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MGM Resorts announce restructuring plan to cut costs

MGM Resorts International (NYSE: MGM) on Thursday announced its plan to reduce costs, with it becoming imperative for the S&P500 entertainment giant to improve efficiencies and financial position. With its new changes, MGM now expects to lift its adjusted EBITDA by $300 million — $200 million by end of 2020 and $100 million more by 2021-end.

Its efforts have been coined “MGM 2020” by the company, as its business optimization drive looks to centralize MGM, while investing on key technologies — hinting at a digital transformation.

While MGM did implement its “Profit Growth Plan” back in 2015, this new move seems to lift the company’s prospects further. CEO Jim Murren weighed in, “MGM 2020 is intended to transform further the way we operate and leverage the most effective operational architecture for our company.”

The latest restructuring includes organizational changes aimed to improve operating efficiencies. After centralizing MGM resorts over the past two years, the company had set up “centers of excellence” that MGM expects to add $200 million of annualized adjusted EBITDA by the end 2020 — half of which is said to be driven by labor savings.

With the robust free cash flow MGM has at its disposal, the resort operator looks to allocate a significant chunk of its annual capital expenditure budget to “specific technology advancements” focused on “innovating and elevating the guest experience through data, pricing, digital and loyalty capabilities and optimizing business mix.” MGM expects this move to add $100 million of annualized adjusted EBITDA by 2021 end.

 

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