MGM Resorts International says it is looking to deliver an annualized Adjusted EBITDA uplift of US$300 million by 2021 as part of a new program called “MGM 2020”.
The program, which aims to reduce costs, improve efficiencies and position the company for growth, includes US$200 million of Adjusted EBITDA improvement by 2020 and another US$100 million by 2021.
According to MGM, “MGM 2020” will be “a company-wide, business-optimization initiative aimed to leverage a more centralized organization to maximize profitability and, through key investments in technology, lay the groundwork for the company’s digital transformation to drive revenue growth.”
The plan expands upon themes that were outlined at MGM’s 2018 Investor Day and builds on its Profit Growth Plan implemented in 2015.
“Today, we are taking the next step in our evolution as an organization,” said Chairman Jim Murren. “MGM 2020 is intended to further transform the way we operate and leverage the most effective operational architecture for our company.”
Union Gaming analyst John DeCree responded to the news by raising estimates and price targets, stating that “MGM 2020” provides a road map for the company to hit its 2020 Consolidated Adjusted EBITDA target of US$3.6 billion to US$3.9 billion.
“Previously, we were conservatively forecasting 2020 Consolidated Adjusted EBITDA of US$3.5 billion, below the lower bound of guidance,” DeCree said in a note.
“Now, with a playbook in hand, we have greater conviction in the long-term EBITDA forecast and are raising our 2020 Consolidated Adjusted EBITDA estimate to $3.6 billion.
“We expect about a third of the first US$200 million of EBITDA improvements will be realized by the end of 2019 with the balance of Phase I coming by the end of 2020.”