Categories Consumer, Earnings Call Transcripts

MGM Resorts International (MGM) Q2 2022 Earnings Call Transcript

MGM Earnings Call - Final Transcript

MGM Resorts International  (NYSE: MGM) Q2 2022 earnings call dated Aug. 03, 2022

Corporate Participants:

Andrew Chapman — Director, Investor Relations

William J. Hornbuckle — Chief Executive Officer and President

Jonathan Halkyard — Chief Financial Officer

Corey Sanders — Chief Operating Officer

Hubert Wang — President and Chief Operating Officer

Analysts:

Joseph Greff — JP Morgan — Analyst

Carlo Santarelli — Deutsche Bank — Analyst

David Katz — Jefferies — Analyst

Shaun Kelley — Bank of America Merrill Lynch — Analyst

Dan Politzer — Wells Fargo — Analyst

Chad Beynon — Macquarie — Analyst

John Decree — Union Gaming Group — Analyst

Robin Farley — UBS — Analyst

Barry Jonas — Truist Securities — Analyst

Presentation:

Operator

Good afternoon, and welcome to the MGM Resorts International Second Quarter 2022 Earnings Conference Call. Joining the call from the company today are, Bill Hornbuckle, Chief Executive Officer and President; Corey Sanders, Chief Operating Officer; Jonathan Halkyard, Chief Financial Officer and Treasurer; Hubert Wang, President and Chief Operating Officer of MGM China and Andrew Chapman, Director of Investor Relations. [Operator Instructions]

Now, I would like to turn the call over to Andrew Chapman. Please go ahead.

Andrew Chapman — Director, Investor Relations

Good afternoon, and welcome to the MGM Resorts International second quarter 2022 earnings call. This call is being broadcast live on the Internet at investors.mgmresorts.com. We’ve also furnished our press release and Form 8-K to the SEC.

On this call, we will make forward-looking statements under the Safe Harbor provisions of the Federal Securities laws. Actual results may differ materially from those contemplated in these statements. Additional information concerning factors that could cause actual results to differ from these forward-looking statements is contained in today’s press release and in our periodic filings with the SEC. Except as required by law, we undertake no obligation to update these statements as a result of new information or otherwise.

During the call, we will also discuss non-GAAP financial measures in talking about our performance. You can find the reconciliation to GAAP financial measures in our press release and investor presentation, which are available on our website. Finally, this presentation is being recorded.

I will now turn it over to Bill Hornbuckle.

William J. Hornbuckle — Chief Executive Officer and President

Thank you, Andrew, and thank you all for joining us this afternoon. Our second quarter results represented our highest adjusted property EBITDAR quarter in the history of Las Vegas, both on an absolute and same-store basis, and the highest second quarter in our Regionals ever with 7 of our U.S. properties setting all time records. I again want to sincerely thank our employees for their continued hard work, commitment to excellence and dedication to creating world-class experiences for our guests. Thanks to them, our company service scores have improved sequentially each quarter both overall and across all the metrics we track. I could not be more proud of the progress we have seen in servicing our customers. Before I dive into our results in more detail, let me reiterate that our long-term strategic planning remains unchanged. We are focused on continually improving our guest experience, delivering operational excellence, investing in our people and planet and allocating capital responsibly.

So let’s turn to those results. We took another meaningful step in April to simplify our corporate structure and complete the monetization of our real estate assets with the closing of our strategic transactions between MGM Growth Properties and VICI. This transaction brought us $4.4 billion in cash, which we intend to use to invest in our core businesses, while continuing to pursue meaningful growth opportunities. One such opportunity was the acquisition of The Cosmopolitan of Las Vegas, was officially closed in May. I’ve had the opportunity to spend some time at the property and have met a number of the co-stars. I cannot say enough about the strength of the team at The Cosmopolitan and the exceptional service culture that has been created there. Our focus now is on integrating the operations of the property into MGM Resorts portfolio and working together to maximize the future success of this world-class resort.

We also recently announced another strategic divestiture and our portfolio. In June, we reached an agreement to sell the operations of the Gold Strike Tunica to the Cherokee Nation for $450 million. As a company, we felt this was an opportunity to sharpen our focus in Mississippi on Beau Rivage and take advantage of an attractive valuation. Gold Strike is a very special property. I’d like again to thank every employee in Tunica for consistently delivering amazing first-class gaming entertainment experiences to our guests. We look forward to seeing Gold Strike continued success with the Cherokee Nation and we expect this transaction to close the first part of 2023. The divestiture follows our prior announcement to sell the operators of The Mirage, which still also stay on-track for close later this year.

Consistent with our strategy to grow our international online gaming footprint, we announced in May, a tender offer for LeoVegas, a leading global online gaming company with licenses in 8 jurisdictions, primarily in the Nordics. LeoVegas has a talented management team, a cloud and mobile-based technology platform and an appreciable growth plan that we will execute on as we develop our digital gaming presence in Europe. We also expect this transaction to close in the third quarter of this year.

Shifting now back to focus on our brick-and-mortar development pipeline. We are hopeful that New York will solicit applications by the end of the year for 1 of 3 additional casino licenses. We are eager to respond and expand our existing property at Empire City, which is less than 15 miles from Manhattan with an attractive footprint for development and growth. If we do receive a license, we look forward to working with the State of New York, Yonkers and the surrounding jurisdictions to drive jobs and economic growth to that region.

In Japan, we submitted our area development plan to the Japanese government in April, and are optimistic that we’ll receive an approval decision in the fall of this year. Following that process, we will share further details about the project.

And in the UAE, we continue to make progress on bringing the MGM brand family to Dubai, where we have a management agreement for non-gaming integrated resort that has been developed in partnership with wasl. The project has broken ground and we’re continuous on the development progress and we will watch with great interest what does or doesn’t happen around gaming in the region, hopefully in the near future.

Turning to BetMGM. Adam Greenblatt and the team provided a comprehensive update at their announced Analyst Day reaffirming their long-term roadmap and path to profitability. The team at BetMGM is also working on a comprehensive refresh to improve the interface in customer experience later this year. Following a successful launch in Ontario in April, BetMGM announced a partnership with Carnival Cruises Corporation to provide onboard ship betting and gaming under the BetMGM brand. BetMGM operates now in 23 markets in United States and Canada across retail, online sports and iGaming operations. In May, BetMGM committed 21% in share in the active markets in both U.S. sports betting and iGaming, which puts us in a number two position.

BetMGM is the clear leader in iGaming and having reached 29% market share in May. And looking forward, with addition of Ohio, most recently Massachusetts as well as the potential for California, we continue to see great opportunity for expansion with BetMGM were acceptable to those 3 states is over 45 million addressable audience. Our investment in BetMGM is an important enabler to our omnichannel strategy and a key competitive advantage that allows us to drive incremental earnings between our brick-and-mortar and online channels. Early results of this strategy have been positive with a strong acquisition story with over 43% of our MGM Rewards sign-ups coming from BetMGM versus 33% in Q2 2021. Of these sign-ups, we have seen substantial growth in those using MGM properties for the first time.

Turning to Macau. Our operations were affected by the limited visitation to the region, obviously, due to the COVID restrictions. As you’ve likely seen, the Macau government closed all nonessential businesses in July in the face of rising case counts, which impacted our properties. Last week, we saw operations reopening on a limited basis and we’re working to minimize our operational costs in the short-term and position our properties to capture more than our fair share of premium mass business as demand returns hopefully in the long-term. We are also working on a concession renewal. We are pleased to have received the terms of this last week with no surprises, with all the submissions due by September 14. The Macau government will then review the submissions and grant new concessions, hopefully by year-end. We remain confident in the future in Macau and are proud to be partners and shaping the future of one of the world’s premier tourist entertainment and gaming destinations.

While our second quarter results were nothing short of spectacular, we are, of course, mindful of the marketplace concerns of a potential recession. We also recognize that starting the back half of the year we’ll be lapping strong comparisons driven by pent-up demand around our reopenings. With all of this in mind, it is important to highlight that we’ve built an incredibly agile business over the last few years due to COVID and other factors, and we will adjust and pivot quickly if we see any signs of consumer demand slowing.

That said, we sit here today, our business in forward-looking pace remains extremely strong. In fact, looking ahead, we continue to be quite bullish on our domestic business outlook based on a number of tailwinds coming in the new year including, a rebound in our convention business, the return of international travel and the line of exciting events to Las Vegas. Let me touch on a couple of these points a bit more. First, in ’23, we expect to grow our convention mix and rate year-over-year.

Also in the terms of citywides, we look forward to welcoming CES back in better form, and once again, the CONEXPO Trade Show to Las Vegas in March of 2023. This will be their first return post the COVID shorten 2020 event, one in rotation, this is one of the most well attended citywide events of the year with historical attendance well north of 130,000. Add to that, the return of the international visitation to Las Vegas, which in 2021 represented only 3% of visitors, then came to 15% in pre-pandemic year and our international customers have longer stay patterns in domestic guests and we expect these guests to return in force as international flight capacity reach over 80% of 2019 summer levels.

And finally, the event calendar Las Vegas is arguably the best city has ever seen, and MGM will be primary beneficiary even as our scale and positioning. Las Vegas is now truly a powerhouse sports destination with the Golden Knights and Raiders calling Las Vegas home. Looking ahead in ’23, the city will host the Sweet 16 and late 8 rounds of the NCAA’s men’s tournament and our first ever Formula One race. And then in early February of 2024 will play host to the Super Bowl. When you put it all together, the business case is incredibly compelling for continued growth and momentum in our business, and as Jonathan will describe, we see tremendous value potential in the shares of MGM Resorts.

With that, I’ll turn it over to Jonathan to discuss the details of the quarter.

Jonathan Halkyard — Chief Financial Officer

Thanks very much, Bill. I too would like to express my sincere thanks to all of our employees for the incredible results we achieved this quarter. We truly have the best team and the best talent in the business. I also want to acknowledge and thank the employees at the Gold Strike Tunica for their contributions to this great property, and also extend my welcome to the CoStar’s of The Cosmopolitan of Las Vegas.

So let’s discuss our second quarter results in a bit more detail. Our consolidated second quarter net revenues were $3.3 billion, an increase of 44% compared to 2021, despite a $168 million negative impact from MGM China due to the COVID-related limitations to visitation Bill mentioned in his remarks. Our net income attributable to MGM Resorts was $1.8 billion, benefiting from a gain related to the sale of MGM Growth Properties.

Our second quarter Las Vegas Strip net revenues were $2.1 billion, and adjusted property EBITDAR for the Strip was $825 million. Our same-store net revenues in Las Vegas, which excludes Aria and Vdara and The Cosmopolitan in 2022 increased 60% versus the second quarter of 2021, and same-store adjusted property EBITDAR in Las Vegas was up 51% versus the second quarter last year.

Now unlike the visitation or the variation month-to-month that we experienced in the first quarter due to Omicron, our second quarter occupancy, ADR and profitability were consistent through the quarter. Second quarter occupancy was 92% continuing the strength that we saw when we exited March. As Bill mentioned, pricing remain strong with ADR in the second quarter at a record $225. On a same-store basis, ADR of $201 was 34% above the second quarter of 2021. Our pricing power is driven by a number of factors; the attractiveness and sophistication of our marketing efforts, the relative value versus other destination markets, midweek conventions returning and the benefit of certain room renovations, including the Bellagio and the Aria Sky Suites, which we completed in 2021.

Our preliminary results from July are also an encouraging sign for the third quarter with occupancy of 94% and ADR up 6% year-over-year, this being our toughest comp versus 2021 given the strong reopening trend we experienced last year. Our gross bookings continue to be robust with occupancy growth in all future months this year and rate up double digits versus 2021 in each month. In fact, during June, we booked the most rooms per day so far this year. Yeah, we really like the demand outlook for Las Vegas.

Our second quarter Regional net revenues were $960 million, an increase of 12% versus the second quarter of 2021. We delivered Regional adjusted property EBITDAR of $340 million, which was 7% above the second quarter of 2021. Margins were 35%, down approximately 200 basis points compared to last year as we brought back more of our non-gaming operations.

Moving to Macau. Net revenues of $143 million in the second quarter represented a 54% decrease compared to the second quarter last year. Adjusted property EBITDAR was a loss of $52 million in the second quarter versus positive $9 million last year. Public health policies remain a headwind in the region as entrants into Macau has been severely limited.

Turning to BetMGM. Our 50% share of BetMGM’s losses in the second quarter was $71 million, which is reported as a part of the unconsolidated affiliates line of our adjusted EBITDAR calculation, and we expect to contribute $225 million to BetMGM this year. Now in the first half of 2022, BetMGM generated net revenues associated with operations of $608 million, which is an improvement of 70% compared to the first half of 2021, and well on-track to meet our forecast of $1.3 billion.

Our second quarter corporate expense, including share-based compensation was $120 million, which included $21 million of transaction costs. We’re strategically investing our corporate expense in growth areas, including improvements to our IT infrastructure, enhanced digital offerings for our guests, and of course, our IR efforts in Japan.

So before we wrap up our prepared remarks, I’d like to restate our capital allocation strategy and touch briefly on how we view the valuation of our company. Our strategy is as follows: First, we’ll maintain a strong balance sheet with ample liquidity. Second, we’ll invest where we have clear advantages exercising prudence in measuring prospective returns for our shareholders. And finally, we’ll return cash to those shareholders. The transactions we’ve completed and announced this quarter, yet again demonstrate our commitment to and execution of these priorities.

We bolstered our liquidity through the closing of the VICI transaction. We improved our portfolio with the acquisition of The Cosmopolitan and the announced sale of the operations of The Mirage and Gold Strike Tunica. We invested in our international digital future with the announced LeoVegas transaction. We returned cash to our shareholders through share repurchases. During the second quarter, we repurchased 32.4 million shares for $1.1 billion. Since the beginning of 2021 through last night, we’ve repurchased 104 million shares for $4 billion, or 31% of our market cap. This activity brings our share count down to approximately 393 million shares. We’ve been aggressively repurchasing our shares over the past 18 months because of the value we see at current trading multiples. Here’s how I think about it.

As of yesterday, our share price was $33 and we had 393 million shares outstanding. So, this implies a market cap of $13 billion. If we add our quarter-end domestic net debt and subtract the value of our 56% stake in MGM China, then we have the enterprise value of our domestic operations. Divide this by the trailing 12 months EBITDA adjusted for corporate expense, Cosmopolitan, Mirage and Gold Strike transactions, and this implies a trailing multiple of 5.3 times, with our stake in BetMGM for free. These deals were announced a few months ago, but our sales of The Mirage and Gold Strike traded at trailing EBITDA multiples of 17 times and 11 times respectively.

But wait, there is more. Our traditional debt is all fixed rate and our lease agreements escalate by only 2% annually for the first 10 years, and thereafter we have a CPI cap of 3%. So we enjoy free cash flow operating leverage by driving EBITDAR growth above 2% or 3%. In the second quarter, our domestic same-store adjusted EBITDAR grew by 33%.

Bill, back to you.

William J. Hornbuckle — Chief Executive Officer and President

Thanks, Jonathan. You know my new Chief Sales Officer is going to come from, and as a company we’ve been busy this year in our pursuit of our vision to be the world’s premier gaming entertainment company. I could not be more proud of the progress we’ve made, but understand there is clearly more work to do. Again, I’d like to thank all of our employees for their contribution to everything we have accomplished. There is a lot of excitement in the rest of ’22 and beyond, I can’t wait for what’s to come. I truly believe our best days are yet to come.

And with that, operator, I’d like to open it up for questions.

Questions and Answers:

Operator

Thank you. [Operator Instructions] And our first question will come from Joe Greff from JP Morgan. Please go ahead.

Joseph Greff — JP Morgan — Analyst

Good afternoon, guys. Bill, my first question to you is and to Jonathan as well, can you talk about maybe any aspirations for large scale M&A, particularly in Asia, given the news about your potential interest in Singapore? That to us is a little bit different than some of the other capital allocation activities that you’ve talked about. But I’ll leave it open-ended, and you can discuss it as you wish.

William J. Hornbuckle — Chief Executive Officer and President

Joe, obviously we love our position in Macau, we’re excited about Japan. I’m not going to comment on anything else. We’ll continue to be aggressively look at M&A and active to the extent it makes sense, but I really don’t want to comment on the Singapore situation. I don’t know if Jonathan want to, and so we stand is we are Joe.

Joseph Greff — JP Morgan — Analyst

Okay. Understood. And Bill, I think your comments that obviously the forward pace in Las Vegas and across the portfolio is not reflecting any consumer retrenchment from any kind of downturn that we’re in, or maybe going into, which is great to see and that’s consistent with others in the industry and others in our coverage universe. Can you talk about what the plan B would be in terms of managing the business if we’re going into a downturn and you see spend per visit and length of stay, God forbids, start to retrench, how do you manage that from an opex perspective, from a labor perspective, how does that maybe translate into sort of a flow-through, particularly in light of sort of the margin gains that you’ve achieved since the pandemic started? And that’s all from me.

William J. Hornbuckle — Chief Executive Officer and President

Yes, I’ll kick it off and maybe turn a part of this over the Jonathan and/or Corey. Look, inflation is an interesting thing to our business. Obviously, we price our hotel rooms every day. So we’re in a great position there. Most of our food and beverage is also dynamic in some respect, I think we as a company have done a great job with energy. We’ve already bought energy through the end of ’23 and most of our employees, about 60% of them are in some form of a union contract and the biggest lift on that comes next year in ’23 with the culinary. We’ve got about 35,000 employees in some ways, shape or form in some kind of a review cycle. So we feel good.

Generally, where we are, I would make this broad comment, we just came through hell and back with COVID. We’ve learned how to manage this company at scale, at a premium, meaning we’re premium operators with high-end product, and I think our margins are still stretching, high ’30s into the ’40s, some of our significant properties even higher. Obviously, we’re not naive to what may or may not happen, but I feel good about the operating model we’ve put in play. I feel good about the levers that we have and the handle we have on costs, and so Jonathan, if you want to talk about some specifics of what might happen, but that’s my general view.

Jonathan Halkyard — Chief Financial Officer

Yeah, Joe, we’ve done certainly forensics on prior recessions and the impact of changing customer behavior and pricing on our operating model, try to adjust it for things like the dramatic, the different supply environment that we have now better than what was experienced back and say, ’07, ’08, and it really depends upon where any reduction in demand would come, whether it be from visitation or pricing or both. I certainly believe having seen this now just in my relatively brief time with the company, our company twice has dealt with pretty material reductions in demand last August, September and then of course, back in January, the operating model really works here and the company has playbooks and I’m confident that we will be able to adjust as much as possible to that kind of reduction and maintain margins perhaps not where they are now, but above where they’ve been in the past under such circumstances.

And I think there are other things that I add is, we still have a number of initiatives in flight that would help us greatly in such a situation and those would include, of course, the cost work that we’ve done over the past couple of years, and also the MGM Rewards program, which is designed in part to stimulate increased visitation from our regional properties in Las Vegas, visitation that I don’t think we get our fair share of now and also cross-property visitation while our customers are within Las Vegas. These are huge opportunities, and I think what would be a bit of a buffer for us in that kind of environment.

William J. Hornbuckle — Chief Executive Officer and President

And I think maybe one last comment Joe to think about our Regionals, in many cases market leading large-scale ultimately really resorts. They’re not smaller properties that do $15 or $20 million. They are large scale places that hopefully do a couple of hundred million. And so, our Regional portfolio even sets up a little different, two-thirds of our database, the average household income is over $110,000, so it’s subset, we have an up market opportunity in the context of our customer base are, and therefore who may or may not be impacted and how severely by a significant downturn.

Joseph Greff — JP Morgan — Analyst

Great. Thank you.

Operator

And the next question is from Carlo Santarelli from Deutsche Bank. Please go ahead.

Carlo Santarelli — Deutsche Bank — Analyst

Hey, guys. Thanks, and good afternoon. Jonathan, I know getting in the property level stuff, you certainly gave some same-store metrics that were certainly helpful. But I wanted to ask around Cosmo, I think you guys had in the release at the time of acquisition. It was LTM run weighing a little over 4 or 15 or so. I was wondering as you’ve kind of gotten in the asset and it’s only been a couple of months, but had some time to integrate. Is there anything along the lines of synergies that you think exist there that might be tangible enough to call out?

Jonathan Halkyard — Chief Financial Officer

Well, there are certainly synergies in this transaction. They relate to the things you might expect, the combination of some facilities that The Cosmopolitan needed to maintain and pay for associated with their relatively small footprint, things like, warehouse space, corporate offices and the rest. I’m proud to say that on the day after we closed the transaction we had their employees, the CoStar as able to park in the Bellagio garage and therefore not have to take bus transportation from a remote spot. But the synergies, I think we’ll realize over the next couple of years. I would note that the, you can probably do this math yourself, but I’ll save you a step on the same-store sales or in same-store EBITDAR calculation, in the 6 weeks that we owned The Cosmopolitan of Las Vegas during the second quarter, it generated kind of just a little bit under 6 $60 million of EBITDAR. So this business is rocking and rolling right now. Corey?

Corey Sanders — Chief Operating Officer

Yeah, and the other thing I would add Carlo that we’ve identified immediately is procurement savings that, and they go both ways, they go on buys that they were getting through Blackstone and on buys that we get.

Carlo Santarelli — Deutsche Bank — Analyst

Great. Thank you guys. And then if I could just one follow-up. I was wondering if you guys had any color you could add on the launch in Ontario and how that’s gone maybe at an industry level or at a company level what the experience there has been today acknowledging, it’s a softer season on the sports side, but perhaps you could shed some color on the iGaming side?

William J. Hornbuckle — Chief Executive Officer and President

It correlates. It’s Bill. Look, it is a softer sports season, as you know, we are exactly where we thought we would be particularly with our iGaming business, obviously, as you know, it was a great market. It’s now been regulated. So there’s a couple of dozen competitors. We’re in the single-digit, high single-digit market share and growing. And so, it’s clearly a real marketplace. It is used to iGaming and sports betting, and so our entry into that has been productive, and we’re pretty excited by where that ultimately all goes.

Carlo Santarelli — Deutsche Bank — Analyst

Great. Thanks, Bill. Thank you, everyone.

Operator

And the next question is from David Katz from Jefferies. Please go ahead.

David Katz — Jefferies — Analyst

Hi, afternoon, everyone. Thanks for taking my question. Could we just spend a moment on LeoVegas and just talk through the strategies for that, and how it sort of fits in to the, obviously there’s very busy plate that you have and what success looks like with it?

William J. Hornbuckle — Chief Executive Officer and President

Sure. Again Bill. So David, pretty straightforward, we believe ultimately that the digitization of our business and therefore our ability to take brands through omnichannel and otherwise make something real of it, is real business, and obviously BetMGM’s head into a $2 billion revenue line next year, hopefully profitability by year-end, and we are interested and want rest of the world. And so a smaller acquisition, you know the numbers, we are probably going to be in at just under $600 million. Hopefully, throw off between $40 million and $50 million the first year, but it’s got an expandable platform, it’s got a built-in team that we really like in terms of its management and so we’re looking at M&A, we’re looking at gaming studios.

They have dabbled in before live dealer, live gaming, and so we like the entry, we recognize it’s not as large scale and therefore needle moving as we might want over time, but we thought it was a great place to start. And most importantly, we like the platform and the players, meaning the team, and so that’s in essence, that’s it. And we think over time, it’s in Canada as well. So it’s an open marketplace obviously for BetMGM, LeoVegas and our partners at Entain as well. And so, we just like the exposure it gives us, it’s a learning curve for us to understand rest of the world and we think we’ll learn a lot from these guys.

David Katz — Jefferies — Analyst

Understood. And as my follow-up, for Jonathan, I just wanted to talk about share repurchases. You’ve obviously done a fair amount of late. And just thinking through how share repurchases might be an ongoing or recurring aspect of the strategy, and frankly something that happen this quarter in and quarter out and how we might think about that?

Jonathan Halkyard — Chief Financial Officer

Sure, David. We mentioned in our results today, we purchased $1.1 billion of shares in the second quarter. That’s our highest investment since this program restarted a little over a year ago, at the, should surprise nobody, at the most attractive price, just $34 and change. I should note that we, since the end of the quarter, we’ve repurchased another 5.3 million shares at a price just above $29. So we did continue the program into the third quarter.

You know, my soliloquy at the end around the attractiveness of the value of the shares is certainly one of the reasons we’ve been so aggressive here and why we will continue to repurchase shares. But it’s also true that this was a part of the strategy, our asset-light strategy to return this capital to our shareholders and fine-tune the leverage of the business, and that $4 billion in the past 15 months, I think more of that strategy is behind us than is still in front of us. We do have just under $1 billion remaining on our share repurchase authorization and we’ll be opportunistic, keeping in mind, some of the other capital requirements we have coming up that we’re excited about things like LeoVegas, New York and so on.

David Katz — Jefferies — Analyst

Understood. Thank you.

Operator

And the next question is from Shaun Kelley from Bank of America. Please go ahead.

Shaun Kelley — Bank of America Merrill Lynch — Analyst

Hi, good afternoon, everyone. I have 2 questions, both related to Las Vegas. So the first would be, just wondering in the second quarter, we obviously all saw a bit of the return of both group convention and some really large scale events business. Can you just give us a sense of maybe relative to your normal or stabilized mix how much group made up in the second quarter, just to get a sense of maybe what any more at in the recovery there? And then the second part would just be, can you just talk a little bit about the health of the Las Vegas gaming customer, specifically maybe some areas about rated versus unrated play those types of metrics. Just to give us a sense of how that’s trending as we get kind of further and further into the recovery. Thanks.

Corey Sanders — Chief Operating Officer

Hey, Shaun, it’s Corey. In Q2, we were about 93% of 2019 room nights in the convention segment, and we actually had our highest catering and banquet numbers since the fourth quarter of 2019. So, pretty positive environment there. We did have one large group that canceled. It’s been the only group that’s not come back, we’re happy to say we’re seeing most of our big groups come back considerably. With regards to the gaming customer, the business is strong in all age groups, across all segments of it, especially in Las Vegas, even our lower end is strong there. And our unrated continues to be outpace where we were in 2019, it’s flattened out since 2021, but all indications are very strong trends.

William J. Hornbuckle — Chief Executive Officer and President

And Shaun, we had said in ’22 we’d be at about 90% pace to ’19 with the exception of this cancellation, we’re right on that point. And so, that’s been the return of what we expected and we’ve seen it. And I think next week we have Cisco in town with 27,000 people, so tech is back, large scale is back, and so that continues to look real positive into next year, particularly given, as I mentioned earlier, the Citywide in the cycle through.

Shaun Kelley — Bank of America Merrill Lynch — Analyst

Thank you very much.

Operator

The next question is from Dan Politzer with Wells Fargo. Please go ahead.

Dan Politzer — Wells Fargo — Analyst

Good afternoon, everyone, and thanks for taking my questions. So I want to hit on capital allocation and your demos there. I think you guys have talked about becoming more global and the importance of diversifying your revenues and cash flows. I mean, how do you prioritize that in terms of — or what are the pecking what are for diversification, is it is in Europe or international or Asia, or is it just really in the media, or just digital versus brick-and-mortar?

William J. Hornbuckle — Chief Executive Officer and President

I think Dan, it’s actually both. I mean, obviously we have a keen interest, we’re going to invest several billion dollars in Japan, if we’re given the opportunity, and so that’ll be another cornerstone for us in Asia between that and Macau, we feel pretty comfortable of what’s going on there. And obviously we’ll watch like everybody what happens in Thailand or any place else, for that matter. But, we like where we are, and furthermore, we’d love to be in Japan at scale. And then for us obviously domestically and particularly, if you think about Las Vegas and some other places, there’s only so many places we can go and continue to grow. And so that’s why digital among many reasons are so attractive to us.

And so we’re going to continue to lean into that, obviously continuing to invest in BetMGM, while painful, it’s going to be productive, we sincerely believe that now 2.5 years into this journey. It’s hitting its marks, it’s doing what it said it was going to do. Time to tell on that business, how quickly it goes profitable, but at the end of the day, if I said we’re going to invest $1 billion in a business and ultimately reap hundreds of millions, and by the way the bill cycle is 3 years, you’d all say let’s go, and so we’re excited by that, and we remain so. And we’ll watch for other opportunities in digital, either through our LeoVegas vehicle or anything else that potentially comes up that could be meaningful for either strategic or basically broader economic reasons.

Dan Politzer — Wells Fargo — Analyst

Got it.

Jonathan Halkyard — Chief Financial Officer

Well, the only other point that I would add is that we have these we think 2 embedded growth vehicles within our business right now. One is the ultimate recovery of Macau. And the second is BetMGM, as Bill mentioned. And those do not require much more capital, at least as compared to the company’s financial resources. At the same time, we’ve been applying capital to reduce our capital base for the benefit of our shareholders, and I think that will provide real leverage as we expect to see those 2 businesses provide earnings growth for the company.

Dan Politzer — Wells Fargo — Analyst

Got it. Then just on BetMGM, I think you guys said that you’re still on pace for the $450 million total investment, which you’re 50% of, as you’re pacing through, I think you have $160 million or so through the first half of the year, how should we think about the back half of the year and the cadence?

William J. Hornbuckle — Chief Executive Officer and President

Yeah. The third quarter cadence goes way down given the seasonality, and then we get back in the football which is productive. So the back half of the year, we’re going to still hit the target number of about 2, and 2.25 invested on MGM’s behalf. We are pacing as we thought we would. iGaming has been a little better which is accretive to us, sports betting, not as much. And you’ve probably seen this or heard about this, we are continuing to pull down some of our marketing spend, while share continues to be important particularly in new markets, we’re getting smarter and smarter and smarter about how we do this. And so, we feel comfortable as we think about ’23 and beyond our ability to make money in this business is within our grasp.

Dan Politzer — Wells Fargo — Analyst

Got it. Thank you so much.

Operator

The next question is from Chad Beynon with Macquarie. Please go ahead.

Chad Beynon — Macquarie — Analyst

Hi, good afternoon. Thanks for taking my question. In terms of the Macau gaming draft bill that was released, how are you guys thinking about broadly thinking about what’s expected from a rebidding process, whether it’s time, commitments or capital, when we see this at the back half of the year? Thanks.

William J. Hornbuckle — Chief Executive Officer and President

I’ll kick this off and that we have Hubert on the phone, maybe can add some color. Obviously, we just got last week the final request for RFP, RFI. The process has started. We have until September 14 to make our submission. It’s been obviously a tough couple of years time to tell who ultimately shows up for submissions, but I’m pretty confident the original 6 licensees will be there. 10-year window present some challenges when you think about, we’re still in the midst of COVID and so the idea of a significant investment would have to be something we’d really understand and study.

There is a lot of things that the government wants around social programing, employment, job opportunities and other things that we’re going to dig heavily into. There are a lot of things around programing and existing square footage that we already own as we delever out of junkets and to really more mass gaming, around experiences around culture, around event activity. And ultimately, there’s a big push on which kind of plays to our daily work in sports, and so sports entertainment is a big, big push, we’d love to see more of that activity case in that market, and so I think we’re ideally positioned to be able to do that as well. Hubert, I don’t know, if you want to add more color.

Hubert Wang — President and Chief Operating Officer

Thank you, Bill. Thank you, Chad for the question. I think that in terms of timing, we’re aggressively working on the tender package, we will submit, of course, before by the September 14 deadline. In terms of commitments, the government does focus on oversea market. So this is, I think where MGM has a lot of strength with its global distribution network. So we’ll be able to focus on that. There are a lot of requirements as Bill mentioned, on the non-gaming side as well. So we will leverage our traditional strengths in arts and culture and together with the show that we are currently underway to produce to leverage these strength for the non-gaming diversifications that government is asking for.

Chad Beynon — Macquarie — Analyst

Thank you very much. Appreciate it. And then separate follow-up, just in terms of capex, Slide 9, you noted the $750 million to $800 million for this year. Can you just kind of remind us are there other, I guess, medium size maintenance projects, particularly in Vegas, that could be on the come in the next couple of years or how should we think about kind of a go-forward maintenance? Just trying to square what free cash flow could be going forward. Thanks.

Jonathan Halkyard — Chief Financial Officer

Now the largest components of our capex Chad are room renovations and our technology investments. Through the first 6 months of the year we’ve invested about $250 million in capex, so were we’re behind pace, but I’m confident we’ll be pretty close to the number that we’ve outlined for this year. And those will continue going into ’23 and ’24. And so, probably a reasonable number for maintenance capex is going to be kind of in the 5% or 6% of net revenue, and we, of course, had a lot of flexibility on timing of those investments, if we need to, but we’ve set forward multi-year schedule of room renovations that we think are important in order to maintain and grow revenues. And I’ll just point out what we have going on right now is room renovation, it’s just begun at New York, New York one in a large segment of the MGM Grand. And then, down in Biloxi room renovation at the Beau Rivage a business which under the leadership of Brandon Dardeau and his team is just having its nominal year so far.

Chad Beynon — Macquarie — Analyst

Thank you very much. Appreciate it.

Jonathan Halkyard — Chief Financial Officer

All right.

Operator

And the next question is from John Decree from CBRE Securities. Please go ahead.

John Decree — Union Gaming Group — Analyst

Hi everyone, thank you for taking my question. Maybe one, Bill or Jonathan, on the labor market and your hiring needs. How do you feel of staffing right now is it’s still difficult to get labor, where you need to be and then perhaps in the context of Bill, some of the events that you’ve outlined as international comes back convention ramps, the big citywides, will you need to kind of continue staffing to get ready for those busy peak periods?

William J. Hornbuckle — Chief Executive Officer and President

Yeah, a good question. Thank you, John. So look, I guess, if there’s such a thing is good news and I’ll tell you this number, we’re under 4,000 open jobs and remember in any given usual time, and I’m making usual ’18, ’19 etc. We’ve always had between 1,200 and 1,500, it’s just hard to keep the cycle going at the scale that we need. And so we’re in a better shape. We still have some key areas like most people in hospitality, around housekeeping, security, cooks that we struggle with in terms of getting people back to work, and so that continues and it’s seeable here and even into our regions for sure in some of the offshoot markets like Atlantic City and the Beau in Mississippi, obviously Tunica has been a challenge, but it shouldn’t be our challenge.

And so I still feel our ability to flex up, we flex up into, I think about our portfolio into the Bellagio’s and the Aria’s of the world with employees, and so I’m not overly concerned. Things like F1 will be a significant undertaking for now in the community, but the company, we’re trying to get our head, we’ve assembled teams around all of that, in terms of the opportunity, which is amazing. I think it’s going to be ultimately for retail business, of note, and potentially gaming business. But generally speaking, we’re in decent shape. We are not running around the hair on fire, if you will, anymore, but there is still some — it’s the state of the economy, there’s 1.5 million jobs available in this industry, of the 11 million jobs still open in America, and we represent that, I think fairly squarely. But we are getting by and pretty excited by the folks that are coming back on-board and I think we’re in decent shape.

John Decree — Union Gaming Group — Analyst

That’s great. Bill, thanks. And maybe the follow-up to that. With that in context, like you said, F1, obviously a big opportunity, a lot of the big events, big revenue opportunity. In Vegas, how would you kind of think about or how should we think about the margin profile as some of those big revenue events come back, but probably some costs as well as you hire, would you kind of expect margin stability absent any kind of pullback in leisure consumer spending, which is hard to predict at this point, but how would you think about kind of the cadence as business still ramps in Vegas on the revenue side as well?

William J. Hornbuckle — Chief Executive Officer and President

Look, and clearly have a view on this, but I would tell you, as it relates to something like F1, the retail potential and the upside of that are substantive, if we’re talking roommates 3 times what we are normally and potentially then some. There are packages that sell for that event at $100,000 retail. And so the scale and scope, we have access to our ticket by alone will be about $20 million, $25 million and we have access to those tickets and then that the ability to charge as we want in package as we want. And so I don’t think that going to be a margin hurt, and I think I’m pretty excited by that one, I got to tell you. Some of the other activity, Corey?

Corey Sanders — Chief Operating Officer

Yeah, what I would add John is, our margins probably already seen the impact because of the way we have to record T-Mobile and the Grand Garden. So now we’re going to benefit from these outside events including what will happen at the Spear if they bring you to and others. It will just bring more people into the city, and I think we saw that especially with the lead-gen with the NFL games, which will be in the fourth quarter and the events that they’ve had. So I don’t think these upcoming — I think these are kind of events will allow us to bring premium customers and actually maintain or increase our margins.

John Decree — Union Gaming Group — Analyst

Understood. That’s really helpful, everyone. Thank you so much and congratulations on another good quarter.

William J. Hornbuckle — Chief Executive Officer and President

Thank you.

Operator

The next question is from Robin Farley from UBS. Please go ahead.

Robin Farley — UBS — Analyst

Great. Thanks for taking the question. I was curious regarding your JV partner Entain, you had made an offer now I guess over 12 months ago. And since then, obviously, and hence stock price is down quite a bit and they’ve lowered guidance, and now your offer, the offer you made last year is a significant premium to where that stock is now. I’m just curious whether, how much were made to revisit because I would think all the benefits of owning 100% of BetMGM are still the same as they were a year ago. So I’m just curious how you’re thinking about that.

William J. Hornbuckle — Chief Executive Officer and President

Robin, we think about it all the time, of course, it’d be foolish to think otherwise, and you can’t buy what’s is not for sale. We remain keenly focused on BetMGM, we’d like more of it. We have a great partnership with them, that business is working well because of what we ultimately all provide our IP, our database, their technology. And so there are other ways to skin a cat and potentially we may have to seek those, and it is what it is. But obviously, we continue to follow the math and we understand it intimately. But for now we have no story there.

Robin Farley — UBS — Analyst

Okay, all right. And then just as a follow-up kind of unrelated, I know you’ve talked about the strength in Vegas that you’re seeing and the forward outlook. I’m curious on the regional front. Others have talked about regional kind of slowing and having tough comps. I’m curious, your view for the regional outlook. Thanks.

Corey Sanders — Chief Operating Officer

Yeah. Robin, this Corey. I think we have 2 different sets of regional properties unlike our competitors. I think when we think about National Harbor, Beau Rivage, Borgata, that you get a lot of tourists, a lot of FIT-type customers, in those properties, we’re seeing the same strength we’re seeing in Las Vegas. As we get into our more traditional drive-in markets, the higher end customers are continuing to come in and play in at the levels they were probably seeing a little softness at the bottom-end of that range and a little bit in unrated, especially at properties like Empire.

Robin Farley — UBS — Analyst

Okay. All right, great. Thank you.

Operator

And the next question will be from Barry Jonas from Truist Securities. Please go ahead.

Barry Jonas — Truist Securities — Analyst

Great. As we look through your different Strip properties in Q2 and now, are there any major differences in performance as you sort of move from the higher end to the lower end?

William J. Hornbuckle — Chief Executive Officer and President

Well, I think it ties to the broader market. Look, anything tied to luxury and high-end retail, and you can obviously put into that case, Bellagio, Aria, now The Cosmopolitan, parts of MGM and parts of Mandalay are doing amazingly well. Room rate activity remains in the high teens, ADR percentages above all things ever, our food and beverage and our costings and our pricing, excuse me, is extremely strong. And so it ties to just about everything else you’ve heard about in the broader economy, we’re able to leverage up on higher-end retail products, and it’s done well for us. Corey?

Corey Sanders — Chief Operating Officer

And the high-end gaming piece in those, in those properties. We are seeing that incremental play. So you’ll see those properties outperform the legacy properties.

Barry Jonas — Truist Securities — Analyst

Got it, got it. And then I just wanted to ask about iGaming, just curious if you have any expectations around future state legalization, you think anything maybe as possible in the next year or 2?

William J. Hornbuckle — Chief Executive Officer and President

Well, I think there are a couple of states. I think the reality is, there’s not a dozen right now. I think there are a couple of states that we’re clearly targeting. We think they have everything, but iGaming in them, and they obviously make an interesting subject and interesting discussion with regulatory and government officials and ultimately regulators. There is a couple, though, that we have benchmarked for next year. And we think we can break into and continue to grow that because it is the key to the bottom line of that business as you know. And so, we’re excited to continue to do that, it’s going to take some time though, depending on how deep this recession may or may not be, when states need money, sometimes they turn to this vehicle. So we’ll see.

Barry Jonas — Truist Securities — Analyst

Got it. All right. Thank you, and congrats on a great quarter.

William J. Hornbuckle — Chief Executive Officer and President

Thank you, Barry.

Operator

Ladies and gentlemen, this concludes our question-and-answer session. I would like to turn the conference back over to Bill Hornbuckle for any closing remarks.

William J. Hornbuckle — Chief Executive Officer and President

Thank you, operator. Just a couple of key thoughts as you think about our call today, and again, congrats to our entire team. I couldn’t be happier with where we are and what we’ve accomplished. Much has been done, and frankly, obviously, much more to go. There has been I think a shift, there is this insatiable appetite for travel experience, experience-based economy and the millennial stepping into it, and I think we’ve seen it in all of our properties, particularly here in Las Vegas. When you think about The Cosmopolitan and others. I think we’re in a great place. I think we’re ideally suited to take advantage of it. You think about travel experiences and how things are reported out, we feel ideally situated to do that.

We think we’ve proven our working model and our operating model has worked, I should say, whether we lever up to the success we’ve had in the last 2 quarters, or frankly whether we need to weather the storm coming up. We think we’re in great shape to do that, and we think we’ve learned a great deal as we think about the future, frankly to go either way. We’re not naive to what the economy may or may not do. And so we have constant pressure on ourselves around employment, around labor, around all things expense-related, and we remain keenly focused on that. We’ve all lived through this before, and don’t want to see some of the mistakes we’ve made in the past replicated. And so, we’re on that.

But generally speaking, if you think about where the company is today, our balance sheet, of note, the opportunities in front of us to go more into Asia, potentially to go more into digital, potentially buyback and take back some more shares for our stakeholders. I think we’re in an amazingly great place and I couldn’t be more excited for our future. So I appreciate everyone’s time today and support generally, and we hope to continue to do the same kinds of things. So thank you.

Operator

[Operator Closing Remarks]

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