MGM Closes Year on High Note
A strong fourth quarter helped MGM Resorts International (MGM) end 2015 on a positive note for overall profitability despite continued challenges in Macau that dragged annual net revenue growth into the red.
Company-wide fourth quarter net revenue dropped 8.1 percent to $2.2 billion. The decline was attributed to falling revenue for MGM China, which reported a 30.6-percent quarterly decline to $498.8 million. Net revenue for MGM’s wholly owned domestic resorts finished the quarter with modest growth of 1.5-percent, bringing net revenue to $1.6 billion.
On an annual basis, company-wide net revenue finished 2015 at $9.2 billion, which was down 8.8 percent from 2014. MGM’s wholly owned domestic resorts accounted for the majority of net revenues with $6.5 billion. That figure represented a 2.4-percent increase from the prior year. MGM China finished the year with $2.2 billion in net revenue, which was down 32.5 percent from 2014.
News was more positive for MGM when it came to profitability. Adjusted property earnings before interest, taxes, depreciation and amortization (EBITDA) in the fourth quarter were up 9.8 percent to $609.6 million. MGM’s domestic resorts carried those results with an EBITDA of $430.7 million, a strong 15.5-percent improvement. Domestic results for the quarter helped overcome lagging profitability by MGM China, which reported a 29.4-percent decline in EBITDA to $131.0 million.
The company’s strong fourth quarter profits helped it end 2015 on a positive note. MGM’s EBITDA closed the year at $2.5 billion, a 2.3-percent improvement over 2014. MGM’s wholly owned domestic resorts accounted for that result with a year-end EBITDA of $1.7 billion (+11.3 percent). By comparison, EBITDA for MGM China dropped 36.5 percent to $539.9 million.
In other recent company news, MGM pushed back the scheduled opening of its $3 billion MGM Cotai resort in Macau from later this year to early 2017. It attributed the move to current market conditions and the timing of other resort openings in the market.
Caesars Ends Positive 2015
With no Macau properties to impact its portfolio, Caesars Entertainment Corporation (CZR) finished 2015 reporting strong growth in both net revenue and profitability.
For the fourth quarter, company-wide net revenue rose 8.7 percent to $1.1 billion. That result continued a positive year overall that saw net revenues climb to $4.5 billion, a 14.7-percent improvement over 2014. Caesars attributed growth in net revenue to its hospitality offerings as well as the performance of Caesar Interactive Entertainment’s social and mobile games business.
Company profitability also closed the year in positive territory. Property adjusted EBITDA in the fourth quarter reached $305.0 million, up 51.7 percent. The quarterly results finished off a successful year for the company, which reported year-end EBITDA of $1.3 billion, an increase of 46.1 percent over 2014. The company cited rising net revenues, operational efficiencies and improved hotel customer mix for increased profitability. The year-end results do not include the performance of Caesars Entertainment Operating Company, which remains in bankruptcy proceedings.
Q4 Story Same for Sands
Las Vegas Sands (LVS) closed 2015 with a fourth quarter performance much like the previous three – sinking revenue and earnings overseas overshadowing mostly positive performances in the United States.
Company net revenue for the quarter fell 16.2 percent to $2.9 billion. The decline was fueled by double-digit drops at each of the company’s four Macao properties and the Marina Bay Sands in Singapore. Those results were contrasted by the performance of the domestic properties. Net revenue for Sands’ Las Vegas resorts climbed 10.4 percent to $37.6 million, while Sands Bethlehem net revenue rose 4.7 percent to $6.3 million.
Year-end results mirrored the quarterly results, with company-wide net revenue falling 19.9 percent to $11.7 billion. The company’s four Macao properties accounted for more than half of net revenue, but that total of $6.7 billion was down 28.7 percent from 2014. Marina Bay Sands reported $3.0 billion (-8.1 percent) in net revenue. Properties in Las Vegas reported net revenue of $1.5 billion (+2.0 percent), and Sands Bethlehem net revenue finished up 8.9 percent at $549.1 million.
Company profitability followed a similar pattern. In the fourth quarter, adjusted property EBITDA declined to $1.1 billion, a fall of 21.9 percent. The quarterly drop was consistent among the company’s five overseas resorts, which combined for $913.6 million (-25.7 percent) in EBITDA. Profitability at U.S. properties climbed 15.4 percent to $131.7 million on the strength of the Las Vegas resorts, where EBITDA rose 24.9 percent to $97.4 million.
Company-wide annual adjusted property EBITDA finished at $4.2 billion, down 23.1 percent from 2014. The decline was mostly driven by properties in Macao and Singapore, where profitability sank a combined 25.6 percent to $3.7 billion. Las Vegas properties reported $305.5 million in EBITDA, a 2.7-percent drop despite rising net revenues. Yet year-end profits for U.S. properties still grew by a modest 1.6 percent thanks to a 12.7- percent rise in EBITDA for Sands Bethlehem.
Revenue, Profits Down for Wynn
Wynn Resorts (WYNN) struggled to the finish line of 2015 as double-digit fourth quarter declines in net revenue and profitability at the company’s Macau operations outweighed positive results from its Las Vegas properties.
The company’s Macau properties reported fourth quarter net revenue of $555.7 million, a drop of 27.0 percent that pulled company-wide net revenue down 16.8 percent to $946.9 million. Quarterly net revenue for Las Vegas operations finished up 3.8 percent to $391.2 million.
Despite the positive fourth quarter finish, net revenue for the Las Vegas properties dipped 1.5 percent to $1.6 billion for the year. Net revenue for Macau and the company overall also finished 2015 down from the prior year. Company-wide net revenue was reported at $4.1 billion, a 25.0-percent decline. Macau operations accounted for most of the lost revenue, falling 35.1 percent to $2.5 billion for the year.
Wynn’s profitability tracked its revenue results. In the fourth quarter, adjusted property EBITDA was reported at $287.5 million, down 18.4 percent, while the Macau operations fell about twice as much, declining 33.6 percent to $160.1 million. EBITDA for Las Vegas operations provided a bright spot in the quarter, rising 14.5 percent to $127.4 million.
Those quarterly results were reflected in the company’s year-end EBITDA results. Overall, Wynn’s EBITDA fell 33.1 percent to $1.2 billion, with the heaviest loss attributed to the 43.7-percent collapse in EBITDA for Macau operations. U.S. operations reported a year-end EBITDA of $477.2 million, which was down 7.4 percent from 2014.
Nevada Gaming Abstract
The Nevada gaming industry enjoyed another year of growth in the fiscal year ending June 31, 2015. According to data in the recently released Nevada Gaming Abstract, gaming operators reported revenue growth of 2.9 percent that increased total revenue to $24.6 billion. That growth rate fell slightly short of the 3.6 percent reported in 2014, mainly due to a dip in gaming revenue, which fell by 0.2 percent to $10.6 billion. By contrast, non-gaming revenue grew by 5.4 percent for the fiscal year.
Although gaming revenue’s flat results influenced overall revenue growth, its impact was limited because of its shrinking share of the revenue pie. This trend continued in 2015 as gaming revenue dropped to 43.2 percent of statewide resort revenue. The trend is more pronounced on the Las Vegas Strip, which has consistently expanded its food and entertainment offerings to attract an ever-evolving visitor base.
On the Strip, gaming revenue dipped under 35 percent of revenue for the first time in 2015, which helped cap its effect on overall revenue growth. Gaming revenue dipped 2.5 percent on the Strip, while non-gaming revenue increased by 5.7 percent. Overall revenue grew by 2.7 percent to $16.7 billion.
Downtown Las Vegas still relies heavily on gaming revenue, which made up 50.4 percent of revenue in 2015. In contrast to the Strip, gaming revenue Downtown grew by 4.0 percent to $528.7 million. That growth, as well as 8.3 percent growth in nongaming revenue, pushed total revenue up 7.4 percent and above $1 billion for the first time since 2008.
Casinos in the Reno area benefitted from growth across all revenue categories except beverages. Gaming revenue climbed 2.2 percent to $675.0 million, while non-gaming revenue increased by 2.8 percent to $635.4 million. They combined to grow total revenue by 2.5 percent to $1.3 billion.
Brian Gordon is a principal with the Nevada based advisory services firm, Applied Analysis. Gordon has extensive gaming and leisure experience from an accounting, finance and operational perspective.