Melco Resorts & Entertainment(US:MLCO)2024-11-05 16:53Financial Data and Key Metrics - Group-wide adjusted property EBITDA for Q3 2024 was $323 million, a 7% increase compared to Q2 2024 [14] - Favorable win rates at City of Dreams (COD) Macau and Studio City positively impacted property EBITDA by approximately $27 million [14] - Operational expenses (OpEx) in Macau remained stable at approximately $2.9 million per day, excluding the cost of the Studio City residency conference [15] - Consolidated cash on hand as of September 30, 2024, was approximately $1.2 billion, with over $3 billion in available liquidity [16] - Total debt declined by approximately $60 million in Q3 2024 following the repurchase of Studio City bonds due in 2025 [17] - The company repurchased 20.7 million ADSs for approximately $12 million during the quarter, with 17.7 million ADSs cancelled [17] Business Line Performance - In Macau, the revamped loyalty program, including the Signature Club for premium mass customers, is showing benefits in increasing efficiency in player reinvestment [6][7] - City of Dreams Manila improved its performance quarter-to-quarter despite added competition [12] - City of Dreams Mediterranean and satellite casinos in Cypress faced challenges due to regional conflict but saw solid increases in GGR and EBITDA through Q3 2024 [12] - City of Dreams Sri Lanka opened in October 2024, with the casino and Nuwa hotel on track to open in the second half of 2025 [13] Market Performance - Macau gaming market continues to grow, with projects planned to attract and retain high-quality patrons, including enhancements to accessibility and customer flow at City of Dreams and a revamp of Studio City's high-limit gaming area [10][11] - The House of Dancing Water is expected to relaunch in Q2 2025 [11] - During Golden Week, mass drop at Melco properties increased by over 20% year-over-year, with record mass drop updates at both City of Dreams and Studio City [23][24] Strategic Direction and Industry Competition - The company is focused on operational discipline and driving revenue to improve EBITDA margins [15] - The promotional environment in Macau is stabilizing, with the company focusing on retaining top players and creating an aspirational path for mid-level players [31][32][33] - The company aims to return to dividend-paying status in the second half of 2025, subject to business conditions [27] - Capital allocation priorities include debt reduction, with potential for opportunistic share repurchases if equity value becomes significantly dislocated [36][37] Management Commentary on Operating Environment and Future Outlook - Management is optimistic about the Macau market, with strong performance during Golden Week and ongoing investments in property enhancements expected to drive future growth [23][24][25] - The company sees significant potential to return to 2019 EBITDA levels, with 2025 expected to be a pivotal year for realizing this potential [51][52] - The company aims to regain its position as the third-largest operator in Macau by 2025, though achieving 2019 market share levels may take longer due to fewer hotel rooms and gaming tables [54][55] Other Important Information - Total depreciation and amortization expense for Q4 2024 is expected to be approximately $135 million to $140 million [18] - Corporate expense for Q4 2024 is expected to be approximately $20 million, with consolidated net interest expense expected to be $120 million to $125 million [18] - CapEx for Q4 2024 is expected to be approximately $115 million, with preliminary plans for 2025 targeting around $400 million, including $70 million to $75 million for Sri Lanka [43][44] Q&A Session Summary Question: Performance during Golden Week and dividend resumption timeline [21][22] - Golden Week performance was strong, with mass drop up over 20% year-over-year and record mass drop updates at both City of Dreams and Studio City [23][24] - Dividend resumption is targeted for the second half of 2025, subject to business conditions and debt reduction progress [27] Question: Promotional environment and share repurchase plans [31][34] - The promotional environment is stabilizing, with the company focusing on effective allocation of promotional spending [32][33] - Share repurchases are opportunistic, with no programmatic plans, but the company remains open to further repurchases if equity value becomes significantly dislocated [36][37] Question: Impact of luxury spending trends on premium mass customers [40] - Post-COVID, Chinese consumers are prioritizing experiences over luxury goods, benefiting Macau's gaming and entertainment offerings [41][42] Question: CapEx guidance for 2024 and 2025 [43] - CapEx for Q4 2024 is expected to be approximately $115 million, with 2025 CapEx targeting around $400 million, including $70 million to $75 million for Sri Lanka [43][44] Question: Dividend trigger and EBITDA potential [47][48] - No specific net debt to EBITDA trigger for dividend resumption; the decision will be holistic, considering leverage ratios and business outlook [50] - Significant potential exists to return to 2019 EBITDA levels, with 2025 expected to be a pivotal year for realizing this potential [51][52] Question: Promotional program and OpEx guidance [58][60] - The company relaunched its player program in mid-September, focusing on guaranteed benefits for top players and new promotional offerings for new entrants [63][64] - OpEx per day is expected to increase to $3.0 million by the end of 2024, with a further increase of $0.1 million per day expected with the relaunch of the House of Dancing Water in Q2 2025 [61][62]