MGM Resorts Turns To F1 Race With Cyber Fallout Now Contained

MGM Resorts CEO Bill Hornbuckle has had little time in recent weeks to kick back poolside at one of his company’s palatial Las Vegas Strip resorts.

Hornbuckle is coming off one of his company’s most trying periods since he inherited the position three years ago. With the fallout of a massive cybersecurity breach now contained, Hornbuckle will turn his attention to the inaugural Formula 1 Las Vegas Grand Prix from Nov. 16-18, an event that is expected to produce the largest economic impact in the history of the city. From there, he will move on to preparations for Super Bowl LVIII in February, when the NFL’s showcase event comes to Sin City for the first time ever.

For now, Hornbuckle is just glad the perilous cyberattack is in his rearview mirror. The September breach forced MGM to temporarily shut down its IT systems at numerous properties, leading to approximately $100 million in insured losses. While Hornbuckle indicated that MGM will receive reimbursements from insurers over the next several quarters, he is bracing for higher cyber insurance premiums next year and beyond.

Hornbuckle took some time during MGM’s 2023 third-quarter earnings call to laud his team for its resiliency in responding to the crippling breach.

“Candidly, this quarter we went through hell and back with the cyberattack,” he told Wall Street analysts on the call. “I am proud with what we’ve accomplished. The fundamentals have changed, we have gone from [a period of] distress to the biggest event we’ve ever seen with Formula 1.”

While MGM has seen strong interest from international tourists for the F1 race, the company is particularly focused on corporate clients for the Super Bowl, according to MGM Resorts COO Corey Saunders. MGM has already sold out its ticket allotment for the F1 race, which features a grandstand adjacent to the company’s iconic Bellagio fountain.

BetMGM’s first quarter of profitability

MGM Resorts International owns a 50% stake in BetMGM with Entain, a major European gaming conglomerate. For the quarter, MGM Resorts reported Adjusted EBITDA of $12.3 million from its share in BetMGM, up considerably from the same quarter a year ago. It marked the first quarter on record that MGM Resorts generated profitability from the online gambling venture. During the third quarter in 2022, MGM Resorts reported Adjusted EBITDA of negative-$23.6 million from BetMGM.

BetMGM ended the quarter ranked third nationally in combined sports betting and iGaming market share, according to MGM Resorts’ internal figures. The venture is live in 28 North American jurisdictions, with market access secured or anticipated in six others. BetMGM’s market reach covers about 50% of the addressable adult population in U.S. and Canadian markets.

The venture is targeting 20-25% in long-term market share in sports betting and iGaming combined.

Hornbuckle admitted there were areas from a product standpoint where BetMGM needed improvement earlier this year. Those issues have been ameliorated somewhat by Entain’s acquisition of Angstrom Sports in July. The acquisition of Angstrom will help Entain with risk analysis and pricing around more complex products such as parlays and in-game products, said Jette Nygaard-Anderson, CEO of Entain, upon completion of the acquisition.

Last week, Nygaard-Anderson disclosed that Entain will continue to invest into BetMGM next year. Asked if MGM Resorts intends to make an investment that is commensurate with Entain’s commitment, Hornbuckle answered in the affirmative. Neither company disclosed how much it plans to spend on the joint venture in 2024. 

Hornbuckle sidestepped questions on a potential takeover of Entain during Wednesday’s call. At last month’s Global Gaming Expo in Las Vegas, Hornbuckle attempted to quiet any merger speculation by telling a large crowd that BetMGM is still a “great marriage for both parties.” During the call, Hornbuckle responded that MGM’s position on Entain remains the same.

Labor negotiations with culinary union

Hornbuckle also provided investors with an update on negotiations with Culinary Workers Union Local 226, a Nevada union that represents approximately 60,000 casino hospitality workers.

On Wednesday morning, the union came to terms with Caesars Entertainment, which employs about 10,000 union workers at nine properties across Las Vegas. The two sides reached an accord after an intense 20-hour negotiation session.

During Wednesday’s call, Hornbuckle told analysts that MGM and the union were near a deal that would result in the largest pay increase in the history of their labor negotiations. Informed of Hornbuckle’s comments, Ted Pappageorge, secretary treasurer of the union, expressed optimism at a press conference that a deal could be reached to avert a strike. On Thursday morning, the two sides reached a deal after another marathon negotiating session.

MGM Resorts generated third-quarter revenue of $3.97 billion, topping analysts’ estimates. The company was projected to generate quarterly revenue of $3.87 billion, according to Zack’s Consensus Estimate, up 13.4% from the same quarter in 2022. MGM also reported earnings, adjusted for non-recurring costs, of $0.64 per share, beating analysts’ estimates of $0.59 per share for the three-month period ended Sept. 30.

MGM traded around $39 a share in Wednesday’s after-hours session, up 2%. During a bumpy 2023, MGM is down about 24% from July, when the company cleared $50. The casino giant opened the year at $37.20 a share.