MGM Resorts International has reported better than expected first-quarter results, on the back of gains in hotels and casinos on the Las Vegas Strip and improved performance in China. For Q1 2022, the casino resort operator reported net income of $479.9 million, or $1.24 per share, up from a loss of $34.8 million, or six cents per share, in the same quarter last year.
Revenue rose 36% year-on-year to reach $3.87 billion, fueled in part by the acquisition of the Cosmopolitan of Las Vegas hotel in 2021. Adjusted for the impacts of property transactions, MGM’s first-quarter revenue and earnings are $2.izz02 billion and $1.24 per share, respectively. Meanwhile, the company produced free cash flow of $390.5 million during the quarter.
Two main factors contributed to the strong performance. Firstly, MGM’s hotels and casinos on the Las Vegas Strip have been delivering solid results, with strong demand for reservations as tourists flock back to the entertainment hub. Additionally, MGM has been making a series of expansions and upgrades to its properties, including the MGM Grand Las Vegas and the Park MGM. These improvements have helped attract customers and drive revenue growth.
Secondly, MGM has been experiencing a bigger rebound in China than anticipated, specifically in the Macau region. The company’s MGM China Holdings – which includes the MGM Macau and MGM Cotai in the Special Administrative Region – recorded revenue of $746.7 million for Q1 2022, a 143% increase compared to the prior-year quarter. The upturn can be attributed to the easing of pandemic-related travel restrictions, allowing more visitors to Macau from mainland China.
MGM’s management has expressed optimism about the company’s prospects for the rest of the year. In a statement, CEO Bill Hornbuckle noted the growing demand for MGM’s Las Vegas properties and the company’s digital initiatives, saying: “We remain committed to returning cash to shareholders, investing in our core business, and pursuing attractive growth opportunities.”
One such growth opportunity is the burgeoning sports-betting market. MGM’s recently formed joint venture with Entain, BetMGM, has been expanding its presence in the US and internationally. In Q1, BetMGM posted gross gaming revenue of $90 million, up from just under $9 million in the same quarter last year. Currently available in 24 US states, BetMGM is preparing to enter the Canadian market later this year.
Aside from sports betting, MGM has also been investing heavily in digital gaming. Earlier this year, the company acquired Play Studios – a game developer that focuses on casino and slot-based mobile games – in a deal worth $1.1 billion. This acquisition is expected to boost MGM’s digital gaming portfolio and help the company reach a broader audience of gamers in the coming years.
That said, MGM Resorts International is not without its challenges. The success of its Macau properties has raised concerns over the company’s growing reliance on the Chinese market, particularly as regulatory uncertainties persist. For instance, the recent wave of crackdowns on offshore gaming in the region has alarmed investors, who worry that these measures could hinder MGM’s growth ambitions. Additionally, the Chinese government is currently considering new regulations for the gaming industry, which could potentially impact MGM’s Macau operations.
Moreover, MGM’s domestic operations face increasing competition, as rivals such as Las Vegas Sands and Wynn Resorts invest in new properties and expand their offerings. These competitors are seeking to capitalize on the pent-up demand for entertainment and travel brought on by the pandemic – a trend that MGM has been riding, to great effect, in recent months.
In conclusion, MGM Resorts International’s first-quarter performance benefited from strong gains on the Las Vegas Strip and a rebound in the Chinese market. With the company’s ongoing expansions, upgrades, and investments in digital initiatives, there are reasons for optimism moving forward. However, MGM will need to navigate a competitive landscape and potential regulatory headwinds as it continues to grow its business.
Shares of the casino resort operator rose after-hours on Monday in light of the positive results.