MGM reports revenue drop from outbreak, says worst is yet to come

MGM Resorts International won’t hold its first-quarter earnings call until next week, but a Thursday statement revealed that COVID-19 hit the company hard in the first quarter. Early estimates show that the company’s net revenue dropped 29 percent compared with the same period the previous year.

MGM expects the pandemic will have an even more significant impact on operations in the second quarter.

“We cannot predict the degree, or duration, to which our operations will be affected by the COVID-19 outbreak, and the effects could be material,” the statement said. “COVID-19 has resulted in significant disruption of global financial markets, which could have a negative impact on our ability to access capital in the future.”

Weakened demand

MGM expects regional properties to open first, with phased reopenings of its Strip properties. This would allow the company to manage resources amid reduced levels of consumer demand and ensure compliance with any government restrictions meant to mitigate the effect of COVID-19.

The company operates 30 properties worldwide, according to its website.

Early estimates show that total net revenue was $2.3 billion in the first quarter, compared with $3.2 billion from the same period last year. Net revenue at its Strip resorts was estimated to be $1.1 billion in the first quarter, down 21 percent from the same period last year. Meanwhile, net revenues at regional properties were $726 million, down 10 percent.

The company expects to see “weakened demand” at its properties with reduced domestic and international travel restrictions, consumer fears and reduced consumer discretionary spending.

Las Vegas Sands Corp. also revealed depressed numbers following nationwide COVID-19-related casino shutdowns. Revenue plunged 51.1 percent in the first quarter compared to the same period last year, according to numbers released Wednesday.

In addition to shuttering its U.S. casinos, Sands also suffered losses after closing its properties in the Chinese territory Macao for 15 days in February.

Burning cash

As of now, the casino shutdowns are set to last through the end of the month, but Gov. Steve Sisolak told the Review-Journal on Wednesday that several directives will probably be extended.

MGM’s statement said that the company “cannot predict the duration of the shutdowns” and is “unable to determine when (its) properties will return to pre-pandemic demand or pricing.”

When they do reopen, operations are sure to look different. MGM laid out details on cleaning guidelines amid the pandemic, including the use of temperature checks, mask protection and more.

But even that may not be enough to draw in certain guests. There have been substantial room and convention cancellations through the third quarter of this year, with “some tentative” rebookings in the fourth quarter and early next year. So far, the company has not seen “meaningful cancellations” for 2021 related to the pandemic.

As of now, MGM properties are “effectively generating no revenue” and have reduced expenses by reducing employee costs through hiring freezes, headcount reductions, furloughs and canceling merit pay increases; introducing a program where senior executives and directors can receive all or part of their 2020 salary as restricted stock instead of cash; and reducing or deferring at least half of planned capital expenditures for this year.

It also expects to see a number of benefits from the CARES Act and plans to ask the board to approve a nominal dividend of $0.01 per share or less, starting in the second quarter.

As of March 31, the company had about $6 billion left in cash and cash equivalent and burns about $270 million each month on expenses as its domestic properties remain closed.

The company said it believes it has a strong liquidity position, valuable assets and aggressive cost-reduction initiatives that will help it fund current obligations for the foreseeable future but that the pandemic will continue to impact its business, financial condition and results of operations, “possibly materially.”

The Review-Journal is owned by the family of Las Vegas Sands Corp. Chairman and CEO Sheldon Adelson.

Contact Bailey Schulz at bschulz@reviewjournal.com or 702-383-0233. Follow @bailey_schulz on Twitter.