What happened
Shares of MGM Resorts (MGM +1.78%) were trading lower on Thursday after the casino operator delivered its third-quarter report. The company saw solid top-line growth in the period, but a change in Macau's gaming laws required it to take a $1.2 billion non-cash amortization charge.
As of 2:13 p.m. ET, the stock was trading 8.7% lower.
NYSE: MGM
Key Data Points
So what
Overall revenue increased by 26% year over year to $3.42 billion, beating estimates for $3.24 billion. That growth was aided by MGM's recent acquisitions of the Cosmopolitan, Aria, and Vdara casinos in Las Vegas. Increased travel and business activity in Las Vegas also lifted results from that segment, as the rooms and food and beverage segments drove the top-line gains.
The company also reported record revenue and adjusted EBITDAR at its Las Vegas segment, and finished with $950 million in total adjusted EBITDAR.
The $1.2 billion non-cash amortization expense came from a change in the useful life of the MGM Grand Paradise gaming subconcession and due to new Macau gaming rules. Macau passed a law in June that requires new gaming licenses to be issued, and as a result, MGM was forced to accelerate the amortization of MGM China's existing license. Management chose not to exclude that charge from its adjusted results; as a result, it reported an adjusted loss of $1.39 per share when the analysts' consensus prediction had been for a profit of $0.23 per share.
Factoring out that charge, MGM Resorts' bottom line would have been close to break even.
In the quarter, the company also spent $307 million to repurchase 10 million shares, a sign it thinks its stock is undervalued.
Now what
MGM did not offer guidance, but the casino operator seems well-positioned if it can secure a new gaming license in Macau. It's growing organically as well as through casino acquisitions, and has one of the leading online gambling platforms in BetMGM.
While there's a lot of noise in the company's latest results, those investments should eventually pay off for MGM Resorts on the bottom line.
