Q3 2020 Melco Resorts & Entertainment Ltd Earnings Call

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Our looking statements made under the safe Harbor provision of Federal Securities Law.

Our actual results could differ from our anticipate that results.

In addition, we may discuss non-GAAP measures.

Definition and reconciliation of these measures to the most comparable GAAP financial measures are included in the earnings release.

Finally, please note that our supplementary earnings slides posted on our Investor Relations website with that I'll turn the call over to Lawrence.

Thank you Richard and Hello, everybody.

During the third quarter or integrated resorts experience gradual recovery in business levels helped by the resumption of the idea visa issuance in Guangdong in late August and nationwide resumption of visa issuance in late September.

Despite increased inbound visitation, thanks to the Macau and the mainland Chinese government measured and prudent approach towards border reopening we have not seen any new Cobra cases after the relaxation of the tribal restriction measures.

Benefiting from the resumption of visa issuance, our Macao mass table games operation, which contributes vast majority of our EBITDA in pre Cove at times saw notable sequential improvements from Twoq to Threeq.

Business trends have also improved in the Philippines we.

With gaming and hospitality operations at city of Dreams, Manila operating on a limited trial run basis as authorized by Pacal.

In the middle of June operations at Cypress casinos, partially reopened.

We saw a swift return of domestic gaming demand, which drove the return of our third quarter gaming revenues to approximately 75% of last year's levels.

Looking ahead, while we are encouraged by the resumption of visa issuance and growing inbound visitation.

Ensuring the safety and well being of our colleagues customers and the communities in which we operate remains our highest priority.

We continue to expect a faster rebound and faster growth in the premium gaming segments, which benefit now post portfolio of luxury integrated resorts tougher.

To further strengthen our leadership in premium mass we have made good use of the past few months to accelerate various upgrade projects at cod.

With the fully renovated new our hotels, how are currently anticipated to riocan before the Chinese new year.

Despite COVID-19 Smelko remains committed to its global development program.

Our next major project in Macau will be studio city phase two where construction is going full steam ahead.

Upon completion the phase two expansion will increase studio city's hotel room inventory by approximately 60% with two new hotel towers offering approximately 900 luxury hotel rooms and suites.

Gaming space will be extended.

New non gaming attractions will also be added which includes a cineplex one of the world's largest indoor outdoor waterpark fine dining restaurants and state of the art mice space.

Insight for Us, we're making good progress with the development of city of Dreams, Mediterranean, which upon completion will be Europe's largest integrator resort offering over 100 gaming tables, 1000 slot machines and 500 hotel rooms.

Turning to Japan.

We remain on wavering in our commitment to bring to the country the world's leading IR.

Our global team continues to monitor the process at a local and national level and engage with key stakeholders.

We remain convinced that Japan represents the best potential new gaming market globally.

At this time, we remain patient and we will maintain our disciplined approach with respect to all development activities, including Japan.

Last week.

While I expect demand recovery in Macau to be gradual I remain confident in the cows medium and long term growth prospects.

I believe Macau is still the most attractive integrated resort market in the world.

Our balance sheet was also strengthened by our recent capital market transactions, enabling us to overcome near term challenges, while investing for the future with that I turn it over to Jeff to go for some of the numbers.

Thank you Laura.

In the third quarter of 2020, we reported negative group wide property EBITDA of approximately $77 million. While luck adjusted EBITDA came in at negative 89 million.

A favorable VIP win rate positively affected EBITDA as.

Cod Macau.

The Manila studio city, and Altira by approximately 8 million 2 million 1 million and $1 million respectively.

On a consolidated basis overall results were positively impacted by approximately $12 million.

The EBITDA upon reaching the mid to high 20% range of our pre recorded gross gaming revenue levels.

Turning to our balance sheet to optimize our capital structure studio City had in July issued $500 million of 6% senior notes due 2025, and 500 million of 6.5% senior notes due 2028.

In August studio City completed a series of private share placements raising approximately $500 million of proceeds to strengthen their balance sheet.

Corporate expenses expected to come in at approximately 20% to $22 million and consolidated net interest expense is expected to be approximately $94 million to $98 million, which includes finance lease interest of $11 million related to city of dreams, Manila and $3 million of capitalized interest.

That concludes our prepared remarks, operator back to you for the Q on that.

Thank you.

I will begin the question and answer your question.

Seen essentially it's more a bar, what's called our premium premium mass more of our hiring premium mass players coming back.

A lot of our players are coming out of the non Guangdong region, Guangdong is still kind of messed up and we're still having some trouble as you kind of heard about probably in some of the other calls and I think it's been pretty well well noted in a lot of the the writings and a lot of things have gone on in terms of Ivy asking how ivs's currently working right now, but we've been fairly pleased with what we.

You've seen come back, we're probably about 35% of our volumes from what we've had before but overall, it's actually worked out fairly well for us in terms of what's come back.

Again, I think where the players we're seeing a little bit right now just to get maybe a little bit more color is the players are playing down a little bit and any of that their average bets are a bit lower they seem to be a bit more cautious playing time has not changed that much one of the other kind of things that we've seen a little bit is that the players don't move between the properties as much now so I think that's probably more of a reaction to covid.

Just the difficulty as you go through each of the properties and having to go through kind of a a check is you're going from property or property or in and out of the casinos.

I see things really appreciate the color, but just just follow up on that.

To mention podium wise.

Getting back to 35%.

The company is already back to public ability.

Just mention the break even point is slower now.

And so in due course, I think we'll see some of that traffic.

Come back to Macau and be diverted to Macau.

I guess on the operational level, David and his team and his senior team have always done a great job in terms of managing for for what the market is I don't know David if you have more color to that.

Whats the math behind the assumptions with respect to incremental bad debt from here I know it.

Something that's been sort of eating away at the EBITDA of the last few quarters. Obviously, you mentioned October sort of same level of monthly run rate as the three Q, what's the assumption behind that mid to high 20% threshold for breakeven.

So I would say on the bottom end of the range, that's excluding bad debts and towards the top end of the range, that's including bad debt.

And do you think at this point.

I mean, not just depends on collections, but when you look back at what we've done the last 17 months.

Do you think you've sort of taken most of the hits or wars or is that sort of maybe an assumption that is that.

Maybe quixotic from someone like me from the outside.

Well as you know I think for the for the majority of this year, we've been very conservative in our provisioning.

Or were you seen the momentum kinda throughout the months, we fight week, and then and turned November.

So what we've seen as the visitation is slow and I would say, it's plateaued, but it has slowed we saw period is right. After we opened up and October once the goodness Golden week started we saw an ice pick up it's slowed back that second week, and then started picking up in the third week I think that was more result, honestly a lot of the visa is coming through.

For the non Guangdong, we noticed when we had when we opened up in September.

As we came out for the Guangdong, there's about a two or three week lag before the visa started coming through so we saw that happened somewhat again with the non Guangdong when it opened up.

Hey, David can you take that.

Sure you know again kind of we're seeing still into it from the IB EPS standpoint, it's still difficult for players to get in here and with Hong Kong being closed. So I think the junkets are just being cautious with the players that they are getting it I think they are struggling in terms as are doing some collections a little bit but overall I think has more to do with EPS and has more to do with them Hong Kong.

Being closed.

Perfect. Thank you so much.

Thank you.

I'd now like to hand, the conference back to Mr. Richard One. Please go ahead.

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