Q1 2022 Melco Resorts & Entertainment Ltd Earnings Call
[music].
Ladies and gentlemen, thank you for participating in the first quarter 2022 earnings conference call.
And then containment limited at this time all participants are in listen only mode. After the call. We will conduct a question and answer session. Today's conference is being recorded I would now like to turn the call over to Jenny Kim Senior Vice President Group Treasurer of Melco Resorts Entertainment limited.
Yeah.
Thank you operator, thank you for joining us today for our first quarter 2022 earnings call on the call are Lawrence Ho, Geoff Davis, Evan Winkler, and our property presidents in Macau and Manila in 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 website with that I'll now turn the call over to Mr. Lawrence Ho.
Thank you Jeanie.
Our results for the first quarter of 2022 continue to reflect the impact of the Covid pandemic.
We saw relatively solid performance across all of our segments over the Chinese new year holiday period.
An increase in Covid cases in China, and tighter border controls led to Macau Gigi are falling more than 50% from February to March 2022.
And negatively impacted our results for the remainder of the first quarter.
Disciplined liquidity management remains a key area of focus.
Total debt increased by $1 3 billion year on year, as we increase available liquidity to support our operations and ongoing development projects.
We will be prudent in managing our balance sheet and liquidity profile as we manage the business through this challenging environment.
In the Philippines, we have been operating all casinos at 100% capacity since March one when the Covid alert level was reduced to alert level one.
We're starting to see international travelers return and in April we saw daily volumes reached close to 80% of pre COVID-19 levels.
Cypress experienced a spike in Covid cases during the first quarter of 2022, which negatively impacted our operations.
However, the situation has improved going into the second quarter were very relaxation and COVID-19 related restrictions.
In terms of our development program in Macau, the construction of studio city Phase two is progressing.
And we continue our efforts to complete the construction by the deadline set in the land concession of December 27 2022.
In Cyprus, we're continuing construction with a target to open by year end.
However, we are encountering difficulties with our contractor who has struggled with meeting its labor resourcing plans and maintaining progress leading to delays.
We are actively dealing with these difficulties as we remain fully committed towards delivering Europe's first integrated resort in Cyprus.
And lastly, we look forward to the Finalization of the new gaming law and fully support the Macau government initiatives in relation to the new legislation.
We appreciate the Macau government's effort to maintain a streamlined and transparent process.
We are committed to participating in the upcoming public tender and remain confident in the pent up demand from Macau as an international tourism destination. Once travel restrictions are relaxed, Florida with that I'll turn the call over to Jeff.
Thanks Lauren.
In the first quarter of 2022, we reported group wide property EBITDA of approximately $56 million.
Despite the overall decline in volumes across Macau during the second half of the quarter.
Macau Vod, Macau fared relatively well and benefited from strong hold.
Luck adjusted group wide property EBITDA came in at $48 million.
Favorable VIP win rate positively affected EBITDA at <unk>.
CRB Macau by approximately $14 million.
While an unfavorable VIP win rate negatively impacted EBITDA.
Video city, and Manila by around $5 million.
Details of these adjustments can be found.
The supplementary earnings slides posted on our Investor Relations website.
As of March 31, 2022.
We had approximately $1 9 billion of consolidated cash on hand.
Our available liquidity, including cash and Undrawn revolving credit facilities at the end of the first quarter was $3 3 billion.
To provide more clarity on our capital structure Melco, excluding this operations at studio city, the Philippines and Cyprus.
Cash of around $715 million and gross debt of <unk>.
$4 7 billion at.
At the end of March 2022.
As we normally do we'll give you some guidance on non operating line items for the upcoming second quarter of 2022.
Total depreciation and amortization expense is expected to be approximately $145 million.
Corporate expense is expected to come in at approximately $15 million.
And consolidated net interest expense is expected to be approximately $90 million to $95 million, which includes finance lease interest of 7 million relating to city of Dreams Manila.
And around $15 million of capitalized interest.
That concludes our prepared remarks, operator back to you for the Q&A.
Thank you Dear participants we will now begin the question and answer session. If you wish to ask a question. Please press star and one on the telephone keypad and your name will be announced.
The first question comes from the line of Joe Greff from Jpmorgan. Please ask your question.
Hi, everyone hope you're well.
There's only so much to ask about Macau were all kind of monitoring and watching.
The same thing so my only question is this and it's both for la.
Lawrence and Jeff can you just talk a bit about the steps youre taking.
It seems youre addressing <unk>.
To reduce the Edr delisting risk.
Thank you.
So hey, Joe.
Laurence.
We have been monitoring that for the last couple of years.
And of course, we know that between the countries U S and China.
Potentially working on a solution, but even if that doesn't come through that the listing risk doesn't really happen until 2024 at the same time, we have been as we've been monitoring over the last two years.
There are a few options that we can.
That we can resort to.
I don't know, Jeff do you have any additional stuff to add.
Yes.
No nothing to add Laurence.
Other than just to reiterate.
We do have some.
A variety of options that we are.
Flooring.
And are available to us and we will.
Move forward.
Expeditiously as we can.
Once we.
Make that determination.
Thank you.
Thank you. The next question comes from the line of Ricardo Chinchilla from Deutsche Bank. Please ask your question.
Hey, guys. Thanks for taking my question I was wondering if you could provide us with an update regarding capex and potentially if there's any further delays in <unk>.
<unk>.
Why it would be the implications of what would you have to engage in discussions with.
The government just to get an extension or if it's not even possible.
Okay.
Hey, Ricardo maybe I'll talk about the studio city first and then perhaps Jeff can cover the Capex So on studio city on land development.
Grant the land grant.
This is due to expire at the end of December of this year and for us.
It's really about getting the proper licenses. The construction is on time on schedule.
And so.
We're very confident that we're going to meet the timelines in terms of getting the necessary <unk> occupation permit and the various for the various government departments to do the inspections and give us give us the relevant licenses.
In terms of the actual opening date that is up to us.
You've seen that also with say Galaxy phase III, which was completed last year and it hasnt yet open.
So I think I'll go right now is to finish up the construction and get the proper licenses and really monitor the market and see how it goes to determine what's the best time to to open the property.
And so specifically on Capex for 2022 for the full year of 2022, we anticipate having capital expenditures of approximately $750 million.
With roughly $650 million.
For the development of.
Mediterranean and studio city phase two.
Now just as one.
Point to highlight is that.
That does anticipate and opening of Cypress.
By year end.
This year.
So really no change from from our last update from last quarter.
Perfect. Thank you so much and one additional question if I may can you please comment on water.
Roughly the incremental expenses, perhaps on a per day basis have been month basis.
With regards to the expansion of CVD, noting that you can reopen.
Whenever you.
You can physically open.
The business volumes are right to kind of upside to this but any color on potential incremental expenses, how should we think about.
But since our Carnegie on cost would be very helpful.
Yes.
Jeff can you take that I don't know if you caught caught all of the question.
No actually I had a bit of trouble.
Hearing that one.
Just quickly if I may repeat.
Is there.
Any estimate or any or how should we think about the incremental costs related to the opening of studio city phase two.
Acknowledging that you guys could decide to fully open the property all when business volumes are right for you to actually make incremental profitability at phase II.
Absolutely Laurence I think I'll defer to David on that one.
Sure, Jeff I got that one so the way we're looking at it obviously as Warren said is look we want to try to open up the bright possible time.
Of our cost as we look forward are probably going to be more related to the W. We think we can stretch with our existing team.
Particularly with some of the programs that we've got working with some of our viewers in converting some of our staff that we've got that are probably more excess staff now converting those over into let's say some of the non gaming rules whether that be in the front desk b in the restaurants, but the idea is to take a lot of our existing staff, where we're overstaffed.
Some of our local talent and to convert them over and to try to operate as best we can.
Going forward with the epic hotel as well as with the Waterpark Indoor water Park that would open.
With the W. There'll probably be some combination of the two.
Some of the <unk>, obviously, we want to make sure we get the Marriott DNA engaged into the property that's going to become very important and we're certainly very excited about having the W. Come in but we would also try to supplement that with a lot of our existing talent and converting whether that be from our existing hotels, but also taking some of our gaming labor and converting them into non gaming labor.
So again, we're going to try to do this efficiently as efficiently as possible and continue to monitor and again, taking some of the great things that we've done during the pandemic here related to our cost structure and things we've been working on over the last few years and really ensuring that that stays in place to try to achieve the best possible margins on a go forward basis.
Perfect. That's very helpful. Thank you so much for taking my questions.
Thank you there are no further questions I would now like to hand, the conference over TSB Speaker Genie Kim.
Thank you everybody for participating in our conference call today, and we will see you next quarter. Thank you.
That does conclude our conference for today. Thank you for participating all disconnect have a nice day.
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No.
Okay.
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Okay.
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Sure.
[music].
Yes.
[music].
[music].
[music].
Ladies and gentlemen, thank you for participating in the first quarter 2022 earnings conference call of the results and then containment limited at this time all participants are in listen only mode. After the call, but we will conduct a question and answer session. Today's conference is being recorded I would now like to turn the call.
All but two amazing journey, Kim Senior Vice President Group Treasurer of Melco Resorts Entertainment limited.
Thank you operator, thank you for joining us today for our first quarter 2022 earnings call on the call are Lawrence Ho Geoff Davis, Evan Winkler, and our property presidents in Macau and Manila in Cyprus before we get started please note that today's discussion may contain forward looking.
<unk> 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 website with that I'll now turn the call over to Mr. Lawrence Ho.
Jamie.
Our results for the first quarter of 2022 continue to reflect the impact of the Covid pandemic.
We saw relatively solid performance across all of our segments over the Chinese new year holiday period, but an increase in Covid cases in China and tighter border controls led to Macau, Gigi all falling more than 50% from February to March 2022.
And negatively impacted our results for the remainder of the first quarter.
Disciplined liquidity management remains a key area of focus.
Total debt increased by $1 3 billion year on year, as we increase available liquidity to support our operations and ongoing development projects.
We will be prudent in managing our balance sheet and liquidity profile as we manage the business through this challenging environment.
In the Philippines, we have been operating all casinos at 100% capacity since March 1st when the Covid alert level was reduced to alert level one.
We're starting to see international travelers return and in April we saw daily volumes reached close to 80% of pre COVID-19 levels.
Cypress experienced a spike in Covid cases during the first quarter of 2022, which negatively impacted our operations.
However, the situation has improved going into the second quarter were very relaxation and COVID-19 related restrictions.
In terms of our development program.
Macau the construction of studio city Phase two is progressing.
And we continue our efforts to complete the construction by the deadline set in the land concession of December 27 2022.
In Cyprus, we're continuing construction with a target to open by year end.
However, we are encountering difficulties with our contractor who has struggled with meeting its labor resourcing plans and maintaining progress leading to delays.
We are actively dealing with these difficulties as we remain fully committed towards delivering Europe's first integrated resort in Cyprus.
And lastly, we look forward to the Finalization of the new gaming law and fully support the Macau government initiatives in relation to the new legislation.
We appreciate the Macau government's efforts to maintain a streamlined and transparent process.
We are committed to participating in the upcoming public tender and remain confident in the pent up demand from Macau as an international tourism destination. Once travel restrictions are relaxed, Florida with that I'll turn the call over to Jeff.
Thanks Lauren.
In the first quarter of 'twenty, two we reported group wide property EBITDA of approximately $56 million.
Despite the overall decline in volumes across Macau during the second half of the quarter.
Macau Macau.
Macau fared relatively well and benefited from strong hole.
Luck adjusted group wide property EBITDA came in at $48 million.
Favorable VIP win rate positively affected EBITDA at Cod, Macau by approximately $14 million.
While an unfavorable VIP win rate negatively impacted EBITDA at studio city, and Manila by around $5 million.
Details of these adjustments can be found in the supplementary earnings slides posted on our Investor Relations website.
As of March 31, 2022.
We had approximately $1 9 billion of consolidated cash on hand.
Our available liquidity, including cash and Undrawn revolving credit facilities at the end of the first quarter was $3 3 billion.
To provide more clarity on our capital structure Melco, excluding its operations at studio city in the Philippines and Cyprus.
Cash of around $715 million and gross debt of <unk>.
$4 7 billion at.
At the end of March 2022.
As we normally do we'll give you some guidance on non operating line items for the upcoming second quarter of 2022.
Total depreciation and amortization expense is expected to be approximately $145 million.
Corporate expense is expected to come in at approximately $15 million.
And consolidated net interest expense is expected to be approximately $90 million to $95 million, which includes finance lease interest of $7 million relating to city of Dreams Manila.
And around $15 million of capitalized interest.
That concludes our prepared remarks, operator back to you for the Q&A.
Thank you Dear participants we will now begin the question and answer session. If you wish to ask a question. Please press star and one on the telephone keypad and your name will be announced.
The first question comes from the line of Joe Greff from Jpmorgan. Please ask your question.
Hi, everyone hope you're well.
There's only so much to ask about Macau were all kind of monitoring and watching.
The same thing so my only question as this is both for la.
Lawrence and Jeff can you just talk a bit about the steps youre taking.
Since youre addressing to.
To reduce the Edr delisting risk. Thank you.
So hey, Joe.
So we have been monitoring that for the last couple of years.
And of course, we know that between the countries U S and China.
Potentially working on a solution, but even if that doesn't come through that the listing risk doesn't really happen until 2024 at the same time, we have been as we've been monitoring over the last two years.
There are a few options that we can.
That we can resort to.
I don't know, Jeff do you have any additional stuff to add.
Yes.
No nothing to add Laurence.
Other than just to reiterate.
We do have some.
A variety of options that we are.
Exploring.
And are available to us and we will.
Move forward.
Expeditiously as we can.
Once we.
Make that determination.
Thank you.
Thank you. The next question comes from the line of Ricardo Chinchilla from Deutsche Bank. Please ask your question.
Hey, guys. Thanks for taking my question I was wondering if you could provide us with an update regarding capex and you know potentially if there's any further delays in <unk>.
D D D.
Why it would be the implications of what would you have to engage in discussions with.
Government just to get an extension or if it's not even possible.
Okay.
Hey, Ricardo maybe I'll talk about the studio city first and then perhaps Jeff can cover the debt Capex and so on.
Curious city on land development.
The land grant.
Due to expire at the end of December of this year.
And for Us.
It's really about getting the proper licenses. The construction is on time on schedule.
And so.
We're very confident that we're going to meet the timelines in terms of getting the necessary <unk> occupation permit and the various for the various government departments to do the inspections and give us give us the relevant licenses.
In terms of the actual opening dates that is up to us and I think you've seen that also with say galaxy phase III, which was completed last year and it hasnt yet open.
So I think I'll go right now is to finish up the construction and get the proper licenses and really monitor the market and see how it goes to determine what's the best time to to open the property.
And so specifically on Capex for 2022.
For the full year of 2022, we anticipate having capital expenditures of approximately $750 million.
With roughly $650 million.
For the development of <unk>.
Mediterranean and studio city phase two.
Now just as one.
Sure.
To highlight is that.
That does anticipate and opening of Cypress.
By year end of this year.
So really no change from from our last update from last quarter.
Perfect. Thank you so much and one additional question if I may can you. Please comment on you know water.
Ralph.
The incremental expenses, perhaps on a per day basis have been Monday's news.
So the expansion of CVD, noting that you can reopen whenever you're.
You can basically open.
The business volumes are right to kind of upset this but any color on potential incremental expenses, how should we think about it.
Since our Carnegie on cost would be very helpful.
Yes.
Jeff can you take that I don't know if you caught caught all of the question.
No actually I had a bit of trouble.
Hearing that one.
Just quickly if I may repeat.
Is there you know.
Any estimate or any or how should we think about the incremental costs related to the opening of studio city phase two.
Acknowledging that you guys could decide to fully open the property owner when business volumes are right for you to actually make incremental profitability at phase II.
Actually Laurence I think I'll defer to David on that one.
Sure, Jeff I got that one so the way we're looking at it obviously as Warren said is look we want to try to open up the bright possible time.
Of our cost as we look forward are probably going to be more related to the W. We think we can stretch with our existing team.
Particularly with some of the programs that we've got working with some of our viewers and kind of converting some of our staff that we've got that are probably more excess staff now converting those over into let's say some of the non gaming rules whether that be in the front desk b in the restaurants, but the idea is to take a lot of our existing staff, where we're overstaffed.
With some of our local talent and to convert them over and to try to operate as best we can.
Going forward with the epic hotel as well as with the Waterpark indoor Waterpark that would open.
The W there'd, probably be some combination of the two.
The <unk>, obviously, we want to make sure we get the Marriott DNA engaged into the property that's going to become very important and we're certainly very excited about having the W. Come in but we would also try to supplement that with a lot of our existing talent and converting whether that be from our existing hotels, but also taking some of our gaming labor and converting them into non gaming labor.
So again, we're going to try to do this efficiently as efficiently as possible and continue to monitor and again, taking some of the great things that we've done during the pandemic here related to our cost structure and things we've been working on over the last few years and really ensuring that that stays in place to try to achieve the best possible margins on a go forward basis.
Perfect. That's very helpful. Thank you so much for taking my questions.
Thank you there are no further questions I would now like to hand, the conference over TSB T Speaker Genie Kim.
Okay.
Thank you everybody for participating in our conference call today, and we will see you next quarter. Thank you.
That does conclude our conference for today. Thank you for participating in all disconnect have a nice day.