MGM Resorts International is grappling with a potential takeover bid from Barry Diller’s People Inc., as it reports its highest-ever second-quarter revenue. The bid, which offers $48.30 per share, emerged in early June, shortly after Caesars Entertainment was acquired by Fertitta Entertainment. This development is significant due to its potential impact on the gambling giant’s strategies and market dynamics. The company’s CEO, Bill Hornbuckle, informed analysts that an independent committee is still reviewing Diller’s proposal, emphasizing that the board will act in the best interests of the company and its shareholders.
MGM reported a record $4.5 billion in group revenue for the quarter, reflecting a 1% increase from the previous year. However, adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) decreased by 6% year-over-year, totaling $610 million. Despite this, net income saw a substantial rise to $292 million, compared to $49 million the previous year. The company ended the quarter with $2.5 billion in cash and $6 billion in long-term debt.
In Las Vegas, MGM’s revenue reached $2.2 billion, with an adjusted EBITDA of $735 million, both marking 3% increases from the previous year. However, analysts raised concerns about the market, particularly questioning how MGM plans to strengthen its offerings for budget-conscious customers. MGM’s COO, Ayesha Molino, acknowledged the challenges in the lower-end segment, notably at properties like Luxor and Excalibur, but pointed to successful initiatives such as all-inclusive packages that have been well-received.
Earlier in March, MGM introduced all-inclusive two-night packages at Luxor and Excalibur for $330, aiming to maintain Las Vegas as a value destination. This move comes in response to rising consumer dissatisfaction over increasing costs in the area. A notable instance of this occurred last June when a $26 bottle of water at MGM’s Aria casino became a viral sensation, prompting criticism. Hornbuckle acknowledged this and stated that the all-inclusive deal is an effort to counteract negative perceptions. The initiative has resulted in over 30,000 room nights booked, stabilizing occupancy and improving the company’s public image.
MGM also reported favorable results in its Las Vegas casino operations, with revenue increasing 17% year-over-year to $536 million. The company’s slot and table game hold rates outperformed the city’s averages, at 9.6% and 29.6%, respectively. Hornbuckle and CFO Jonathan Halkyard discussed potential room renovations at the Aria and Cosmopolitan properties, although specific costs and timelines have not been disclosed.
Regionally, MGM set a new record with same-store quarterly revenue of $904 million, despite a 4% year-over-year decline in net revenue to $924 million, and a 9% drop in segment-adjusted EBITDAR to $280 million. The company’s financial measures adhere to GAAP standards. In April, MGM completed the $546 million sale of its Northfield Park racino operations in Ohio, following its withdrawal from the New York casino license race last October. Currently, MGM does not foresee any imminent mergers or acquisitions, though Hornbuckle did mention upcoming renovations at the Borgata casino in Atlantic City and the Beau Rivage casino in Mississippi.
MGM is also closely observing the development of the Sphere Entertainment venue near its National Harbor property in Maryland. The Sphere, a smaller version of the well-known venue on the Las Vegas Strip, is anticipated to attract visitors and open by 2030, though no exact opening date has been confirmed.
Internationally, MGM China reported static revenue of $1.1 billion for the second quarter, with a 15% decline in segment-adjusted EBITDAR to $257 million. The decrease is partly attributed to the FIFA World Cup, which diverted high-rollers in June. MGM China CEO Kenneth Feng highlighted the importance of optimizing casino floor operations rather than solely focusing on reinvestment to maintain sustainable margins.
On the digital front, MGM Digital saw a 20% year-over-year revenue increase to $196 million, although its adjusted EBITDAR loss grew to $31 million from $26 million the previous year. These figures include performance from its LeoVegas subsidiary but exclude BetMGM, its joint venture with Entain. BetMGM reported second-quarter revenue of $711 million, a 3% rise year-over-year, driven by an 8% increase in iGaming revenue to $483 million. Online sports betting revenue remained unchanged at $228 million, while adjusted EBITDA decreased by 15% to $74 million, with MGM’s share of contributions dropping 11% to $171 million.
Addressing queries about BetMGM’s potential under the joint venture structure, Hornbuckle clarified that MGM benefits from the brand while Entain provides the technology, and there are no immediate plans to change the arrangement.
MGM’s adjusted earnings per share came in at $0.59, slightly below analysts’ expectations of $0.63. Nonetheless, analysts responded favorably to MGM’s overall performance, keeping the company’s stock stable at $45.66 per share by Thursday’s close. Over the past year, MGM’s shares have increased by approximately 22%. MGM repurchased 4 million shares, valued at about $164 million, during the quarter and still has $1.4 billion available from an April 2025 stock repurchase plan.
Looking ahead, Macquarie analyst Chad Beynon maintained an outperform rating for MGM, raising the target price to $54, citing the enduring value of MGM’s Las Vegas presence, robust regional portfolio, improving returns in Macau, and a path to digital profitability as key strengths. Similarly, Truist analyst Barry Jonas maintained a buy rating with a $55 target price, noting strong regional performance despite challenges in Macau. He also highlighted Las Vegas’s stable results and its robust convention business.
As MGM continues to navigate market changes and potential acquisitions, stakeholders will be attentive to the company’s strategic decisions and their implications for future growth and profitability. The outcome of the ongoing review of Diller’s offer and planned property renovations will be key areas to watch in the coming months.
4.2/5
