MGM Resorts International (MGM) FY2025 Earnings Quality Report

Grade: F — Major Red Flags

Framework: Schilit *Financial Shenanigans* + Beneish M-Score + forensic accounting principles

Data: SEC EDGAR 10-K (Filed 2026-02-11, FY ended December 31, 2025) + Yahoo Finance

Auditor: Deloitte & Touche LLP — Unqualified opinion (1 critical audit matter: goodwill impairment of MGM Digital)

One-line verdict: MGM's financial statements reveal a company under multiple simultaneous pressures. Net income attributable to MGM fell 72% to $206M on $17.5B in revenue. Operating income collapsed 33% to $1.0B despite revenue growing 2%, driven by a $279M goodwill impairment (primarily Empire City), $93M in Empire City write-offs, a $186M increase in depreciation, and surging gaming taxes at MGM China. The balance sheet carries $31.4B in debt against $2.1B in cash. Debt/EBITDA stands at an alarming 18.3x (using reported EBITDA depressed by impairments and one-time charges). Goodwill and intangibles at 258% of equity sit on top of a casino business where the critical audit matter is — fittingly — goodwill impairment of the MGM Digital segment. The M-Score of -2.73 passes cleanly, confirming the numbers are not manipulated; they are simply bad.

Four Segments, Divergent Trajectories

Per the 10-K segment disclosures:

"Consolidated operating income decreased 33% in 2025 compared to 2024. The decrease was due primarily to $279 million of goodwill impairment of which $256 million related to Empire City, $93 million of write-offs and impairments related to Empire City recorded within property transactions, net, an increase in gaming taxes incurred primarily at MGM China, and an increase in depreciation and amortization expense."

Las Vegas Strip Resorts — the crown jewel portfolio including Bellagio, Aria, The Cosmopolitan, and MGM Grand — declined 4%. This is a demand signal that premium Las Vegas gaming and hospitality softened in 2025.

Profitability: Revenue Up, Profits Crater

The CFFO/NI ratio of 12.3x is extraordinary — not because cash flow is strong, but because net income is artificially depressed by non-cash impairments and write-downs. Operating cash flow of $2.5B remains healthy, but net income of $206M makes ROE and earnings-based ratios misleading.

Cash Flow

Per the filing: "Cash provided by operating activities was $2.5 billion in 2025 compared to $2.4 billion in 2024. The increase from the prior year was due primarily to the change in cash paid (refunded) for income taxes, an increase in Segment Adjusted EBITDAR at MGM China, and changes in net working capital, partially offset by a decrease in Segment Adjusted EBITDAR at our Las Vegas Strip Resorts."

The 18-Point Screening

Revenue Quality

A2 — Casino receivables growing faster than revenue. Per the filing, "approximately 57% and 50%, respectively, of the Company's gross accounts receivable related to casino receivables." The loss reserve was $129M against $718M in gross casino receivables, an 18% reserve rate. The filing warns: "Because individual customer account balances can be significant, the loss reserve and credit losses can change significantly between periods."

Expense Quality

Cash Flow Quality

C4 — Extreme leverage. Total debt of $31.4B against cash of $2.1B. This includes MGM China subsidiary debt secured by its Macao casino operations. The consolidated debt load is staggering for a company generating $2.5B in operating cash flow.

Balance Sheet

D1 — Goodwill exceeds equity 2.5x. The $6.3B in goodwill and intangibles is concentrated in the Las Vegas Strip Resorts and Regional Operations from historical acquisitions (Mandalay Bay, The Mirage, CityCenter, The Cosmopolitan). Deloitte's critical audit matter focused specifically on goodwill impairment of "a reporting unit in the MGM Digital Segment" — requiring the auditor to evaluate "discounted cash flow model" assumptions including "forecasted revenue growth rates, EBITDA margins, long-term growth rates and discount rates."

The Company already impaired $279M of goodwill in FY2025, primarily $256M at Empire City. If MGM Digital's performance disappoints, additional impairments are likely.

D2 — Debt/EBITDA. The 18.3x ratio is driven by depressed reported EBITDA from impairments. Using segment-adjusted EBITDAR (which the Company prefers), the leverage looks more manageable. But the GAAP-based metric is what the screening framework captures.

Acquisition Risk

Manipulation Score

The M-Score confirms the numbers are not manipulated. The poor performance is genuine.

Key Risks from the 10-K

1. Goodwill Impairment — Already Happening

$279M in goodwill impairment was recorded, with $256M at Empire City. The filing warns of "the occurrence of impairments to goodwill, indefinite-lived intangible assets or long-lived assets which could negatively affect future profits." With $6.3B in goodwill remaining and MGM Digital flagged as a critical audit matter, further impairments are a live risk.

2. Las Vegas Strip Softening

The Las Vegas Strip Resorts segment declined 4%. For a company whose identity and brand are built around Las Vegas, a weakening Strip is the primary business risk.

3. MGM Osaka — Development Risk

The filing references MGM Osaka (the Japan integrated resort project), noting that "future construction, development, or expansion projects will be subject to significant development and construction risks, which could have a material adverse impact on related project timetables, costs."

4. Tariff and Trade Impact on Tourism

The filing warns that "trade disputes between the United States and other countries, including as a result of the imposition of tariffs, could lead to a decrease in cross border-travel." International tourism is critical to both Las Vegas and MGM China operations.

5. Casino Credit Concentration

With 57% of gross AR from casino receivables and individual customer balances that "can be significant," a single bad debt on a high-roller can meaningfully impact results. The loss reserve of 18% on casino receivables assumes most credit will be collected — a bet on continued customer solvency.

Summary

Grade: F. Three simultaneous fails — AR, debt coverage, and goodwill/equity — on a backdrop of declining profitability.

MGM generates real operating cash flow ($2.5B) from iconic properties. The M-Score of -2.73 confirms the books are clean. But the financial structure is precarious: $31.4B in debt, $279M in goodwill impairments already taken, Las Vegas Strip revenue declining, and net income cratering 72%. The goodwill/equity ratio of 258% means that a moderate additional impairment could further compress the equity base.

The Company's strategy depends on MGM China growth, the Japan project, and MGM Digital (BetMGM) achieving profitability. All three are uncertain. Meanwhile, the debt service obligation is fixed and the Strip is softening. This is a company with good assets and a dangerous balance sheet.

**Disclaimer**: This report is based on MGM Resorts' FY2025 10-K filed with SEC EDGAR on February 11, 2026. This is NOT investment advice.

Data: SEC EDGAR 10-K + Yahoo Finance

Auditor: Deloitte & Touche LLP (Unqualified opinion, 1 critical audit matter — goodwill impairment of MGM Digital)

Fiscal year ended: December 31, 2025