Melco Resorts & Entertainment Limited (NASDAQ:MLCO) Q1 2023 Earnings Call Transcript

Melco Resorts & Entertainment Limited (NASDAQ:MLCO) Q1 2023 Earnings Call Transcript May 10, 2023

Operator: Ladies and gentlemen, thank you for participating in the First Quarter 2023 Earnings Conference Call of Melco Resorts & Entertainment Limited. [Operator Instructions] Today’s conference is being recorded. I would now like to turn the call over to Ms. Jeanny Kim, Senior Vice President, Group Treasurer of Melco Resorts & Entertainment Limited. Please go ahead.

Jeanny Kim: Thank you, operator and thank you, everybody, for joining us today for our first quarter 2023 earnings call. On the call are Lawrence Ho, Geoff Davis, Evan Winkler and our Presidents in Macau, Manila and Cyprus. Before we get started, please note that today’s discussion may contain forward-looking statements made under the Safe Harbor provision of federal securities law. Our actual results could differ from our anticipated results. In addition, we may discuss non-GAAP measures. A definition and reconciliation of each of these measures to the most comparable GAAP financial measures are included in the earnings release. Finally, please note that our supplementary earnings slides are posted on our Investor Relations website. With that, I’ll now turn the call over to Mr. Lawrence Ho.

Lawrence Ho: Thank you, Jeanny. We have seen a very encouraging start to the recovery in Macau during the first quarter of 2023 following the relaxation of border restrictions in early January and the recovery has progressed faster than we had anticipated. We continue to see improving momentum into April and solid performance during the May Golden Week. Mass drop and mass GGR during this closing week period exceeded the same period in 2019 and the turnover in our premium direct segment more than doubled. We launched some exciting new initiatives in April. We started Macau’s first-ever series of residency concert at Studio City and opened Studio City Phase 2 starting with the opening of Epic hotel tower and the indoor water park.

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We also plan to open the W Hotel tower in September which will round out our hotel portfolio in Macau. These initiatives reinforce our long-standing commitment to bringing unique world-class entertainment and hotel offerings to Macau. We have a diverse range of events that are being planned for the future that we believe will continue to drive international tourism and position Macau as a leading destination for leisure and entertainment. We’ve seen strength in the Philippines with a solid recovery underway. Adjusted property EBITDA at City of Dreams Manila for the first quarter of 2023 surpassed the first quarter of 2019. Performance in Cyprus has also been strong with both GGR and adjusted property EBITDA exceeding 2019 levels. The operational results of our temporary and satellite casinos have proven that there is strong demand in Cyprus.

We’re excited to open City of Dreams Mediterranean in mid-June and showcase our expertise with the first integrated resort of its kind in the region. With that, I turn the call over to Geoff to go through some of the numbers.

Geoffrey Davis: Thank you, Lawrence. Our group-wide adjusted property EBITDA for the first quarter of 2023 was approximately $191 million. Luck-adjusted group-wide property EBITDA for the first quarter of 2023 came in at $197 million, a favorable win rate positively affected COD Manila by around $14 million, while in Macau, COD and Studio City were negatively affected by close to $20 million due to unfavorable win rates. Property EBITDA at COD Macau and Studio City were also negatively affected by mass hold which was lower than our historical average. If we normalize for both mass and VIP, Macau property EBITDA for 1Q 2023 would have been $192 million compared to our reported results of $121 million and the hold-adjusted property EBITDA margin would have been approximately 28.5%.

We have been able to achieve significant cost savings over the last few years and this continues to be a focus as we hire staff to support the recovery. We estimate that we will have approximately 2,000 fewer full-time employees compared to 2019 once we are fully ramped up, including the FTEs needed for the opening of Epic, the W and the water park at Studio City. We remain disciplined on cost management and expect to retain at least 20% to 25% on of the savings we achieved through the COVID period as permanent savings. Turning to our cash and liquidity. As of March 31, 2023, we had close to $1.5 billion of consolidated cash on hand. Melco, excluding its operations at Studio City, the Philippines and Cyprus accounted for around $750 million.

Of this, approximately $125 million was restricted and includes cash collateral required for concession-related guarantees issued to the Macau government. Total debt declined by around $550 million during the first quarter of 2023 with the repayment of our revolving credit facility. As we normally do, we’ll give you some guidance on non-operating line items for the upcoming second quarter of 2023. Total depreciation and amortization expense is expected to be approximately $140 million. The higher amount compared to previous guidance is due to the recognition of the new Macau gaming concession as an intangible asset on January 1 and the related amortization costs. Corporate expense is expected to come in at approximately $20 million and consolidated net interest expense is expected to be approximately $120 million to $125 million.

This includes finance liability interest of around $5 million related to fees payable in relation to the Macau gaming concession, finance lease interest of $5 million to $10 million relating to City of Dreams Manila and around $5 million to $10 million of capitalized interest. That concludes our prepared remarks. Operator, back to you for the Q&A.

Operator: [Operator Instructions] And I’m showing we have a question coming from the line of George Choi with Citi.

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Q&A Session

Operator: [Operator Instructions] And our next question coming from the line of Praveen Choudhary.

Operator: And our next question coming from the line of Angus Chan with UBS.

Operator: And our next question coming from the line of Simon Cheung with Goldman Sachs.

Operator: And I’m showing no further questions in the queue. I will now turn the call back over to Jeanny Kim.

Jeanny Kim: Thank you, operator and thank you for joining us for the call today. We’ll see you next quarter. Thank you.

Operator: Ladies and gentlemen, that does conclude our conference for today. Thank you for your participation. You may now disconnect.