MGM Resorts International's acting CEO explained on a call to discuss first-quarter earnings how the company is watching for the right time to welcome back guests.
LAS VEGAS—Bill Hornbuckle said he’s been with the MGM Resorts International for 20 years and in the industry for over 40. He’s seen the effects of original MGM Grand fire in 1980, 9/11, the global financial crisis and the 2017 shooting at Mandalay Bay Resort & Casino.
“The COVID-19 pandemic is truly unprecedented,” he said on his first quarterly earnings call as MGM Resorts’ acting CEO.
As a result, MGM Resorts has had to take some unprecedented steps over the first quarter of 2020. The company closed all its U.S. properties in mid-March, Hornbuckle said. It maximized its liquidity and minimized its spending over the past several weeks by cutting its dividend, reducing or deferring its non-essential spending, amended its credit agreement and raised nearly $750 million in new bonds, he said.
“The most difficult step, however, was to furlough nearly 63,000 employees,” he said. “That was painful. It was a hard decision to make, but we are actively preparing for the day we can welcome them back.”
MGM Resorts has $4.6 billion in cash on its balance sheets because of its real estate transactions, Hornbuckle said. Excluding MGM China and MGM Growth Properties real estate investment trust, it has an estimated domestic cash outflow of nearly $270 million each month while the company is closed.
During this international health crisis, MGM Resorts is focused on the safety of its employees and guests as well as strengthening the communities in which it operates, he said. The company has continued to provide health care benefits to its affected employees. The company, its employees and its partners have collectively raised more than $12.8 million for its employee emergency grant fund to provide relief for employees and immediate families in need, he added.
MGM Resorts also has given more than 1 million food items and products to local communities, provided logistics for 250,000 COVID-19 tests in the state and donated more than 1 million units of personal protective equipment, Hornbuckle said. MGM China has been supporting its surrounding region as well, donating 20 million Macau patacas ($2.5 million) to the Hubei province and provide other means of support such as PPE, to its local community.
“Although COVID-19 presents unique challenges, we're extremely well-positioned culturally, financially and operationally to handle this crisis because of the strength and the actions we are poised to regain momentum as soon as the danger to public health lifts, and we can begin store restore normal operations,” he said.
Health and safety is at the forefront of everything MGM Resorts does, Hornbuckle said. Consumer confidence is key to an economic recovery and thoughtful reopening strategies are vital to building public trust, he added.
The company is working through its safety plan now and expects to share it with the public in the next two weeks, he said. There are key areas that are essential to protect the public and build confidence in the company’s ability to put people back to work and safely welcome guests.
“We are collaborating with public health officials, experts in epidemiology and bio safety, and both state and federal governments to come up with a set of protocols that will help deliver a secure environment,” he said.
These protocols will include measures such as physical distancing, stringent sanitation and cleanliness procedures, provisions of PPE, crowd management and more, Hornbuckle said. MGM Resorts is also working on digital innovations for touchless interactions across the guest experience to improve protection and improve confidence.
“We’ll continue to be driven by data, by science and by public health guidelines to evaluate and evolve our operating practices and guests’ interactions,” he said.
With these areas in the works, the company is looking at when it can reopen its domestic properties, Hornbuckle said. That largely depends on the decisions of elected officials and public health authorities in Nevada, New Jersey, Maryland, Michigan, Massachusetts, Mississippi, Ohio and New York, he said. Looking at the varying health conditions in these states, the company is preparing to open them in phases.
Mississippi will likely open sooner than other more heavily impacted states, Hornbuckle said. The company anticipates properties in regional drive markets will rebound faster than those in fly-in destinations, he said. Once Las Vegas casinos are allowed to open, the company will decide about property openings based on consumer demand and the economics of individual properties. That will be balanced, however, by the needs of its employees, local regulators and other key stakeholders.
MGM Resorts anticipates the Macau market will show meaningful recovery as early as this summer given the stabilization of COVID-19 cases in Asia and recent comments made by Macau’s chief executive, Hornbuckle said.
“In all cases, we will open in a way that protects the health and safety of our guests and our employees,” he said. “And again, I must stress, that is our highest priority.”
By the numbers
MGM Resorts reported consolidated net revenue decreased by 29% year over year to $2.3 billion, mainly because of the temporary closing of its domestic and Macau properties, according to its earnings report. Consolidated operating income grew to $1.3 billion compared to $370 million last year. Net income attributable to MGM Resorts totaled $807 million compared to $31 million last year. Consolidated adjusted earnings before interest, taxes, depreciation and amortization and restructuring or rent costs decreased by 61% to $295 million compared to $748 million in Q1 2019 because of the suspension of operations at its properties.
The first two months of the year were stronger than the company’s internal projections, Hornbuckle said. On a same-store basis, Las Vegas Strip EBITDA was up 27%, and its regional operations’ adjusted property EBITDA was up 26%. Those results were thanks to robust organic growth and phase one of its MGM 2020 plan working in full force, he said.
“As expected, performance deteriorates dramatically in March when we were required to close all of our domestic properties,” Hornbuckle said.
The company’s strategic plan has three overriding goals driving it forward, he said. It will simplify its operating model, maintain a commitment to strict capital discipline and bring a focus on executing initiatives such as MGM 2020.
As of press time, MGM Resorts’ stock was trading at $16.83, down 49.4% year to date. The Baird/STR Hotel Stock Index was down 38.6% for the same time period.