There's administration change at some point, and the overall focus of it changes and/or if, in fact, it is continued to allow to go forward. You know, this has been in U.K. for 25 years. The idea of prediction markets is not new. It's got about seven or 8% market share. It's a marginalized business at its very core. The actual business model itself is not a great model. All that said, if down the road we had to get in, yeah, would we be disadvantaged, i.e., the context of database growth? Yes. We could get in, we would step in, and we'd have a product. Like, we'd want and need to participate. I don't think it gets there.
Okay. If there was, you know, some form of iGaming type prediction, like is that just a bridge too far?
Yes.
Okay. Yeah.
Yes. If they were foolish enough to attempt that, I think where there's been some consternation with regulators, I think you would see a very strong outcome. I could be wrong, but I don't think I am.
Let's turn to the capital allocation. You guys have been a prolific buyer of your stock. It sounds like obviously the value is still there. Can you maybe talk about where you see the value? Is it, is it Japan? Is it BetMGM? Is it kind of all of the above?
It's all of the above, but you don't really have to go too deep to really understand where the value is. You know, the market value of our holdings in MGM China is about $3.5 billion right now, roughly $13-$15 a share. Depending upon your assumptions around BetMGM, a business that has guided to over $300 million of EBITDA this year, our 50% stake of that is probably worth another $13-$15 a share in our view. That leaves our domestic OpCo, you know, a business that's generating over $2 billion in EBITDA. You know, that's 2.5-3 times EBITDA.
Bill wasn't kidding when you just apply the simple math that was reported in the press yesterday around multiples being in the market for Caesars. That gets to a pretty healthy valuation for our company as compared to where we're trading today. That's the reason we've been so ambitious in our share repurchase activity, and we'll continue to do that so long as we see that value. That being said, we do have some big projects. We're allocating this year probably $450 million in equity investment to our Japan project, and that will grow next year and the year after. We think that that's going to be the largest and most successful integrated resort globally since Marina Bay Sands.
We're very happy to put capital there. We have opportunities in the domestic portfolio to invest, and we'll pick our spots for growth capital as well. As we've talked about earlier this morning, our digital businesses are no longer consumers of capital. They're providers of capital for our business, and the same, of course, is true for MGM China, which is generating free cash flow. Those are really our priorities. We have our Japan investment.
We have some targeted CapEx, growth capital investments domestically, and then repurchasing our stock at, I mean, heck, a multiple half that which we are selling our MGM Northfield Park slot-only facility, a business, a good business, but it's a slot-only facility in Ohio we're selling for nearly 7x late or early in the second quarter.
If there is a transaction in the market, you know, and assets fall out, is there a scenario where, you know, you could be looked to be acquisitive?
It'd be remote. We have enough of Las Vegas.
Right
You know, in terms of concentration. You know, we have been about diversity, and we like our positions in the markets, and the idea that we are a diverse company. I think it proved itself out last quarter, and I think it'll continue to prove itself out. So look, Never say never, and I'm sure there might be one or two regional assets that would be attractive, but I'm sure they're attractive to the buyer too. So.
Right.
You know, I mean, I doubt it. I do wanna put a little color on Japan for a second 'cause I think it's really important longer term. I'm betting my career on it, literally. You can quote me on that, 'cause I've been told that. Look, here's a market. If it just manifests itself what's going on today in Singapore, if we start with a $2 billion cash flow business, we're gonna net about $800 million out of this thing, given our stake and given our share. It's a meaningful business. I think it potentially could be bigger than that, but time to tell. If you put it in perspective, 120 million people, 6 million people. We are an hour and a half closer from Shanghai and Beijing than Macau.
The proximity, the scale, what's happening in the pachinko business to this day in Japan is over $30 billion. That, you know, we're pretty assured about. The notion that, you know, this won't be just a... We've seen one of the additional concerns with Yumeshima, this isolated thing down in Osaka Bay. Quarter of a million people a week went through the last week of the expo. The infrastructure's there. It works. I think the product we're gonna build is gonna be exceptional, world-class, overly used term, but it will be, given the things we do and what we're known for. I'm, like, very excited by what that potentially brings us. Yeah, it's 2030, and yeah, we're gonna put our money up front. That's the way Japan works with the banks.
by the end of 2028, which will be a flash, we'll be through that, and then I think the reward will be substantive. I truly believe that.
Going back to kinda the capital allocation, is the thought you're, you know, shrink the share count today, you're gonna have this influx in a few years, and then the free cash flow per share?
Yeah. We've looked at it as steady growth Las Vegas, steady growth regional. It's just, you know, let's just keep our steady growth going. Midterm is all about digital, and long-term is Japan. It's
The way I think about it is, you know, we've bought back over half our shares in the last three and a half years. There is tremendous potential energy in what we've created with the inflection in the digital business, the cash flow out of MGM China, and our investments in Japan, and that potential energy is against a much reduced share count and one that will continue to be reduced. That's, you know, that turns into very strong free cash flow per share for our shareholders. It's kinda the way I think about it too.
Got it. Makes sense. We wanna leave a couple minutes here for questions from the field. Okay. All right.
Been thorough apparently. Thank you all.
Thank you so much.
Thanks, Dave.
Yep. Thank you.
Appreciate it.