Melco Resorts & Entertainment(MLCO) - 2023 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The group-wide adjusted property EBITDA for Q2 2023 was approximately $257 million, a 40% increase compared to Q1 2023 [7] - Luck-adjusted group-wide property EBITDA for Q2 2023 was$ 277 million, with a favorable win rate positively impacting COD Manila by around $2 million, while unfavorable win rates at COD and Studio City negatively impacted by approximately$ 12 million [7] - As of June 30, 2023, the company had around $1.6 billion of consolidated cash on hand, with total debt balance remaining stable from Q1 to Q2 2023 and net debt decreasing by approximately$ 100 million [9] Business Line Data and Key Metrics Changes - The mass segment in Macau showed a 43% increase in GGR in Q2 2023 compared to Q1 2023, with mass drop continuing to outperform 2019 levels [4][5] - In the Philippines, the mass segment also outperformed 2019 levels in Q2 2023 [5] - The opening of City of Dreams Mediterranean in Cyprus in July is expected to enhance operational prospects [5] Market Data and Key Metrics Changes - Daily property reservations in Macau reached their highest point since reopening in July 2023 [4] - Labor supply issues in Macau have largely been resolved, allowing the company to provide a full suite of services and amenities [4] Company Strategy and Development Direction - The company plans to add another 560 hotel rooms with the opening of W Macau at Studio City in September [4] - The focus remains on enhancing entertainment offerings, as evidenced by the successful residency concert series that has increased property awareness and visitation [18][39] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ongoing recovery in Macau, with expectations for continued growth in mass drop and premium direct VIP segments [4][26] - The company anticipates that improvements in transportation infrastructure will further boost the grind mass segment [26] Other Important Information - The increase in operating expenses in Q2 2023 was largely due to costs associated with the residency concert series at Studio City, with daily OpEx rising to around $2.4 million [7] - Management confirmed that approximately 20% to 25% of cost savings during COVID are expected to translate into permanent savings, equating to about 200 basis points of margin improvement [12][13] Q&A Session Summary Question: Is the guidance on permanent OpEx reductions still valid? - Management confirmed that 20% to 25% of cost savings during COVID are expected to be permanent, translating to approximately 200 basis points of margin improvement [12][13] Question: What was the impact of unfavorable hold at City of Dreams and Studio City? - All hold adjustments were strictly on VIP, with no adjustments made for mass [15][16] Question: How is the residency concert series performing in terms of visitation? - The concert series has significantly increased visitation and spending patterns, with high occupancy rates at Studio City [18][39] Question: What will be the OpEx when W Macau opens? - Expected OpEx for Q3 is around$ 2.5 million per day, normalizing to approximately $2.3 million to$ 2.4 million per day when excluding concert series costs [24] Question: Are mass revenues already exceeding 2019 EBITDA levels? - Management indicated that while they have taken market share, they are not yet at the levels of GGR to return to 2019 EBITDA levels [33] Question: What is the status of non-gaming proposals? - All operators have submitted their non-gaming proposals, which are under negotiation with the government for adjustments [28][30][31]