MGM Resorts International have published their third quarter results for the period ending 30th September 2019, with the Las Vegas based group showing an increase in consolidated net revenues of 9% compared to the prior year quarter to $3.3 billion.
However, consolidated operating income decreased 42% compared to the prior year quarter to $238 million. Excluding a non-cash impairment charge of $219 million in the current quarter related to Circus Circus Las Vegas and adjacent land, included within property transactions, net, consolidated operating income increased 11% compared to the prior year quarter. The deal sees Circus Circus being offloaded by the MGM Group which we reported here on Casinomeister US back on 16th October 2019.
Commenting on the figures released, Jim Murren, Chairman and CEO of MGM Resorts, said: “We performed well in the third quarter, which came in line with our expectations. Our consolidated net revenues increased by 9 percent and consolidated Adjusted EBITDA increased by 14 percent.”
“Our Las Vegas Strip Resorts saw an increase in revenues by 4 percent with non-gaming revenues up 6 percent thanks to a robust performance in rooms and food and beverage. Gaming revenues at our Las Vegas Strip Resorts declined by 3 percent due to ongoing weakness in Far East baccarat volumes, offset by increases in slots and domestic table games play.”
“Adjusted Property EBITDA at our Regional Properties increased by 27 percent with notable strength at MGM National Harbor and Borgata. We were very pleased with the ramp up of our Cotai property, which generated $80 million in Adjusted Property EBITDA during the quarter, despite some challenges in the market place.”
Murren continued and further explained the reasoning behind the sale of Circus Circus by the group, by commenting: “We recently announced two significant transactions, which form part of our broader asset-light strategy and the shift in our business model away from a capital-intensive real estate business towards a developer, manager and operator of leading gaming, hospitality and entertainment properties.”
“We entered into an agreement to sell Circus Circus Las Vegas for consideration of $825 million and entered into an agreement with Blackstone Real Estate Income Trust that values the real estate of Bellagio at $4.25 billion, representing a purchase price multiple of 17.3x rent.
“We expect that the agreements to sell Circus Circus Las Vegas and to monetize the Bellagio real estate assets will provide us with net after tax cash proceeds, including expected debt breakage costs, of $4.3 billion, a majority of which will be used to fortify our balance sheet and then return capital to shareholders.”
“Following these transactions, we will still retain several highly valuable real estate assets including MGM Grand Las Vegas, MGM Springfield, our 50 percent stake in CityCenter and our 68 percent economic ownership in MGM Growth Properties LLC. I am excited about the prospects for our business as we enter 2020.”
“We expect the combination of a healthy Las Vegas market and successful implementation of MGM 2020 to drive EBITDA and free cash flow growth. Simultaneously our asset light transition will generate significant proceeds from real estate monetization that can be used to strengthen our balance sheet, meaningfully reduce our shares outstanding, and invest in select growth initiatives.”
“Our increased profits spread across fewer shares outstanding will result in enhanced free cash flow per share and generate meaningful value for our shareholders.”
