MGM Resorts International (MGM) Q1 2023 Earnings Call Transcript

MGM Resorts International (MGM 0.90%)
Q1 2023 Earnings Call
May 01, 2023, 5:00 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good afternoon, and welcome to the MGM Resorts International first-quarter 2023 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. Participants are in a listen-only mode. After the company's remarks, there will be a question-and-answer session.

In fairness to all participants, please limit yourself to one question and one follow-up. Please note, this conference is being recorded. 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 first-quarter 2023 earnings call. This call is being broadcast live on the internet at investors.mgmresorts.com. We have also furnished 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 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, will also discuss non-GAAP financial measures and talking about our performance.

You can find the reconciliation of 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.

Bill Hornbuckle -- President and Chief Executive Officer

Thank you, Andrew, and good afternoon and thank all of you for joining us today. I'd like to start by highlighting the recent news that the Japanese central government officially certified our area development plan in Osaka, which is a recognition of our perseverance and the great partnership that we have forged after more than a dozen years. This is one of the final steps that paves the way for us to begin our development process in Osaka to create what we are likely be the first integrated resort in Japan. I'd like to thank the government of Japan, the city of Osaka, a local partner, ORIX, and Ed Bowers and the development team, and the many MGM employees who helped make this a reality.

It's truly an honor, and we look forward to getting started on this major development to increase our global reach and fulfill our strategy to increase our geographic diversification. Turning to results. MGM Resorts posted just an outstanding quarter of financial performance to start 2023, driven by another record Las Vegas quarter and significant recovery at our MGM China. MGM China is experiencing a rapid recovery following the lift of public health policy restrictions.

Our first quarter outperformance in Macau is a direct result of the meticulous preparation and well-executed plan put together by our team at MGM China, who ensured that we were ready to capture market share and drive results upon reopening. I'll point to a few KPIs that reflect our impressive start to the year in Macau. In the first quarter, our MGM China properties generated adjusted property EBITDAR of 169 million, or 88%, of our first quarter 2019 adjusted property EBITDAR. Our market share was 15% during the quarter, and we are confident in our ability to sustain share which we put in place key structural advantages including, one, we gained an additional 200 tables as part of the concession renewal process.

This represents a 33% increase in the tables for MGM in a market with fixed table allocations. Currently, our half of our incremental tables are fully in use, and the remaining will be added as demand returns and we complete further refurbishments on the casino floors. We also enhanced our property and remodels in the casino floors at both MGM Macau and MGM Cotai to focus on mass and premium mass, along with adding 57 high-end villa suites at our Cotai property. In addition, we also have the advantage of our global sales' international branch marketing network.

We are actively leveraging our customer database to bring global customers to our properties. While we recognize that additional hotel supply will enter the market, these drivers, along with a deep customer understanding from our property leadership, I believe will allow MGM China to maintain a share in the teens. I'd also like to thank the Macau SAR government for their partnership, and we look forward to working alongside them as we support Macau's positioning as a world center for tourism and leisure. Moving stateside, we have once again achieved exceptional results in Las Vegas with a record-breaking first quarter.

This marks our seventh consecutive quarter of record EBITDAR, and we had all -- we owe it all to the hard work and dedication of our thousands of employees. This quarter's Strip performance was fueled by a fantastic calendar of sports events, including for the first time, hosting Sweet Sixteen and March Madness and other entertainment and convention events at our properties and throughout the city. The quality and consistency of entertainment and sports programming at MGM Resorts and throughout Las Vegas has been a catalyst for the permanent transformation and strength in demand of our offerings. This is no better example than Formula 1, which as you know, will come to Las Vegas for the first time this November.

Additionally, we are laser-focused on continuing to invest in our properties with a handful of capital and projects on the Strip. At Bellagio, we are completing a three-year remodel of all rooms and suites with our spa tower. This is in addition to enhancing our high-end gaming offering with a newly remodeled club, Prive, for high-end table games customers, and our baccarat lounge just reopened after a full renovation. We have begun construction of a pedestrian bridge to connect the cosmopolitan Las Vegas with Bellagio and Vdara.

We are undergoing a full upgrade of our Mandalay Bay Convention Center along with numerous restaurants, bars, entertainment outlets, and significant room remodels at New York-New York MGM and the Water Club at Borgata. By the way, we'll soon carry the MGM flag alongside Borgata's brands. These initiatives will be drivers of our customer loyalty and spend and, ultimately, future free cash flow. Onto our regional portfolio.

It showed consistent year-over-year top-line growth with stable profitability. I'd like to specifically recognize the Beau Rivage team and congratulate them for executing well on a beautiful roomy model, which is completed in 2022 and is seeing a very strong customer response. Turning now to BetMGM. In the first quarter, we expanded our footprint by launching in Ohio and Massachusetts, bringing our total active markets to 26.

Based on results thus far, BetMGM remains on track to hit fiscal '23 revenue guidance of $1.8 billion to $2 billion. BetMGM is also continuing to make progress toward profitability later this year, all while continuing to expand and improve its product offering with our joint venture partner Entain. As we look at this business, we're encouraged by the improving economics that will translate into long-term profitability. As a reminder, as states mature and we focus on growing our NGR, optimizing retention bonusing, and focusing on most profitable players, overall CPAs will decrease and the conversion from GGR to NGR will increase, ultimately driving profitability.

Internationally, we announced today the first major investment by our subsidiary, LeoVegas, with LeoVegas entering into an agreement to acquire the majority of a game developer, Push Gaming. Push is a proprietary content provider that will allow LeoVegas to grow its library of games as they extend their digital gaming presence to new markets. Push offers several industry-leading games to over 200 operators globally. On the development front, we're working through the RFA process in New York.

We plan to submit our official application in the summer and hope to receive a response by the first half of next year. We continue to expect total spend in New York to be approximately 2 billion inclusive of the licensing -- inclusive of the licensing fee. And should we win a license in New York, our plan is for extensive property improvements such as a new 5,000-seat theater, new food and beverage outlets, covered parking, and an increase overall to the casino floor space. We will share more specifics as part of our submission process continues.

Now back to Japan. As we progress, we see great opportunity. Osaka has approximately 30 million people within a three-hour transit time of our site in Yumeshima. Our site in Osaka is also expected to drive international tourism in Japan given its proximity to other major -- other major Asian countries.

And I will remind all that Osaka is closer to many northern Chinese cities than any other gaming market. Considering that they will likely be our integrated resource offerings for -- the first integrated resort offerings for some time in Japan, we believe this project will generate a minimum to high teens free cash flow yield. Putting it all together, MGM Resorts offers steady earnings power through our existing operations and world-class brands, plus significant growth opportunity through our digital business, the recovery in Macau, and our development opportunities. Our balance sheet boasts impressive strengths with 4.5 billion of cash, excluding MGM China, as shown in the presentation.

Now to Jonathan for more detail on the quarter.

Jonathan Halkyard -- Chief Financial Officer

Thanks, Bill. And I, too, want to congratulate our employees for delivering another record quarter of financial results. I'd also like to recognize and thank our teams in both Japan and Macau for their outstanding wins this quarter. Digging into the numbers.

Our consolidated businesses generated revenues of 3.9 billion this quarter, up 36% from last year, and adjusted EBITDAR of 1.1 billion. An even more impressive story was our free cash flow. During the quarter, net cash from operating activities was 704 million. Less capital expenditures, free cash flow was $564 million.

It's important to note that 184 million in cash flow from operating activities and $6 million of capex related to MGM China in the quarter. This was a particularly strong quarter in free cash flow due not only to our operating results, but also timing of taxes, interest payments, and ramping of capex. Our operating results certainly benefited from a recovery at MGM China as Macau reopened and our team executed on that reopening plan. Gross gaming revenue or Wynn at MGM China ramped to 78% of 2019 in the first quarter, or 663 million, compared to less than 50% marketwide GGR recovery.

This increase was driven by our main floor GGR, which exceeded 2019 levels in the first quarter. Adjusted property EBITDAR was 169 million, 88% of 2019 first-quarter levels, and margin was 27% compared to 26% in 2019. Here in Las Vegas, margins of 38% remain in line with our performance for the last several quarters. On a year-over-year basis, our revenues grew 513 million and our adjusted property EBITDAR grew 242 million, representing a flow-through of 47%.

These results are a testament to the market leadership of our properties, our pricing strategy, and expense controls. First-quarter occupancy was 92%, and ADR was $258, an increase of 31% year over year. Looking forward, our pace which reflects on-the-books rooms, is up year over year for every month from now until November. Food and beverage is also worth highlighting this quarter as it benefited from the 14-percentage-point increase in occupancy and a 38% increase in restaurant covers.

Food and beverage revenues were up 52%. And banquet spend, which is one of our highest-margin businesses, grew 84% due to the recovery in our group segment versus a year ago. In the regionals, first-quarter same-store revenues that excludes Gold Strike grew 10% with adjusted property EBITDAR up 6% year over year. BetMGM generated net gaming revenues from operations of 476 million in the first quarter, representing a 76% increase over 2022.

BetMGM's market share was 28% in iGaming and, when blended with online sports betting, had 17% market share in the U.S. across states in which it operates. Our 50% share of BetMGM operating losses was $82 million, which represents our highest expected loss of the year as the first quarter is a heavy acquisition period with Super Bowl and March Madness, plus launches in two states. At the cohort level, the data is showing robust player economics and a successful bonus optimization strategy.

Same-store NGR from online sports increased 100% in the first quarter, and BetMGM remains on course to profitability later in 2023. Before turning it back to Bill, I'll conclude, as usual, with a few observations on our free cash flow and our financial algorithm more generally. We're in an enviable position financially. Our collection of superior properties in Las Vegas, together with the stable operating performance of our regional portfolio, generates ample free cash flow from our domestic operations.

BetMGM is fully capitalized now, growing rapidly and turning toward profitability later this year. Our Macau enterprise is already operating at near pre-pandemic levels. Our balance sheet is strong and highly liquid. At the end of the quarter, excluding China, we had approximately $4.5 billion of cash, as shown in the presentation, and more cash than debt, creating a net cash position of 1.3 billion.

All of this allows us to invest for growth, delever, and repurchase shares, steadily reducing our share count. In the first quarter, we completed the sale of the Gold Strike Tunica for $450 million in gross proceeds. We received 170 million in the early prepayment of a note receivable that was secured by excess land from our Circus Circus transaction. We repaid $1.25 billion of our 6% notes.

In April, we paid 138 million to a minority investor in National Harbor as a result of the sale of their economic interest. And we agreed to purchase real estate between the Bellagio and The Cosmopolitan of Las Vegas to enable connectivity among these properties going forward. And this morning, we announced the acquisition of Push Gaming, augmenting our international digital strategy. The Japan and New York development opportunities lie before us, and we expect them to offer attractive free cash flow yields for our shareholders.

This year through today, we've repurchased -- repurchased 16 million shares for $654 million, excluding excise tax, and that represents 4% of our share count. And we'll continue to repurchase shares, capturing the free cash flow yield on our shares, reducing our share count, and growing free cash flow per share. Bill, back to you.

Bill Hornbuckle -- President and Chief Executive Officer

Thanks, Jonathan. A couple of comments and then we'll open it up for questions. You know, I got to say I'm extremely proud of the entire team. It's arguably one of our best quarters ever.

If you think about the overall performance, Las Vegas, Macau, the major development news we had in Japan, our pursuit of New York, things are going exceptionally well there. Jonathan just mentioned, and obviously, it's our intent that MGM is an inflection point, and then we continue to push through LeoVegas and growing our digital business on an international scale. We are obviously now almost a year into our acquisition of Cosmopolitan, and so we couldn't be happier with the position in the leading resorts we have here in Las Vegas. We have four of the country's top eight regional casinos in terms of performance, which fortifies the effort that we have her, and not only those markets, but sending people back to Las Vegas.

And we have a fortified balance sheet that still continues to allow us to buy back the shares and we think appropriate and invest in our company's future. With that, operator, we'll open up to any questions.

Questions & Answers:

Operator

Thank you. We will now begin the question-and-answer session. [Operator instructions] And the first question will be from Joe Greff from J.P. Morgan.

Please go ahead.

Joe Greff -- JPMorgan Chase and Company -- Analyst

Good afternoon, guys. I hope you're well. Jonathan, your comments in Las Vegas, in terms of looking ahead and talking about your bookings pace and how it's up year over year, every month now through November, very interesting comment. Can you talk about how even that is or how even performance in Las Vegas between the higher end and the lower end between midweek and weekend? Then I have a follow-up.

Jonathan Halkyard -- Chief Financial Officer

Sure. I will -- I'll make a couple of comments, Joe, and then I'll certainly invite Corey to add his perspective as well. You know, the strength in -- in -- in Las Vegas really has been driven mostly -- not entirely but mostly by weekend rates. That's where the real pricing power has been.

It's been certainly supported by the event schedule Bill referenced in his remarks. But we're still seeing -- during the quarter saw growth -- growth in the midweek room rates as well, but the real strength has been from the weekends. And then going forward, you know the -- any differences in terms of the pacing on the books is -- is typically driven by the group customers that are on the books. You know, the groups are a bit lighter during the summer months than they are, say, deeper into the fall.

But I would say, on balance, that it's a pretty even outlook we have in terms of the way the pace is building.

Bill Hornbuckle -- President and Chief Executive Officer

I would agree.

Joe Greff -- JPMorgan Chase and Company -- Analyst

Great and thank you. And then, obviously, significant recovery in Macau and good to see, it's been a long time coming. Obviously, we got good marketwide news this morning on marketwide performance in April. Can you talk about what you've seen thus far in April and maybe to us what we see from the industrywide market performances? I guess more, you know, grind -- or base mass recovery.

Can you talk about what you're seeing in terms of the recovery thus far in the second quarter?

Bill Hornbuckle -- President and Chief Executive Officer

Joe, we've got Hubert on the phone. I'm going to turn it over to him. Before I do, I just want to recognize that team, thank Hubert, Kenny, and Pansy. Of note, their leadership has gotten us to a great place.

April has been amazing. Maybe Hubert, you can speak a moment on Golden Week, how it's kicked off, But over to you, Hubert.

Hubert Wang -- President and Chief Operating Officer, MGM China

All right, thanks. I think that, we look at the daily visitation to Macau, it has been steady on the rise month after month, you know, since January after travel restriction was lifted. Inbound daily visitor count averaged about 50% in first quarter, and April is already at 75% of 2019 level. So, if you walk around the street, you can already see the pre-COVID hustle and bustle and atmosphere has reemerged in Macau, into our resorts and the streets.

So, we have seen similar patterns in terms of recovery, in terms of the GGR recovery, particularly in March and April and leading toward the Golden Week. We think that the market will continue to recover as more and more gaming customers and leisure travelers make their first post-pandemic trip to Macau. Another source of recovery is the concerted efforts by concessionaires to attract overseas players. Now, obviously, I think that MGM has led the market in recovery pace.

For example, our daily mass GGR has already exceeded 2019 levels, as Bill noted. The trend continues into April at an elevated level. We're already -- in terms of mass, we're already 115% of 2019 mass level. And --

Joe Greff -- JPMorgan Chase and Company -- Analyst

Do you think you maintain -- do you think you maintain the market share gains from 1Q thus far in April? And one final --

Hubert Wang -- President and Chief Operating Officer, MGM China

Yeah. I think that we have seen -- the market number was released yesterday, and we have seen the -- the share being stable.

Joe Greff -- JPMorgan Chase and Company -- Analyst

Great and --

Bill Hornbuckle -- President and Chief Executive Officer

Joe, reflecting on my comments earlier, look, it's not lost on us, it's probably 10,000 rooms, give or take, left to open in Macau. And so, arguably, that will have an impact. But I think the team's ability to drive high-end mass and into some VIP has been demonstrated. You know, we're well over 90% both in GGR and EBITDA in April.

And the first couple of days of Golden Week have seen just under a quarter of a million people hit the market. And we're getting more than our fair share of that, but we do recognize there's 10,000 rooms to go.

Joe Greff -- JPMorgan Chase and Company -- Analyst

Great. And then just one quick one here, I know I'm sort of going above my follow-up allotment of one question. If we adjust for normal VIP hold in Macau, what was that property level EBITDA performance?

Bill Hornbuckle -- President and Chief Executive Officer

Hubert?

Hubert Wang -- President and Chief Operating Officer, MGM China

I think it was 169 EBITDA [Inaudible]

Joe Greff -- JPMorgan Chase and Company -- Analyst

It's 169 VIP hold. If we adjust that for normal VIP table, it would be --

Hubert Wang -- President and Chief Operating Officer, MGM China

Yeah, probably --

Jonathan Halkyard -- Chief Financial Officer

It's -- it's 14 million, Joe, is the answer.

Hubert Wang -- President and Chief Operating Officer, MGM China

Yeah.

Joe Greff -- JPMorgan Chase and Company -- Analyst

Perfect, yeah. Thanks, guys.

Operator

Thank you. And the next question will be from Shaun Kelley from Bank of America. Please go ahead.

Shaun Kelley -- Bank of America Merrill Lynch -- Analyst

Hi, good afternoon, everyone. Congrats on the results and specifically the news out of Japan. So, if I may, I just wanted to start with the -- the -- the Japan project. You know, Bill, like, obviously, you've been working on this milestone for a long time.

Can you help us think about, you know, key remaining milestones and very specifically, you know, when should investors start to prepare for, you know, capital commitments needing to go into the ground and maybe a little discussion about, you know, broad level plans around project financing for it?

Bill Hornbuckle -- President and Chief Executive Officer

Sure. I'll leave the last part to Jonathan, but let me kick it off. So, obviously, the development plan and the certification by the national government was the big outstanding item to get across the finish line, and that's just been accomplished. We have a land lease, and we have various agreements with the municipality that we have to get done, presuming this next quarter those will get done.

That being said, we're looking to break ground either late this year or first part of next year and it's between a $4.5 million and $5 million -- I want to say 5 million, I wish -- it was a five-year build. It is, you know, probably going to open first quarter-ish, second quarter of 2030, So, we've got some time to go. There's obviously a lot of work to be done. It's a man-made island in terms of borings, and so that's the general timing around it.

On financing, Jonathan.

Jonathan Halkyard -- Chief Financial Officer

Yeah. We and our partner, ORIX, will be putting together a bank financing for the project. That financing, that work has already been underway actually for some period of time. Our -- our equity investments will begin in earnest in late 2024 and into 2025, really through 2027, at which point we'll be tapping into this financing for the completion of the project.

Shaun Kelley -- Bank of America Merrill Lynch -- Analyst

Great. Thank you for that. And then, my follow-up, just to switch gears, would be on online. You gave some great color about some of the, you know, KPIs and how the GGR, NGR side is going.

Could -- could you just talk a little bit about the operating loss cadence as we move throughout the year? And, you know, can you reiterate the sort of joint contribution of around $150 million commitment for the full year? Is that still in play, or does that need to be tweaked a little bit as we sit here today?

Bill Hornbuckle -- President and Chief Executive Officer

No, Shaun, I'm hoping not. Look, if you think about last year, you think about this year, obviously, football, an investment into it with Super Bowl, March Madness, we opened two states. Actually, we came in a little under our own plan, and so we don't -- we don't think we're going to have to put any more cash in of substance. We have -- we had one more cash call recently, and I think we're hopefully done.

And so, we look forward to the back half of this year beginning to grow or show some EBITDA. So, nothing has changed, I think, to answer your question.

Jonathan Halkyard -- Chief Financial Officer

And I'll just add, by under our plan, I mean under the investment that we anticipated putting into the -- into the venture. And -- and in terms of the pace, you know, we do expect as we go through the year that we're going to be turning toward EBITDA profitability and that we'll reach that during the second -- second half of the year.

Shaun Kelley -- Bank of America Merrill Lynch -- Analyst

Thank you very much.

Operator

The next question is from David Katz from Jefferies. Please go ahead.

David Katz -- Jefferies -- Analyst

Hi, afternoon, everyone. Thanks for taking my questions. I wanted to just drill a little deeper on BetMGM, you know, which obviously is going, you know better than as planned, is going very well. When we look at the partnership and think about, you know, the MGM database and its, you know, benefits to the BetMGM JV in conjunction with, you know, those customers that are coming in through BetMGM, right, you know, both of which have added to the productivity here, you know, I suppose the question we ponder with a lot of investors is, you know, the bigger that gets, how does that arrangement, you know, work and sort itself out, etc.? And I'm -- I'm not asking, you know, when are you going to go back and make another offer; I'm really just trying to get a layer down.

Thank you.

Bill Hornbuckle -- President and Chief Executive Officer

Look, David, we're very excited by what's been created. Obviously, to think after this amount of time, we could have a $2 billion top-line business this year, which is showing all signs of profitability is exciting for us. You know, we have tens of thousands of customers that are driving an omnichannel basis over 100 million a year back and forth. And so, that part of the business is starting to click in and starting to work.

You know, we have work to do on product. You know, we need single -- single wallet, single account to be really effective and in places like Maryland, places like New Jersey, Pennsylvania, and New York. So, we've got some work to do on the sports product. Obviously, we're market-leading in gaming at 28% share, and so no one even comes close to that.

But we're mindful that people are trying, so we're very focused on it. You know, so I'm not going to have a precursor where we go with all of this. I think we're in great shape. We've got another couple of years to mature this business and see where it ends up, and then we'll take it from there.

David Katz -- Jefferies -- Analyst

Fair enough. If I can just follow on with a question about Macau and how we think that -- or we might theorize how that revenue mix turns out, with one of the questions being how much direct VIP returns and, you know, ultimately, what that mix and what that margin settles in at as we, you know, progress through this year. Any help there would be appreciated.

Bill Hornbuckle -- President and Chief Executive Officer

Yeah. Hubert, why don't you handle the first part of that, and I'll try to do clean-up.

Hubert Wang -- President and Chief Operating Officer, MGM China

All right. So, well, David, I think that the VIP component as total is probably around 15% of the -- of the number -- of the total number. And in terms of margin, I think that we'll see a little bit higher margin on the direct premium business, probably around 13% to 15%, in that neighborhood. So, Bill, anything to add?

Bill Hornbuckle -- President and Chief Executive Officer

No, David, you know, look, obviously, we're leaning into mass. I think the way to look at the totality of the business, obviously, the junket operatives were not cheap to do business with. I mean, they took a lot of the margin out of the business. The fact that now we're on our own doing this, you know, there's a formula that suggests somewhere under 100% of former GGR levels, we could drive over 100% EBITDA.

You know, it's arguable where that's going to land, 85% or 90% of total top line. But we do believe that. And we think the business will settle in in the mid-20s in terms of a margin business overall. And so, you know, we do have a -- not unique, but we do have a special opportunity because we've been at it 30 to 40 years in terms of driving and knowing customers and where they live in Malaysia and the rest of Asia.

We just had a very significant group coming from Thailand that was driven by our branch office there. And so, you know, we think it's net advantage. And we think, ultimately, our margins would be better than once they were given the nature of the junket business.

David Katz -- Jefferies -- Analyst

OK. Fair enough. Thanks very much. A nice quarter.

Bill Hornbuckle -- President and Chief Executive Officer

Thank you.

Jonathan Halkyard -- Chief Financial Officer

Thanks.

Operator

And the next question is from Stephen Grambling from Morgan Stanley. Please go ahead.

Stephen Grambling -- Morgan Stanley -- Analyst

Hey, good afternoon. Sticking with the digital side, you referenced some of the aspirations to continue to expand worldwide. What are the criteria or priorities that you're focused on, or what dealbreakers are there to any potential partnership or transaction as we think global? And do you generally expect them to be more bolt-on deals, or could you even contemplate something more transformational?

Bill Hornbuckle -- President and Chief Executive Officer

Well, for now, we've been looking to try to build a fundamentally strong business. So, with LeoVegas, we -- we saw a team we liked a lot, and frankly, the good news is nine months later, we still do. We saw technology that lived in the cloud versus, you know, dot net or something else of that nature, so a business that could grow and ultimately scale easily. We had three other pillars.

We wanted to get into the content business. And it's interesting, with Push, they have some of the leading games in the world and the context of things that they have created, so we're excited by that, and ultimately potentially transforming that in those games from digital to brick and mortar and vice versa. We think there's a long-term play there. We're interested in live dealer.

There's nothing that suggests, given the nature of our business, that we should not be in that business. And so, I think through LeoVegas, there's an opportunity to do that. LeoVegas currently does live dealing now through a third party, but I think it's a place we'd like to get to and ultimately have our own sports betting technology as well for the rest of the world. Take BetMGM aside from that discussion.

Look, we've looked at everything, and we'll continue to do. So, there are some things that would be substantive out there, but it's too early to tell. I'm trying to build a business with the team there. Gary Fritz has been a big part of this.

Obviously, he's the front and with Gustaf and the team at LeoVegas. And so, we're excited by where we are. We've got a ways to go. And it's one of these things, hopefully, two or three years from now, upon reflection when we look back, we've built something meaningfully.

Stephen Grambling -- Morgan Stanley -- Analyst

Makes sense. And maybe as a follow-up on the digital side in the U.S. and thinking through the march to positive EBITDA and beyond, we saw FanDuel I think hit profitability about a year ago and then ramped a bit, lumpy thereafter given the seasonality and mix of sports. Given your SKU toward iGaming, how might the magnitude of that flip to positive EBITDA and then consistency compare and contrast to maybe some of the peers?

Bill Hornbuckle -- President and Chief Executive Officer

I think you make a good point. Look, the second quarter last year for us showed a little bit of profit, if you may recall. The third quarter, like everyone, we bounced into or bumped up to football, which is always a big promotional push at the beginning of football. I don't suspect that will change much.

Obviously, there are a few players. We've all become a lot more disciplined, but I think it'll be a little lumpy. But I think the bottom line will be going in the second half of the year. We're going to show profitability in totality.

And obviously, iGaming for us is a key thing, recognizing, you know, it's in five states -- six states, of which three are meaningful for us.

Stephen Grambling -- Morgan Stanley -- Analyst

Fair enough. Thanks so much.

Operator

The next question will be from Brandt Montour from Barclays. Please go ahead.

Brandt Montour -- Barclays -- Analyst

Hey, good evening, everybody. Thanks for taking my questions. I just wanted to follow up on Joe's first question about Las Vegas room rates. And understanding that the weekend is driving most of it, but it was also curious if you've seen any difference in pricing elasticity between the higher-end properties and the lower-end properties recently.

Jonathan Halkyard -- Chief Financial Officer

You know, the growth for us has really been in the -- in the higher-end properties. I mean, we -- we think all our properties are higher end, but the -- certainly, the luxury properties have seen more of the growth. You know, price elasticity -- elasticity is, you know, it's a -- it's a tough concept to apply here since, you know, the properties like the Bellagio, Cosmopolitan, Aria are -- you know, have different customer segments in some ways from the ones, say, at Mandalay Bay or Luxor or Excalibur. And so, you know, we're attempting to -- to -- to drive price wherever we can at each of these properties.

But I would say, the general matter, the weekends are where we have greater pricing power and in the -- in the luxury properties.

Brandt Montour -- Barclays -- Analyst

OK, that's -- that's really helpful. And then, one follow-up on Las Vegas, if you Jonathan might care to comment on the seasonality for Las Vegas this year, if you think it would be different than pre-COVID years and anything you'd call out out there.

Jonathan Halkyard -- Chief Financial Officer

I wouldn't say there's any difference in seasonality. If anything, just the strength of the event calendar and just the increased sophistication with which we're marketing to all of our segments, if anything, might reduce the seasonality that we face. We've already, on previous calls, called out the differences in 2023 against last year with the first quarter and the fourth quarter, for different reasons, probably being a bit stronger year over year. But that's really not seasonality as much as just some mediocre synchronic issues during this year and last.

Bill Hornbuckle -- President and Chief Executive Officer

In the fourth quarter, we'll see obviously Formula 1 for the foreseeable future. You know, time to tell how meaningful it ultimately is. There's estimates that will bring $1 billion to the valley, which obviously will take more than our fair share of, hopefully. And if you go back to '19, the Raiders have just gotten going and didn't start until 2020 in the middle of COVID.

So, you know, that programming is consistent and extremely strong. So, in the fourth quarter, it ought to look better than the average pre-'19, But, you know, time to tell ultimately what Formula 1 -- what it brings us.

Brandt Montour -- Barclays -- Analyst

Great. Thanks so much.

Jonathan Halkyard -- Chief Financial Officer

Thanks, Brandt.

Operator

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

Dan Politzer -- Wells Fargo Securities -- Analyst

Hey, good afternoon, everyone. Thanks for taking my questions. First, on Macau is -- how would you say that the margins should trend over time? I think last time, you guys talked about high 20s as an exit rate, you know, for this year, but it seems like we're tracking above that. You know, I know there was some benefit of holding the quarter, but would you say, you know, you're fully ramped in terms of where you need to be, and there should be a lot of leverage as we go forward, or there are additional headcount that you'd look to add?

Bill Hornbuckle -- President and Chief Executive Officer

Hubert, why don't you take it?

Hubert Wang -- President and Chief Operating Officer, MGM China

Yeah, I think it all remains the same. Our margins should be in the high 20s. There are a few things, you know, in favor of that, further recovery of the mass-driven market and also the continuous deployment of our incremental tables onto the mass floor. So, these will help to generate high-margin mass business.

Some of the labor savings from COVID period will be permanent, particularly at management level. And we're also looking at some innovative games to further attract mass play. So, these are the things that will be helpful. But on the flip side, I think that we do know that the gaming tax increase 1% under the new contract -- new concession contract.

And I think some of the labor savings, you know, will be -- will be rectified through recruitment for understaffed situation. So, in the second half of this year, I think that the labor cost will increase because we have to fill some vacancies to address this issue. So -- but overall, I do believe that we will be able to maintain our margin in the high 20s.

Dan Politzer -- Wells Fargo Securities -- Analyst

Got it. And then, just turning to New York, I think you mentioned about 2 billion of capex there. I know timing is kind of -- kind of a moving target here. But as you think about the cash that would come out and maybe the options to finance this through VT, is there any flexibility there where you might be able to pull forward some type of sale-leaseback? Or is it, you know, you have to build it and then -- then go forward to get an agreement in place?

Jonathan Halkyard -- Chief Financial Officer

Yes, I think there is some flexibility, not to speak for -- for VT, of course, but they are -- but they are fantastic partners of ours. And, you know, and as we plan for that project and think about the ways in which we will finance it and the best way to allocate our capital, doing a sale-leaseback with BG at some point certainly could make a lot of sense for us. And that's part of our planning.

Dan Politzer -- Wells Fargo Securities -- Analyst

Got it. Thanks.

Operator

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

Chad Beynon -- Macquarie Group --- Analyst

Good afternoon. Thanks for taking my question. On Slide 7 and 8 in the deck, you pointed out really strong slot handle and table drop, looks like, in the regional market and in Vegas. Is there anything to talk about just in terms of additional detail within the segments' strength at the high end? Is that kind of continued, as -- as we've expected, for the past couple of quarters? Any weakening at the low end? Or anything else to call out to kind of help frame out, you know, where the consumer is within your database? Thanks.

Corey Sanders -- Chief Operating Officer

Yeah. Hi, Chad. It's Corey. Yeah, we're seeing some really strong strength in our database, especially in our gold plus customers.

Those are ones that are may not be hosted but are around 400-plus. And those numbers are pretty significant. We see not only their trips continuing to increase, but also their play continue to increase. And in most areas of our database, we're seeing increases in both trips and in spend.

The one area where we may be seeing a little bit less is the younger customer. They're probably a little bit more impacted than anything we've seen, but nothing materially.

Bill Hornbuckle -- President and Chief Executive Officer

And then, Chad, maybe one final point, and I'll be interested to see how this manifests itself over the next three to six months. With China reopening up, the one segment we still miss is the high-end Asian/Chinese gamer. And so, time to tell, we've gotten about 80% of our visitation back from international play, but those players made up like 50% of the play, and particularly when you think about something like baccarat. And so, I see there's an opportunity.

I don't know how it manifests itself yet, given policy, given capital restraints. But we're -- we do see it as something we're going to focus on, trying to drive.

Jonathan Halkyard -- Chief Financial Officer

Final thing I'd add, Chad, around segmentation is, you know, we've now seen it for sufficient number of quarters to say that it's a nice trend, which is just the return of our 65-plus players here in Las Vegas but, more -- more importantly, in the regions. Their trips to steadily increasing each quarter for the past three or four quarters, age 65-plus.

Chad Beynon -- Macquarie Group --- Analyst

OK, thank you, all. And then, given the conclusion of the U.K. white paper, a market that you'll be in soon, seems like a win for both the operators and responsible gaming in general. Does anything change positively or negatively in terms of timing or just, you know, your expectations, your excitement about that market and other global markets as you look to -- to grow this digitally?

Bill Hornbuckle -- President and Chief Executive Officer

Yeah. Chad, let me -- look, we're excited that it's finally out. I don't think there was any harm in it. But in fact, I think, to the contrary, I think it was a good piece -- a good piece, not legislation yet, but a good piece of overview.

It has set out standards obviously for protecting folks. At the same time, it enabled and let VIP continue. And so, there are some promotional opportunities. At one point, if you remember, there was a consideration that you would have to stop all of the bet activity.

For us, I think with Leo Vegas, potentially, the opportunity presents itself. You know, we're now excited to go look at that market as a real market to push into and push on. And so, I think, you know, bottom line, it was done responsibly. It was modified, I think, to a point of it does what it needs to accomplish but still enables our businesses and others like it to continue to go forward progressively.

Chad Beynon -- Macquarie Group --- Analyst

Thank you very much.

Operator

And the next question is from Robin Farley from UBS. Please go ahead.

Robin Farley -- UBS -- Analyst

Great. Thanks. Just wanted to ask about Japan. You laid out a timeline, which was really helpful.

I'm just wondering at what point does it become where you're -- you're committed in terms of the capital investment there. I -- I know you mentioned potentially breaking ground later this year, but I assume, somewhere in between now and then, it becomes sort of, you know, where --where it's a full commitment. I'm just wondering in that time frame.

Bill Hornbuckle -- President and Chief Executive Officer

Yeah, Robin, look, I think at this point, we're fairly committed. There's -- you know, the idea of going in reverse would be something hard to contemplate. We have to sign the land lease. And I think given the nature of that lease and given the other documents we have signed with the government of the city of Osaka, they're definitive in nature, and therefore, we're paying out cash.

And so, you know, within the next three months, it's as hard as it's ever going to get, and so we're going to go forward with some excitement from that.

Robin Farley -- UBS -- Analyst

OK, great, thank you. And just for my follow-up, I have a question on -- on Vegas. And in your slides, you break out the same-store Vegas casino revenue down, and I think it's the third consecutive quarter. And I'm just wondering if this is an -- and obviously, it hasn't hurt your profitability, of course, as your -- as the room revenue comes back so strongly.

But I'm curious, when you look at that trend with the same store gaming revenue, is this just kind of -- do you think, like, a resetting of there was this sort of COVID driven -- you know, COVID-driven strength, and then it kind of resets and it'll grow again from there? Or I guess -- so, in other words, maybe there's another quarter where that declines, and then we've kind of anniversary that COVID bump, and then it goes back to growth. Or just how -- how should we think about that? Thanks.

Jonathan Halkyard -- Chief Financial Officer

The -- the -- the way to think about that is that the -- the gross gaming revenue, we have net against that for -- for rated players, the customer complementarities that we provide to them. And those are generally priced at retail. The large -- largest portion of that are rooms, but there's certainly food and beverage as well. And the -- and the price of those has increased dramatically.

Our ADR year over year grew 31%. So, the -- the cost which is then assessed to that and, therefore, reflected in -- in the casino revenues goes up. And so, the demand for gaming in our business has never been higher across segments, but the cost of the rooms that we provide to these guests to earn those complementaries has gone up. So, the -- the profit associated with it, the revenue and profit at the margin has been monetized in our hotel and food and beverage operations and not as much in gaming.

So, the trick of it is that the margin is that we're making the right decisions about -- about which customers and segments to have on property, weekday and weekend, to maximize profitability for the company. But I would not interpret that as any reduction of demand on the -- on the gaming side.

Robin Farley -- UBS -- Analyst

OK, great. Thanks for the color.

Jonathan Halkyard -- Chief Financial Officer

Thanks.

Operator

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

John DeCree -- CBRE Group -- Analyst

Hi, everyone. Thank you for taking my questions. Maybe one particularly in the regional U.S. markets on the non-gaming spend that has been coming back really strong over the last couple of quarters.

Obviously, a longer tail to the recovery. But, you know, curious if you could give us some insights into the consumer and that non-gaming spend. How much is driven by -- by price, Jonathan? I think you mentioned in your last response that the cost of obviously F and B and those types of things has gone up, but is it new customers coming back that you haven't seen in a while? Or are customers just opting to -- to spend more on F and B? Is it timing with, you know, the opening of additional restaurants or additional hours in regional markets? But how would you characterize the recovery in the non-gaming spend? It's been so strong.

Corey Sanders -- Chief Operating Officer

Yeah, John, this is Corey. I think last year in the first quarter, especially in our bigger boxes in the regionals, we were constrained on hotel rooms. In this quarter, we had full accessibility both in Borgata and, as Bill mentioned, the brand-new Beau Rivage rooms. So, we're seeing huge demand in the Beau Rivage rooms from current customers and new customers, but it's also driving a significant amount of hotel revenue in food and beverage revenue that would not have been there last year.

John DeCree -- CBRE Group -- Analyst

Got it. Thanks, Corey. Maybe revisiting a question from earlier or a comment about the Chinese or Asian gaming play, you know, potentially coming back to Las Vegas. Corey, I don't know if you're the best person, if you could kind of remind us how big was that business, I guess, pre-COVID? And then, maybe in the context of Cosmo, if they had a good-sized Asian gaming business as well, you know, which is now a part of your portfolio that wasn't previously.

Just to get a sense of how much more opportunity there could be if that -- if that customer does come back.

Corey Sanders -- Chief Operating Officer

Yeah, John. So, if we looked at Q1 of '19, that customer would have made up about 45% of our rated win at that time. They're currently about 25% -- 20% of that. So, if that comes back, you know, from that perspective, it's pretty meaningful.

From a Cosmopolitan, they are pretty big in the international business. And, in particular, the Far East and Korea are very strong markets for them. Their size is about a tenth of what we do.

Bill Hornbuckle -- President and Chief Executive Officer

And, John, they think about baccarat, back in '19, it's like 450 million top line. So, you know --

John DeCree -- CBRE Group -- Analyst

Got it. OK.

Bill Hornbuckle -- President and Chief Executive Officer

You can [Inaudible].

John DeCree -- CBRE Group -- Analyst

Yeah, real number. That's helpful. Thanks, Bill. Thanks, Corey.

Operator

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

Barry Jonas -- Truist Securities -- Analyst

Great. Thanks. Yeah, I was hoping I could get more color on the non-same-store components of Vegas. You know, how is The Cosmo integration or ramp going relative to your expectations? And then, for Mirage, to what extent have you been able to redirect revenues to your remaining properties? Thanks.

Corey Sanders -- Chief Operating Officer

Yeah, this is Corey. The Cosmopolitan operation is going extremely well. We're very happy with the results we're seeing there. The business is continuing to be strong.

We are in the process now of defining when we will be converting them over to MGM Rewards. We will make sure, from a customer perspective and employee perspective, it will be a smooth transition. So, more to come on that and then up and coming quarters. The Mirage is interesting.

When we put it up for sale, we started seeing customers starting to convert and come over to our other properties. So, in general, you know -- obviously, there are pure Mirage customers that have stayed pure Mirage customers, but in general, we're happy with what we've been able to obtain in our business.

Jonathan Halkyard -- Chief Financial Officer

And as I -- as I kind of rewind the tape and -- and look at the capital that we applied to The Cosmopolitan versus that which we freed up from the sale of the Mirage and the incremental EBITDAR and, more importantly, EBITDA after rent associated with that, this has just been a fantastic set of transactions for -- for MGM and the shareholders.

Barry Jonas -- Truist Securities -- Analyst

That sounds great. And then, just as a follow-up, can we get an update on your project in Dubai? I'm just curious if you think gaming will come at some point to Dubai or any of the other emirates, for that matter, beyond what's been announced by Wynn? Thank you.

Bill Hornbuckle -- President and Chief Executive Officer

Yeah, I'll take that one. Barry, s relates to Dubai, we are still doing pylons. That property continues to evolve. We -- we -- we -- we, the managers, but the owners yet again want to upgrade the property I think with gaming in mind.

But, you know, it's up to Abu Dhabi and the national government to ultimately decide. We've had people on the ground there, basically nonstop since the first of the year, trying to understand the opportunity in Abu Dhabi. And ultimately, if it'll open up to -- well, if passed and when passed, it will open up to the other emirates. Whether the rulers of each emirate then take it upon themselves to approve, it is, a, up to them.

Obviously, we're focused on Dubai given the nature of our project. We think it would be ideal. There happens to be 150,000 to 200,000 square feet of space that could be converted into such a thing. But time to tell there, and we're not saying no to Abu Dhabi either.

We find both those markets, given the location of the airport right in between both of them, as compelling. You know, we're hoping "any day," but I got to believe as the summer fulfills itself, we'll hear more news on that.

Barry Jonas -- Truist Securities -- Analyst

Sounds great. Thank you so much.

Bill Hornbuckle -- President and Chief Executive Officer

Yeah.

Operator

And our final question today will come from Steve Wieczynski from Stifel. Please go ahead.

Steve Wieczynski -- Stifel Financial Corp. -- Analyst

Yeah, hey, guys, good afternoon. It's obviously very late in the call. Most of my questions have been answered, but I'll just ask one. And this -- this question might be way out there in left field, but I'm going to ask it anyway.

So, you know, if we think about the impact that the Raiders, the Knights have had on visitation to the city, you're now going to get the, you know, the As at some point probably in the near future, you know. And we're talking about, let's call it, 81 home games or so in typically slower visitation periods. You know, it might be too early to know, but just wondering if you guys have -- have thought about this at all and maybe what type of impact you might eventually see there.

Bill Hornbuckle -- President and Chief Executive Officer

We have. And obviously, given the location and the conversation of a pedestrian bridge from it to the park, which is obviously where T-Mobile sits, you know, we think it could bring about 400,000 tourists a year to the valley that wouldn't otherwise come. We think that's a reasonable number. That's a number that's been created by a bunch of folks looking at it.

And so, we think that part's accretive. You know, we're not a fan of any more tax dollars put into this. We yield the governor's position and -- and assume, you know, that this will be done responsibly for the state and ultimately for Clark County. All that said, I like you believe it will happen, and it will be accretive, I think, to the overall visitation.

Steve Wieczynski -- Stifel Financial Corp. -- Analyst

OK, great. Thanks, guys. Appreciate it. Good quarter.

Bill Hornbuckle -- President and Chief Executive Officer

Thank you.

Operator

And, 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.

Bill Hornbuckle -- President and Chief Executive Officer

Thank you, Robert. I'll be quick. I know it's late. Again, I want to thank everyone for joining us.

Just on my earlier comments, we couldn't be happier about the quarter and the progress that we've made on so many fronts. And again, I want to thank all of our employees, particularly this particular quarter, our Macau team for successfully launching. I'm going to be participating with Jonathan in JPMorgan's forum in Toronto next month, and I'll be doing a couple of meetings with Deutsche Bank in New York as well. I thank everyone for their time and hope you all have a great evening.

I look forward to speaking to you guys in a couple of months. Thank you.

Operator

[Operator signoff]

Duration: 0 minutes

Call participants:

Andrew Chapman -- Director, Investor Relations

Bill Hornbuckle -- President and Chief Executive Officer

Jonathan Halkyard -- Chief Financial Officer

Joe Greff -- JPMorgan Chase and Company -- Analyst

Hubert Wang -- President and Chief Operating Officer, MGM China

Shaun Kelley -- Bank of America Merrill Lynch -- Analyst

David Katz -- Jefferies -- Analyst

Stephen Grambling -- Morgan Stanley -- Analyst

Brandt Montour -- Barclays -- Analyst

Dan Politzer -- Wells Fargo Securities -- Analyst

Chad Beynon -- Macquarie Group --- Analyst

Corey Sanders -- Chief Operating Officer

Robin Farley -- UBS -- Analyst

John DeCree -- CBRE Group -- Analyst

Barry Jonas -- Truist Securities -- Analyst

Steve Wieczynski -- Stifel Financial Corp. -- Analyst

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