Daniel J. D'Arrigo - MGM Resorts International James Joseph Murren - MGM Resorts International Corey I. Sanders - MGM Resorts International Christopher W. Nordling - CityCenter Holdings LLC William Joseph Hornbuckle - MGM Resorts International Grant R. Bowie - MGM China Holdings Ltd. Catherine Park - MGM Resorts International.

Harry C. Curtis - Nomura Securities International, Inc. Joseph R. Greff - JPMorgan Securities LLC Carlo Santarelli - Deutsche Bank Securities, Inc. Shaun Kelley - Bank of America Merrill Lynch Felicia Hendrix - Barclays Capital, Inc. Robin M. Farley - UBS Securities LLC Thomas G. Allen - Morgan Stanley & Co. LLC Steven Eric Kent - Goldman Sachs & Co.

Steven Wieczynski - Stifel, Nicolaus & Co., Inc..

Good morning, and welcome to the MGM Resorts International First Quarter 2016 Earnings Conference Call.

Joining the call from the company today are Jim Murren, Chairman and Chief Executive Officer; Dan D'Arrigo, Executive Vice President, Chief Financial Officer and Treasurer; Bill Hornbuckle, President; Corey Sanders, Chief Operating Officer; James Stewart, CEO of MGM Growth Properties; Grant Bowie, CEO and Executive Director of MGM China Holdings Limited.

Participants are in a listen-only mode. After the company's remarks, there will be a question-and-answer session. Please note, this conference is being recorded. Now, I would like to turn the call over to Mr. Dan D'Arrigo. Please go ahead..

Well, thank you, Gary. And good morning and welcome to MGM Resorts International's first quarter conference call. This call is being broadcast live on the Internet at www.mgmresorts.com. A replay of the call and electronic copy of the investor presentation we will refer to during today's call is available on the company's website.

We furnished our press release this morning on Form 8-K with the SEC. And on this call, we will make forward-looking statements under the Safe Harbor provisions of the federal securities laws. Actual results might differ materially from those projected in the forward-looking statements.

Additional information concerning factors that could cause actual results to materially differ from those in these forward-looking statements is contained in today's press release and in the company's periodic filings with the SEC, including our most recent Form 10-K and Form 10-Q reports.

During the call, we will also discuss non-GAAP financial measures in talking about the company's performance. You can find a reconciliation of these measures to GAAP financial measures in our press release, which is also available on our website. Finally, please note that this presentation is being recorded. And with that, I'll turn it over to Mr.

Jim Murren..

Well, thank you, Dan. And good morning, everyone. I've got to say, I've the one been looking forward to this earnings call. We're excited to talk to you about our outstanding results and what we see going on, in the future.

We've also mixed it up a little bit, we provided for the first time a really strong investor deck, we encourage you to go through that, we had a lot of internal folks working on that and we think it's extremely valuable to understanding the MGM story. We're clearly very pleased with our earnings results.

We're also pleased that we've executed on the initiatives that we talk to you about. Our cash flows in the quarter were up 24% and our margins were the best that we've achieved since 2007. We're going to have a lot of time this morning for Q&A, but I want to brag on a few key highlights in the quarter.

First, I'd like to welcome to the New York Stock Exchange officially, MGM Growth Properties. Last week, we completed that incredible IPO. It was the largest IPO to-date this year, and by the way, it's the third-largest REIT IPO ever.

In the room, we have James Stewart our outstanding CEO and our CFO Andy Chein here and they are already hard at work, we're extremely pleased about not on the outcome of the IPO, but really more importantly what it means for MGM Resorts going forward. And I'm extremely excited about the future of both the companies.

Now look, we've talked about Crystals a few times, on our earnings call. We said that, if we got the right price for Crystals, we would sell it and we certainly got the right price. We sold Crystals for $1.1 billion, that by the way is a really remarkable 4.2% cap rate.

This was the largest sale of a single enclosed mall in the United States in more than a decade. As a result of that, CityCenter declared over $1 billion in dividends to its owners, of course, MGM is half of that, so we received $540 million in dividends.

As a result of that transaction, in MGP, we've improved our balance sheet profoundly, that's a $1.6 billion of total cash that goes fully to debt repayment.

Now on the profit growth plan, remember, we announced that about nine months ago and we set ourselves some very ambitious goals and I'm incredibly proud of the fact that our results have far exceeded our initial expectations and have really been astounding.

We challenged ourselves to really redefine, literally how we operate every aspect of our business. And this required a comprehensive unprecedented team effort amongst the 40,000 people that were directly involved and the 63,000 total employees of MGM Resorts.

And you can see the results, in the first quarter, our PGP realized $59 million of incremental EBITDA, and that includes our 50% contribution of economic interests of CityCenter. If you add that up, we're obviously ahead of schedule, because we had previously guided to achieving about $200 million of annual EBITDA by the end of this year.

We also, if you recall, announced that we were committed to achieving a 30% EBITDA margin by the end of 2017, and you can see that we are clearly ahead of our forecasts on that as well. I think relative to this point, and I hope you look at the debt, because we've talked about in some great detail how we're achieving this.

I want to emphasize the fact that the culture of our company has changed, and has improved.

And it has been now won of relentless attention to continuous improvement, and not accepting the way things have been done for decades upon decades in the gaming industry, and not simply looking for the fix or the quick buck, but we're literally changing how we conduct our business.

This has permanent long-term accelerating implications for our revenues, our profits and the culture and the enthusiasm we're working for MGM Resorts. Now, I know we're going to get a lot of questions on Las Vegas, the outlook on Las Vegas. So, let's cut to the chase and say we're doing great, and the outlook is strong.

Last month, if you remember, we unveiled The Park, which is that entire entertainment district and a course, the T-Mobile Arena. What a start we've had there.

It's only been a month, and we've hosted over 100,000 guests in the Arena and most of those people were visiting our Los Vegas, and most of the people that are booking new events are booking because they want to visit Los Vegas to go to the new T-Mobile Arena events, which of course is great for the entire town.

A lot of energy there, a lot of energy in The Park, we've seen some great F&B numbers in that side of the Strip, and we think that the neighborhood only gets better, and of course we own the neighborhood.

Generally speaking in Los Vegas, trends are strong and it's lead by very robust demand in the convention business, but also great growth in our other retail and leisure channels. As you can see in the first quarter, our wholly-owned Strip resorts achieved an 8% RevPAR growth, that of course is better than the guidance we gave you, we guided to 6%.

And we continue to see great growth strength in that convention in corporate business.

In fact, no deceleration at all inside and we're really proud of the fact, grateful that we expanded the Mandalay Convention Center when we did because it has allowed us to maximize the corporate business – high margin corporate business, while still maintaining a very solid and important tradeshow business.

And because of that, we have a lot more flexibility to manage the largest portfolio of convention space in Los Vegas by a mile. I know you know we have a tough comp in May because we had the great Casino event, the Mayweather and Pacquiao event in May, but we're off to a good start, really good start here in the second quarter. We had a great April.

And as a result of that, our confidence in the quarter remains very strong and we believe we can achieve RevPAR growth of 5% in the second quarter, even though the month of May is an incredibly tough comp because of what I mentioned. And that's because we did so well in April and we're looking great in June as well.

And we have a great calendar of events at all of our venues, T-Mobile, MGM Grand and Mandalay Bay.

MGM China performed well in the quarter, obviously it's a rugged tough market, cash flows have been impacted by the market and roughly by $9 million from a low hold percentage, but we see encouraging signs now in the mass business, and the key contributor to our profitability there is mass. So, that gives us good confidence.

We believe in this story, the long-term prospects of Macau.

We're highly confident that the quality of what we produce in terms of our great employees, our great offerings, our great service not only at MGM Macau, but what we are going to deliver at MGM Cotai positions that company, MGM China for renewed and solid growth, and of course, Grant is on the line and we'll tackle any of those questions in a moment.

In conclusion, I just have to emphasize how deliberate we have been internally to execute on a plan that we promised to our board and we promised to you.

We have literally fundamentally changed the way not only we are operating our business, but I've got to say, we're fundamentally changing the way operators operate in Las Vegas because we are the leader, we are doing better than anyone else here and people want to know how we're doing it and then they're trying to copy us.

We are the premier operator here and in fact, in every market in which we operate. And we are right to brag about the fact that we have the best properties operating at the highest level in every market in which we operate.

We're driving revenue growth, we're exceeding the revenue growth of the market, we're exceeding the revenue growth of our competitors, we're exceeding the revenue growth of the United States hospitality industry and we're exceeding the revenue, margin and profit growth of corporates here in the U.S.

We told you that we would be absolutely lasered-in on improving our balance sheet, and we sure have. And we're getting, finally, the credit from the rating agencies, in fact Moody's gave us a two-notch upgrade recently, and I expect far more of those type of announcements in the future. We are the preferred developer in new markets.

We win when we go in. We won in Massachusetts, we won in Maryland, we're building strong there, you can see the progress of Maryland by the way in investor deck. It's going to be the most spectacular integrated resort outside of Las Vegas that exists, and I think the most profitable one outside of Las Vegas when it opens at the end of this year.

I have to say that looking at how we performed in the marketplace, we outperformed in every aspect. We are the leader in conventions, we're the leader in entertainment, we're the leader in gaming, and we gained market share.

We benefited from the efforts of our PGP plan, our great cultural changes, our strong corporate finance and legal teams and we're incredibly proud of how we are doing at MGM Resorts. And we are as excited about MGM as we are about MGM Growth Properties and its future as well.

And so with that, I'd like to turn it over to the operator and we'll take the questions..

We will now begin the question-and-answer session. And the first question comes from Harry Curtis with Nomura. Please go ahead..

Hi. Good morning, everyone, and thanks for the incremental detail that you provided this quarter. I have two questions related to Vegas, both focusing on forward trends, booking trends.

The first is, if you just take a look at the most recent booking trends over the last one month or two months for the second half of 2016 and into 2017, how is that booking pace and pricing? Jim, you mentioned that it's been pretty strong, I'm just wondering, if you can put a little bit of detail around that?.

I'm going to turn it over to Corey, he's got a bunch of stuff in front of him here..

Yeah. Harry, the actual second quarter looks really strong and actually the third quarter even looks better just from a convention base. We're looking at significant increases in rooms. In both those cases, the price increases also, they're decent given where we are in the market.

So I think, when you look at that base and look at where the leisure and FIT's booking, we feel pretty strong about where we are right now..

When you look at this back half of 2016, given the guidance of up 5% in the second quarter, is the back half at a similar rate or better?.

Our third quarter continues to pace pretty strong, Harry. Fourth quarter is probably our toughest comp for the year, but that being said, we feel pretty good about how October and November is shaping up from a convention standpoint. And we think the back half of the year will be as good as the first half..

Okay..

Yeah, Harry, we are at a point here, where – have we ever been better in terms of our convention bookings – we are right now at an all-time record in terms of the amount of convention space, amount of conventions we have on the books in the year, for the year, the amount of bookings that we have on a quarterly basis, that our convention mix, which was a record last year is going to be higher this year.

And, yeah, it's a tough comp because we did so well in the fourth quarter last year, but we're off to a tremendous start.

Do you want to say anything more, Corey?.

Yeah. I think when you look at it from a percent of mix on 2016 will beat 2015, which was a record year and take us to a new number mark, as a percent of convention. And we're doing that with the additional space at Mandalay Bay, but we are still constrained to some degree in peak periods of how much space we could rent.

And so we'll continuously look for opportunities to move business around and also invest in opportunities to continue to feed that business..

So that leads to my second question, which is 2017, if you are already at a record mix of group.

How much more can you push that in 2017, are you seeing it more in the shorter periods?.

Yes, we are. And also remember – yeah, we have more on the books in 2017 than we do now. And remember ARIA is adding 200,000 square foot – square feet of convention space and we're able to repurpose some of our other spaces here.

Remember also with T-Mobile as a new asset, a really important asset in the market that frees up Mandalay's Event Center and sometimes MGM for more conference space. So, we have over 3 million square feet of convention space here in Las Vegas. We obviously, vastly exceed our competitors.

And we have more on the way and we have the ability with the great sales team to move stuff around. So, we fully expect to have a better year in 2017 on the convention business than we do this year..

And as a reminder, CONEXPO comes back in 2017..

That's a good win..

Yeah. That is a really good win. Thanks. Thanks, guys. Great trends..

Thank you, Harry..

The next question comes from Joe Greff with JPMorgan. Please go ahead..

Good morning, everybody. Obviously, the 1Q contribution related to the Profit Growth Plan was ahead of what most of us had modeled.

Jim, can you give us what some of the big buckets or the big drivers of that $59 million was? And I'm assuming it's a little bit more OpEx related than revenue related?.

Yeah. I'm going to hit the high points and then, I'll turn it over to Corey or to Chris. We studied a lot of great companies that have gone through a similar exercise.

And one other things that the best companies have done, the ones that have had the best results, they've told us very clearly, they said, they establish a plan, the plan is based on initiatives that they and outside consultants help them identify.

Then they setup a target number and no ones to get into it, they realize that some of those initiatives aren't going to work, but they find dozens and dozens of other ones they never even thought about. That's happened here in space.

Almost everything that we identified is working, but we have found dozens and dozens of other initiatives we didn't think about. And it's because we've changed the way all of us think about our business.

And it's a big contributor to driving revenue as well, being more thoughtful at the front desk, being more thoughtful about pricing, being more thoughtful about our convention business, working together to yield the huge portfolio of properties that we have.

And as you can see in the deck, we got very strong results on the cost side and many thing – the exciting thing is, many of the biggest dollar initiatives are just being launched now.

So, do you want to add some other points, Corey?.

Yeah. I think in the deck, we go through a lot of those examples, Joe and everything from airplanes, to wine up-sells, to room up sells, to how we manage labor. We're about 45%, 50% – 45% revenue, 55% expense right now. When it's fully implemented, we expect to be a third on the revenue and two-thirds on the cost.

So there is still some opportunities on the cost projects that take a little bit longer to see the flow through, but we're extremely pleased with the way our teams are performing and have stood up to the challenge..

Yeah, I'm just looking at something Chris Nordling gave me, it's across every single department, right Chris. I mean, we're getting revenue profit growth in our casino departments, look at our slot revenue by the way. Here much more money we're making in our slot department than frankly our competitors or how we used to do. There is an example.

In our Hotel Division, our Entrainment Division. Retail which was never a particularly great department for us is a record year last year. Last year and it's off to a great start here. Our F&B profits, where we cut G&A. And really, it's across the board and Chris, how many people do you have working in the PMO office on this..

We have about 40 full-time running initiatives and team leads on all the projects, you know our best people..

So, this is like a bunch of people in this room, sitting around a room and saying, could we dream up some stuff.

There are 40 of our best and brightest men and women that have left their jobs internally within this company, going into a new job in this project management office and are driving with project leads that are even more senior to them, these would be property presidents, senior and executive vice presidents that are leading individual initiatives that are driving this effort.

So, I don't, and by the way, the other message that's really important on this, that we learned from the best and brightest companies. This isn't something that has an end day. This should go and go on forever. We're not going to go back to the way we used to run our business or frankly the way most companies run their business.

And this is, as in the Japanese term of Kaizen, means continuous improvement, that's the way we are running the company now..

And Joe, the other benefit that we're seeing that we don't count in these PGP numbers is just a laser focus on the operations efficiency.

So just to give you an idea, we're down about 1,400 FTEs and probably 60% of that is PGP, the rest is purely operators being very focused on our proper staffing levels and making sure that we're as effective as possible..

That's helpful. Thank you. And then I have a Macau question, I don't want, Grant to feel lonely over there.

Grant, how much of this labor expense are you carrying at Peninsula that you planned to ultimately shift over to Cotai?.

Well, at the moment, we particularly in gaming, and basically got all of them management, because management is in place, so it's probably around 500 FTEs..

And will they translate into dollar amount?.

It doesn't work quite like that, but it's a significant amount. It's probably maybe 25 basis points to 30 basis points in margin..

Thanks. Great. Thanks guys..

Thanks, Jim..

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

Hey, everyone. Good morning and thanks for taking my question. Just as you guys look at the 2Q to 4Q period and obviously, maybe looking at the 2Q more specifically, since you provided the plus 5% guidance. Would you be able to possibly breakout the various segments of the business, i.e.

convention, leisure, other casino, et cetera and kind of give us the sense for where you are getting the most pricing power, which of those segments you're seeing the most pricing power, as you go through the balance of the year?.

Sure Carlo, much like last year, we've seen good strong pricing in convention and leisure is right behind actually, in overall pricing and that trend has continued. Corey got – getting through the details right now, but definitely leisure and convention had been our two strongest segments..

Yeah. All retail has got to..

Yeah. I mean if you look at our, what we're expecting from our websites and call centers, that number ADR impact will actually be higher than the guidance, we've given. And that's because, the solid book of base that we have. So that looks pretty strong, leisure channel looks strong, I mean it's pretty consistent across the board..

Okay. Great. I think Corey, if you don't mind, if I could follow-up on that.

Just in terms of the percentage of room nights that are booked right now through third-parties relative to your direct channels, do you guys have any color on that, that you can provide? And is that possibly a future opportunity to drive stronger net RevPAR?.

So I think that trend is very consistent across the hotel industry right now, where you're seeing that business increased significantly, and for many reasons including the investments, that Expedia's put in.

They are a very strong partner for us, I think there are opportunities with websites and our royalty program, to shift some of that business and that would obviously increase our RevPAR. I think we're constantly looking at it. We're strategically looking at it. I know some of the bigger chains have been very aggressive and how to attack that.

I'm not sure that we believe that's the right strategy, how we use them with our other – with our FIT and convention strategy in maximizing RevPAR that way..

Yeah. That's a good point, Corey. I just can't over emphasize how unique the Las Vegas market is, and how different we are versus the broader U.S. And Expedia is another dimension of saying the same thing which is we're Expedia's largest customer here, and we have a very good relationship with them as well.

And they know that we're the home team, we have 42,000 rooms here, no one anywhere in any market has as many rooms or has the higher percentage of rooms as we do in a rapidly growing market like Las Vegas.

So, we have a lot of programs, we work with all of our vendors that maximize and actually start with the basic philosophy that Las Vegas market is unique and you cannot look at the Las Vegas market like you look at New York. We have no new supply coming online of any major extent.

We have rising visitation, we have improving room product, because of renovations we and our competitors are making, and we're a vital, vital market on the global landscape.

So I read about what's the some of the other companies are having, we don't share that angst, but we're having a very good relationship and we're seeing growth in revenue in all of our channels, FIT, our retail business, our leisure business and we're able to do that, because of our unprecedentedly strong convention business..

Great. Thanks, everyone..

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

Hey, good morning, everyone. Maybe one more question on what's going on in Las Vegas because obviously, the trends there are great. But when we look at some of the non-room and non-gaming components, it does look like the trend across the wholly-owned resorts there actually still down a little bit, at least on the top-line basis.

So, part of that's probably initiatives you guys have in place, but could you talk a little bit about what you're seeing in some of those businesses? Any headwinds or anything you're doing to reposition, what you might be doing in retail, entertainment and F&B?.

Well, maybe I'll tackle one of them.

And Corey, will probably tackle the F&B, but on entertainment for instance, we made a strategic decision obviously, on our entertainment focus where that line item is down year-over-year, but that decision was when we teamed up AEG to build the new T-Mobile Arena, part of that deal beginning with this year on the opening was the MGM Grand Garden would become part of that joint venture.

And so, it's part of that joint venture that now is a least entity within the MGM complex. And so, we no longer report the revenues of all those events and that revenue is now basically just a minimum leased stream and that's in partnership now with the new T-Mobile Arena.

We obviously manage the day-to-day and all of the programming at the arenas, but it's part of that joint venture. So, there is some strategic decisions that we've made that obviously, has caused some of that shift.

Obviously, we've had the showroom down at Monte Carlo for the new Monte Carlo Theater that will come online later this month, I mean later this year.

And then in the first quarter, we also had for an extended period of time, The Love Show Was Dark over at The Mirage as we are making some modifications to the show and some enhancements with our third partners there, during the first quarter. So, we had a few less in-house shows during the first quarter..

And Shaun, what I would say is, you're right. We are strategically looking at our business and slot is a perfect example, where we're actually up in the tough market, but we're really driving the bottom-line. And we're up almost $12 million in profitability in slots. On food and beverage, we're seeing pretty good spending trends there.

When you have more convention business, some of that goes into the catering line. So, the restaurants are doing fairly well. We'll keep adjusting based on the changing market needs, I think The Park is the perfect example of that, the outlets in The Park are medium--priced, approachable.

And we're seeing a lot of that, especially in Vegas to be able to give a diverse variety and change out some of the restaurants to adjust to where the market is now, but in general, I think we're pretty happy with this spend, we're being strategic about it, we're making sure that we make as much profitability, that's our main focus, and then to drive the top-line with that goal – that's where we're focused on right now..

Yeah. Maybe, just to sum those two good points up. We have meetings constantly on revenue per occupied room. Total revenue per occupied room and profit per occupied room. So, where we find opportunities to drive revenue and profit, even if it means shifting out of some departments into others, we will do that.

And that would be something, I think you should focus on going forward as our revenue and our profit per occupied room, which is rising and that's a result of a lot of these investments that we're making in areas where we think the consumer is going to be more receptive to spend money..

Great. Thank you for all the detail.

And maybe to switch gears a little bit, Dan, there has been a lot of, obviously, kind of big strategic moves that have – that impact the balance sheet here a little bit, and I was wondering if you can give us a little bit of outlook on the CapEx inclusive of sort of the expenditures required for Cotai, so we can – as people on the call here can begin thinking about the prospects for free cash flow as we look out to the openings of National Harbor and then Cotai in 1Q 2017?.

Sure, Shaun. Our guidance as far as what we gave on our last call has not changed materially in any respects. We got about – over in Macau, we got about $1.5 billion in CapEx planned over the next 12 months. And largely those dollars, obviously, are all for MGM Cotai in getting that property to its completion by the end of Q1 next year.

And that's how we see the largest CapEx development on the table right now. National Harbor for the full year is pacing about $650 million to its completion by the end of this year, in terms of its overall cash needs and our maintenance and growth within our properties is roughly running in kind of a $425 million to $450 million range for this year.

Springfield will probably be, the first order of business is, obviously, the site remediation and site prep work that the team is undertaking there and the first real construction dollars, will be focused on building the parking garage there, over the next 12 months to 14 months and that will probably be about $100 million to $125 million in CapEx for Springfield..

Thank you very much..

And by the way, a lot of us were just down at National Harbor. It's awesome. It is really unbelievable. So, take a look at the investor deck and see – usually when you do a rendering, that building doesn't turn out like the rendering, but you could see how we're following the vision here and the level of excitement.

We're going to have over 40,000 applications for those jobs that we're going to hire at the end of this year. And the workflows that we're seeing out of our great National Harbor team have been really spectacular. And the creativeness is going to be outstanding and the building is coming out really remarkably well..

The pictures are great. Thanks for that..

Thanks..

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

Hi, good morning. Just a....

Good morning..

Just a quickie on National Harbor, I think in the release, it still says end of the year, do we have an exact date?.

No, it'd be in the middle of December..

Okay, thanks..

But probably second week of December..

Yeah..

We're targeting December 9, but probably a month before we put a pin in it, but we're targeting December 9..

Yeah. I didn't want to say that, Bill, but....

Thanks for that, Mr. President. We're going to say middle of December and we're targeting for some date that Bill might have mentioned..

Put pressure on me..

Okay. So I think I heard like November 27 or....

No, no, no. I'm not ruining my Christmas holiday. I don't know about you, it will be opened before Christmas..

Yeah..

Okay. Thanks. So to get to my real questions here. Regarding the gaming trends on the Strip, just with the 6% decline in table volumes, I was wondering if you could just call that out. Was that entirely due to Baccarat or was that also mass tables. And then assuming the growth in the non-gaming trend in Vegas continues, which it seems like it will.

Just wondering do you think it's driven more by moderating gaming revenues or increased spend in non-gaming or both are – how are you analyzing that?.

Right, who wants to take it, Dan or Corey, or Cathy, do you want to take that?.

Sure. Well, the 6% decline in volumes, we actually did pretty well – most of that was due to Baccarat, actually, our non-bac table gaming volumes were up. So to answer your question, most of that was due to non – was due to Baccarat..

Yeah. So I think what we're seeing is, we held pretty well in Baccarat, the Far East is still hanging in there, although still struggling a little bit. But our national play is strong and you're seeing that in the non-Baccarat not only drop, but win..

Okay. And then....

Yeah. And I'm just looking at some other things. China was – our play from China-source play was still down a lot and Chinese New Year was slow as a result of that.

But as Corey mentioned, our other non-China Asian business, we've had good – much better results out of Japan, other parts of the Far East and that has helped, ARIA did very well and obviously we have a very large marketing team. So I think of course, we have the largest marketing team.

So we've been able to move our emphasis on markets, where we feel like there is more fertile territory for developing customers, that has had an impact and we've been focusing more on domestic play..

Okay..

And domestic is up....

Our rated domestic play has been up about 7% in the first quarter, offset by a decline in our international rated play..

Okay. That's helpful. And then we've just been kind of looking – just get to my other part of my question, we've been looking at these – I think we've all been looking at these trends where we've been seeing moderating gaming revenues and increased non-gaming.

So just wondering, if you could talk about that phenomenon regarding the people that you see coming right? Obviously, you're growing your convention business and is that kind of cutting into the gaming side of things?.

Yeah. I think, my guess is and anyone can jump in, my guess is that our non-gaming revenues and profits will continue to grow more rapidly than our gaming revenues and profits.

And part of it has to do with the nature of the business, part of it has to do the investments that we're making, expanding convention business, building arenas, hosting music festivals, developing more F&B product, and been able to find more corporate business, more hotel business. The National business is going to completely be driven by the U.S.

economy, the U.S. economy is doing well, better than I think the news would tell you. Certainly, we're seeing it, in terms of good play and in terms of the spending trends across our portfolio.

And what we like about our company is we get to see all kinds of customers, the customers who check-in the Circus Circus and the ones who check-in the Bellagio and everything in between. And we're seeing, you can see this in the results, but we're seeing increased consumer spending in these areas.

The International business is the one that has always been troubling to us ever since the recession and we don't have as much visibility, in terms of how that business is going to grow.

We know we are the largest market share provider in the high-end here in Las Vegas by virtue of having the three properties that cater to that, but I just don't have a visibility whether international gaming is going to grow. I do believe the national gaming is going to grow.

It is, as Dan mentioned, but I believe that our non-gaming revenues and profits will grow more rapidly.

Anyone agree or disagree?.

Okay. And just quickly Dan, housekeeping.

Just wondering what the current balance of your NOLs is and when you expect to be a cash tax payer?.

We're actually a cash tax payer today, not at the full rate given our foreign tax credits, but we're actually a cash tax payer today. And the NOLs are pretty minimal at this point in time, it's really based on our foreign tax credit at this point in time..

And how long....

For effective rate..

Yeah. Our effective rate, right now is basically about 17.5%..

And then do you foresee in the, I don't know near or mid-term getting to a full rate?.

I don't see that really changing for the next few years..

Okay. Thank you..

The next question comes from Robin Farley with UBS. Please go ahead..

Great. Two questions. One is, I know you gave a lot of color by quarter on Vegas RevPAR, that's very helpful, thanks. But just wanted clarify should we – as we put that all together, is that still – you had talked about a 6%.

So, your RevPAR outlook at one point, is that still kind of roughly on track if we put all those pieces together?.

Well, Robin, when we gave that guidance, we thought we'd do around 6% in the first quarter. So, we're ahead of that pace at this point in time. So, I would have to say that if anything we – our confidence level has increased significantly since we gave that last guidance..

Okay, great. That's helpful. And then on Macau, when you had, last quarter had pushed back the opening to Q1, one of the factors you mentioned was kind of market conditions.

Now sitting here a couple of months later, how do you feel that market conditions? In other words, is there – actually answer if market conditions are kind of similar to what they were two months ago in your view that that opening to maybe even go past Q1 of 2017?.

Grant, do you want to tackle that or Bill?.

Grant, why don't you speak to the market, and I'll speak to the project..

Okay. So, when we were talking about market conditions, I think the other critical point for us is the timing of all the projects both in terms of logically the ramping up periods and we are seeing some – the ramp up is taking a bit longer.

And the other component of that is obviously recognizing that Macau government is sensitive to bringing the projects on at a particular price. So, we see some positive signs in the market in general. I think everyone is talking about stabilization and if you look at our numbers, our mass numbers are generating 86% of that EBITDA now.

So, they're pretty strong. We had a really good April, so we're starting to see some traction and we are seeing collective quarters of that, so I think to get ourselves into that 2017, assuming that others get open as they say, they're going to get open, is probably good timing and then I'll turn it back to Bill to say, getting the project done..

Thanks, Grant. In context to the project, Jim and I and others, Dan will be out for a board meeting later this month. And we'll make yet again another assessment.

We're roughly slated to finish construction end of October, early November and then remembering the last part of this process really resides with the relationship between signoffs between ourselves and the government, which pushes into we believe end of first quarter, that may trickle over that, but I think, we'll have some real clarity on that around the month once we have hands on view yet once again of where we are..

Great. Thanks, very much..

The next question comes from Thomas Allen with Morgan Stanley. Please go ahead..

Hey, good morning. So, the Bellagio, had the highest EBITDA in entire Vegas market, for the first quarter since the second quarter 2012, so it's quite achievement. So, EBITDA was up $26 million, $27 million year-over-year, can you just talk about what drove that and expected sustainability of the performance? Thanks..

Yeah. Thanks for noticing that and not only that, but its outstanding margin. And if you have some time, you might want to compare it to its competitors in the market. Maybe also, look at how many rooms Bellagio has versus its competitors as well. We've been able to drive really great growth in our room product, we renovated those rooms.

They have been received extremely well. We've added a couple very popular F&B outlets. The convention business is extraordinarily strong at Bellagio, to a point where we're studying on a preliminary basis where could we add a little more space here, because it's an extremely good problem to have.

Our slot and table business has been outstanding and this is the best property in Las Vegas and it improved it in the first quarter.

Corey, do you want to?.

Yeah. I think it's general across the whole property. We're seeing increases not only in revenue, but there are probably – we've always had our luxury properties benefit probably the most from the PGP and so, you're seeing it on the expense side also. Slots have actually an all-time record in the slots for the first quarter.

So they are just – it's quick in on all engines, I think the properties never been better, the upgrades we've made with the restaurants and the facility have all been well received. We have some new executives in there that are really clicking and really taking the property to the next level.

So I think when we look at it and you look at the margin there, the margins are always been right up there, with any luxury property in town and then now it's beginning to outpace any property even by that much more..

And keep in mind, because it's sometimes frustrating to us, that Bellagio is not our only luxury property, it's not the only property that we dedicate our energies on our International and National Gaming business to, it has two other formidable competitors in ARIA and the MGM Grand.

So, if you were to look at those properties and then obviously ARIA had a great quarter as well and as well as the Grand and think about how we're doing, vis-à-vis the marketplace in any aspect of the business.

I think there could be only one conclusion is that – for this quarter at least and I think it's going to continue, MGM Resorts is the best operator in this town..

Thanks. And then pass over to Grant. Grant, two quick questions. We just had made Golden Week, what does that feel in the market during that week in your opinion? And then there has been some talk about banning all proxy or phone betting. What your thoughts about the potential ramification there? Thank you..

So, on your first question. As I said, the end of April was really excited, gave us a good month. And then the Holiday has been quite good and is run through probably next two days or three days. So, we were all pretty satisfied, came out looking pretty good.

The key issue for us was we saw some customers come back and we're applying at some really good rate. So, we're starting to see some traction with some increased volumes, that's what the trend that we're looking for.

On the proxy betting, I think it's saying – it's going to be a government announcement in the next few days to clarify the situation with that. And clearly, our position will be that we will follow the direction of the government.

As I said 86% of our EBITDA now comes out of the mass, so whatever happens in the notion of proxy, it will probably be yet another continuation of pressure for the junkets themselves, but it probably is not going to be that significant for any of the operators, certainly not significant – that significant for us..

Thank you..

The next question comes from Steven Kent with Goldman Sachs. Please go ahead..

Hi, good morning, three questions.

First, just on the costs saves, when I hear you all speak about them, they sound similar to somewhat with The Mirage, MGM merger, reductions, the expense reductions during the financial crises, are these opportunities, Jim, that just naturally escalate and you have to go back every few years and that's why you're saying the culture has to change? I just wanted to understand that little bit better.

And then any sort of EBITDA guidance on the JV operating income, CityCenter comes out because of the sale of Crystals, what can we expect in terms EBITDA from the T-Mobile Arena JV and any operating income, do we expect operating income from the JV broadly to be down year-over-year in 2016. I'll leave it there, because it's a multi-part questions..

Sure. I'll tackle the first one and then – and anyone jump in on that. Interesting insight.

And I think there is some points of comparison, but more I frankly more stark contrasts, so when MGM and Mirage combined back in 2000, it was really a focus on eliminating duplicate positions, eliminating duplicate corporate functions, consolidating areas that had been completely utterly independent and then to a degree that we were able to do 16 years ago, try to use a larger scale for better procurement and it really was more, I think, a function of some one-time if you look at it, savings, it really impacted positively, impacted the margins of Mirage Resorts in the year, so post the May 2000 acquisition.

Then fast forward to the Mandalay Resort Group, we basically did the same thing. What we did here was, from the very beginning, we were conscious not to try to do – go down that path. We already felt that our labor is at one point, the largest variable cost. Our labor expenses were reasonable.

We have been tracking FTEs since The Mirage acquisition days and our FTEs have been flat to down, and more importantly, we look at labor in a lot of other metrics, labor per occupied room, labor per food cover, labor in a ways that would show and I think we're going to have an Investor Day coming up that will show you that, our labor costs have been decreasing along the way.

So, in this case, in the PGP, it was really challenging ourselves to do things very, very differently, where – how we procure.

What kind of procurement policies do we put into place, how do we pay for our product? What kind of terms can we generate? We've been reducing the number of vendors that we deal with in every channel going from dozens of different vendors to a handful, and what that does to stability of product and pricing.

Looking at more thoughtfully, how our volumes are being generated and using technology that did not exist in 2000 to schedule and use our buildings more efficiently, making investments, we didn't buy any planes when we bought Mirage, we sold planes.

We bought planes, not because we needed new planes, because we needed more efficient planes and the planes that we have today, the only fleet of its kind in this industry operates at half the operating costs of the traditional fleet and that's important, when you're spending hundreds of hours a year per plane flying customers into Las Vegas.

And looking at really how we are leveraging also different game types, different products on the casino floor, I have to say it's a very different program than we had before. And I think that it really speaks to – and I could tell you as someone that was there on both deals. We didn't have a 42-man and women PMO office that was reaching out.

We didn't have [Bain] initially. We didn't use the resources that are available today to change the culture of our company. And so I would think that did we – did we have expense creep, which is kind of part of the question, probably after The Mirage acquisition.

When everything was great, we're having record years in 2005 and 2006 and 2007, and we thought we were really smart and we turned out that there are a lot of things we could have done better, but this is a very different program and we're using technology more than we ever did before..

And the other thing I would add, Jim, is we are really focused on centers of excellence and bringing new skill sets into our industry, including areas like analytics where the industry has done an okay job, but now we're going into much more advanced analytics, that help us match our forecasts with our labor needs, with our customer service needs, and we're very focused on constantly improving that customer service experience..

Why don't you brag on her for a moment..

On Elisa..

Yeah, sure..

We just hired Elisa and was not just hired, she has been here probably like six months. Elisa Gois, she came from Host Marriott, no, just Host, right..

Host Hotels & Resorts..

Yeah. And we're happy to have her here to stand up an analytics team. Now what we used to do is we used to have analytics teams at every property with a multiple layers of people.

So the FTE cuts, that you are seeing here are more strategic, more business-oriented and more permanent and they're relating to inefficiencies of an old way of doing business, compared to new technologies, new methodologies that are out there for us today..

And I think, once we get you all in a room, we're going to show you some of these things. We talked early on about the employee dining room where we were wasting so much food, which is really – it's criminal to waste the kind of food that is wasted in the United States.

So we reduced our food waste to provide a better product, but providing in a fashion that is more efficient. What we do in terms of linens and terry, our programs there have changed dramatically.

What we're doing in terms of amenities and supplies in terms of – how many – Chris how many different kinds of shampoo bottles did we have?.

16..

16? That's a smart move. So when we put the two big acquisitions together, we had some big high-level things we knew we needed to accomplish and we did, but from the ground up here, this is a very different program. And I think the next question was on CityCenter..

Well, Steve, I think it was on your guidance ....

JV..

On JV EBITDA and their contribution. So as you know, we don't give EBITDA guidance. What we did do in the investor deck is we did highlight some things for you to consider as you're modeling out, some of the impacts at the joint venture level.

CityCenter comes to mind, obviously with the Crystal sale, that will be discontinued ops as you saw in the first quarter going forward. There'll also be a gain on the sale of Crystals in the second quarter and there is some final depreciation adjustments in the Zarkana Theater for April that will hit the second quarter as well.

We laid all those out in the investor deck. I think the important thing to note on these joint ventures is, when you look at CityCenter, you look at Borgata, these are balance sheets that are less than four times leveraged.

They are throwing off a significant free cash flow and that is a huge opportunity for the owners of these assets going forward and obviously, we own both 50% of Borgata and CityCenter.

And I just saw with the Crystals dividend, I think you will see more dividends and more free cash flow opportunities from these joint ventures going forward, more so than we have in the past..

Yeah. I think when we made – I think we made it well – remember, when we made our 30% target goal, we also said at that time that this company MGM Resorts would be an investment-grade company in a very short period of time.

Obviously, with these two major transactions, the Crystals and the MGP transaction, we've accelerated that timetable even further, that combined with the dividend potential of all of our enterprises including MGM China as soon as MGM Cotai is opened, and the free cash flow we're generating, gives us great comfort that we're going to get there in a really relatively short period of time..

Okay. Thanks for those insights..

Thanks, Steve..

We'll take the last question..

The final question comes from the Steve Wieczynski with Stifel. Please go ahead..

Hey. Good morning, guys. So, Jim, I guess the first question.

I know it's still early on, but with the T-Mobile Arena opening up about a month ago, can you just give us some color around? So when there is a big concert and I know Billy Joel was there and some stuff like that – what did the trends look like at the properties around the Arena?.

Yeah. We've had better attendance on these shows than we had predicted. We have had far greater activation by the sponsors. They are hosting their own parties, whether it's obviously T-Mobile itself or Toshiba or the other main sponsors, that generates not only revenues for the joint ventures, but activation in the area.

We've seen tremendous numbers out of the Beer Garden and the leased venues that are along the park. We've seen improved gaming numbers at both New York-New York, and The Monte Carlo, slots and table volumes are up, and specifically event-driven tremendously.

And it's not just in that finite area, it's radiating around, so if you go around at New York-New York to Tom's Urban for example, or go to The Nine Fine Irishmen or wrap around the corner in front of Monte Carlo, you're going to see double-digit gains over 20% gains in bars and lounge revenue and profit.

So the foot traffic is up tremendously, we think that the programming, we've had some events in The Park itself, that have been really fun, activating The Park has its own place for art festivals and food festivals and that has generated – and by the way it's generated a lot of local interest as well.

For us that live here in town, we know that you've really come to the Strip unless you're working like we are or you got someone from out of town visiting.

But we're finding more and more locals coming down and going to Harlem Globetrotters or going to The Killers Concert or Billy Joel, and we got a big fight this weekend by the way, and we're activating The Plaza as well.

So really extremely pleased with the result so far and it's got us very excited about the future of Monte Carlo, something that I've alluded to in prior calls. But we've taken a good look at this building and believe that amongst our entire portfolio, it has the most profit upside through a repositioning.

And so we've been working as you know on that as well and there will be more to come and when we're prepared to talk about it..

Great. Thanks for the color. And then second question, real quick question. I don't know, if you will be able to answer this or not, but when you look at The Grand and you talked about The Grand being a pretty formidable competitor to The Bellagio.

With The Garden arena there now, and I guess you look at The Grand only having about 600,000 square feet of convention space.

Is that something you guys would look at basically changing out relative to the number of hotel rooms there? I guess, I'm trying to get as The Grand seems like it has probably not as much convention space as it possibly could need?.

We are – we've been for the last five months undergoing an internal inventory review of our entire portfolio here.

And what we don't want to do is, build and expand too rapidly and then not being able to fill that space going forward, we're just be – we're trying to be very thoughtful on to knowing what the trends are, which are extraordinary in 2016, 2017, 2018. But trying the guesstimate what we're going to be in 2018, 2019, 2020 and that's harder obviously.

The one property that that stands above our others in terms of an obvious ones for growth of convention business is the MGM Grand. The MGM Conference Center was built the year I joined the company..

That's right..

And it was built and located, because there was going to be a development that would've more seamlessly connected the MGM Grand to the Conference Center, that development we stopped.

And so, that's an area where there's no doubt given the 5,000 plus rooms, given its location proximity to the airport, it's brand, it could fill off a lot more convention space and the good news as you know about convention space, it's the least expensive space to build.

And the ROI on the Mandalay Convention expansion is outstanding and we didn't talk about ROIs, but I'll just stand on this point, if you think about the way we're spending our capital today, because we have no intention to building a new full-scale resort here.

We are spending a lot of money here, but in areas where we believe we'll have immediate, and very strong returns. And I would say the 5,300 seat theatre at Monte Carlo is a really good example of that. When that opens up next year, or late this year, Bill Hornbuckle has got a line of people, he'd kill me if I announce..

..

He is reaching over the table, but believe me, Wynn, we're going to be able to announce a series of A-plus residency acts that will occupy that and make that investment, that $90 million investment, a very good return for us.

So that is how we are viewing capital in the Las Vegas Strip, is looking for ways where we can build on our strengths and spend a manageable amounts of capital to drive above average returns and one of those areas where we think we can do that at the right location is in the convention space and I would say that MGM is on the top of that list..

Thanks a lot. Thanks for the color. I appreciate it..

Thanks, Steve. And, Gary, I think that brings us to our allotted time of an hour. I know we got started a little bit late, but we're clearly and obviously around all day-to-day to enter any follow-up questions and we greatly appreciate, everyone, for joining the call with us this morning..

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect..