Jim Murren - Chairman, Chief Executive Officer Dan D'Arrigo - Executive Vice President, Chief Financial Officer Bill Hornbuckle - President Corey Sanders - Chief Operating Officer Grant Bowie - CEO, Executive Director of MGM China Holdings Limited.

Joe Greff - JPMorgan Harry Curtis - Nomura Shaun Kelley - Bank of America Shaun Kelley - Bank of America Felicia Hendrix - Barclays Stephen Grambling - Goldman Sachs Carlo Santarelli - Deutsche Bank John DeCree - Union Gaming Thomas Allen - Morgan Stanley Chad Beynon - Macquarie Robin Farley - UBS.

Good morning, and welcome to the MGM Resorts International, Fourth Quarter 2017 and Full Year Earnings Conference Call.

Joining the call from the company today are Jim Murren, Chairman and Chief Executive Officer; Dan D'Arrigo, Executive Vice President and Chief Financial Officer; Bill Hornbuckle, President; Corey Sanders, Chief Operating Officer; and 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. 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 Mr. Dan D'Arrigo. Please go ahead..

Well, thank you Nicole and good morning everyone and welcome to the MGM Resorts International, fourth quarter and full year 2017 earnings call. This call is being broadcast live on the Internet at www.mgmresorts.com and we have furnished our press release on Form 8-K to the SEC this morning.

On this call we will make forward-looking statements under the Safe Harbor provisions of the Federal Securities Laws. Actual results may differ materially from those contemplated in these statements.

Additional information concerning factors that could cause actual results to materially differ from these forward-looking statements is contained in today's press release and in our periodic filings with the SEC. During the call we will also discuss non-GAAP financial measures in talking about our performance.

You can find the reconciliation to GAAP financial measures in the press release, which is also available on our website. Please also note that our supplemental earnings deck is posted to our website. And with that, I’ll turn it over to Mr. Jim Murren. .

Well, thank you Dan and good morning everyone. I’d like to take a moment to put out strong fourth quarter and full year into a longer term perspective.

You know last several years MGM has undertaken a really remarkable transformation, aligning all of our brands into one global entertainment brand, driving a disciplined, unified view of strategy, creating and continuing to build one common approach to get service and firmly establishing a clear and unwavering set of values that guide both our behaviors and our contributions to the communities in which we operate.

These decisions, thoughtfully planned and carefully executed have resulted in a robust and resilient business model and that provides for defensive earnings streams but also creates really strong tailwinds for the further and I would say 2017 proved that out.

Despite the clear challenges we had in the fourth quarter, our earnings were relatively well protected and we finished the year strong and we are excited about 2018 as well. We had given guidance in the fourth quarter of EBITDA margins down 100 basis points. They are actually down only 30.

We’ve given REVPAR guidance of I think down 5% to 7% and the actually outcome was down 4.9%. We think that 2018 is going to be a very strong year for our company based on what we see, here in Las Vegas and in Macau and in our regional properties and we’ll start with Macau.

Of course we all just got back from there, having just opened a beautiful new resort MGM COTAI February 13 and literally it was just before an important New Year’s, the Lunar New Year. We think that this property is a game changer in the market, and really in fact for integrated resorts around the world.

It’s so breathtakingly unique that everyone is going to want to go into the spectacle. In fact thousands upon thousands already have and to experience a one of a kind environment.

You remember that we set out here to design and develop an innovative, integrated resort that would fulfill the requirements of the government to support global tourism and we’ve delivered on that.

What’s exciting is that the opening event is just the beginning, because we have many catalysts to drive further traffic and profitability to COTAI in this year, including launching our first resident show ‘Destiny’ which will drive even more mass customers and a lot of buzz around the property, but also of course when we open up our Mansion along with five junket operators to support the VIP business.

We opened only recently, so the data is early, but I can say that demands for both properties has been strong, both in terms of rooms and in terms of gaming activity. We had not all our rooms available at COTAI for the opening.

I think that we had about, what Bill, 900 – about 900 and they will continue to add on rooms and Grant will get into that in his comments. But we’ll have all the rooms open in the spring. And on the finance, we continue see really gratifying loyalty of our customer base there.

We obviously finished the year strong driven by both, good Mass business and VIP in the fourth quarter and we’ve seen traffic over there and frankly we haven’t seen in quite some time and that’s continued into the New Year.

And so between the two properties we are excited about the opportunities that they offer us and we think we are very well positioned for the market in terms of the type of product the customer is looking for, and we are confident that we are able to build our market share and command more than our fair share of the market as we have in the past, commensurate with the fact that we have a high quality product in the best management and employees in the business.

And here in Las Vegas, this is the second time we talked to you since we experienced the great shock to our community in October and yet our fourth quarter materialized as we expected, as we discussed on our last call - in fact it was a touch better.

And I think that speaks to the power of our brands and the resiliency of our strong and nimble operating model. We have strong analytical horse power here allowing us to understand our business in a real time basis and make more accurate forecasting.

The commitment of our people here is really the big story in our relationships and of course the continued recognition that Las Vegas offers an unparalleled suite of experiences for the town that helps keep this market fresh, relevant, exciting, all that we could see in the fourth quarter and certainly into this year.

Now there is a lot of interest in Las Vegas today, and others are investing in the marketing which we welcome. We know this drives incremental visitors and well better position the city for the further and I have to say was the genius of our Founder, Kirk Kerkorian.

You know he thought us to invest in our community, to encourage others to do so and together the destination would grow and MGM would benefit. That’s what he always said to us and that’s still true today and we are very, very excited about the future because of the collective investments that we and others are marking.

We continue to see and pursue attractive ROI opportunities in this market, reinvesting in our properties to maximizes their full potential and when we do so, we create meaningful new offerings to the city and that drives incremental demand; and of course we’ve achieved this recently with our expansion to the Mandalay Convention Center, our award winning T-Mobile Arena, more recently the convention expansion at ARIA which literally just opened last week and in already getting great feedback in full, and this year we will continue to invest further.

Obviously more in convention space, the expansion to the MGM Grand which will open up early next year and of course Monte Carlo’s dramatic transformation to Park MGM and NoMad, certainly it’s been disruptive to us, but when we open venues like Bavette’s which is the best Steak House in Las Vegas in now, we are seeing immediate customer demand.

And as we’ve discussed, as a destination Las Vegas has transformed itself literally into a sport’s lover’s town, and that obviously also drives more opportunities for the destination and for MGM.

And if you add to that the fact that the Supreme Court will likely legalize sports betting this year, MGM is really poised to immediately take advantage of that opportunity. Sports as it relates to our performing events here and as it relates to our industry, we believe it is a significant avenue of growth for MGM Resorts in the further.

So let’s talk about 2018 for a moment and why we are optimistic. As we said before, first let’s talk about the first quarter. It’s a challenge because of the lapping of CON/AGG and the fact that CES shifted a week. That said, if you look at CES it was another really successful show. In fact we reached at MGM Record Hotel Revenue days during that time.

We also had good Super Bowl very strong and so far a really strong Chinese New Year and we remain very optimistic about the high end throughout the entire year. So despite the concerns about some of that calendar shift and some corrections more broadly, we feel good about the U.S.

Economy and very positive about our forecasting ability for the balance of this year and certainly some of the benefits that accrue to a company like MGM, like the corporate tax cut change, that will also help not only MGM, but the customers that visit us. The fundamentals of our business are very sound.

We continue to see very healthy levels of bookings. We’ll get into that more specifically, but our corporate meetings and convention business is really terrific.

The event calendar is outstanding for 2018 and we have some interesting ideas of how to continue to innovate our entertainment offerings, not only driving into ’18 but into ’19 and so I think that will bode well for the market place of which we are the greatest beneficiary.

We also see good opportunities to grow the destination in Macau working with our fellow concessioners and the fact that MGM COTAI has much more to offer as it continues to add its new offerings.

We remain committed to the investments that we talked about and being very disciplined in our use of capital and we are focused on the projects that we have in the pipeline that we’ve ready outlined to you; obviously the transformation of Monte Carlo, the continued expansion of our brand here with the convention expansion at MGM Grand.

The continued added addition to our portfolio with MGM Springfield opening up later this year and of course what we have going on in COTAI.

And if you add to that what James Stewart and the team is doing over at MGM Growth Properties, which is certainly the premier triple net release three in the space, with a great cost to capital and quite a bit in their pipeline of which MGM is the largest economic beneficiary.

We feel good about the prospects for the MGM Resort’s shareholders and so what are we going to do with our future? Given our cash flow growth, and the fact that we are nearly completed with our development cycle, we intend to continue to execute on a very disciplined for pronged capital allocation strategy.

First, we will continue to reinvest in our business where we know it makes sense to maximize performance and increase our competitive advantages, that’s working very well here in Las Vegas. We will make sure that we maintain a very strong credit profile and an outstanding balance sheet.

We will look for prudent growth opportunities where we believe MGM has a differentiating opportunity and where the returns can be outsized and we will continue to return capital to our shareholders.

And on that note, since we started this journey we’ve returned about $580 million to our shareholders and as I’m sure you saw today, we also announced 9% increase in our quarterly dividend. I’m proud of what we accompanied in 2017. I think that 2018 will be a great year for our company and with that, I’ll turn it over to our operator for Q&A..

Thank you. [Operator Instructions]. Our first question comes from Joe Greff of JPMorgan. Please go ahead. .

Good morning, Jim. Good morning everybody. .

Good morning,.

Good morning Jim.

Jim, your full year 2018 Las Vegas strip outlook suggest that the 2Q through 4Q will grow about 8% on average in terms of EBITDA. Can you just talk about how you see – obviously the 3Q has a very difficult comparison to what you delivered last year.

But can you talk about maybe how backend loaded it is to the 4Q and just maybe you can give us some specificity on the group phase. You mentioned earlier that corporate meetings were terrific and then in that count you said that’s steady.

If you can give some specific data points behind that, that would be great and then I have a follow up?.

Sure Joe. I’ll start and then I’ll turn it over to Dan and Corey. First on REVPAR, I think the guidance we gave is up 2% to 4%, and obviously with the hold that we have in the first quarter that would imply pretty decent REVPAR growth in the balance of the year which we expect.

Q2 and Q3 look about the same in terms of REVPAR up in the mid-single digits and we should be up double digit in REVPAR in the fourth quarter, to give you a sense of how that plays out. Obviously the fourth quarter against the unusual comparison a year ago, Q2 and Q3, you know really healthy REVPAR growth.

We did have a couple of major fights in the third quarter that certainly drive lot of demand in the third quarter ’17, that’s going to be the challenge to do as well as that.

On the other hand we have a couple of big fights ad a huge concert in the second quarter of this year, bracketed around I think an Investor Day Cathy’s having to trying to entice investors to come on out because we have a big Canelo GGG fight right, happening in that quarter.

We also have a U2 concert happening in that quarter and both of which bodes well. And there is another fight in the second quarter as well, so second quarter looks pretty strong from an event perspective. Third quarter we are still working on how to compete against great event calendar in the third quarter ’17. But that’s how the event shapes out.

In terms of convention business, it looks strong all year. I’ll talk to these guys to hit it, but we have seen good in the year for the year. Their pace is strong. Our convention mix looks like it will be about what it was last year.

For this year really solid bookings and we get the benefit of REV’s convention expansion, which is really unique and already well received. And so I think that looks pretty strong.

Dan, do you want to add anything to that or…?.

What I would add Joe is obviously the hole in the first quarter by CON/AGG, it was the biggest hall. There is some city wide shrinkage a little bit in the third quarter that we hope to get some corporate business, but other than that it looks pretty good on the convention side..

Great, excellent. Then Dan with sort of how you’re thinking about the next few years in terms of domestic CapEx, you know we always kind of you know sort of penned you in the $500 million to $600 million range. I know in ’18 it’s a little bit north of that.

How do you think about domestic CapEx beyond this year and kind of a steady run rate basis?.

Yeah, I think the $500 million to $600 million Joe is a good place holder as you look out multiple years. We are a little bit higher in ’18.

Part of that is timing and some of the bigger, chunkier kind of CapEx pieces that are come to the finish line in ’18, so we are a little bit higher there in ’18, but we’re a little on the low end of the range in ’17. So I think the $500 million to $600 million on a long terms basis is still the right level.

’18 will just be a little bit higher due to some timing and some of the completion of as Jim mentioned, The Park, MGM, the Convention Center at MGM and so there is a few chunky things that just happen to fall into ’18..

Thank you very much..

Thanks Shaun..

Our next question comes from Harry Curtis of Nomura. Please go ahead..

Hey, good morning everybody. Just a quick follow-up on Joe’s question. As far as the convention business in Vegas, Corey are you seeing much in the way of overflow into the lower priced shoulder months and I don’t think I got a sense of what the general pricing is on the business that you’ve got on the books.

Is it up mid-single digit or a reasonable guestimate?.

On the lower months, so this usually happens within the year or during the year and so we have some leads for that period right now that we are pretty optimistic about. On the pricing, we have on the books from a definite perspective. We are seeing low to mid single digit growth..

Got it. And then Jim you mentioned that Grant is on the phone.

I wonder if he might give us some early impressions on traffic and volumes since the opening and maybe the reasonable question is how many cylinders do you think its operating on now versus what it can get to?.

Sure. I’d like to know too Grant, so….

Thank you. Harry, well the right thing about having a Chinese New Year is there’s never a shortage of people. The great challenge of having at Chinese Yew Year, if you’re not ready it could be quite scary and what I would say on both counts is we have really pushed the capacities to the property significantly over the last four or five days.

So it came up well. Its sitting – and most importantly, the take up right has been very strong. Now we’ve had traffic through here. Just some foot traffic exceeding Macau and as Jim said, the Macau numbers are very strong.

It is the ramp up period and we are working it through, but if there’s one number that really sticks out to me is that from get-go we’ve been able to get the mass win per unit per day on the gaming tables. Pretty close to the same numbers that we’ve got in Macau and we wanted a market leader.

So the critical point is, I think I told you that we’re positioned well to the market that we’re targeting. So that mid-premium mass market. So I am very pleased with the feel and the pace and the rhythm that we’re getting into the property.

As you would expect, we had some challenges, but apart from that it’s been touch wood, very smooth, and now we just need to dig in and really start executing on our other plan.

Sign-ups through our relationship program are running at about nine times the rights that we’re getting in Macau and that is positive, extremely positive to us despite from what was heard throughout the market here and interestingly enough, even before we got going we already had built up nearly half a million participants in our vChat accounts.

So we half a million people already following us before we even opened doors. So all in all I think it’s very positive. Yes, it’s a challenging time to make any judgments, but there’s some really, really good first indicators and the appeal is amazing. The only challenge though I have is how do I monetize people taking photographs as Jim said.

It is phenomenal and therefore we’re going to get huge amounts of reach adding to the market, because all of those photos are going on social media. If there is anything specific Harry other than what I’ve said, happy to try and fill in the gap..

I guess the one gap I’d be interested in is your expected opening of The Mansion rooms and where does that position you versus some of the higher end offering in Macau?.

Well, The Mansion will be totally unique. I don’t think that specific product actually exists yet.

There is some beautiful other suites in other properties, but I think the whole private, personal night here of what The Mansion created in Las Vegas being injected into Macau, I think is extremely unique and that’s all part of this dream and we’ll bring that on later in the year.

Critically for us first is we want to get moving on the junket, so they might come on a little earlier than the – and then once the junkets are in, then The Mansion will bring out the rest of the – will be the last piece of the puzzle for us to lock in. So I think its unique.

I think it’s an amazing environment and I think it just picks up from what’s already been achieved and the market knows what to expect because there are so many customers out here who have various semantics of Vegas..

Grant, thank you. That does it for me..

Thanks Harry..

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

Hi, good morning.

Grant, maybe to stick with just kind of where on COTAI for a quick minute – could you just give us a little bit more if it’s possible on sort of the specific timing? Do you think The Mansion rooms are opened by the end of the second quarter still or does that shift at all and when do you think you could have some of those junkets in the building up and running as well?.

Well junkets, we’re looking to try and get in sort of June, July and it looks like with The Mansion just getting all the details finished we’ll be opened in September..

Okay, that’s great. And then maybe to switch back to Vegas, you guys gave very good color on the corporate convention side, but you know the Monte Carlo ramp is clearly having some impacts on both, kind of what you guys delivered in ’17 and how ’18 plays out too.

Could you just give a little bit more color on sort of overall we netted out how do you think that you know the kind of Monte Carlo Park transition ends up impacting total dollars of EBITDA throughout ’18 and then what kind of lift or IRR should we be trying to think about for that investment as we blend into ’19 and ’20?.

Shaun, this is Dan. On the IRR front we are looking at the investment, it’s just a little bit over $500 million for the conversion and transformation to Park MGM and NoMad on the capital side. It’s about $525 million in total. The return on that we expect to be mid-teens, cash-on-cash return as we ramp that property up.

It will be completed as we said in the release by the end of this year, so the last components come on in the fourth quarter, that being the NoMad and the completion by the end of the year. The front entry and the eatery and some more food and beverage entertainment product will be online by the end of the year.

We would expect the brand campaign to be launched and running in the back half of this year, 2018 and so you know I almost look at this again to a new property opening, because the property will be so different and unique and a new brand will be cushioning that brand campaign throughout ’18 and into ’19 and I expect ’19 to be a ramp up period with kind of ’20 being achieving kind of that full kind of cash-on-cash return that we’re looking for..

Yeah, the other part of it, I think you’re looking for what – how it hit us in the quarter and going forward on the EBITDA especially..

Yeah, I think when you look at the quarter, fourth quarter in terms of its impact, about two-thirds of the decline was a result of the construction disruption. Obviously we’ve been bringing things back online, but there is still a lot going on, a lot of disruption there. So that was about two-thirds in the fourth quarter.

There is still going to be a level of disruption in Q1. We’re estimating that to be about $9 million, $10 million in terms of the EBITDA impact from a construction stand point. So there is still again some disruption throughout ’18 and there’s a lot still going on, a lot coming online.

We’ll give you move color as we get through the year, but about $9 million, $10 million in the first quarter is related to that disruption..

Just to be clear, on the mid teens type number when we get to stabilization, is that inclusive of or after getting back some of just the pure disruption that you lost in. So it will be that on top of whatever the run rate was before the project began directionally..

That’s correct. I think you know if you look at prior to kind of putting shovels on the ground and I think the property was doing, you know call it circuit kind of $70 million, $80 million of cash flow, so that’s off of that pace. So your thinking about it correctly Shaun..

Great, thank you very much..

Our next question comes from Felicia Hendrix of Barclays. Please go ahead..

Hi, good morning, thank you. So Jim in your prepared comments, when you were making comments to that, the use of capital, it seemed to me that maybe you were asking us to read between the lines regarding what is the uses of capital, which would be M&A.

So just wondering, are you actively looking for opportunities and if something would come up on the strip, would you be interested in that?.

I’m looking at – first off, I don’t prepare anything, so these are unprepared remarks..

In you’re off the cuff remarks?.

I am looking at my off-the-cuff remarks and I don’t see anything between those lines about M&A. But no, honestly we are not focused on M&A at MGM Resorts. We’re focused on M&A at MGM Growth Properties and James will speak to that on his call, but I think that what I would say about the strategy, we like where we are.

We see rapidly growing free cash generation in this company over the next several years. We have articulated what we want to do with that cash to our board and to our investment community and we’re going to stay the course.

Clearly we’re part of a dynamic industry and so we will always keep our feelers out there and figure out what’s going on in our industry, but we certainly like our positioning as a market leader in every market that we operate with exception to Macau and now that we have COTAI, we’re going to pick up a bunch of share there we believe and I wouldn’t read anything into a deviation of our articulated strategy..

Okay, thank you for that. And then just switching gears, can we just talk about the environment on the south end of the strip. Can you talk about their promotional environment there and have you – how has it been changing, maybe kind of daily or weekly and I am trying to get to that, but also just understand its demand for Mandalay Bay.

You know where is that? What are you doing to drive traffic? You know how long can it take to improve, you know that sort of thing?.

Yeah, there is no doubt we were more promotional in the fourth quarter than we would have been otherwise and we were more promotional in the fourth quarter than we are right now.

We’ve already started releasing quite a bit of that pressure, but do you want to speak to that?.

Yeah, I think when you look at it obviously, given the incident of October 1, we really had to kind of go off script of what we were doing throughout the first nine months of the year. The team did as Jim mentioned earlier, a great job in executing and I would say there is a huge amount of recovery already within Mandalay that has taken place.

But there is still some residual impact at Mandalay as you recall roughly about 80% of the cancelation volume that we saw in the fourth quarter was directly impacting the fourth quarter, but there was some impacting the early part of this year.

So I think as time continues to progress here, that Mandalay continues to recovery and continue to get back to its normal self. But there is still a little bit of an impact in the early part of this year. .

Yeah, and I would just say that the promotional activity as now here we are in February is same towards last year. .

Yeah, I think it’s pretty similar Felicia. The only hole you have is the CONEXPO hole that companies are probably maybe trying to fill, but the way we are yielding variances back to where we were before.

Mandalay Bay’s impacted us a little bit more, because we also were a little slower on turning back the marketing on that property for a few more weeks. So it will have some impact in the first quarter, minor in the rest of the quarters, but everything else feels like it’s pretty much back to normal. .

Okay, thank you. .

Our next question comes from Stephen Grambling of Goldman Sachs. Please go ahead. .

Hey, good morning. Thanks for taking the questions. You know maybe looking longer term, I think at the 2016 Analyst Day you had consolidated adjusted EBITDA and free cash flow projections through 2019.

Can you just talk to the biggest puts and takes versus that range and then I guess on a related note, I know you have a goal of hitting prior peak margins on the Strip. Maybe u could remind us where that peak and what might be different or similar about the operations now versus that can make that target either achievable or not? Thanks..

Sure Steve, this is Dan. So at it relates to kind of prior peak levels in terms of our Strip EBITDA margin, they were roughly around 33% here in Las Vegas.

So I think when you kind of look at the trajectory, we’ve been on the guidance we’ve been given, we continue to kind of be on that path to achieve those levels over the next year or so and get back there. I think the, if there is upside to that, it’s going to come really from out stretched kind of top line growth.

We still think there is good side upside to the economy, we are still growing but that’s really been kind of low single digit growth. I that turns out the upside and out phases our expectation them you know there could be some upside to that margin.

But based on what we are seeing right now, what we are doing in terms of cost containment and the programs that continue today from PGP, etcetera, we think 50 to a 100 basis points year kind of guidance puts is on the trajectory to be back at those peak levels within the next 24 months. So we finished up around just north of 31% last year.

It’s probably a little bit higher than we expected. So we feel like we are a little ahead of the plan thus far, but continue to be on that pace. As far as the puts and takes on Analyst Day, that’s gone back almost kind of two years now. The biggest one is probably in just the timing around COTAI.

I think that model if I remember correctly had kind of COTAI opening in kind of March, April of 2017. So that’s probably the biggest in terms of the change that model would be the timing around COTAI and obviously now the growth of that market that was not kind of laid out in that model when we put it together back in ’16. .

And I’d add a couple of things to it Dan. One on the puts and takes on the model. We underestimated the impact of Monte Carlo. So certainly, that we are below where we through we would be in terms of cash flow there. But every other Strip property is at or above what we are looking for.

With Bellagio hitting an all time record as an example, our regional properties are sport on, in terms of what we had projects and so I think the put and take is the opening of COTAI, that was the big difference. .

And probably, now that we know the tax reform is obviously another one that will positively impact our free cash show in ’18 and ’19 and beyond from that standpoint as well. .

And in terms of margins, the one point I’d make out – I’d bring up right now is, depending on your raise on inflation, inflation has obviously impacts to the industry both negatively in terms of labor, but also positively and in terms of pricing power.

So to extent that we can improve our revenues through pricing power in a slightly inflationary environment versus our expenses, we should input to see margin improvement that we did not see prior to 2007.

So I would – since the dawn of time, which I define as 1984 when I joint Wall Street, you know hotel companies and casino hotel companies typically do well from a margin perspective in inflationary environments because the ability to change prices instantly against the backdrop of expenses is a favorable dynamics for companies like ours.

It certainly, we see as the case here as we continue to increase pricing in a verity of channels, whether it be in room rates or fees. Our restaurant prices we believe that we have some room lent to grow in all those and that should more than offset the inflationary impact of labor and other expenses. .

It’s all very helpful and maybe if I could sneak one follow up in since you brought up the benefits of tax reform. I guess how is tax reform and the incremental cash flow thought about differently in the sense of capital allocation. I know you previously said 3.5 times I think where your target leverage ratio is.

Does that change with tax reform?.

No.

We do this as a windfall unexpected pickup for the company, but our leverage targets remain the same and so the ability to have additional cash available will be allocated to the areas that I talked about in terms of return on capital to shareholders and if we find good ROI growth opportunities, but we view that as part of the overall fee cash flow story.

.

Fair enough, thanks. Best of luck this year. .

Thanks Steve..

Thanks Steve. .

Our next question comes from Carlo Santarelli of Deutsche Bank. Please go ahead. .

Hey everyone, good morning. Guys if you could just as you talk about 2018 and obviously you guys provided a lot of color on the top line. When you think about the 50 to 100 basis points margins and obviously you spoke to some of the challenges putting you closer to the lower end this year.

Just in terms of cost pressure as it pertains to the strip this year. Is there anything outside of the one timers and some of the old headwinds from last year that you guys would point out. .

Well, we have labor negotiations..

Yep..

That’s always – you know that happens every fourth, five years, we can discuss that. So that’s happening right now. We are having good dialog with the union as are the other companies on the Strip. So we’ll see how that plays out, but that’s certainly an impact as it relates to Las Vegas. Other labor issues, don’t see, are FDs are in good shape.

Other expenses no. as you know we were early on adopting an independent strategy on energy that has worked to our benefit and so I don’t see any expense changes at all for this year.

Do you guys?.

No..

Outside of Las Vegas we also have discussions with the union that we are working with at National Harbor and so that’s a discussion that’s ongoing right now.

We have the expenses that we are taking now as we are ramping up MGM Springfield, which is looking fantastic though, by the way and opening up soon, before September, before Labor Day and other than that I see nothing.

Do you guys?.

No. .

Great, thank you and then Dan, maybe this one is best for you. Just in terms of the cash taxes for ’18 and ’19, that’s very simplistically you’re looking for something like 1% effective rate from the cash side.

Is there anything in particular that could change that setup? I noticed that the language around that and the GAAP tax seem to be, that the GAAP tax piece is obviously a lot easier to forecast. .

No, we are not anticipating any material or significant changes from that level. I think when you look at 2017, I think in total we had, about $180 million of cash taxes in total. We’ll still have some state taxes in 2018 of roughly plus or minus call it around $20 million of State taxes in 2018 but pretty minimal in terms of federal taxes in ’18. .

Very helpful, thanks a bunch. .

Thanks Carlo. .

Our next question comes from John DeCree of Union Gaming. Please go ahead. .

Good morning everyone, thank you. I wanted to talk a little bit about the Borgata business in Las Vegas. I think in the slide deck you had mentioned a little bit about strength in the international business and I think a couple of years ago we saw Macau as kind of the leading indicator relative to Borgata performance in Las Vegas.

So wanted to see if you can provide us a little bit more color as to what you guys are seeing in the business in Vegas and perhaps some antidotal comments here in town on Chinese New Year so far?.

Well, maybe I’ll start that and anyone jump in. That was at the party that I was at Sunday night. The high end is very healthy right now and the Borgata business is very strong. We hosted our major event for the event for the Year of the Dog at ARIA on Sunday night.

We had 2900 people in our ballroom and we had had over 900 people on our waiting list to be able to go that event. The tone of event, the tone of business in town is better than we’ve seen in a number of years. And we are feeling very encouraged by the level of traffic that we are seeing in town at our properties and our competitors properties.

We also had an extraordinary successful two day concert at MGM Grant. A performer that’s knows around the world and sold out and highly recognizable to that customer. So the tone in the town I’m sure is robust for everybody.

It certainly has been for us here at MGM Resorts, at ARIA, Bellagio and MGM where we cater to that type of play and that’s encouraging going into this year, particularly because we have some events slated for the year that draw high end customers and you know a big fight does that, a major concert does that and we have a couple of both.

So I would say that is encouraging for us. Our market share in town is growing and I think that the fact that the COTAI is open is going to help that as well. We are getting incremental cost country play; people coming back and forth, sampling COTAI as Greg could speak to, they haven’t been to the property in a while and they are coming here.

So Corey, you want to add to that..

What I would add is, if you look at the Borgata play there is a huge correlation between what happens in Macau and what happens in Vegas and the fact that Macau’s backup again I think you are seeing a lot of strength here also. .

And I think the one point I’d add to Corey is that what we are also seeing is more domestic players as a percentage of the Borgata mix than we ever had before which is encouraging both form the other standpoint of the mix of play and also the strength that we are seeing here domestically in our customer.

So there is more domestic play as a percentage of the overall Borgata mix than we’ve ever seen before..

Yes, I would think that January, you know Chinese New Year surrounding the Super Bowl last year and into the end of January and beginning of February. The separation of the two events actually helped up and allowed us to fill our villas and mansions, both times with domestic customers for Super Bowl and the Asian customers for Chinese New Year.

So that was also positive for us. .

That’s helpful, I appreciate the color everyone. I wanted to as a follow up just kind of extend that question to the domestic gaming business in Las Vegas. We talked a little bit about inflationary pressures with tax reform and Jim I think your comments about raising prices.

With the tax reform bill and the potential impact on the consumer, has the outlook for the domestic gaming business changed at all or are you still kind of thinking kind of a low single digit growth business on the kind of domestic casino floor. .

I think it’s early to tell. It’s certainly a positive in terms of what we might see, its early to tell through, and where we would pick up business would not only be here, but I would think a property like Detroit, National Harbor, those will be properties that you know should see incremental benefit to this. So I think it’s early but encouraging. .

Great. Thanks for the questions. .

Thanks John. .

Our next question comes from Thomas Allen of Morgan Stanley. Please go ahead. .

Hey, good morning. When we think about your 2018 REVPAR guidance of 2% to 4%, can you just help us think about the relative performance by property or types of property? Thank you..

Who wants to tackle that?.

You know, I mean I think the high end is going to do well, our luxury properties in general and if they do then that drives the core properties as well. But do you have any more specifically? Yeah, I’m just looking at numbers two and I mean Easter falls, a little bit of Easter noise here but....

I mean as Monte Carlo continues to kind of change obviously from you know a core classification that we’ve historically had at that property. As that has been predominantly a drag in ’17, that should become more a positive throughout ’18 for us, so that would help the core propitiates from that perspective.

Keep in mind in the first quarter the biggest impact of CON/AGG, when you think about luxury versus core, it is more on the core side than the luxury, because they just don’t have the ability to back to convention business and really are just rate takers during those big city wide events.

So the properties that don’t have a lot of convention space are the ones that will feel it during that week in March. So luxury still looks strong throughout the year based on convention.

I’d say as we kind of classify our core properties separately, they still have growth that are probably more affected by the first quarter and Monte Carlo will kind of help that group of properties throughout the year drive a better RevPAR story..

And I would add a couple of things just to think about for this is, one is a big fight and a big consort in the second quarter that would benefit the properties around, where that’s been held. It’s been held in both cases at T-Mobile.

We have the summer league coming in, obviously this would be the second year of really of MGM being the sponsor of the NBA Summer League, it would be bigger than ever. That’s going to have a big impact on visitation at a time where we typically struggle, that’s going to help. I think our team will be in the payoffs I think. .

I was getting there..

The Vegas Golden Knights. The impact, that’s started the season at a 200:1 odds of getting into the Stanley Cup is now 9/2, and a playoff series at T-Mobile would obviously have a big impact on New York, New York and Park MGM in the neighborhood. And then we get into the fourth quarter where we again are going to have some events.

So I think it would be fairly broad based, but clearly where we have the most pricing power typically are in our luxury properties and Bellagio and ARIA, they set the tone and our properties are able to draft off of our luxury properties and I think that will help this year. .

Thomas, from a percentage increase the cores will also have the benefit of the resort fee increase this year which will help the percentage increase and core a little bit more. .

Right, that’s a good point Corey, I mean the some of the core properties are actually, we are lagging in the market to see whose portfolio had the higher resort fees, which is a great change since they started the resort fees not long ago, but welcome to the party.

It certainly benefits looking at what our competitors are doing the market place and its helping overall pricing. .

Helpful, thank you and then can we just confirm what is the convention mix for 2017, was it 19.5% and then with its new commencing space, can that increase and will take that few years, or how should we think about?.

So, it’s right around 19% is where we finished up, which was where our target was for ’17. ’18 is shaping up to be very similar to that 19% as well. From a mix standpoint that does not include ARIA, so they are looking at a slight increase in their mix at ARIA for 2018 with their new convention space. The MGM Grand expansion comes on in early ’19.

So those start to see that benefit more in ’19 than in ’18. .

Helpful, thank you..

Thanks Thomas. .

Our next question comes from Chad Beynon of Macquarie. Please go ahead. .

Hi great, good morning, thanks for taking my questions. I just wanted to go back to the 1Q guidance that issued with negative 250 basis points of margin declines.

So if home loans are declining and the Monte Carlo impact is lower, is the 250 simply a product of Dan kind of what you just talked about with the tough comp form the core properties mainly in March and then also what looks like kind of a tough table hold. Just wanted a little bit more color on that guidance. Thank..

Chad, those are really the three drivers when you look at it. Obviously it’s the comparison to CON/AGG last year. It is the disruption at Monte Carlo and I think the whole of last year and the first quarter was north of 25%.

So those are the three factors that are our guidance of that down 250 basis points year-over-year, so you are thinking about it correctly. .

And probably a little bit of the impact of Monte Carlo. I mean… [Cross Talk].

Okay, thanks. And then can we get an update just on Japan that’s been the news clipping a little bit more latterly. Just any milestones or any specific dates that we need look forward in 2018 from a catalyst perspective. Thank you..

Well you know what you’ve probably been reading is that the dial is moving forward and that there is discussion and debate around the gambling addiction counter measure bill I think it’s what it called, which should the first issue that the diet would consider; that would to provide funding for and identification of problem gaming.

And then the second measure would be the implementation act which probably what you have been reading about. And the current dialog there from what we see is still shooting for a mid-year discussion in the diet and hopefully a passage of that by say June or July. MGM has been very active there.

We spent a lot of time both in local jurisdictions and in Tokyo and I think we are as well positioned as any company in the world as it relates to developing our reputation there, reaching out to potential consortium partners, talking time to understand the market, and we are very encouraged about that and it certainly – if the implementation passes, it will set off a highly competitive RP process and MGM is I think well positioned to positively participate in that..

Okay, thank you very much..

And maybe last question please..

Our next question comes from Robin Farley of UBS. Please go ahead..

Great, thanks. Most of my questions have been asked already. Maybe just one with the – what your expectation or initial conversation has been around concession window [inaudible] maybe starting this year in advance of the 2020 expiration. Thanks..

Well, thank you Robin.

We had the honor or hosting the Chief Executive and most of the cabinet at our opening at MGM COTAI on the 13th and I could say that we’re very proud of the event and I think that the feedback that we have consistently received from the government, leading up to the event has been very favorable in terms of what they think of the property and all the pre-tours and certainly that night.

We have not had discussions about the concession renewal with the government. We have taken the view that if we continue to deliver on what we expect is the expectations of operators like ourselves, that we will be treated fairly and I was very confident of that.

I think that sometime later this year or next year there will be a discussion around the concession renewal process or as the government says, the rebid of concession. But they have not reached out to us to discuss that and we have not reached out to them..

Okay, great. Thank you..

Okay. Well before we end, I’d just like to first thank you all for joining us today and just reiterate a couple of points here. One is, I am incredibly proud of the people here at MGM, particularly after the events of 1 October.

We quickly scaled our business, put our analytical and operational horsepower to work and made strong guidance about what we thought we would do in an uncertain time and we delivered on that guidance and delivered on the company for the employees and the people.

That just shows how different a company that we are today than maybe five or ten years ago and really the strength of our business model. We have strong tools to understand our business, both in terms of ’18 and beyond.

That’s why you will sense more confidence from us in terms of our predictive abilities and we see a good year for this year on balance here in Las Vegas and in our regional properties and the outlook for Las Vegas, we didn’t touch about it much in terms of new entrants coming into the market today, but we view positively in terms of driving investment in the town, creating jobs, construction and operating jobs that accrues to the benefit of the whole community.

We loved the tax law change and the fact that people are pouring out of California to move to Nevada and that has an impact on housing and on incomes and on spend throughout the valley.

We are very excited about the expansion and renovation of the convention center and undoubtedly that will help the northern end of the Strip which has encouraged investments out there with the Fontainebleau Resorts World and the single greatest beneficiary as an incumbent to that is of course Circus Circus which enjoyed a tremendous year in ’17.

Though the out year we see that 13 moved all around Mandalay Bay for the Raiders Stadium, Bill Hornbuckle sits on that board.

They are on track, they are spending money, they are working hard and that’s certainly encouraging for us because we own that neighborhood and having the stadium there will have a big benefit to Mandalay, Luxor, Excalibur, etcetera.

And so I feel like Las Vegas is well positioned and MGM is capitalizing on what we see happening in this market, and we’re throwing off free cash and we expect that free cash to grow demonstrably and that provides us many opportunities to benefit our shareholders in terms of dividend growth, in terms of share repurchase, in terms of investing in our business to get outsized returns and yes, if a unique opportunity like Japan or anything else presents itself, we want to make sure we’re able to capitalize on those in some cases one of a kind opportunities.

And with that, I will say thank you. Thank you for joining us and your support in MGM and as always, we’re around to take any follow-up questions..

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