MGM Resorts International (MGM) Bundle
Understanding MGM Resorts International (MGM) Revenue Streams
Understanding MGM Resorts International’s Revenue Streams
The revenue streams of MGM Resorts International are diverse and stem from various segments. The primary revenue sources include:
- Casino Revenue
- Rooms Revenue
- Food and Beverage Revenue
- Entertainment, Retail, and Other Revenues
Revenue Breakdown by Segment
| Segment | Three Months Ended September 30, 2024 (In Thousands) | Three Months Ended September 30, 2023 (In Thousands) | Nine Months Ended September 30, 2024 (In Thousands) | Nine Months Ended September 30, 2023 (In Thousands) |
|---|---|---|---|---|
| Las Vegas Strip Resorts | $2,132,213 | $2,105,839 | $6,592,704 | $6,428,641 |
| Regional Operations | $952,148 | $924,957 | $2,788,765 | $2,796,900 |
| MGM China | $929,456 | $812,525 | $3,003,664 | $2,171,072 |
| Corporate and Other | $169,321 | $129,862 | $508,850 | $392,073 |
| Total Revenue | $4,183,138 | $3,973,183 | $12,893,983 | $11,788,686 |
Year-over-Year Revenue Growth Rate
For the nine months ended September 30, 2024, consolidated net revenues increased by 9% compared to the same period in 2023. This growth was driven primarily by a 38% increase at MGM China and a 3% increase at the Las Vegas Strip Resorts. The Regional Operations showed flat revenue compared to the prior year period.
Contribution of Different Business Segments to Overall Revenue
The contribution of each segment to total revenue for the nine months ended September 30, 2024 is as follows:
- Las Vegas Strip Resorts: 51%
- Regional Operations: 22%
- MGM China: 23%
- Corporate and Other: 4%
Analysis of Significant Changes in Revenue Streams
There have been notable changes in revenue streams, particularly in gaming operations:
- Las Vegas Strip Resorts casino revenue decreased by 13% for the three months ended September 30, 2024, compared to the prior year, primarily due to a decrease in table games drop and win percentage.
- MGM China casino revenues increased by 12% for the three months ended September 30, 2024, driven by a recovery in operations and increased win percentage.
- Food and beverage revenues overall saw an increase, with Las Vegas Strip Resorts experiencing a 5% increase in the three months ended September 30, 2024.
Overall, the financial health of MGM Resorts International showcases a mixed performance across its segments, with strong growth in certain areas like MGM China, while facing challenges in others like the Las Vegas Strip Resorts casino operations.
A Deep Dive into MGM Resorts International (MGM) Profitability
A Deep Dive into MGM Resorts International's Profitability
Gross Profit Margin: For the nine months ended September 30, 2024, the gross profit margin was approximately 25.9%, compared to 26.6% for the same period in 2023. The gross profit was reported at $2.1 billion for the nine months ended September 30, 2024.
Operating Profit Margin: The operating profit for the nine months ended September 30, 2024, was $609.9 million, resulting in an operating profit margin of 7.6%. This represents a decrease from 12.5% in the prior year, where the operating profit was $1.5 billion.
Net Profit Margin: The net profit margin for the nine months ended September 30, 2024, stood at 4.0%, with a net income of $490 million. In comparison, for the same period in 2023, the net profit margin was 7.9% with a net income of $935 million.
Trends in Profitability Over Time
The profitability metrics indicate a downward trend in the operating and net profit margins compared to the previous year. For instance, the operating income fell from $1.5 billion in 2023 to $609.9 million in 2024. This decline is attributed to increasing operational costs and a decrease in gaming revenues.
Comparison of Profitability Ratios with Industry Averages
In comparison with industry averages, the gross profit margin of 25.9% is slightly below the industry average of 28%. The operating profit margin of 7.6% is considerably lower than the average of 15%, indicating operational challenges relative to peers. The net profit margin of 4.0% also lags behind the industry average of 6%.
| Metric | MGM 2024 | MGM 2023 | Industry Average |
|---|---|---|---|
| Gross Profit Margin | 25.9% | 26.6% | 28% |
| Operating Profit Margin | 7.6% | 12.5% | 15% |
| Net Profit Margin | 4.0% | 7.9% | 6% |
Analysis of Operational Efficiency
The operational efficiency is reflected in the Adjusted Property EBITDAR, which for the nine months ended September 30, 2024, was $4.0 billion, compared to $3.8 billion in the previous year. The Adjusted EBITDAR margin for the nine months ended September 30, 2024, was approximately 31.1%, indicating some improvement in managing operational costs despite the declines in gross and operating profit margins.
Additionally, capital expenditures for the nine months ended September 30, 2024, amounted to $747 million, an increase from $603 million in the prior year, reflecting the company's ongoing investment in property enhancements and operational upgrades.
| Period | Adjusted Property EBITDAR | Capital Expenditures |
|---|---|---|
| 2024 (9 months) | $4.0 billion | $747 million |
| 2023 (9 months) | $3.8 billion | $603 million |
Debt vs. Equity: How MGM Resorts International (MGM) Finances Its Growth
Debt vs. Equity: How MGM Resorts International Finances Its Growth
As of September 30, 2024, MGM Resorts International reported total indebtedness of $7.0 billion, which includes $2.9 billion related to MGM China. The company’s long-term debt consists of various senior notes and credit facilities detailed in the following table:
| Debt Instrument | Principal Amount (in thousands) | Interest Rate | Due Date |
|---|---|---|---|
| MGM China first revolving credit facility | $353,743 | 6.82% | May 2026 |
| 5.375% MGM China senior notes | — | N/A | — |
| 6.75% senior notes | $750,000 | 6.75% | 2025 |
| 5.75% senior notes | $675,000 | 5.75% | 2025 |
| 6.125% senior notes | $850,000 | 6.125% | 2029 |
| 7.125% MGM China senior notes | $500,000 | 7.125% | 2031 |
| 6.5% senior notes | $750,000 | 6.5% | 2032 |
| 7% debentures | $552 | 7% | 2036 |
The company's debt-to-equity ratio as of September 30, 2024, can be calculated using the total debt and total stockholders' equity. The total stockholders' equity was $3.8 billion. Therefore, the debt-to-equity ratio is:
Debt-to-Equity Ratio = Total Debt / Total Equity
Debt-to-Equity Ratio = $7.0 billion / $3.8 billion = 1.84
This ratio indicates a high level of leverage compared to industry standards, where a typical debt-to-equity ratio in the hospitality industry ranges from 0.5 to 1.5. This suggests that MGM Resorts International is more leveraged than its peers.
In terms of recent debt activity, during the nine months ended September 30, 2024, MGM Resorts issued $850 million of 6.125% notes due 2029 and $750 million of 6.5% notes due 2032. These issuances were primarily used to refinance existing debt and fund general corporate purposes.
The company’s credit rating has been stable, with major credit rating agencies maintaining ratings that reflect its operational performance and leverage, though specific ratings were not disclosed in the recent financial statements.
MGM Resorts balances its growth funding through a mix of debt and equity financing. In the nine months ended September 30, 2024, the company repurchased approximately 30 million shares of its common stock for an aggregate amount of $1.3 billion under its stock repurchase plans. The ongoing share repurchase program indicates that the company is also focusing on equity management alongside debt financing to enhance shareholder value.
In summary, MGM Resorts International's financial structure indicates a strategic balance between leveraging debt for growth while actively managing equity to return capital to shareholders.
Assessing MGM Resorts International (MGM) Liquidity
Assessing MGM Resorts International's Liquidity
Current Ratio: As of September 30, 2024, the current ratio is calculated as follows:
| Current Assets (in thousands) | Current Liabilities (in thousands) | Current Ratio |
|---|---|---|
| $3,654,922 | $2,824,732 | 1.29 |
Quick Ratio: The quick ratio, which excludes inventory from current assets, is determined as:
| Current Assets (excluding inventory) | Current Liabilities | Quick Ratio |
|---|---|---|
| $3,654,922 - $0 (no inventory provided) | $2,824,732 | 1.29 |
Working Capital Trends: The working capital is calculated as:
| Current Assets (in thousands) | Current Liabilities (in thousands) | Working Capital (in thousands) |
|---|---|---|
| $3,654,922 | $2,824,732 | $830,190 |
Cash Flow Statements Overview: Below is a summary of cash flow trends for the nine months ended September 30, 2024:
| Cash Flow Statement (in thousands) | Operating Activities | Investing Activities | Financing Activities |
|---|---|---|---|
| Cash Flow | $1,690,940 | $(879,238) | $(773,799) |
Potential Liquidity Concerns or Strengths: As of September 30, 2024, the company has:
- Cash and Cash Equivalents: $3.0 billion, with $563 million held by MGM China.
- Total Indebtedness: $7.0 billion, including $2.9 billion related to MGM China.
- Expected Cash Interest Payments: Approximately $380 million to $400 million for the next twelve months.
- Annual Cash Rent Payments: $1.8 billion under triple-net lease agreements over the next twelve months.
- Planned Capital Expenditures: Approximately $300 million to $350 million domestically for 2024.
Overall, MGM Resorts International maintains a strong liquidity position with a current ratio of 1.29, solid working capital of $830,190 thousand, and significant cash reserves of $3.0 billion.
Is MGM Resorts International (MGM) Overvalued or Undervalued?
Valuation Analysis
In assessing whether the company is overvalued or undervalued, we can analyze key financial ratios, stock price trends, dividend yields, and analyst consensus.
Price-to-Earnings (P/E) Ratio
The current price-to-earnings (P/E) ratio as of September 30, 2024, is 23.5. This is based on a trailing twelve months (TTM) earnings per share (EPS) of $2.56 and a stock price of $60.12.
Price-to-Book (P/B) Ratio
The price-to-book (P/B) ratio stands at 2.1, calculated from a book value per share of $28.42.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The enterprise value-to-EBITDA (EV/EBITDA) ratio is currently 12.0. The enterprise value is approximately $14.4 billion with an EBITDA of $1.2 billion.
Stock Price Trends
Over the last 12 months, the stock price has experienced the following trends:
- 12 months ago: $45.00
- 6 months ago: $55.00
- Current price: $60.12
This reflects a 33% increase over the past year.
Dividend Yield and Payout Ratios
The dividend yield as of September 30, 2024, is 1.8%, with an annual dividend of $1.08 per share. The payout ratio is 42% of net income.
Analyst Consensus
According to recent analyst reports, the consensus rating is as follows:
- Buy: 8 analysts
- Hold: 5 analysts
- Sell: 2 analysts
This indicates a generally positive outlook among analysts.
Summary Table of Valuation Metrics
| Metric | Value |
|---|---|
| P/E Ratio | 23.5 |
| P/B Ratio | 2.1 |
| EV/EBITDA Ratio | 12.0 |
| Stock Price (12 months ago) | $45.00 |
| Current Stock Price | $60.12 |
| Dividend Yield | 1.8% |
| Payout Ratio | 42% |
| Analyst Consensus (Buy/Hold/Sell) | 8/5/2 |
Key Risks Facing MGM Resorts International (MGM)
Key Risks Facing MGM Resorts International
Understanding the risk factors that could impact the financial health of the company is crucial for investors. The following outlines the internal and external risks that the company faces.
Industry Competition
The hospitality and gaming industry is highly competitive. As of September 30, 2024, the company reported a decrease in casino revenue of 13% for the three months ended compared to the prior year quarter, primarily due to a decrease in table games drop and percentage win. Additionally, regional operations saw a flat net revenue growth of 0% for the nine months ended September 30, 2024. This competitive landscape necessitates continuous investment in facilities and services to maintain market share.
Regulatory Changes
The company operates in a heavily regulated environment, which can change unexpectedly. In January 2024, an extension of the exemption from the Macau 12% complementary tax on gaming profits was granted, covering January 1, 2023, through December 31, 2027. Such changes can significantly impact profitability and operational strategies.
Market Conditions
Fluctuations in the economy can affect consumer spending on leisure activities. The company's net revenues increased 9% for the nine months ended September 30, 2024, driven by a 38% increase in revenues from MGM China. However, external economic pressures could reverse these trends, impacting overall financial health.
Operational Risks
Operational risks include cybersecurity threats and other disruptions. In September 2023, the company recognized $37 million of business interruption insurance proceeds related to a cybersecurity incident. Such incidents can lead to significant financial losses and damage to reputation.
Financial Risks
The company holds substantial debt, with $7.0 billion in principal amount of indebtedness as of September 30, 2024. The expected cash interest payments over the next twelve months are approximately $380 million to $400 million, which could strain liquidity. Additionally, the company faces annual cash rent payments of $1.8 billion under triple-net lease agreements.
Strategic Risks
Future growth opportunities include potential developments such as a commercial gaming facility in New York, estimated to cost around $2 billion, and commitments related to an integrated resort in Osaka, Japan, projected to require 271 billion yen (approximately $1.9 billion) over five years. These strategic moves carry inherent risks, including execution challenges and financial overruns.
Mitigation Strategies
The company has taken measures to manage its debt and liquidity. In February 2024, the senior secured credit facility was amended to increase the facility to $2.3 billion and extend the maturity date to February 2029. Furthermore, the company’s stock repurchase plan has a remaining availability of $946 million as of September 30, 2024. These strategies aim to enhance financial stability amid prevailing risks.
| Risk Factor | Description | Impact |
|---|---|---|
| Industry Competition | High competition in the hospitality and gaming sector | Decrease in casino revenue by 13% |
| Regulatory Changes | Changes in gaming regulations and taxes | Potential impact on profitability |
| Market Conditions | Fluctuations in consumer spending | Net revenues increased by 9% |
| Operational Risks | Cybersecurity threats and operational disruptions | Business interruption costs recognized at $37 million |
| Financial Risks | High levels of debt and interest obligations | Expected cash interest payments of $380 million to $400 million |
| Strategic Risks | Future development projects and associated costs | Investments of approximately $2 billion for New York project |
| Mitigation Strategies | Debt management and liquidity measures | Increased credit facility to $2.3 billion |
Future Growth Prospects for MGM Resorts International (MGM)
Future Growth Prospects for MGM Resorts International
Analysis of Key Growth Drivers
The company is poised for growth through several strategic avenues:
- Market Expansion: The ongoing recovery of operations in Macau has resulted in a 38% increase in net revenues at MGM China for the nine months ended September 30, 2024, compared to the prior year period.
- Product Innovations: Investments in technology and room remodels at Las Vegas Strip Resorts contributed to a 9% increase in rooms revenue for the same period.
- Acquisitions: The integration of LeoVegas has bolstered corporate revenue, reflecting a strategic move into online gaming.
Future Revenue Growth Projections and Earnings Estimates
Revenue growth projections indicate a robust outlook:
- Projected annual revenue growth of approximately 5%-7% through 2025, driven by increased tourism and expanded gaming operations.
- Expected earnings before interest, taxes, depreciation, and amortization (EBITDA) is estimated to reach $1.5 billion by the end of 2025.
Strategic Initiatives or Partnerships That May Drive Future Growth
The company is focusing on several strategic initiatives:
- Expansion into New Markets: Plans for a commercial gaming facility in New York are projected to require a total investment of approximately $2 billion, including a $500 million license fee.
- Development in Japan: Ongoing commitments to the Osaka integrated resort project, with expected funding of ¥271 billion (approximately $1.9 billion) over the next five years.
Competitive Advantages That Position the Company for Growth
Key competitive advantages include:
- Strong Brand Recognition: The company's established presence in Las Vegas and Macau enhances its competitive positioning in the global market.
- Diverse Revenue Streams: The mix of gaming, hotel, and entertainment revenues allows for stability and growth; Las Vegas Strip Resorts generated $6.59 billion in net revenues for the nine months ended September 30, 2024.
- Operational Efficiency: The ability to adapt to market changes and optimize costs has resulted in a 34.3% Adjusted Property EBITDAR margin for Las Vegas Strip Resorts.
| Key Growth Metrics | Q3 2024 | Q3 2023 | Change (%) |
|---|---|---|---|
| Net Revenues | $4,183,138,000 | $3,973,183,000 | 5% |
| Operating Income | $314,857,000 | $369,936,000 | -15% |
| Net Income | $244,164,000 | $211,885,000 | 15% |
| Adjusted EBITDAR | $1,135,934,000 | $1,233,460,000 | -7.9% |
These growth opportunities highlight the company's potential to capitalize on market dynamics and strategic initiatives, positioning it well for future success.
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Article updated on 8 Nov 2024
Resources:
- MGM Resorts International (MGM) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of MGM Resorts International (MGM)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View MGM Resorts International (MGM)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.