MGM Resorts International Looking Back and Looking Forward

MGM Resorts International is out with their Q4 2020 financials that ended December 31 and understandably, the numbers are bleak. Sunk by pandemic-related dips in business volume and travel activity, by hotel closures and casino shutdowns and travel restrictions to their iconic properties around the globe, the company can look back and conclude that things can't get much worse.

But with the look back comes a focus on the future for MGM Resorts International. President and CEO Bill Hornbuckle, updating investors, said: “We remain confident in the long-term recovery of our business. We have strengthened our operational foundation through cost efficiencies that position us for sustainable growth, as solutions to the public health crisis accelerate and restrictions continue to ease."

Highlighted Grim Q4 Numbers

MGM Resorts' Q4 numbers paint a predictably grim picture for the company's 4-month period ending December 21. COVID-19 led to consolidated net revenues decreased 53% compared to the prior year quarter to $1.5 billion.

Consolidated operating loss during Q4 was $364 million compared to consolidated operating income of $3.0 billion in the prior year quarter, which included a $2.7 billion gain related to the Bellagio real estate transaction. Net loss attributable to MGM Resorts was $448 million compared to net income attributable to MGM Resorts of $2.0 billion in the prior year quarter.

Total revenue was down 53% from a year ago to $1.49 billion, and MGM lost $448 million, or $0.90 per share on an adjusted basis. A bit of good news comes in the form of analysts expecting revenue of $1.47 billion and a loss of $0.96 per share, meaning that the company actually did better than most insiders predicted.

Locations, Locations, Locations

MGM's bread-and-butter is typically their regional operators but the coronavirus pandemic put the brakes on their contributions. the 2020 Q4 financials revealed that 40 percent of its net revenues from the quarter came from its regional operations.

Las Vegas, their reliable biggest contributor accounted for only 32%. Net revenues in Vegas decreased 66% compared to the prior year quarter to $480 million due to the pandemic and related operational restrictions as well as mid-week hotel closures at Mandalay Bay, The Mirage, and Park MGM for a portion of the current quarter.

MGM China's net revenues decreased 58% compared to the prior year quarter to $305 million while the company's other regional operators reported a slightly better 34% decrease to $595 million due to the pandemic and related operational restrictions including a partial quarter of operations at MGM Grand Detroit.

Translation - Operational losses at the company's Las Vegas and China properties were responsible for the bulk of the Q4 2020 deficits.

But...

MGM Resorts International is striking an optimistic tone along with a report on their disappointing Q4 numbers. President and CEO Bill Hornbuckle said last week during an investors update:

“Our fourth quarter results delivered adjusted property EBITDAR improvements over the third quarter and our regional operations continued to generate margin growth.”

“We are engaged on pandemic response while staying focused on the future. This includes maintaining a strong balance sheet to seize opportunities and continuing to drive BetMGM, our US sports betting and igaming venture.

“I look to the future with hope and gratitude for the strength and determination of our teams and communities, and the continued loyalty of our guests. Safety and well-being remain our highest, unwavering priorities.”

More About BetMGM

The unquestioned bright spot for MGM Resorts International in Q4 2020 was the performance of their BetMGM brand that reached a 17% market share in the sports betting and iGaming markets where it was active. The MGM mobile app quickly rose to prominence and has become one of the more trusted and recognizable mobile betting platforms in the US, where the legal sports betting industry is in the midst of exponential growth.

“BetMGM gained significant market share throughout 2020 while successfully launching in seven new states. We expect to be in 20 markets by the end of the year and are very pleased with the January launches in Iowa, Michigan, and Virginia,” commented Bill Hornbuckle.

“Our BetMGM business is now really hitting stride,” BetMGM CEO Adam Greenblatt said. “We’ve got the right team, the tools are working, and we’re seeing the fruits of that in the numbers.”

Revenues for the betting app doubled between Q3 and Q4 of 2020, and despite an outage before this year's Super Bowl, the app's handle was 17X that of its handle for the 2020 NFL Championship game.

BetMGM reported 2020 revenue of $178 million besting the October 2020 guidance of $150 million to $160 million. The company's betting app currently boasts a top-three market position in every market it serves.

“In 2021, we and our partner Entain expect new revenue associated with BetMGM to grow well over 100 percent,” Hornbuckle said. “We remain aligned on investing aggressively to fund the growth of this business.”

Saying Goodbye to a Difficult Year

COVID-19 turned the world on its head in 2020. Virtually no industry went unaffected. Casino operators and the tourism sector were among the worst. Revenues plunged and layoffs ensued but there are signs that the world's economy may climb out of its funk in 2021.

Along with that should come a rise in MGM's share price that took a major hit in 2020 and provided a total return of 6.6% over the past 12 months, well below the S&P 500's total return of 16.6%.

If MGM Resorts International proved on thing in 2020, it is that they aren’t just a regional casino company. Their mobile betting app rose to the top of its category in Q4 and during the year and could reasonably keep the company afloat as long as COVID-19 stays relevant. Worry not about MGM Resorts International -2021 should be a bounce-back year.