MGM Resorts International's Growth Strategy and Partnerships Drive Profitability
2023-08-04
MGM Resorts International held its second quarter 2023 earnings conference call, during which the company's executives discussed their financial performance and outlined their commitment to maximizing profit and delivering exceptional customer service. The meeting primarily focused on the company's growth strategy and its digital and BetMGM business.
One of the most significant takeaways from the meeting was the company's emphasis on growth rather than recovery. The CEO and President highlighted their dedication to maturing cohorts in sports and iGaming, with a particular focus on reducing cost per acquisition and implementing more disciplined marketing strategies. However, they acknowledged that there is still room for improvement in their product offerings.
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To address this, MGM Resorts International announced partnerships with Entain and Angstrom for BetMGM, aiming to regain market share. Additionally, the company revealed that approximately 30% of sports bettors transition to the casino, impacting the iGaming business. Despite this challenge, MGM Resorts International continues to dominate the casino industry and is actively innovating by introducing new games that bridge the gap between digital and brick-and-mortar experiences.
In summary, the company's main objective is to enhance its digital and BetMGM business through strategic partnerships and innovative initiatives, ultimately driving profitability and reclaiming market share.
Based on the meeting outcome, the market outlook for MGM Resorts International appears positive. The company aims to achieve a 10% gross margin in phases, primarily through football and post-football activities. They plan to leverage Angstrom to offer high-margin bets, differentiating themselves from competitors. The second quarter results showed lower customer acquisition costs, higher margins on online sports betting, increased play by loyal customers, and positive contributions from pre-2023 markets. These indicators suggest a promising path towards improved profitability in the future. The legalization of iGaming, particularly in states like Michigan, has had a positive impact on the company. MGM Resorts International aims to maintain its market share and believes that omnichannel integration will drive customers back to their brick-and-mortar properties. Additionally, the outlook for conventions and events in 2024 is optimistic.
During the call, several key drivers of the business were discussed, including a diverse product offering, profitability indicators such as lower customer acquisition costs and higher margins, the influence of iGaming and BetMGM, an omnichannel strategy, and convention bookings.
The meeting highlighted several important Key Performance Indicators (KPIs) for MGM Resorts International. Gross Gaming Revenue (GGR) was a key focus, with the CEO mentioning that the company's GGR was slightly over 9%, and they aim to surpass 10% once the deployment of Angstrom is completed. This demonstrates the company's commitment to increasing revenue from gaming activities. The CFO also emphasized lower customer acquisition costs as a positive indicator for profitability, indicating that the company is effectively acquiring customers at a reduced cost. Furthermore, higher margins on online sports betting were mentioned as a leading indicator for profitability, suggesting that the company is generating increased profits from its online sports betting operations. Lastly, increased play by loyal known customers was highlighted as another important KPI.
The company's outlook for the quarter and year ahead appears positive. Despite heightened competition, MGM Resorts International has experienced record growth in July and has maintained its market share. The company plans to expand its sales and marketing teams, open more offices, and increase its headcount. Additionally, they are focusing on capital projects and enhancements to improve the overall customer experience. Overall, the company expressed optimism regarding the balance of the year in terms of recovery and financial results.
The call included the participation of various individuals, including Andrew Chapman, Bill Hornbuckle, Jonathan Halkyard, Joe Greff, Shaun Kelley, Corey Sanders, David Katz, Barry Jonas, Carlo Santarelli, Stephen Grambling, Dan Politzer, Brandt Montour, Hubert Wang, Robin Farley, John DeCree, and Chad Beynon. These participants represented different roles within the company, such as directors, executives, analysts, and researchers, bringing diverse perspectives and expertise to the discussion.
During the meeting, MGM Resorts International also discussed recent developments and future plans. They announced a long-term agreement with Marriott International to create a new MGM collection within the Marriott Bonvoy program. This collaboration will allow Marriott Bonvoy members to book rooms, earn and redeem points at 17 MGM Resorts properties. The company expects this partnership to increase profitability by reducing customer acquisition costs and attracting higher average daily rates and on-property spending. Additionally, upcoming events and bookings, such as Black Hat, Magic, and a Beyonce concert, are expected to boost bookings for the remainder of the year. The Formula 1 event in November was also highlighted as showing promising occupancy and rates, potentially becoming a record-breaking casino event for the company. MGM Resorts International also reported positive performance in Macau, surpassing the second quarter of 2019 in adjusted property EBITDAR and maintaining high margins.
Overall, the earnings conference call provided valuable insights into MGM Resorts International's financial performance, growth strategy, and future plans. The company's focus on improving its digital and BetMGM business, along with positive market indicators, suggests a promising outlook for the company's profitability and market position.