MGM Q1 Earnings Call: Digital Turnaround and International Expansion Take Center Stage
Hospitality and casino entertainment company MGM Resorts (NYSE:MGM) met Wall Street's revenue expectations in Q1 CY2025, but sales fell by 2.4% year on year to $4.28 billion. Its non-GAAP profit of $0.69 per share was 51.5% above analysts' consensus estimates.
Is now the time to buy MGM? Find out in our full research report (it's free).
Revenue: $4.28 billion vs analyst estimates of $4.27 billion (2.4% year-on-year decline, in line)
Adjusted EPS: $0.69 vs analyst estimates of $0.46 (51.5% beat)
Adjusted EBITDA: $637.1 million vs analyst estimates of $1.14 billion (14.9% margin, 44.2% miss)
Operating Margin: 9%, down from 10.5% in the same quarter last year
Free Cash Flow Margin: 7.5%, down from 8.6% in the same quarter last year
Market Capitalization: $9.5 billion
MGM Resorts' first quarter results were shaped by progress in its digital business and continued emphasis on loyalty programs and strategic partnerships. CEO Bill Hornbuckle attributed the company's performance to the rapid turnaround at BetMGM, robust engagement from its MGM Rewards program—which surpassed 50 million members—and strong contributions from the Marriott partnership in driving hotel occupancy. Management also pointed to record March results in key metrics, particularly on the Las Vegas Strip, and highlighted the ability of certain segments to generate adjusted EBITDA margins at or above 30%.
Looking ahead, management emphasized ongoing investments in international projects and digital expansion. Hornbuckle noted, 'Our digital businesses in the US and beyond are growing and turning profitable,' and described the company as well positioned for future growth with a pipeline that includes new developments in Japan and potential opportunities in New York. CFO Jonathan Halkyard reinforced the focus on operational agility and disciplined capital allocation, indicating that while share repurchases have been aggressive, capital will be reserved for large-scale projects moving forward.
Management's remarks highlighted several operational levers and strategic initiatives that shaped the quarter's financial performance. The company noted that digital segment gains, loyalty program expansion, and new partnerships were key contributors, while cost discipline and international investments continue to play central roles.
Digital turnaround at BetMGM: The BetMGM business reported a 34% increase in net revenue and positive EBITDA, reversing prior losses. Management credited a more targeted approach to customer acquisition and improved engagement in both iGaming and online sports.
Loyalty program growth: MGM Rewards reached 50 million members, up over 50% since 2020. Hornbuckle called this database growth unmatched among mature gaming peers and tied it directly to omnichannel opportunities, particularly in leveraging the Marriott partnership.
Marriott channel drives occupancy: The Marriott partnership delivered over 440,000 room nights through April, with management describing these guests as highly accretive and supportive of record first quarter slot win. Group customers now also earn Marriott Bonvoy points, further boosting appeal for conventions.
International expansion momentum: The company made progress in Japan by finalizing contractor agreements and breaking ground in Osaka, with management remaining confident in the project's high-teens percentage return potential. In Macau, MGM China maintained a mid-teens market share and increased its dividend payout policy.
Cost discipline and digital efficiency: The company reduced full-time equivalent employees across regions, aided by increased use of digital customer interactions for services like concierge and call centers. Management indicated that such digital interfaces handle a significant portion of initial traffic for these services, helping contain labor costs, with AI adoption noted as an emerging element.
MGM Resorts' forward outlook centers on digital profitability, international project execution, and the ability to drive operating efficiency amid shifting macroeconomic conditions.
Digital business scaling: Management expects continued profitability improvements from BetMGM and international digital operations, with Brazil seen as an early bright spot and further product launches planned.
International projects ramping up: The Osaka integrated resort in Japan and potential New York casino license are expected to require significant capital outlays, with management aiming for high return on investment. The company has hedged most of its equity commitment to Japan to limit currency risk.
Operational cost control focus: Ongoing use of digital tools and process automation is expected to help manage labor expenses and support margin stabilization, even as inflation and tariffs present near-term headwinds.
Brandt Montour (Barclays): Asked how Las Vegas demand trends are evolving in April and about the impact of lower Canadian inbound travel. Management replied that overall demand remains strong due to group and event bookings, and Marriott partnership offsets softer Canadian leisure travel.
Carlo Santarelli (Deutsche Bank): Questioned whether lower payroll growth reflects cost savings initiatives. Management confirmed ongoing efforts to manage labor costs, including headcount reductions and increased digital interactions with customers.
David Katz (Jefferies): Sought clarity on cost variability for the Japan project given material price risks. Management noted contingencies are built into budgets and emphasized scope certainty before construction begins.
Shaun Kelley (Bank of America): Asked about investment cadence in Brazil's digital launch and future capital allocation as large projects ramp up. Management stated that marketing spend in Brazil is concentrated in the first half of the year and future share repurchases will be balanced against project funding needs.
Chad Beynon (Macquarie): Probed sensitivity of non-gaming revenue trends and the potential impact of tariffs on future capital projects. Management said non-gaming trends are stable, and tariffs are not expected to materially impact near-term development plans.
In coming quarters, the StockStory team will be watching (1) the continued profitability and user growth of BetMGM and the broader digital portfolio, (2) progress on the Osaka project's construction milestones and Japan's regulatory environment, and (3) evidence that the Marriott partnership and loyalty expansion sustain higher occupancy and slot metrics. Execution against these markers will be crucial as capital commitments rise and competitive dynamics shift.
MGM Resorts currently trades at a forward P/E ratio of 15.6×. Is the company at an inflection point that warrants a buy or sell? The answer lies in our free research report.
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