MGM Resorts International  (NYSE: MGM) Q4 2019 Earnings Call Transcript

MGM Resorts International  (NYSE: MGM) Q4 2019 Earnings Conference Call
February 12, 2020

Corporate Participants:

Aaron Fischer — Chief Strategy Officer

James J. Murren — Chairman and Chief Executive Officer

Bill Hornbuckle — President and Chief Operating Officer

Corey Sanders — Chief Financial Officer and Treasurer

Grant R. Bowie — Chief Executive Officer and Executive Director

Catherine Park — Executive Director of Investor Relation

Analysts:

Joe Greff — JPMorgan — Analyst

Stephen Grambling — Goldman Sachs — Analyst

Felicia Hendrix — Barclays — Analyst

Harry Curtis — Instinet — Analyst

Shaun Kelley — Bank of America — Analyst

Thomas Allen — Morgan Stanley — Analyst

Carlo Santarelli — Deutsche Bank — Analyst

Presentation:

Operator

Good afternoon, and welcome to the MGM Resorts International Fourth Quarter and Full Year 2019 Earnings Conference Call. Joining the call from the company today are Jim Murren, Chairman and Chief Executive Officer; Corey Sanders, Treasurer and Chief Financial Officer; Bill Hornbuckle, President and Chief Operating Officer; Grant Bowie, CEO and Executive Director of MGM China Holdings Limited. [Operator Instructions].

Now I would like to turn the call over to Aaron Fischer. Please go ahead.

Aaron Fischer — Chief Strategy Officer

Good afternoon, and welcome to the MGM Resorts International Fourth Quarter and Full Year 2019 Earnings Call. This call is being broadcast live on the internet at investors.mgmresorts.com, and we’ve also finished our press release on 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 materially 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’ll 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’ll now turn it over to Jim Murren.

James J. Murren — Chairman and Chief Executive Officer

Well, thank you, Aaron, and good afternoon, everyone. Before we begin discussing our fourth quarter and full year 2019 results, I want to spend a moment talking about the announcement we made this afternoon. As you may have seen, I’ve informed the Board that I will step down from the company prior to the expiration of my contract. The Board will promptly conduct a comprehensive search for the right leader who’ll take MGM Resorts into the future. And I will do whatever I can to support the Board during this time. This was not a decision that I made lightly. However, I know the company is well positioned, our balance sheet is strong, we have an efficient operating model and a powerful strategic plan. Our growth areas of sports betting, Japan and entertainment have never looked better. Our bench of management talent is deep. The company is strong and growing. In my 22 years with MGM Resorts, I’ve accomplished a lot, and I’m proud of the company it has become.

Leading MGM resorts as CEO for the past 12 years has been the most rewarding and fulfilling experience in my professional career. And I want to thank our talented employees for all of their support and dedication. Together, we transformed MGM Resorts into a global entertainment company with a worldwide footprint, while creating significant value for our shareholders. Looking ahead until a successor is named, I will continue to lead the company. As always, I will remain focused on executing our strategy, and I’m fully committed to supporting a seamless transition. I’m confident that the Board will find the right person, who will continue to execute on our plan and drive value for MGM shareholders. With that, I’d like to turn our discussion over to our results. MGM has a lot to be excited about this past year. We began 2019 with two major plans. The first was to dedicate more focus on our asset-light strategy, which allows us to unlock the value of our real estate assets and recycle capital into higher growth, higher return opportunity. We made great progress as we monetized the underlying real estate of Bellagio and will soon monetize the real estate of MGM Grand Las Vegas at benchmark-setting multiple.

We also sold Circus Circus Las Vegas, which was not core to our long-term strategy. We continue to work toward reducing our stake in MGP, which currently has a market value of around $7 billion. Our recently announced transactions as well as the anticipated cash redemption of $1.4 billion of our MGP operating partnership units are expected to yield $8.2 billion of net cash proceeds to MGM. These proceeds in conjunction with our free cash flow will allow us to achieve domestic net financial leverage, excluding MGP of approximately 1time by year-end, while still returning significant capital to shareholders. As such, I’m pleased to report that we paid down $3.1 billion of our debt in the fourth quarter. Further, as a testament to our continued confidence in our overall business and strategy as well as the value potential of MGM Resorts, we announced today a 15% increase in our quarterly dividend. We also announced the authorization of a new $3 billion share repurchase program, which we intend to put to use tomorrow with a $1.25 billion modified Dutch auction tender.

We believe that this is an opportune time to repurchase shares despite the volatility in some segments of our business. While the coronavirus, which I will discuss shortly, will clearly have a near-term impact to MGM China, we remain confident that it will not have a long-term impact on our business. We are pleased with the outlook of our domestic businesses with strong underlying trends in Las Vegas, including continued growth in RevPAR, food and beverage and domestic gaming spend. MGM has the benefit of having a good, broad-based snapshot of our customer base here in Las Vegas. We have guests from all income groups coming from all over the world. And we are especially happy with the performance of our mid-market properties, which produced strong margin improvement. This, to us, speaks to the strong underpinnings of the Las Vegas market as well as the success of our MGM 2020 plan. We are investing in Japan and in our online and sports betting business, and while these businesses are contributing losses to our P&L today, we expect both to create meaningful value in the years to come. And we do not believe either of these initiatives are reflected in our current stock price. Secondly, we implemented our MGM 2020 plan, which a year later is successfully realizing material savings in labor, sourcing and revenue enhancement opportunity.

We’ve refined our operating model to create greater efficiencies and faster decision-making throughout the organization. We’ve also completed implementing numerous labor and yielding initiatives, which will drive more upside this year. We’re proud of the progress we made during 2019, as we look forward to steps to evolve our organization. We have advanced our transition to a less asset-intensive business model. We’ve made meaningful strides to optimize our portfolio, strengthen our balance sheet and enhance our free cash flow. In 2019, we also returned over $1.3 billion to shareholders in the form of dividends and buybacks. Since the end of the year, we have continued to buy back shares. And as of earlier this afternoon, we had only $4 million left remaining on our current $2 billion authorization. As we look into calendar year 2020, we expect certain headwinds, which we believe are unpredictable within a reasonable range of accuracy. We’re currently navigating an extremely fluid environment with the coronavirus, which we are taking very seriously. The safety of our employees and guests is our top priority, and we continue to work closely with the local authorities to ensure that we’re doing what’s right for the well-being of everyone there.

As such, our Macau casinos and gaming areas are currently closed, so we are maintaining some non gaming facilities to support our hotel guests. During this time, with our casinos closed, we are actively managing our costs and are incurring approximately $1.5 million of operating expenses per day across both properties. The majority of which is payroll. While the current situation creates volatility in our business near term, we are confident that it does not reflect the medium to long-term earnings potential of these assets or in the marketplace. In fact, while short-lived, we have been seeing signs of an improving marketplace during the first couple of weeks in January, with our businesses averaging just under $2.5 million of property EBITDAR a day. In addition, the Far East baccarat market here in Las Vegas had a difficult year in 2019. And as such, we are cautiously not expecting a material recovery in the near term. And so given the current environment, we have decided to remove our 2020 financial target. But with that being said, organic growth in our U.S. business, excluding Far East baccarat has been tracking in line with our expectations.

And we see the strength in our underlying domestic business continuing from the fourth quarter into this year. We also remain deeply committed to substantial growth of free cash flow per share this year, driven by healthy EBITDAR growth moderating capex as our properties are in excellent shape and a reduction in our share count. So moving on to our results. Our full year 2019 consolidated net revenues increased 10% in consolidated adjusted EBITDAR was up 6%. Our fourth quarter consolidated net revenues grew 4%, and we generated consolidated adjusted EBITDAR of $682 million. Our fourth quarter results were solid, but below our expectation, mostly due to the persistent weakness in Far East baccarat volumes and hold in Las Vegas as well as a couple of other onetime items. We’ve also accelerated our investments in sports and in Japan. Our Las Vegas Strip hold adjusted property EBITDAR for the year was $1.67 billion and $392 million in the fourth quarter. Excluding Circus Circus and the $24 million insurance proceeds we received in the prior year quarter, our hold adjusted Strip EBITDAR increased 4% year-over-year. Our fourth quarter results continue to be driven by strong demand across all of our segments with Far East baccarat being the only key offset. Our Strip net revenues were up 4% in the quarter.

Nongaming revenues in RevPAR, both up a robust 6%. Our convention business was exceptionally strong, and we finished 2019 with an all-time record convention mix for the fourth quarter and the year at over 21%. Our casino revenues decreased 4%, and with table games win down 18% driven by that Far East baccarat. Our non-baccarat table games and slot win were actually up in the quarter. Our first and fourth quarters have historically trended higher in Far East play. And as we mentioned on our last call, we knew we were up against a tough comparison quarter as the prior year’s quarter’s casino volumes were very strong. And while our Far East business in the fourth quarter was roughly in line with the second and third quarters it was still lower than we had expected, driven by a handful of premium high-end customers. To provide some context, Far East baccarat has historically contributed anywhere from 5% to 7% of our Strip EBITDAR, and now it’s down to 2%, which creates a low base for 2020. In other words, Far East baccarat contributed a little over $35 million to our 2019 adjusted EBITDAR, and that was down over $100 million year-over-year.

Our fourth quarter Strip EBITDA margins would have been up about 1.5 points year-over-year, if you were to adjust for Circus Circus and the insurance proceeds received in the prior year as well as the back rate impact. Regionally, we operate some of the premier assets across the United States, with leading positions in most of our markets. Regional operations fourth quarter net revenues and adjusted EBITDAR grew 15% and 14% respectively, due to the inclusion of Northfield Park and Empire City. In 2019, MGM National Harbor and Borgata, each generated over $200 million in 2019 adjusted property EBITDAR. And our Mississippi operations grew EBITDAR by 13%. MGM Springfield has admittedly performed below our expectations, and we’ve recently made some changes there to better position the property. MGM China’s net revenues grew 6% in the quarter despite the 8% market-wide GGR decline. Adjusted property EBITDAR was up 10% to $185 million, driven by MGM Cotai, which grew EBITDAR by almost 40% year-over-year to $75 million.

VIP hold normalized EBITDAR was up 11% to $177 million. Despite the short-term uncertainty in the marketplace, we remain well positioned there as MGM China’s strong liquidity position and strong balance sheet bodes us well. And of course, Grant will be on the line to answer your questions during the Q&A. Moving on to MGM 2020. I’m proud to say we continue to make excellent progress on the plan, achieving all of our targeted savings and revenue enhancements, some of which continue to be on an accelerated basis. As of year-end 2019, many of our initially identified labor and sourcing initiatives have been implemented, and we will continue to drive further upside this year. In the fourth quarter, we achieved approximately $55 million in incremental EBITDAR, bringing our total to north of $130 million for the year in 2019. Clearly, we’re ahead of plan. We did experience slight delays in the fourth quarter and rolling out certain technology-related initiatives, which has now occurred by the end of the year. And we remain confident that we will beat our $200 million adjusted EBITDAR uplift goal by year-end. And Corey, of course, is here to provide more detail on that during Q&A. Looking out further, we expect the healthy trends in Las Vegas outside of Far East baccarat to continue into 2020.

We expect strength in the first quarter, driven by our convention and entertainment calendar. Last year, visitation grew 1% to near historic high levels. In McCarran’s passenger counts reached an all-time record of 51.5 million. Consumer confidence remains high. And while leisure booking windows are naturally short, we continue to see strength in that segment, especially bolstering our legacy property. And we have a lot to look forward to. The city is continuing its evolution as a sports town, with the NFL draft in the second quarter, and we are pleased to be hosting the NFL red carpet event on the Bellagio fountain. Las Vegas will also debut the Raiders at the 65,000-seat Allegiant Stadium, which is in Mandalay Bay’s backyard and will serve as a positive catalyst for our South Strip property. In boxing, we also have the heavyweight fight Fury versus Wilder rematch just next weekend. Our convention business is shaping up well, especially with the return of CON/AGG in the first quarter. Park MGM is also hitting its stride, with all of its elements up and running, anchored by the wonderfully unique food and beverage offerings and a strong entertainment roster at park theater.

As I mentioned earlier, Far East baccarat remains soft market-wide, and we’re not assuming a material recovery in the near term at our luxury properties in that segment, namely, at Bellagio, MGM Grand and Aria. And while the headwinds in 2019 set a very low base for 2Q and beyond, the first quarter remains a challenge in that Far East baccarat business. And finally, while we are currently closed in Macau, we continue to believe in the long-term success of MGM China. Before I turn it over to Q&A, I think it’s important to quickly reiterate our strategic goals for MGM Resorts. MGM Resorts is advancing its strategy of becoming an asset-light operator of market-leading properties across the United States. As a result, we will be better positioned to recycle capital from the more mature markets to high-growth, high-returning opportunities such as sports and Japan. By executing our strategy, we will: continue to leverage our brand and operating expertise as well as our investment in technology to enhance the guest experience; remain diligent about maintaining efficiencies in the streamlined business with reignited focus and discipline on cost; continue to grow MGM China’s market share in Macau, as we remain confident in our long-term prospects there; continue to reduce our ownership stake in MGP in the most efficient manner; and ultimately, deconsolidate.

We will remain committed in our free cash flow per share growth and very deliberate and thoughtful in our approach to capital allocation to maintain a fortified balance sheet with our targeted domestic net financial leverage, excluding MGP of approximately 1time by year-end 2020, return capital to shareholders, especially as we continue to evaluate paths to maximize the value of our 50% stake in City Center, the real estate of MGM Springfield and our ownership stake in MGP. Finally, we are in the prime position to capitalize on our two key long-term growth opportunities, japan and sports. Which we believe will create meaningful long-term value for MGM Resorts. We’ve made a substantial investment in time and effort in Japan, and we believe the MGM and ORIX-led consortium remains the front-runner to win the license in Osaka this summer. We have made significant progress with our sports betting business, which will support long-term growth for our online and bricks-and-mortar business. Looking ahead, our path is clear, and we remain focused on monetizing our remaining owned real estate assets, executing on our MGM 2020 plan, and transforming the way we operate to position MGM Resorts for future growth and long-term value creation.

With that, I will now turn it over for Q&A.

Questions and Answers:

Operator

[Operator Instructions] And the first question will come from Joe Greff with JPMorgan. Please go ahead.

Joe Greff — JPMorgan — Analyst

Hello, everybody.

Bill Hornbuckle — President and Chief Operating Officer

Hi, Joe.

Joe Greff — JPMorgan — Analyst

I have two buckets of questions. One relates to your news, Jim. And then the second question relates to your comments on Las Vegas. On the first bucket of related questions on you, Jim, will you be staying on the Board of MGM or MGP after a successor is anointed? And my second question related to that is, my perception of view is that you’re sort of the point person or the face person for MGM in Japan. I guess, who is carrying the torch in addition to you in Japan, for Osaka? And then my third related question is, do you anticipate any — or should we anticipate any other executive or property personnel changes, either now or in the medium term as a result of today’s news?

James J. Murren — Chairman and Chief Executive Officer

Sure, Joe. I’ll take those three. First, I think it’s important to kind of reset why I’m doing this and why I’m doing it now. I really feel after 12 years, especially after the last couple of years, we’ve really changed the dynamic of this company. We’ve created an incredible team of leaders portfolio property presidents, property presidents, heads of centers of excellence. And I think companies, honestly, never been in a better position than it is right now. And when I thought through how I could best serve MGM going forward. I thought it was pretty clear that a leader should help lead a company into the next decade or 2. And so I wanted to make sure the Board had the time, which I will use promptly to do a robust search and find my successor.

And I’ll help in any way I can in that regard. I do that with the confidence that we have such a great team in place. To my left, I look at Bill Hornbuckle and to my right Corey Sanders, Atif is on a plane flying back here. We have such great talent that I depend upon and trust to continue to run this company going forward. And I don’t want to get ahead of the Board’s process. They’ve developed a committee, they’ll hire a search firm. They’re going to go out and find the best possible candidate internally, externally or otherwise. And until that time, I will remain in all my post, Chairman of MGM Resorts, MGP, MGM China. But that’s my immediate focus at this point in time. As it relates to Japan, very likely in May, I will be leading a group of people, including Bill Hornbuckle to my left, to speak to the people of Osaka as the Chairman and CEO of MGM Resorts about why MGM and ORIX is the preferred partner.

Why MGM and ORIX would be the operator that would put Osaka in safe hand why MGM Resorts and ORIX are the most responsible, most compliant, most dynamic company. And I’m absolutely sure I’m going to be involved in the Japan project. In fact, I’ll probably be even more involved in the Japan project as time goes by. And as it relates to the team here, we have a seasoned respected team that I intend to work with, I know the company values and will continue to be here as we seamlessly transition the company into its next generation. So I hope I answered all three of those.

Joe Greff — JPMorgan — Analyst

That was great. And then switching over to just performance in Las Vegas. Looking back at the 4Q, obviously, Bellagio, The Grand in Mandalay Bay. Those are the ones, I guess, in that order, with Far East baccarat exposure. Was there anything else that those three properties are at the higher price point segment that’s causing their performance to be markedly different than everything else on the Las Vegas portfolio. Is there anything related to MGM 2020 transition or distraction that could have an impact on operating expenses that perhaps we didn’t anticipate?

Corey Sanders — Chief Financial Officer and Treasurer

No, Joe, this is Corey. To the contrary, they had a really good strong fourth quarter last year from that Far East segment and all of the EBITDA shortfalls from those properties are mainly from Far East, and in particular, MGM actually had a record fourth quarter ADR number. So we’re tracking the 2020 results at all properties, those properties are probably getting a little bit more benefit. The shortfall from that parties business was the main factor.

Joe Greff — JPMorgan — Analyst

Great, that’s all for me. Thank you guys.

Operator

Next question will be from Stephen Grambling with Goldman Sachs. Please go ahead.

Stephen Grambling — Goldman Sachs — Analyst

Thanks. Two quick follow-ups. I just want to make sure I heard correctly to the last set of questions on your decision, Jim. I guess, first, just to confirm, so you — are you going to be staying on the Board of MGP? And then secondarily, you mentioned funding the right successor or the best successor? And clearly, the business has changed significantly over the past two years and really over the past 10 years, so how does that inform how the Board thinks about the right background of a successor versus maybe 10 years ago? Thanks.

James J. Murren — Chairman and Chief Executive Officer

Sure. Bill and I joined the same month, I think, Bill? In 1998, Corey was already here. We had a whopping 1.5 properties. We had the MGM Grand and half of New York. New York, I think we had about 4,000, 5,000 employees in total. And obviously, a gaming-centric organization. And we have, through the collective energy of so many men and women that have been here or still here created this global entertainment company that is far more diverse than ever before. I think that, in answer to the first question, I cannot get ahead and we’ll not get ahead of the Board’s search committee and process. I serve at the pleasure of the Board, I’ve said that I will stay on in whatever capacity. I am the Chairman of all those companies you mentioned as I am the CEO, but it’s hard to say what will happen after that. What I do know is that the companies are better positioned now than they have ever been before, not only MGM resorts, but m in terms of the characteristics of a new CEO.

Again, that will be a process that the board and the search committee a lot of management here will have some involvement in. But I think you’re on the right track in the sense that we are a very diversified global entertainment company that expects to be able to evolve into a global experience, digital entertainment, sports company and be able to leverage what we’ve learned about running these large resorts and what we’re learning about the digital experience, which we believe is vastly under, if not at all, valued in the current securities of MGM. And so we’re devoting a tremendous amount of effort and time through our sports and entertainment initiatives, it’s certainly dragging down our P&L right now, but we are planting seeds, which we believe will yield tremendous growth in the future. And I’m sure the board and the board members and the search committee will be looking at what MGM is going to look like five years from now, when they’re evaluating the kind of leader that MGM Resorts should have.

And that really is why this is so rewarding a time for me that we’ve taken the company to where we are today. Our strategic plan is well-known to us internally. We have the right men and women in place. Our real estate strategy is well defined, and obviously, has been more successful than anyone imagined. We’ve set the blueprint and how to continue to go down that path. And now it’s time for the board to work with board members, a search committee and stakeholders to find the right person that will take the company to ever greater heights than even we are today.

Stephen Grambling — Goldman Sachs — Analyst

So that’s a good segue to a follow-up question just on sports betting. And as we look at the initial results of not only sports betting, but igaming in New Jersey. Can you talk about your initial learnings in terms of the JV? How it frames the expectations for that longer term? And you mentioned some investments or spending ahead of growth now? Are you at a point where that should start to moderate? Or are you still in investment mode?

Bill Hornbuckle — President and Chief Operating Officer

Stephen, this is Bill Hornbuckle. Let me grab that one. Obviously, you can tell, we’re still very bullish. We feel a little underappreciated given what’s happened in the marketplace. And some of the statistics are compelling and growing. We did over $100 million last year in net gaming revenue, our active player growth is up over 126% since June. Interestingly, we’ve taken a unique position because of our asset-based here in Las Vegas and the experience we can offer during Super Bowl, by way of example, eight of the top 10 bets in America were with Roar or MGM resorts. We’re in four states quickly to be in eight by year-end. We have access into ’16, and we have a view on six more that we hope to government affairs to open up, led by Massachusetts. Candidly, our GVC venture with Rob went off to a slow start in New Jersey. It’s two mega companies trying to put themselves together.

We’ve effectively done that. We now have 150 men and women working in New Jersey every day to push this forward. And I think we’re in a much better place than we were a year ago. I think you know this, Michigan has just passed, we hope to dominate. And frankly, we should there. We’ve got a huge retail presence. It accepts online gaming and casino as well, which we think will be unique opportunity. We have done and executed a deal with Buffalo Wild Wings. And if I think about Michigan alone, of the 1,685 stores, they have 27 of them are in Michigan. We’ve got Yahoo! Sports behind us. It’s now just unwinding and launching. They got 60 million sports viewers and 7 million of fantasy alone. And then in Las Vegas, literally next week, we launched Bet MGM. We haven’t even launched a platform here yet. And so kiosks, a presence and an overview around Bet MGM and both on an app and as well as a branding exercise throughout all of our sportsbooks takes play over the next three months.

And so we’re extremely aggressive. Look, order of magnitude, well, it’s heavy — it’s not heavy capital. If this whole thing cost both partners, $100 million, it will be a lot. It’s about $2 million of state. If we invest over the next couple of years, $30 million each, that’s probably realistic. But we had hoped by 2023, pushing into 2025 to go into profit. And you’ve all looked at the analyst — your own projections, if it’s a $10 billion market, which is short in some people’s examples, and we own 15% of it, it’s $1.5 billion, you can do the margins on that. It’s a real business, and it’s a real business before we take advantage of what brings us here in Las Vegas. And what we’ve seen in Mississippi, and to some degree, now at Borgata. So extremely bullish on the whole thing.

Stephen Grambling — Goldman Sachs — Analyst

Helpful. Thanks so much. I’ll jump back in the queue.

Operator

The next question is from Felicia Hendrix with Barclays. Please go ahead.

Felicia Hendrix — Barclays — Analyst

Hi, thanks so much. I was wondering if we could just return to the comments, Jim, you had on the Strip EBITDA margin? You said it would have been up 1.5 percentage points year-over-year, if it wasn’t for Circus Circus, the baccarat situation and the insurance proceeds, but I’m just wondering if you could help us understand how much baccarat affected the flow-through on margins in the quarter?

Just the missed on the EBITDA margin side was considerably even hold adjusted. So I’m trying to understand that better, especially given the expectation for baccarat to stay weak. And along those lines, I was just wondering if there was anything you guys are doing on the cost side to mitigate the lower baccarat demand that you’re expecting?

James J. Murren — Chairman and Chief Executive Officer

I’ll take part of it, maybe all three of us have a different view. One good indicator is take a look at the mid-market properties. And there, you’ll see where the flow-through works. Margin improvement. A couple of real strong quarters there. And the margins on Far East baccarat in general are so high that it has an outsized impact on margin and that’s what happened in the nutshell, at MGM, Aria and Bellagio, the underpinnings of those three properties outside of that segment, which is significant in the fourth quarter for them were all very positive. We typically do most of our business in that field in December, literally last couple of weeks of December. So we had projected. We knew we had a tough comp year-over-year, but we had a very poor December at those properties, which had the impact on the margin and so I mean, I think that’s one answer to it. Corey, do you have another?

Corey Sanders — Chief Financial Officer and Treasurer

Yes. What I would — Felicia, about — of that EBITDA miss, I would say, wholly owned, $13 million of it was a hold adjusted. Aria also had a pretty big piece. The rest is volume. And we had a pretty strong quarter the year before from a volume perspective as we identified last quarter. When you look at that business, as Jim has mentioned, it’s really the premium Far East customer. The margins on that is pretty significant. So now the base goes down to a pretty low base, as we mentioned earlier, about 2% of EBITDA so we shouldn’t have that headwind of trying to offset that $100 million of profit at a high, fairly, let’s say, 60%, 65% margin. And so the comparison becomes much easier. On the cost side, Bill, do you want to cover a few things we’re doing there?

Bill Hornbuckle — President and Chief Operating Officer

Look, overall, I think, mostly through 2020, you’ve all heard of the labor savings. We’re up over $100 million. We remain there. The luxury properties have leaned into that heavily. We’ve got several initiatives ongoing with purchasing and many of the supplies that we’ve secured. And so we are — all of that is clicking into play. It just got buried in this Far East story.

Corey Sanders — Chief Financial Officer and Treasurer

And we’re looking at our international offices, our international staffing to make sure that, that matches the volumes.

James J. Murren — Chairman and Chief Executive Officer

Yes, I guess, the bottom line on that is, we lost $100 million of profit last year, we only made $35 million. That’s where we’re going up against this year, $35 million of profit last year. And what we’re trying to help you with is kind of if you adjust, getting back to your question, we’re just out Circus Circus, obviously, and that one timer of the insurance proceeds we’ve gotten a year ago and the baccarat impact, which is what Bill and Corey are talking about that hold and drop, our margins would have been up 150 basis points.

Corey Sanders — Chief Financial Officer and Treasurer

And the final thing I would add on the — we looked at our nongaming margin improvement across all properties in Las Vegas, so we’re up over 1.2%. So we’re seeing the margin flow-through in all the other areas. So that’s what gives us some confidence.

Felicia Hendrix — Barclays — Analyst

Okay. And it sounds like you’ve now like rebased. So you’re — so the tough comps are kind of behind. And so when we think about our modeling going forward, we have that lower base.

James J. Murren — Chairman and Chief Executive Officer

Yes. There’s going to be a little bit in the first quarter, right? We talked about that, but that’s it.

Corey Sanders — Chief Financial Officer and Treasurer

I mean, that’s not to the extent that we saw in the fourth quarter.

James J. Murren — Chairman and Chief Executive Officer

Yes. Not to the extent of fourth quarter, but then that’s — it is where it is now. It will come back. We’ve been in this business a while, but we’re just not predicting any recovery in the Far East business this year, just — we just can’t guess what that’s going to be.

Felicia Hendrix — Barclays — Analyst

Yes, that’s fair. And Grant, wake-up Grant. I have a question. So Grant, I know it was — Jim mentioned this a bit in his prepared remarks, but it was just kind of a quick sentence. Can you just talk to us a bit about what you were seeing pre-corona? And I believe at the time, there’s some market share gains and stuff like that. So can you just tell us before everything kind of closed down what you were seeing?

Grant R. Bowie — Chief Executive Officer and Executive Director

Sure. Thanks, Felicia. And I was awake. Actually, this is probably one of the most greater tragedy. We were seeing some really positive. As Jim said, we were running at 2.5 for the period immediately into Chinese New Year. And with the Mansion online, we were way, way overbooked. We were actually not confirming any Mansion rooms because we just had a big list. So we were really in a very good place, all of the things we were looking at doing were really coming together.

But I guess, that’s what being in business is about, it’s about how you handle the versatility. And now we just reset ourselves, and we just want to move forward. But by and large, everything is moving in the right direction. We were still tracking positively on share gains, particularly in the premium end of the market.

Felicia Hendrix — Barclays — Analyst

Okay, thank you very much.

Operator

Next question comes from Harry Curtis with Instinet. Please go ahead.

Harry Curtis — Instinet — Analyst

Hello, everyone. Hello, everyone. And first, Jim, I just have to say thank you for all of the service that you’ve given to your company and you’ll still be there for all our questions, but it’s been a great run. Thank you.

James J. Murren — Chairman and Chief Executive Officer

Thank you, Harry.

Harry Curtis — Instinet — Analyst

Let’s see. The first question I had is really related to the weaker Asia baccarat. I’m just trying to understand why it was such a surprise? Is it — was it due to competitive pressures? There were some thinking going into the end of the fourth quarter that Xi’s visit might have pushed business to Las Vegas. What are your hosts telling you about the source of the volume weakness? And did some of it come back in the early part of January?

Bill Hornbuckle — President and Chief Operating Officer

So Harry, this is Bill. Let me take a first crack at that. Look, as alluded to last year, we had an amazing event in the fourth quarter with Tiger Woods versus Mickelson that netted us substantive amount of EBITDA. So comparative was difficult, put that into the mix. The second thing is, as you know, all year, our ability to get liquidity in and out of Macau and China has been hampered. We continue to look at ways to do that righteously, we have been disproportionately hurt. I would suggest to you that our marketing environment is such, we relied heavily on junkets and large-scale customers our market share was well in the mid-40s for a considerable number of years based on we probably have more than $3 million customers and up than most. And I know we had more million dollars in customers and up in most.

And those are the individuals most impacted by some of these liquidity issues. The interesting part of the year, going into Chinese New Year, while it wasn’t last year and clearly, anything like 2018 and we still had a reasonable show up. We had a great event. We had a decent concert at the weekend following with about 6,000 folks in it. And it wasn’t a horrific event by any stretch, given the circumstance and what had happened globally. So we remain optimistic that if we can get through, obviously, and we will get through what’s happening now in China and in Macau. And we understand what the — what can be accomplished with liquidity and getting those customers back to Las Vegas. The appetites there are desire to go after them and the network we’ve created is there and we’ll continue to succeed.

Harry Curtis — Instinet — Analyst

So as a follow-up, do you think that Beijing has put any roadblock in place that has impacted customer volumes?

Bill Hornbuckle — President and Chief Operating Officer

Well, I mean, as you know, in Macau, they’ve become very stringent on utilizing the casinos and junket operatives for accessing liquidity in and out of this market or any other market. I don’t want to — I won’t predetermine where that directive came from. Or if it was our own directive, but that is fact. And so I’ll leave it at that.

Harry Curtis — Instinet — Analyst

Okay. I just had one other quick one for Grant. You’ve got a pretty good crystal ball, Grant. And just — I wanted to see if you had an opinion on what do you think the markers will be that Beijing wants to see before they begin allowing customers back into Macau?

Grant R. Bowie — Chief Executive Officer and Executive Director

Harry, I think the critical point is, it’s going to be the spread of the infection. Their sole and complete focus is about containing and eliminating this outbreak. The Macau government has taken very effective and decisive action and indicators we’re giving is that the single measure of whether the — when the — firstly, the casinos will be reopened. And then hopefully, the ability for IVS to be put on board is going to be about the containment of the virus, I think it’s as simple as that.

Harry Curtis — Instinet — Analyst

So it’s not a question of it’s just peaking, it needs to be eradicated?

Grant R. Bowie — Chief Executive Officer and Executive Director

Well, I’m not a virologist. So I think it’s just a question when the experts are comfortable that the cycle of the virus spread has been contained, and they have it under control. It may also mean that the IVS program has not opened up as a signal step, it may happen regionally. We’re just sitting, working with the government to make sure that we take care of ourselves and take care of everyone else and that we’re ready. Macau’s in a very fortuitous position because of that decisive action from the government.

We’ve had two infections, but we haven’t had any since the action taken by Chief Executive, and we’re now up to eight to nearly 10 days without any further infection. So that’s the critical point. We need to make sure that Macau is safe. And then we obviously continue to work and support the initiatives in China to make sure we can contain this within China.

Harry Curtis — Instinet — Analyst

All right, well, fingers crossed. And thanks, everyone.

James J. Murren — Chairman and Chief Executive Officer

Thank you.

Operator

The next question will be from Shaun Kelley with Bank of America. Please go ahead.

Shaun Kelley — Bank of America — Analyst

Hi, great. Thank you for taking my question. Maybe just one big picture strategic one, and then maybe a follow-up on the whole baccarat piece. But on the strategic question, Jim, in some of the prepared remarks, you did mention some of the as you laid out on the strategy, I think, you laid out some of the future road map here for the stake in MGP. Could you help us like — or maybe elaborate a little bit of that. I believe you talked about both kind of a potential further reduction in stake and then ultimately changes in governance or your consolidation there.

But could you give us a little bit more in either timing or the company’s willingness to maybe change some of — maybe unilaterally changed either the dual-class stock or some of the mechanisms that could trigger a deconsolidation? Because you get a lot of questions were sort of in-process through all the big sort of asset-light movement here, and I think this would be helpful for investors.

James J. Murren — Chairman and Chief Executive Officer

Sure. Well, first off, we are, as the largest stakeholder of MGP, its biggest supporters. And certainly, the stock has done well since we developed the UPREIT a few years ago. Our economic ownership in MGP will be about 55% after the $1.4 billion OP unit redemption and remember, that’s down from our original 73% stake. And we are absolutely committed to ultimately owning far less of MGP on a going-forward basis. And we are committed to deconsolidate MGP. We’ve always said that MGP continues to have the right path forward with the right management team and it will acquire quality assets outside of MGM. And it will access the capital markets to do so, and that is a path to further reduce our stake in MGP. The OP unit redemptions for cash provide another path for us to reduce our stake, and we’ll continue to look to monetize a portion of our equity stake is long it is done in a manner that maximizes the benefits to both companies. Because I have to repeat, it’s important to note that MGM is still an important stakeholder there.

You know that we have an agreement with MGP to redeem the $1.4 billion of cash at our election. When that’s exercised in full, it still leaves us with zone around $5 billion worth of units. Those units have varying tax basis and — but a sizable subset of the remaining units have a higher basis and can be sold in taxable transactions with manageable tax leakage. We’re not going to get into the details of it specifically, but I can say with great certainty that it is our goal to continue to help MGP thrive, help it grow a diverse quality portfolio of assets, make sure it does so with a strong balance sheet, help it find partners as it has recently had found with Blackstone that can show future growth opportunities for MGP and inject more capital into MGP and find a way forward that MGP very deliberately becomes that independent corporate governed #1 type of company that MGM Resorts is. We’re proud of where we stand with ISS at MGM Resorts. We take corporate governance seriously. Independence, we take our commitment to shareholders seriously. And we have nothing but the clear direction for MGP to do so in this deliberate fashion.

And I think that we’ve proven that point of finding transactions that make sense for MGP, finding partners that could provide significant incremental value to MGP, making sure that MGP’s stakeholders, all of the stakeholders are treated fairly ensuring that MGP has a strong balance sheet to provide a platform to grow in the future. And it is our goal to make sure that the company that we believe to be the premium by far best-in-class triple net in its space, we’ll continue to be able to thrive because it does have the best assets in that industry and because it has the best tenant of any of the triple nets, a tenant in MGM Resorts that is only getting stronger every single day from its own balance sheet perspective. And so I think history, in this case, is a really good guide to the future. And we’ve made progress. We’re a bit ahead of our plan. We’re deliberate on this, and we’re going to continue to move forward so that MGP continue to grow, grow independently and be the best possible triple net it could be.

Shaun Kelley — Bank of America — Analyst

Thank you for that. And then maybe as a follow-up, we talked plenty about the baccarat business. But I think throughout some of the commentary, you guys also called out some specific investments in sports and entertainment, but probably specifically on the sports side as some things are getting up and running. Could you perhaps either help us kind of call out or quantify either sort of what level of run rate were those numbers in the fourth quarter that we saw? And probably much more importantly for folks, what kind of investment level are we looking at as we fast forward to kind of 2020 or maybe into 2021? And is that running through any of the divisional level P&L? Or is this all just stuff that we’re either seeing in corporate or somehow kind of elsewhere in the P&L?

Corey Sanders — Chief Financial Officer and Treasurer

Yes, Shaun, it’s Corey. It’s probably a little bit north of $10 million for the quarter. Most of it is running through management and other. All of it’s running through management and another. It would either be through the unconsolidated joint venture with Roar or investments we’re making with regards to our sponsorships and team efforts there.

Shaun Kelley — Bank of America — Analyst

Great. Corey, any thoughts on sort of next year budget of that kind of similar $10 million type number? Is that a good quarterly run rate?

Corey Sanders — Chief Financial Officer and Treasurer

No. I think Bill gave a number on what we thought the investment — the additional investment would be in sports next year, and I think that’s a good number.

Shaun Kelley — Bank of America — Analyst

Thank you very much.

Operator

Next question will be from Thomas Allen of Morgan Stanley. Please go ahead.

Thomas Allen — Morgan Stanley — Analyst

Congrats, Jim, on what has been a long and successful career at MGM, and no you’re not going anywhere soon, but I just want to say thank you for your help over the years.

James J. Murren — Chairman and Chief Executive Officer

Thank you. Thank you very much.

Thomas Allen — Morgan Stanley — Analyst

So look, there are a lot of moving parts in Vegas. So I just wanted to see if you could kind of level set expectations a little bit, at least for the first quarter, given you do have some visibility into the first two months or the first one and half months of the quarter. So first quarter consensus for Vegas EBITDA is about $440 million. Last year, you did $400 million. Can you just kind of give us a sense of expectation?

James J. Murren — Chairman and Chief Executive Officer

Well, I’ll give you some macros around what we see, if that helps. And we’ve been doing quite a bit of analysis on this. What we see first is strong population growth, which is obviously significant for the local resorts out here, but also we see all-time highs in convention and meeting business, we see the prospect for strong McCarran business. We see events this year. We did not have last year. It’s — if anyone saw Nashville last year. In terms of the NFL, imagine what Las Vegas can do. Of course, CON/AGG this quarter and the Raiders, everything leading up to the Raiders. Think about the Las Vegas Convention Center expansion. We’re really excited about the sphere. I can’t wait to go to that. I think it’s important to know that our slot win last year was actually up 4% for the year. Our non-bac table games were actually flattish, and we’re going to have a lot more impact on 2020 in the first quarter, than we did in the fourth quarter.

And so as that’s ramping up, you should model in the fact that we’re hitting our stride there. Conventions are important to the whole city they’re important to us. It will be important to Mandalay Bay, which is returning back to its — really its full recovery. It’s kind of business as usual at Mandalay. We had very low attrition levels there in 2019, the lowest we’ve had a few years, and that’s starting to really build momentum and there will be a lot more groups in Las Vegas, starting in the first quarter than we had last year, not just because of the citywide, but with Wynn and Caesars expanding their spaces. That’s good news for the town. It’s bringing more people to town. We’re actually seeing some of that. And finally, that leisure demand that we talked about. I know those are short booking windows, but they are illustrative of real-time demand and they’ve been very positive. And of course, the entertainment calendar is terrific. So without getting into cash flow numbers and guidance, and we’ve talked why that we think this is a better approach towards communicating with investors. We have a pretty well, a very broad view of what’s happening here in Las Vegas.

And we like what we see in all of these metrics, save for that Far East baccarat business. But the domestic box business, the domestic table business, the slot business, the nongaming business, combined with some real good trends in the rooms here in town, which of course, creates nice flow through for everybody and we’ll be amplified, at least for us this year because of really hitting our stride on our 2020 initiatives, which is ramping up fairly rapidly, gives you a sense why we feel that there’s a significant pace of cash flows here in the first quarter that are superior to what we saw in the fourth quarter.

Bill Hornbuckle — President and Chief Operating Officer

Yes. And Thomas, just looking at the first quarter, the other thing that I think we didn’t cover, Park is beginning to ramp, and we like the ramp that we’re seeing there. So between Park, last year, we hardly had any 2020 benefit and then you take the RevPAR benefit, we should expect to see from Q1 in a strong convention quarter, I think, even though we will not be giving guidance, we feel pretty good about the first quarter.

Thomas Allen — Morgan Stanley — Analyst

I think it’s — you guys spent a long time trying to get people to shift that focus away from RevPAR growth, and you put up 6% RevPAR growth this quarter and had really strong RevPAR growth the past few quarters. I assume that should continue to be strong, that’s not impacted by the Far East play and coronavirus isn’t having an impact on kind of the core trends? Is that a fair comment? And just talk about convention mix for 2022, would be helpful. Thank you.

James J. Murren — Chairman and Chief Executive Officer

Yes. I mean, we’re going to stand by what we’re talking about. We see these strong macro trends. It was a great RevPAR quarter, there’s no doubt about it. And I think what we’ve laid out here is — gives you the setup for nice growth. But beyond that, we’re not going to get too into it. Very minimal impact on corona.

Catherine Park — Executive Director of Investor Relation

We’ll take the last question please.

Operator

And that question will come from Carlo Santarelli with Deutsche Bank. Please go ahead.

Carlo Santarelli — Deutsche Bank — Analyst

Hey guys, and Jim, congratulations on your career. Just, if I could, when you guys look at the Las Vegas landscape today and think about the position that the company is in from a balance sheet perspective, acknowledging that the buyback that you’re doing in the near term here as well as the incremental $1.75 billion that will remain outstanding, all coupled with kind of your 1 time domestic, I believe, that’s an EBITDA number leverage, correct, after rent. How does M&A kind of play into that, given the fact that there could potentially be some assets on the Strip that might fit nicely with the portfolio?

James J. Murren — Chairman and Chief Executive Officer

Yes. We’re really not focused on M&A. We like what we own. We approach our portfolio in a way that — particularly pruning it as we have over the last several years. We like these assets. I don’t envision us being very focused on M&A going forward. I do believe that what we are looking at where can we deploy capital in high ROI ways. We think that’s Japan. We think that sports. If we can help motivate some change in Yonkers and provide more of a gaming experience there. That certainly was part of the strategic basis that we acquired that asset. But that really is our focus right now is working toward reducing our assets, recycling that capital, getting that balance sheet absolutely what the best it’s been since I’ve been at the company right now and getting better and getting ourselves so well positioned for whatever the world will bring in the future. And recycling and returning that capital to the shareholders, 15% increase in the dividend today should send the message as well as the return on capital in the form of share repurchase.

And that really is our focus, delivering on the strategic plan of 2020, making sure that this operating model, which is a young model. We have men and women that are only recently been put in these strong leadership positions, making sure that they have the ability to thrive, finishing the execution of this real estate strategy and really devoting. And I’m going to spend an awful lot of my time on sports and entertainment and on Japan, which I believe I could help the company best focus on those areas to create value for the future. So with that, I want to thank everyone, first for calling in. And just to highlight a couple of points before we end. We are focused on the impacts of the coronavirus. And I think Grant said it well, we’re absolutely prioritizing the safety of our customers and our employees. But we feel that, that situation will be managed and the company is well positioned, given our diversification as a global company and our balance sheet strength. We’ve made a lot of meaningful progress with our real estate transactions resulting in the $8.2 billion of net cash proceeds.

And we’re using that dramatically reduce leverage to invest in places I just mentioned, in Japan, and in sports. We’re firmly on track to continue to announce additional real estate transactions this year. Our domestic business is very solid. And we are very focused on these cost reductions, which we know will further support growth in EBITDAR and free cash flow per share. I want to thank you all for your support. And I want to make it very clear, I’m not leaving MGM anytime soon. And so I know for sure that I’ll be on the next call with you, and I look forward to talking with you all between now and then. And with that, have a very nice day. Thank you.

Operator

[Operator Closing Remarks]