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Melco Resorts & Entertainment Limited (NASDAQ:MLCO) Q1 2024 Earnings Call Transcript

Melco Resorts & Entertainment Limited (NASDAQ:MLCO) Q1 2024 Earnings Call Transcript April 30, 2024

Melco Resorts & Entertainment Limited isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Ladies and gentlemen, thank you for participating in the First Quarter 2024 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 for joining us today for our first quarter 2024 earnings call. On the call are Lawrence Ho, Geoff Davis, Evan Winkler; and our Property 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 laws. 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 Web site. With that, I'll now turn the call over to Mr. Lawrence Ho.

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Lawrence Ho: Thank you, Jeanny. And thank you all for joining us today. We have had an eventful year so far. We've had a shift in management. Our sales force has been restructured. We've knocked down walls and started reconfiguring our gaming areas and opened several new retail outlets at Studio City, to name a few highlights. On the financing side, we paid down another $250 million in debt, raised $750 million in bonds and extended the maturity of our $1.9 billion revolving credit facility, significantly reducing our refinancing risk in 2025. We had a slow start in January but we recovered in February in part due to Chinese New Year. And the improvement in our performance in March and April reflects the steps that we've taken towards regaining our leadership position in premium mass.

Melco Macau's first quarter [indiscernible] property EBITDA reached 89% of 2019. In March, both COD Macau and Studio City recorded the highest mass table games dropped ever. And in April, we continued to gain market share, recording the highest daily gaming revenue since Macau's reopening in January 2023. We remain extremely optimistic about Macau's continued growth potential. Various initiatives recently announced by the Chinese government, such as the multi-entry group tour visas between Macau and Hengqin, the new cities added to the IVS program in March. easier online visa application process for residents of China's 20 largest cities, as well as the proposed connection of Shenzhen to the Macau Zhuhai bridge, increases accessibility to Macau and enlarges our customer base.

We are confident that we will maintain our market leading position based on the quality of our properties and our continued efforts to enhance our services and offerings. In the Philippines, City of Dreams Manila continues to generate solid results in mass table games and slots, but we had some bad luck in VIP this past quarter. City of Dreams Mediterranean and our satellite casinos in Cyprus showed positive EBITDA and cash flow through the first quarter. We have been working on expanding our marketing efforts throughout Europe as well as the Middle East, and we're cautiously optimistic that we can continue to expand profitability despite the continued conflicts in the region. Today, we announced that we are working with the John Keells group in Sri Lanka in relation to their new integrated resort development.

A bustling casino table surrounded by players, highlighting the gaming entertainment offered by the resort.
A bustling casino table surrounded by players, highlighting the gaming entertainment offered by the resort.

The integrated resort will be rebranded as City of Dreams Sri Lanka and will be the first of its kind in Sri Lanka and South Asia. We will be responsible for the fit-out and operations of the casino, which we expect to open in mid-2025, while the City of Dreams Sri Lanka Integrated Resort itself is expected to open in the third quarter of 2024. This is a landmark development in Sri Lanka and we're thrilled to participate in this opportunity. This is a capital light investment with an attractive return profile, allowing us to expand the City of Dreams brand and broaden our customer reach. And finally, I'm excited to announce that we have hired Tim Kelly as Property President of City of Dreams Macau. Tim was most recently President at Atlantis Global for Kerzner International based in Dubai and has achieved great success in building the Atlantis brand since joining them in 2017.

He has a unique blend of skills and experience that we believe positions him perfectly to lead this next chapter of City of Dreams, and I would like to welcome him to the Melco family. With that, I turn the call over to Geoff to go through some of the numbers.

Geoff Davis: Thank you, Lawrence. Our group wide adjusted property EBITDA for the first quarter of 2024 was approximately $299 million. Luck adjusted group wide property EBITDA for the first quarter of 2024 came in at $329 million. Unfavorable win rates negatively impacted our results at City of Dreams Macau and City of Dreams Manila by approximately $33 million. Whereas a favorable win rate at Studio City had a slight positive impact of approximately $2 million. Details of these adjustments can be found in the supplementary earnings slides posted on our Investor Relations Web site. In April, we significantly reduced our refinancing risk in 2025 with a series of transactions that include the extension of our $1.9 billion revolving credit facility to 2027, a $750 million bond issuance and a $100 million tender offer on Studio City bonds due 2025.

The proceeds from the $750 million bond issue have been used to repay loans under the RCF and the extension of the RCF allows us to draw down again in 2025 to refinance the $1 billion in bonds due at Melco. We have always been prudent as well as opportunistic in managing our financing structure and maturities and we believe that the actions taken to reduce our exposure to future market volatility. We now have $300 million to refinance at Studio City by July 2025 and we are actively reviewing alternatives. As of March 31, 2024, we had around $1.3 billion of consolidated cash on hand. Melco, excluding its operations at Studio City, the Philippines and Cyprus, accounted for around $635 million. Of this, approximately $125 million was restricted as collateral required for the concession related guarantees issued to Macau government.

Pro forma for the recent bond issue, our undrawn and available credit lines for additional liquidity, increased to $1.8 billion. As we normally do, we'll give you some guidance on nonoperating line items for the upcoming second quarter of 2024. Total depreciation and amortization expense is expected to be approximately $135 million to $140 million. 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 $7 million relating to fees payable in relation to the Macau gaming concession and the Cyprus gaming license and finance lease interest of approximately $6 million relating to City of Dreams Manila.

That concludes our prepared remarks. Operator, back to you for the Q&A.

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