MGM's Q3 2025 Earnings Call: Contradictions Emerge on Dividend Policy, Regional Casinos, Digital Investments, Macau Strategy, and Las Vegas Demand

Guidance:

• Q4 2025: expect stabilization in Las Vegas with improving room rates, groups/conventions returning and all MGM Grand rooms upgraded and back online.
• Q4 2025: BetMGM to begin distributing cash to MGM Resorts with at least $100M expected in Q4 and quarterly distributions thereafter.
• 2026: growth expected driven by a strong group/convention calendar (over 90% contracted) and improved booking pace; Japan (MGM Osaka) remains a multi-year growth catalyst.
• MGM Digital: full-year EBITDA losses could approach $100M due to Brazil investments; focus on scaling and launching an in‑house sportsbook in Q4.
• Capital: ARIA room renovation to start Nov 2026; 2026 CapEx expected below 2025; details to be provided on the Q4 call.

Business Commentary:

• Las Vegas Market Dynamics:
• MGM's consolidated net revenues grew despite a challenging Las Vegas market, particularly after concerns regarding consumer value emergence during the summer.

• The company attributed this growth to geographic and channel diversity, with a solid performance from luxury properties and regional markets.

• Macau Performance and Market Share:

• MGM China achieved record 3Q EBITDAR and a market share of 15.5%.

• This positive momentum was supported by the successful launch of the Alpha Gaming Club and strong visitation during the Golden Week holiday period.

• Digital Business Growth:

• BetMGM reported record revenue growth in 3Q, with improved profitability and cash distributions to MGM Resorts for the first time.

• The growth was driven by customer acquisition and retention strategies in Europe and Brazil, supported by a disciplined investment approach.

• Operational Challenges and Cost Management:

• Las Vegas segment saw a $130 million decrease in EBITDAR due to business interruptions and occupancy disruptions.

• The company managed costs by reducing expenses alongside top-line fluctuations, maintaining a focus on cost containment and efficiency.

• Exit from New York Casino Project:

• MGM withdrew from the commercial license application in Yonkers, NY, due to concerns related to return on investment and market conditions.
• The decision was based on aligning investment sizing with market conditions and preserving capital for other opportunities.

Sentiment Analysis:

Overall Tone: Positive

• Management repeatedly stated optimism: "we see stabilization in the fourth quarter and growth in 2026," cited record 3Q EBITDAR in Macau and said BetMGM raised 2025 EBITDA guidance and will return "at least $100 million" this quarter; they highlighted cost actions, portfolio optimization and high conviction in Japan and digital growth.

Q&A:

• Question from John DeCree (CBRE Securities, LLC): Can you elaborate on the decision to exit Yonkers, New York, beyond the press release? Was it investment sizing, and how should we think about MGM's return hurdles going forward?
  Response: Yonkers no longer met return thresholds—large minimum tax (~$400M), tighter competitive landscape and a shortened license term (15 vs 30 years) made the economics unattractive, so capital will be redeployed to higher-return opportunities (e.g., Japan) or buybacks.

• Question from Shaun Kelley (BofA Securities): How do you balance allocating capital between land-based assets and digital growth given the evolving digital trajectory and BetMGM's improving cash generation?
  Response: Digital is now cash-generative; focus is on organic growth of existing digital businesses (BetMGM, Europe, Brazil) rather than acquisitive expansion, and digital investments are prioritized but not crowding out other high-return projects.

• Question from Shaun Kelley (BofA Securities): On Q4 stabilization—is it sequential improvement, flat, or do you need a stronger group calendar (e.g., Q1) to see Vegas segment growth?
  Response: Management sees sequential improvement with Q4 stabilizing (October potentially better than last year) supported by groups and F1, though some December leisure weeks remain a fill risk.

• Question from Brandt Montour (Barclays Bank PLC): Regarding Macau share gains and peers being aggressive—have you changed strategy, and is that reflected in the share numbers?
  Response: MGM China is emphasizing premium product differentiation (Alpha Villas/Clubs, suite conversions) and customer-focused CapEx rather than aggressive promotional share purchases, driving mid‑teen market share and record EBITDA.

• Question from Brandt Montour (Barclays Bank PLC): Update on the $150M savings program and whether pricing actions had to be adjusted given consumer sensitivity to prices in Vegas?
  Response: Over 90% of cost actions are complete; pricing and fee corrections were made to restore perceived value (kept resort/park fees), and management would not undo the actions taken.

• Question from Daniel Politzer (JPMorgan Chase & Co): Have you seen a widening performance gap between luxury and lower-tier properties (e.g., Bellagio vs Excalibur/Luxor), and what levers exist to address it?
  Response: Yes—luxury properties remain strong while Excalibur/Luxor underperformed due to lost drive and international visitation; levers include targeted value/pricing actions, cost containment and property-specific initiatives to remediate demand.

• Question from Daniel Politzer (JPMorgan Chase & Co): Appetite for diversified cash flow and thresholds for M&A—what would you pursue?
  Response: High bar for regional M&A—management prefers high-quality, scalable assets; given cheap stock valuation, share repurchases are often the highest-return deployment unless an exceptional asset appears.

• Question from Steven Wieczynski (Stifel): Are booking patterns for FIT visitors differing across properties (luxury vs legacy), and are they converging?
  Response: Luxury booking patterns remain consistent with prior behavior; legacy/midscale properties are booking differently—some bookings are occurring further out—so the divergence persists.

• Question from Steven Wieczynski (Stifel): Are regional assets for sale after the Northfield Park sale—would remainders be sold or are they core?
  Response: Regionals are market-leading assets (many with 25–47% local share) considered core and not actively being marketed, though anything could be sold at the right price.

• Question from Stephen Grambling (Morgan Stanley): What are the primary levers to unlock shareholder value—diversification vs simplification and the lowest-hanging fruit across China, BetMGM, digital?
  Response: Key levers are growing digital/BetMGM and realizing dividend/cash flow from MGM China, alongside Las Vegas margin improvements and share buybacks; digital and BetMGM monetization are priorities.

• Question from Stephen Grambling (Morgan Stanley): Are organizational or bylaw changes needed to pursue a BetMGM unlock?
  Response: No—management indicated no structural or bylaw changes are required; partnership with Entain is cooperative and they continually discuss value-creation.

• Question from Barry Jonas (Truist Securities): On the 2026 group outlook—any specific large citywide conferences to call out driving the strength?
  Response: Management highlighted a strong 2026 group calendar with the first half especially robust—Q1/Q2 convention mix north of 20%—enabling room night growth and potential rate ups.

• Question from Barry Jonas (Truist Securities): Are promotions increasing in regional markets and on the Strip?
  Response: Competition exists but MGM focuses on targeted, host-driven VIP reinvestment and product differentiation; regional reinvestment is measured and margins were ~30.1% this quarter.

• Question from Chad Beynon (Macquarie Research): With MGM Grand renovation complete, should we expect ADR increases and returns to materialize or will market softness delay them?
  Response: Renovation has improved product quality and management expects ADR and AAC to lift over time as occupancy refills and customers respond positively, though it will be gradual given market conditions.

• Question from Chad Beynon (Macquarie Research): Update on ARIA renovation timing and overall Vegas CapEx for 2026 vs 2025?
  Response: ARIA room renovation begins November 2026 with principal work in summer 2027; 2026 CapEx is expected to be below 2025 levels and detailed guidance will be provided on the Q4 call.

Contradiction Point 1

Dividend Policy and Shareholder Returns

It involves differing statements about the dividend policy and shareholder returns, which are crucial for investor expectations and financial planning.

Are promotions increasing in regional markets and Las Vegas? - Steve Wieczynski(Stifel)

2025Q3: We have a great relationship with Entain. No significant organizational changes are needed to unlock value in BetMGM. - William Hornbuckle(CEO)

Can you detail the share buyback strategy amid development plans? - Shaun Clisby Kelley(BofA Securities)

2025Q2: Share buybacks have been slowed due to development pipeline needs. However, the company remains within leverage targets, and share repurchases are still possible given strong cash flow. - Jonathan Halkyard(CFO)

Contradiction Point 2

Regional Casino Performance and Strategy

It involves differing statements about the performance and strategic value of regional casinos, which impact investment decisions and market positioning.

Are any regional properties for sale, and what is MGM's stance on the regional portfolio? - Steven Wieczynski(Stifel)

2025Q3: We view our regional portfolio positively, with properties dominating their markets. We view them as strategic to our brand and don't see any need to sell currently, though we would consider the right price. - William Hornbuckle(CEO)

Can you elaborate on the partnership with Bonvoy and its advantages? - David David Katz(Jefferies LLC)

2025Q2: We are just getting started with regional casino growth.There's no more strategic pursuit to grow in that area than we've had in the past. - William Hornbuckle(CEO)

Contradiction Point 3

Digital Investment Strategy and Cash Generation

It involves the company's strategic approach to digital investments and their cash generative capabilities, which are crucial for understanding the company's financial outlook.

What were the reasons for exiting the Yonkers project, and how does this decision affect future investment hurdles for MGM? - John DeCree (CBRE Securities, LLC)

2025Q3: Currently, our digital investments, particularly BetMGM, are cash generative. We're growing existing businesses rather than pursuing inorganic growth. - Jonathan Halkyard(CFO)

What are the next steps for the Dubai hotel and gaming opportunities? - Barry Jonas (Truist Securities)

2025Q1: We have built a platform. We've got a cash flow positive platform in key markets. If you look at us over the next year or two, we will spend some money on customization, some money on marketing. - Jonathan Halkyard(CFO)

Contradiction Point 4

Macau Market Share Strategy

It highlights the company's strategic approach to maintaining market share in the competitive Macau market, which is essential for regional growth and financial performance.

Can you explain Q4 stabilization and future growth of the Vegas segments? - Shaun Kelley (BofA Securities)

2025Q3: Competition is not new, and we see it as rational. MGM China focuses on understanding customers, with CapEx projects to improve service and experiences. Recent initiatives like Alpha Gaming Club and Alpha Villas are well-received, ensuring market share. - Kenny Feng(CFO)

Are the modest wage increases part of the $150 million in expected annual savings? - Carlo Santarelli (Deutsche Bank)

2025Q1: In Macau, we are a leader in the mass segment. We continue to expand our mass market with over 50% of our customers coming from mainland China. - Kenny Feng(CFO)

Contradiction Point 5

Las Vegas Demand and Revenue Initiatives

It involves changes in the company's outlook and strategies for the Las Vegas market, which is a key revenue driver for MGM Resorts.

How do you balance ROI for digital growth versus land-based gaming in the US? - Shaun Kelley (BofA Securities)

2025Q3: July was challenging, but there has been sequential improvement. October could potentially exceed last year's results. - William Hornbuckle(CEO)

What revenue measures have been implemented in Las Vegas to address flat demand? - Carla Santarelli (Deutsche Bank)

2024Q4: We have tens of millions of dollars in revenue initiatives in place, most implemented in December to start the year with a head start. - Jonathan Halkyard(CFO)