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Hospitality and casino entertainment company MGM Resorts (NYSE:MGM) reported Q1 CY2024 results exceeding Wall Street analysts' expectations, with revenue up 13.2% year on year to $4.38 billion. It made a non-GAAP profit of $0.74 per share, improving from its profit of $0.44 per share in the same quarter last year.
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MGM Resorts (MGM) Q1 CY2024 Highlights:
- Revenue: $4.38 billion vs analyst estimates of $4.23 billion (3.7% beat)
- Adjusted EBITDA: $1.23 billion vs analyst estimates of $1.18 billion (4.7% beat)
- EPS (non-GAAP): $0.74 vs analyst estimates of $0.58 (28.6% beat)
- Gross Margin (GAAP): 46.4%, down from 48.7% in the same quarter last year
- Free Cash Flow of $377.2 million, similar to the previous quarter
- Market Capitalization: $12.5 billion
Operating several properties on the Las Vegas Strip, MGM Resorts (NYSE:MGM) is a global hospitality and entertainment company known for its resorts and casinos.
Casino OperatorCasino operators enjoy limited competition because gambling is a highly regulated industry. These companies can also enjoy healthy margins and profits. Have you ever heard the phrase ‘the house always wins’? Regulation cuts both ways, however, and casinos may face stroke-of-the-pen risk that suddenly limits what they can or can't do and where they can do it. Furthermore, digitization is changing the game, pun intended. Whether it’s online poker or sports betting on your smartphone, innovation is forcing these players to adapt to changing consumer preferences, such as being able to wager anywhere on demand.
Sales GrowthReviewing a company's long-term performance can reveal insights into its business quality. Any business can have short-term success, but a top-tier one sustains growth for years. MGM Resorts's annualized revenue growth rate of 6.6% over the last five years was weak for a consumer discretionary business. Within consumer discretionary, a long-term historical view may miss a company riding a successful new product or emerging trend. That's why we also follow short-term performance. MGM Resorts's annualized revenue growth of 23.8% over the last two years is above its five-year trend, suggesting some bright spots.
We can better understand the company's revenue dynamics by analyzing its most important segment, Casino. Over the last two years, MGM Resorts's Casino revenue (Poker, sports betting) averaged 23.3% year-on-year growth.
This quarter, MGM Resorts reported robust year-on-year revenue growth of 13.2%, and its $4.38 billion of revenue exceeded Wall Street's estimates by 3.7%. Looking ahead, Wall Street expects revenue to remain flat over the next 12 months, a deceleration from this quarter.
Cash Is KingIf you've followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can't use accounting profits to pay the bills.
Over the last two years, MGM Resorts has shown mediocre cash profitability, putting it in a pinch as it gives the company limited opportunities to reinvest, pay down debt, or return capital to shareholders. Its free cash flow margin has averaged 9.1%, subpar for a consumer discretionary business.
MGM Resorts's free cash flow came in at $377.2 million in Q1, equivalent to a 8.6% margin and down 33.1% year on year.
Key Takeaways from MGM Resorts's Q1 Results We liked how MGM Resorts beat revenue, adjusted EBITDA, and EPS expectations this quarter. Management attributed the good performance to "...strong performance at MGM China and in Las Vegas specifically at our luxury resort properties." Zooming out, we think this was a very solid quarter. The stock is up 2% after reporting and currently trades at $40.52 per share.