MGM loses $145m despite Q2 revenue boost; CDI and WMS revenues rise

TAGs: churchill downs incorporated, MGM Resorts, wms industries

churchill-downs-wms-industries-mgm-resortsMGM Resorts Q2 financial report card showed a 29% revenue boost to $2.32b, but continued weakness at its domestic properties and an $85m non-cash impairment charge on its Grand Victoria joint venture in Illinois resulted in a loss of $145.5m for the quarter. Of all the major casino operators, MGM has the most exposure to the Las Vegas Strip, and while room revenues rose 3%, casino winnings fell 1%, leaving overall domestic earnings flat at $1.5b. Meanwhile, MGM’s digital version of the strip, MyVegas, has officially emerged from its beta cocoon. The social gaming joint venture with PlayStudios made its Facebook debut on Tuesday, and iOS and Android versions are in the pipeline.

As might have been expected, MGM China fared better than MGM’s domestic properties, but the joint venture with Pansy Ho also bucked the recent trend of the Asian enclave’s casinos by posting a 6% rise in revenue to $709m, helped immeasurably by a 7% rise in mass market table games turnover and a 39% rise in slot machines (the increasing popularity of slots in Macau was also demonstrated in Las Vegas Sands’ recent Q2 report). VIP table game turnover in Macau was off 6% from Q2 2011, while hold percentage was 3.3%, up marginally from 3.1% the previous year. Despite the quarterly loss, and the fact that the company is still sitting on $13.4b of long-term debt (with annual interest of $1.1b), MGM shares rose 7.5% on the day to close at $10.08.

Racetrack operator Churchill Downs Inc. (CDI), which, like MGM, has applied for a Nevada online poker license, continued its winning ways from Q1 by posting record earnings in Q2. Revenue at CDI’s racing operations rose 8% to $270.8m, while net earnings came in at $48.6m, a 21% bump over Q2 2011. CDI’s online operation,, saw a significant rise in turnover, which led to a 13% revenue gain to $52.7m and an 11% gain in earnings to $12.5m. Revenues at CDI’s casino in Mississippi and its racinos in Miami and New Orleans were up 4% to $51.4m, resulting in earnings of $19.4m – up 52% over 2011, but that figure includes a $5m insurance payment due to flooding that closed the Harlow’s Casino Resort & Hotel in Mississippi for 25 days in 2011 Unlike MGM, CDI has been chipping away at its debt load, reducing it from $127.6m at the end of 2011 to just $63m now.

Gaming device maker WMS Industries – yet another Nevada online poker hopeful – reported its third sequential quarter of revenue growth for the three months ending June 2012, which also marks the end of WMS’ fiscal year. Revenues were $195.9m, down from Q2 2011’s $203.2m, but up 19% over Q1 2012. More importantly, the Q2 2012 earnings of $22.1m were nearly double the previous year’s $10.3m. Operating expenses as a percentage of revenues fell from 52.7% in Q2 2011 to 45.7% this year, boosting margins from 4.7% in 2011 to 16.2% this year. Product sales were up 2% year-on-year to $133.1m based on a 16% rise in new unit shipments. Replacement unit figures hit the second highest quarterly total in WMS history – 3,900 of the total 4,672 machines shipped in North America (for a total of 6,146 shipped worldwide).


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