MGM Resorts International said the company is well under way with its wide-ranging MGM 2020 plan to slash labor costs and improve efficiencies across its corporate reach.
In announcing first quarter results that looked strong across the board, the gaming giant said 35 executives have already taken voluntary retirements since MGM 2020 was launched in January, and another 1,000 jobs throughout the MGM portfolio will be going away by June.
Speaking on the earnings call, Chief Financial Officer Cory Sanders, whose predecessor, Dan D’Arrigo, was one of the retirees, said the company is looking in total at cutting $100 million in labor costs in furtherance of the initiative’s aim of boosting cash flow by $300 million by 2021.
While activist hedge funds and investors have been pressuring management to do more to boost the share price, they no doubt found a lot to like from operations in the first three months of the year.
Net revenues grew 12.6 percent to $3.17 billion with help from Massachusetts, where the 7-month-old MGM Springfield contributed $77.9 million, and Empire Casino in Yonkers, N.Y., acquired in January, kicked in another $36.6 million.
MGM China, the Macau subsidiary that operates the company’s two resorts in the Chinese territory, grew revenues by 23.2 percent to $734.2 million.
Cash flow increases also were reported from MGM Detroit and MGM National Harbor in Maryland.
On the Las Vegas Strip, MGM’s 50 percent stake in the CityCenter resort complex was good for $344 million in net revenue, a 13 percent increase year on year, while the rest of the Las Vegas Strip portfolio was down less than 1 percent with revenues of $1.4 billion. Non-gaming revenues were up 4 percent.
“The first quarter came in slightly better than our expectations,” Chairman and CEO James Murren said, blaming the relatively flat results in Las Vegas on a reduction in baccarat results. “We had fewer visits from certain Far East players and a bad hold percentage.”
Net income was down 86 percent to $31 million, but the decline was due to a combination of charges from the Empire Casino acquisition, the recent extension of the company’s license in Macau and a tax credit that hit in the first quarter of 2018. EPS was down 85 percent to 6 cents a share.
MGM 2020, which took up a good portion of the call, is not just about cost savings, Sanders said, but is laying “the foundation” for a new corporate operating model that calls for a more centralized organization, with the transfer to the corporate level of some operating decisions normally made at the property level, which he said will lead to greater efficiencies through a better match of labor supply with guest demand and fewer layers of management.
Murren echoed his assessment, saying, “We are creating a streamlined, nimble organization that empowers leaders to make faster decisions.”
Looking forward, the company said its plans to develop a major resort in Osaka, Japan, are progressing quickly. A development partner has been secured there, and a request from the city to submit a conceptual outline for the project will be ready by August.
In the U.S. the company said it has hit the ground running on the sports betting front and has a full calendar of events calculated to deliver strong returns in Las Vegas, highlighted by two upcoming Paul McCartney concerts at the T-Mobile Arena, residencies by Aerosmith and Janet Jackson at the Park Theatre, and the return of residencies by Lady Gaga and Bruno Mars later this year.
The balance of 2019, Murren said, “is looking outstanding”.
