Q2 2024 Melco Resorts & Entertainment Ltd Earnings Call
Operator: Joseph Greff, John DeCree, David Sisk Music, Ladies and gentlemen, thank you for participating in the second quarter 2020 20th floor earnings conference call of Melco Resorts And Entertainment Ltd. 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.
Speaker Change: Ladies and gentlemen, thank you for participating in the second quarter 2024 earnings conference call of Melco Resorts.
Speaker Change: and Entertainment Ltd. At this time all participants are in listen-only mode.
Jeanny Kim: I would now like to turn the call over to Ms. Jeanny Kim, Senior Vice President, Group Pressurer, All-Malco Results and Entertainment Ltd. Thanks for your attention. Thanks, operator, and thank you all for joining us today for our second 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 law.
Jeanny Kim: 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 Ms. Jeanny Kim, Senior Vice President, Group Treasurer of Medical Results and Entertainment Limited.
Jeanny Kim: Our actual results could differ from our anticipated results. In addition, we may discuss non-gap measures; a definition and reconciliation of each of these measures to the most comparable gap financial measures are included in the earnings release.
Jeanny Kim: Thanks, Operator, and thank you all for joining us today for our second quarter 2024 earnings call. On the call are Lawrence Ho, Jeff Davis, Evan Winkler, and our property presidents in Macau, Manila, and Cyprus.
Speaker Change: Before we get started, please note that today's discussion may contain forward-looking statements made under the Safe Harbor Provision of Federal Securities Law. Our actual results could differ from our anticipated results.
Speaker Change: 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.
Jeanny Kim: Finally, please note that our supplementary earnings slides are posted on our investor relations website. With that, I'll turn the call over to Mr. Lawrence Ho. Thank you Jeanny and thank you all for joining us today.
Speaker Change: Finally, please note that our supplementary earnings slides are posted on our Investor Relations website. With that, I'll turn the call over to Mr. Lawrence Ho.
Lawrence Ho: A strategic initiative to expand profitability and drive growth will continue to evolve in the second quarter of 2024. We are investing in people and incorporating enhancements to our properties to provide the best premium experience available in Macau to our patrons. Our GGR has continued to grow quarter to quarter and year over year, and our teams have focused on driving continued expansion of our market position. I'd like to take this opportunity to welcome Tim Kelly [inaudible]. He has just joined us this month as property president for City of Dreams, Macau. We're very excited to have him on board to lead our initiatives for TOD Macau. City of Dreams Manila had another solid quarter.
Lawrence Ho: Thank you, Jeanny, and thank you all for joining us today. Our strategic initiatives to expand profitability and drive growth continue to evolve in the second quarter of 2024.
Lawrence Ho: We are investing in people and incorporating enhancements to our properties to provide the best premium experience available in Macau to our patrons.
Lawrence Ho: Our GGR has continued to grow quarter to quarter and year over year, and our teams are focused on driving continued expansion of our market position.
Lawrence Ho: I'd like to take this opportunity to welcome Tim Kelley.
Speaker Change: He has just joined us this month as property president for City of Dreams, Macau. We're very excited to have him on board to lead our initiatives for COD Macau.
Lawrence Ho: We've experienced some headwinds in the market, but we remain confident that we will maintain our market position and continue generating solid results. City of Dreams Mediterranean and our satellite casinos in Cyprus build upon the momentum seen in the first quarter, with luck-adjusted EBITDA growing more than 30% quarter to quarter. Our partnership with the John Hughes Group to open Sri Lanka's first integrated resort is progressing well. City of Dreams Sri Lanka is expected to open in 4Q 2024 with its hotel, restaurants, and banquet facilities, while we target to commence operations of the casino in mid 2025. With that, I'll turn the call over to Jeff to go through some of the numbers. Thanks, Warren.
Speaker Change: City of Dreams Manila had another solid quarter. We've experienced some headwinds in the market but we remain confident that we will maintain our market position and continue generating solid results.
Speaker Change: City of Dreams Mediterranean and our satellite casinos in Cyprus built upon the momentum seen in the first quarter, with luck-adjusted EBITDA growing more than 30% quarter to quarter.
Speaker Change: Our partnership with the John Hughes Group to open Sri Lanka's first integrated resort is progressing well.
Speaker Change: City of Dreams Sri Lanka is expected to open in 4Q2024 with its hotel
Speaker Change: restaurants and banquet facilities while we target to commence operations of the casino in mid 2025. With that I'll turn the call over to Jeff to go through some of the numbers.
Lawrence Ho: Our group-wide adjusted property EBITDA for the second quarter of 2024 was approximately 303 million; Rolling Chip Winrates increased to more normal levels of approximately 3% in the second quarter, and therefore luck-adjusted group-wide property EBITDA was in line with reality. Our OPEX in Macau increased this quarter from approximately $2.7 million per day to $2.9 million per day. This excludes the cost of the Studio City Residency fee.
Jeff: Thanks, Lawrence. Our group-wide adjusted property EBITDA for the second quarter of 2024 was approximately $303 million.
Jeff: rolling chip win rates increased to more normal levels of approximately 3% in the second quarter and therefore luck-adjusted groupwide property EBITDA was in line with actual.
Jeff: Our OpEx in Macau increased this quarter from approximately $2.7 million per day to $2.9 million per day. This excludes the cost of the Studio City Residency Concerts.
Geoff Davis: The majority of the increase was due to an increase in labor costs, which reflect the 2.5% salary increase, as well as the additional hires we have made across the board in Macau. We are investing in people to elevate the quality of our service that we provide to our patrons and to increase our productivity. In April, we significantly reduced our refinancing risk for 2025 with a series of transactions that included the extension of our $1.9 billion revolving credit facility to 2027, 750 million bond issuance at Melco, and a 100 million tender offer on the Studio City bonds due 2025. The proceeds from the 750 million bond issue have been used to pay down the RCF.
Jeff: The majority of the increase was due to an increase in labor costs, which reflect the 2.5% salary increase, as well as the additional hires we have made across the board in Macau. We are investing in people to elevate the quality of our service that we provide to our patrons and to increase our productivity.
Jeff: In April, we significantly reduced our refinancing risk in 2025 with a series of transactions that included the extension of our $1.9 billion revolving credit facility to 2027.
Jeff: a $750 million bond issuance at Melco and a $100 million tender offer on the Studio City bonds due 2025.
Jeff: The proceeds from the $750 million bond issue have been used to pay down the RCF.
Geoff Davis: The extension of the RCF allows us to draw down again in 2025 to refinance the 1 billion in bonds due at Melco. We now have $300 million to refinance at Studio City by July 2025. Studio City is generating solid levels of free cash flow, and we are actively reviewing our refinancing options. Our current liquidity position is robust. As of June 30, 2024, we had around 1.3 billion of consolidated cash on hand and over 3 billion in available liquidity. Melco, excluding its operations at Studio City, the Philippines, and Cyprus, accounted for approximately $670 million of this cash balance.
Jeff: The extension of the RCF allows us to draw down again in 2025 to refinance the $1 billion in bonds due at Melco.
Jeff: We now have $300 million to refinance at Studio City by July 2025.
Jeff: Studio City is generating solid levels of free cash flow, and we are actively reviewing our refinancing options.
Jeff: Our current liquidity position is robust. As of June 30, 2024, we had around $1.3 billion of consolidated cash on hand and over $3 billion in available liquidity.
Jeff: Melco, excluding its operations at Studio City, the Philippines, and Cyprus, accounted for approximately $670 million of this cash balance.
Jeff: Additionally, approximately $125 million of the Macau cash was restricted as collateral required for concession-related guarantees issued to the Macau government.
Operator: Additionally, approximately $125 million of the Macau cash was restricted as collateral required for concession-related guarantees issued to the Macau government. As we normally do, we'll give you some guidance on non-operating line items for the upcoming third quarter of 2024. Total depreciation and amortization expense is expected to be approximately $135 to $140 million. Corporate expenses are expected to come in at approximately $20 million. And Consolidated Net Interest Expenses, expected to be approximately 120-125 million. This includes finance liability interest of around $7 million relating to fees payable in relation to the Macau Gaming Session and the Cypress Gaming License and finance lease interest of approximately $6 million relating to the City of Dreams in Manila.
Jeff: As we normally do, we'll give you some guidance on non-operating line items for the upcoming third quarter of 2024.
Jeff: Total depreciation and amortization expense is expected to be approximately $135 to $140 million.
Jeff: Corporate expense is expected to come in at approximately $20 million.
Jeff: and consolidated net interest expense is expected to be approximately $120 to $125 million.
Jeff: This includes finance liability interest of around $7 million relating to fees payable in relation to the Macau gaming concession.
Jeff: and the Cypress Gaming License and finance lease interest of approximately $6 million relating to City of Dreams of Manila. That concludes our prepared remarks. Operator over to you for the Q&A.
Operator: That concludes our prepared remarks, operator. Now, over to you for the Q&A. Thank you. As a reminder, to ask a question, please press star 1 and 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 and 1 again. Once again, please press stars 1 and 1 on your telephone and wait for your name to be announced. To withdraw your question, please press stars 1 and 1 again.
Operator: Thank you. We are now going to proceed with our first question. The questions come from the line of George Chao from CTP's after questions. Thank you very much. I guess I'll start with a topical question. I guess this is for Lawrence. Would you please share with us your view on the criminalization of illegal cash exchange activities and whether you think it hits GGR materially?
Lawrence Ho: And secondly, on our recent visit to Macau, we saw some construction work on the Supreme Masking floor. Would you please share with us any details about the upgrades you're doing to the gaming floor, please? Thank you very much. Thank you very much. All right. Hey, thanks, George.
Speaker Change: Thanks for watching and I'll see you in the next video.
Speaker Change: [inaudible]
Speaker Change: We are now going to proceed with our first question.
Speaker Change: The questions come from the line of George Howe from City, please ask your question.
George Howe: Thank you very much.
George Howe: I guess I'll start with a topical question, and I guess this is for Lawrence. Would you please share with us your view on the criminalization of illegal cash exchange activities, and do you think it hits GDR materially?
Speaker Change: And secondly, on our recent visit to Macau, we saw some construction work at the City of Green's mass gaming floor. Would you please share with us any details about the upgrades you're doing to the gaming floor, please? Thank you very much.
Lawrence Ho: You know, I think the money changer issue is not new. It's been talked about for over a year now. So and again, it's not a surprise to us. For us, you know, of course, it has a bit of an impact in terms of liquidity for players. But I think the bigger issue in terms of the softness in June, and we saw growth in July already, and August is off to a very good start. It's more related to the Euro Cup, which lasted from mid-June to mid-July, and also this year, the Chinese school holidays started two weeks later.
Speaker Change: I think on the money changer issue, it's not new. It's been talked about for over a year now, and again, it's not a surprise to us.
Speaker Change: For us, of course it has a bit of an impact in terms of liquidity to players, but I think the bigger issue in terms of the softness in June, and we saw growth in July already and August is off to a very good start.
Speaker Change: It's more related to the Euro Cup, which lasted from mid-June to mid-July, and also this year, the Chinese school holiday started two weeks later, so it didn't really start until mid-July. So, again,
Lawrence Ho: So it didn't really start until mid-July. So again, it's, you know, whether it's the Euro Cup, which happens every four years, just like the World Cup, or Chinese school holidays where, you know, parents want to stay home and make sure that the kids are, you know, done with their final exams before they travel. So I think, you know, some of the softness that was seen in June and July was more of an impact rather than money changers.
Speaker Change: It's, you know, whether it's the Euro Cup, which happens every four years, just like the World Cup.
Speaker Change: or Chinese school holidays where parents want to stay home and make sure the kids are done with final exams before they travel.
Speaker Change: So I think some of the softness that was seen in June and July, that was more of an impact rather than money changers.
Lawrence Ho: And, you know, with regard to the money changers, we've seen this in Macau over the years. I think this has been a story, you know, 10 years in the making. More union pay state terminals, less union pay, IBS, you know, the frequency of people being able to visit decreases. Again, it's nothing.
Speaker Change: And, you know, with regards to the money changers, we've seen this in Macau over the years, you know, I think this has been a story, you know, 10 years in the making, you know, more union pay state terminals, less union pay.
Speaker Change: You know, IBS, you know, the frequency of people being able to visit decreases.
Lawrence Ho: I don't think it's going to change the thesis about Macau dramatically. So, if anything, we're very positive and optimistic about the future. I think what we've seen so far in August is a more typical summer.
Speaker Change: Again, it's nothing, I don't think it's gonna...
Speaker Change: changed the thesis into Macau Dramatically, so if anything we're very positive and optimistic about the future. I think what we've seen so far in in August Is a more typical summer
Lawrence Ho: And so, you know, we're happy heading into the second half of the year, and I believe that we will continue to see growth on the gaming floor changes that you saw. Again, I think since our Q1 call, we've talked about the need to reinvest in our people, to reinvest in what was the brand promise of City of Dreams. And, of course, we've done a lot of work through City as well. City of Dreams is our flagship.
Speaker Change: We are happy heading into the second half of the year and I believe that we will continue to see growth.
Speaker Change: On the gaming floor changes that you saw, again, I think since our Q1 call, we've talked about the need to reinvest in our people, to reinvest in what was the brand promise,
Speaker Change: of City of Dreams and, of course, we've done a lot of work at Studio City as well. You know, City of Dreams is our flagship and, you know, I think...
Lawrence Ho: And I think post-COVID, I think we've admitted that there was work that needed to be done from a maintenance standpoint at the same time to maintain our, well, reestablish our former premium mass leadership position. And that's why we're reinvesting in the gaming floor. And, you know, I think by Q4, hopefully by Golden Week, we would have probably the nicest VIP slot area that will open at that time, subject to, subject to, you know, approvals and regulations.
Speaker Change: post-COVID, I think we've admitted that, you know, there were work that needed to be done from a maintenance standpoint and at the same time to maintain our, well, to
Speaker Change: you know, to re-establish our former premium mass
Speaker Change: Leadership position. That's why we're reinvesting into the gaming floor and
Speaker Change: I think by Q4, hopefully by Golden Week.
Evan: We would have a probably the nicest VIP slot area that will open at that time subject to subject to, you know, approvals and regulations. And at the same time, I think, you know, perhaps Evan.
Lawrence Ho: And at the same time, I think, you know, perhaps Evan can talk about more of some of the exciting stuff that we're doing at City of Dreams, including reactivating the entrance that directly faces MGM co time win. So I think that entrance has never really been open for 15 years and given the busyness of that corner right now. Again, that is something that we're working on for Q4. I don't know, Evan, you want to add anything... Sure.
Evan: Um, can can talk about
Evan Kim: More of some of the exciting stuff that we're doing at City of Dreams including reactivating
Evan Kim: the entrance that directly faces MGM-Kotai and Wynn. So I think that entrance has never really been open for 15 years.
Evan Kim: given the busyness of that corner right now. Again, that is something that we're working on for Q4. I don't know, Evan, you want to add?
Evan Winkler: I guess circling back specifically on Studio City, if you'd been there over the last few months, they had a lot of porties. Sponsored American Deposit Receipt Repr 3, What we were initially. Stripping off some of the stone floor.
Evan Kim: Sure, I guess circling back specifically on Studio City, if you've been there over the last couple of months, we had a lot of porting going up.
Evan Kim: and it looked fairly dramatic.
Evan Winkler: Repairing the Raised Floor Joseph Greff, John DeCree, John DeCree, Corporate so that Sponsored American Deposit Receipt Repr 3, Get better volumes, we've actually shifted some table inventory over there and reset. So that was the primary focus of that, in addition, or I'm sorry, opened our new stadium. There are a couple of new slot areas that are in the works that will be happening here in the near term. Sponsored American Deposit Receipt Repr 3, We're going to do a little work opening up our higher limit area as you walk into the floor. On your right, there's a wall there that sort of prevents some of the traffic.
Evan Kim: What we were initially doing was
Evan Winkler: And so it's not a big tweak, but we think by, Sponsored American Deposit Receipt Repr 3 Play and Flow Into Those Areas, Kevin would tell you it was sort of a Something we should have thought about on our own, but a happy- Are Loyalty Areas Property, not surprisingly, when people shot [inaudible] American Deposit So it's done well for our days, in Sponsored American Deposit Receipt Repr 3, Customer Service and Promotional Areas right as you walk on the Gaming Force, so that's primarily... [inaudible] Lawrence alluded to at city, got a series of short term and long term activations in the very Sponsored American Deposit Receipt Repr 3, Shs Sponsored American Deposit Receipt Repr 3, Property, and activating that.
Evan Kim: Stripping off some of the stone flooring
Evan Winkler: And then also doing, Shs Sponsored American Deposit Receipt Repr 3 Light Rail Level going into the prop. [inaudible] In addition, we've got a new Four, Coincide [inaudible] The anniversary of the handover of Macau, and that's Sponsored American Deposit Receipt Repr 3, Shs Sponsored American Deposit Receipt Repr 3 Sports Cars in the Lobby, and that we've got, Sponsored American Deposit Receipt Repr 3 very near term Thank you very much for the color.
Evan Kim: Repairing the raised floor and putting in carpets so that we could do a more
Evan Kim: Folsom floor set as that property is continued to get better volumes. We've actually shifted some table inventory over there.
Evan Kim: and Reset the Floor. So that was the primary focus of that. In addition, if you've been there recently, we just reopened, or I'm sorry, opened, our new stadium, which looks great.
Evan Kim: There are a couple of new slot areas that are in the works that will be happening here in the near term.
Evan Kim: We've got some enhanced food and beverage stations that you've probably seen on the floor.
Evan Kim: And then as we look forward, perspectively, we're going to do a little work opening up our higher limit area that as you walk into the floor.
Evan Kim: On your right, there's been a wall there that sort of precluded some of the traffic, and so it's not a big tweak, but we think by opening up and giving a little better visibility there, we're going to get some better play and flow into those areas.
Evan Kim: As Kevin would tell you, it was sort of something we should have thought of on our own, but a happy coincidence when we moved our loyalty areas up to the front of the property, not surprisingly when people saw it just coming in, in loyalty and redemption, it's enhanced sign-ups.
Evan Kim: and so it's done well for our database and so those areas that are getting sort of built out and refined are going to stay there in terms of having the customer service and promotional areas right as you walk in on the gaming floor. So that's primarily at Studio City.
Lawrence Ho: As Lawrence alluded to at City of Dreams.
Speaker Change: We've got a series of short-term and long-term activations.
Evan Kim: of enough of the traffic that we're getting sort of at the corner that exists between us and a couple of our competitors where you get people and as they walk forward right now there's construction disruption but as that goes away making sure that we capture those people.
Evan Kim: So we're looking at creating short-term entrance into the property and activating that.
Evan Kim: And then also doing some activations up on the light rail level going into the property. In addition, we've got a new exhibition that's going to come in Q4 coinciding with
Evan Kim: The anniversary of the handover of Macau, and that's going to be in the space we call the White Gallery, which is the part of retail right by NUA.
Evan Kim: which is going to be an incremental traffic driver.
Evan Kim: sports cars in the lobby, and that we've got concerts on the weekend that have attracted some pretty good crowds. So we've got a number of
Lawrence Ho: Very near-term activations that are going on now and continuing on into Q4, as Lawrence said, in terms of making sure that City of Dreams is activated and we're getting the football that we want into that property.
Operator: And by the way, those sports cars; I saw a few of those, and they were amazingly good looking. And I think you guys strategically put them at the, you know, MGM facing entrance, which I think is very smart. Thank you very much. Thank you. We are now going to proceed to our next question. The question comes from the line of Ricardo Chinchilla from Deutsche Bank. Please ask your question.
Speaker Change: Thank you very much for the color. And by the way, those sports cars, I saw a few of those, and they were amazingly good looking. And I think you guys strategically put them at the, you know, MGM facing entrance, which I think it's very smart. I'll jump to the queue. Thank you very much.
Unknown Executive: Ladies and gentlemen, thank you for participating in the second quarter, 2020 more earnings conference call of Melco Resorts and Entertainment Ltd. 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 Ms. Jeanny Kim, Senior Vice President, Group Pressurer on Melco Resorts and Entertainment Ltd. Thank you. Thanks, operator.
Speaker Change: Thank you. We are now going to proceed with our next question.
Lawrence Ho: [inaudible]
Speaker Change: The questions come from the line of Ricardo Chinchilla from Dogebank. Please ask your question.
Lawrence Ho: Hey guys, thank you so much for thinking of the questions. I was hoping if we could start with the promotional environment. We continue to hear about the second quarter. It was very promotional by some of your competitors. I was hoping if you could provide us some color with regard to how those trends have evolved in July and into August.
Ricardo Chinchilla: Hey guys, thank you so much for taking the questions. I was hoping if we could start with, you know, the promotional environment. We continue to hear that, you know, in the second quarter it was very promotional by, you know, some of your competitors. I was hoping if you could provide us some color with regards to, you know, how
Jeanny Kim: And thank you all for joining us today for our second quarter, 2024 earnings call. On the call, our Lawrence Ho, Jeff Davis, Evan Winkler, and our property presidents in Macau, Manila, and Cypress. Before we get started, please note that today's discussion may contain forward-looking statements made under the safe harbor provision of federal security's law. Our actual results could differ from our anticipated results. In addition, we may discuss non-GAP measures, a definition and reconciliation of each of these measures to the most comparable, GAP financial measures are included in the earnings release.
Ricardo Chinchilla: those trends have evolved in July and into, you know, August, and if you are seeing any change or, you know, any sort of escalation or de-escalation of some of the freebies that are being offered to customers there.
Evan Winkler: And if you are seeing any change or any sort of escalation of the escalation of some of the previews that are being offered to customers there. Hey, Ricardo, you know, we're incredibly disciplined in our reinvestment, you know, for player reinvestment, with a laser focused on the best incremental margin per reinvestment dollar. You know, naturally, Macau is a very competitive environment. And, you know, I think we have chosen to focus on competing on service, on the quality of the resources and the amenities that we offer. But with regard to more details, maybe, you know, Evan, you can provide a bit more update.
Ricardo Chinchilla: Hey, Ricardo, you know, we're incredibly disciplined in our reinvestment. You know, for player reinvestment, we're laser focused on the best incremental margin per reinvestment dollar.
Unknown Executive: Finally, please note that our supplementary earnings slides are posted on our investor relations website.
Lawrence Ho: With that, I'll turn that turn the call over to Mr. Lawrence Ho. Thank you, Jeanny. And thank you all for joining us today.
Speaker Change: You know, naturally Macau is a very competitive environment.
Ricardo Chinchilla: And, you know, I think we have chosen to focus on competing on service, on the quality of the resorts and the amenities that we offer. But with regards to more details, maybe, you know, Evan, you can provide a bit more update.
Lawrence Ho: A strategic initiative to expand profitability and drive growth continue to evolve in the second quarter of 2024. We are investing in people in incorporating enhancements to our properties to provide the best premium experience available in Macau to our patrons. Our GGR has continued to grow quarter to quarter and year over year, and our teams have focused on driving continued expansion of our market position.
Evan Winkler: Sponsored American Deposit Receipt Rep 3, I think we can ten you- Shs Sponsored American Deposit Receipt Rep 3, Sponsored American Deposit Receipt Repr 3 In terms of specific things you've probably seen for us, We started out by... Shs Sponsored American Deposit Receipt Rep 3, I think there was probably a period when everyone in Macau was at risk of dying on the mass Sponsored American Deposit Receipt Repr 3, A higher level play into those airs that we've been refined.
Evan Kim: I think with respect to what we're doing, we're not elevating our aggregate level of spend.
Evan Kim: I think we continue to believe that for the long term, we're probably at an elevated period in the history of the market and that it will eventually unwind and come down, but it remained, I don't think that it accelerated, but it remained high through Q2.
Lawrence Ho: I like to take this opportunity to welcome Tim Kelly. He has just joined us this month as property president for City of Dreams Macau. We're very excited to have him on board to lead our initiatives for COD Macau.
Evan Kim: In terms of specific things you've probably seen for us.
Lawrence Ho: City of Dreams Macau had another solid quarter. We've experienced some headwinds in the market, but we remain confident that we will maintain our market position and continue generating solid results.
Evan Kim: We started out by
Evan Kim: You know, flooding the floor for everybody with food and beverage.
Evan Kim: I think there was probably a period at the beginning of Q2 that...
Evan Kim: You know, everyone in Macau was at risk of diabetes, given the amount of snacks that were being given out on the mass floor, and we pulled that back.
Lawrence Ho: City of Dreams Mediterranean and our satellite casinos in Cyprus built upon the momentum seen in the first quarter with luck adjusted EBITDA growing more than 30% quarter to quarter. Our partnership with the John Hughes Group to open Sri Lanka's first integrator resort is progressing well. City of Dreams Sri Lanka is expected to open in 4Q 2024 with its hotel, restaurants and banquet facilities while we target to commence operations of the casino in mid 2025.
Evan Winkler: [inaudible] Sponsored American Deposit Receipt Repr 3, of where we're putting those promotional dollars. We're putting those promotional dollars in the same way as we're putting those promotional dollars in the same way as we're putting those promotional dollars. So if I were to characterize what we've done, I don't know that we have been able to significantly reduce the aggregate spend in Q2, but I will say that we have refined it. Sponsored American Deposit Receipt Repr 3, Sarah Lee, in the near term she had coming down. God, that's very helpful.
Evan Kim: And we've now refined our offerings to where we have sort of fewer things on the mass floor and targeting more of our premium players with premium food and beverage offerings and higher quality to sort of drive.
Evan Kim: Higher level play into those areas. And so we've been refining things across the board.
Evan Kim: in terms of where we're putting those promotional dollars.
Evan Kim: So if I were to characterize what we've done, I don't know that we have been able to reduce significantly the aggregate spend in Q2, but I will say that we have refined it, and I think we're getting a better sense on where we get better return on those dollars.
Jeff Davis: With that, I'll turn the call over to Jeff to go through some of the numbers. Our group wide adjusted property EBITDA for the second quarter of 2024 was approximately 303 million. Rolling chip wind rates increased to more normal levels of approximately 3% in the second quarter, and therefore, luck adjusted group wide property EBITDA was in line with actual.
Evan Kim: and we're going to continue to do that into Q3. I don't necessarily in the near term see it coming down significantly, but I don't see it going up.
Evan Winkler: If I may follow up on your OPEX, you guys are obviously adding a lot of very exciting things to CDO dreams to provide the best service for your guests. So I'm hoping if you could comment on your OPEX expectations, because we've seen the peak of OPEX, or should we consider that there's additional investment that you're going to do in OPEX as these new amenities are opening. And if you could also comment on the cost of the CDO dreams and how long that is going to extend into the second half of the year.
Speaker Change: Got it. That's very helpful. If I may follow up on, you know, your OPEX, you guys are obviously adding a lot of very, you know, exciting things to City of Dreams to fulfill, you know,
Jeff Davis: Our op-ex in Macau increased this quarter from approximately 2.7 million per day to 2.9 million per day. This excludes the cost of the studio city residency concerts. The majority of the increase was due to an increase in labor costs which reflect the 2.5% salary increase as well as the additional hires we have made across the board in Macau. We are investing in people to elevate the qualities of our service that we provide to our patrons and to increase our productivity.
Speaker Change: the best service to your guests. So I was hoping if you could comment on your OPEX expectations. Have we seen the peak of OPEX or should we consider that there's...
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Jeff Davis: In April, we significantly reduced our refinancing risk in 2025 with a series of transactions that included the extension of our 1.9 billion revolving credit facility to 2027, a 750 million bond issuance at Melco and a 100 million tender offer on the Studio City bonds due 2025. The proceeds from the 750 million bond issuance have been used to pay down the RCF. The extension of the RCF allows us to draw down again in 2025 to refinance the 1 billion in bonds due at Melco. We now have 300 million to refinance at Studio City by July 2025. Studio City is generating solid levels of free cash flow and we are actively reviewing our refinancing options.
Speaker Change: into the second half of the year. Thank you.
Evan Winkler: Thank you. We'll start with the overall costs when we look at both SC and City of Dreams over the last several months. We've done a pretty significant ratcheting of Product and Service, and I would say that the lion's share of that. I wouldn't say that there's nothing left, but I think we're into the late innings in terms of doing that, and now it is refined. Sponsored American Deposit Receipt Rep 3, Our New Call [inaudible] are delivering the kind of service that guests Melco, so I could see them continuing to trickle up a little bit. The Mass Majority, There are some distinct differences there from, so for example, House of Dancing Water.
Speaker Change: So,
Speaker Change: Let me start with the the overall costs when we look at both SC and City of Dreams Over the last several months. We've done a pretty significant ratchet up in terms of Product and service and I would say that the lion's share of that has been done
Speaker Change: I wouldn't say that there's nothing left, but I think we're into the late innings in terms of doing that, and now it is.
Speaker Change: refining, training, making sure that all of our
Speaker Change: our new colleagues and new members of the Melco family.
Speaker Change: are delivering the kind of service that guests have come to expect from Melco and that is leading the market. And so while I could see them continuing to trickle up a little bit, I think the mass majority of that is behind us.
Jeff Davis: Our current liquidity position is robust. As of June 30, 2024, we had around 1.3 billion of consolidated cash on hand and over 3 billion in available liquidity. Melco, excluding its operations at Studio City, the Philippines and Cyprus, accounted for approximately 670 million of this cash balance. Additionally, approximately 125 million of the Macau cash was restricted as collateral required for concession related guarantees issued to the Macau government.
Speaker Change: There are some distinct there from, so for example, House of Dancing Water at City of Dreams will be its own cost line item.
Geoff Davis: Cost Line [inaudible] That's obviously going to raise costs. I will say I'm less worried about that because, obviously, the show in and of itself has always been an EBITDA positive. Sponsored American Deposit Receipt Repr 3, Shs Sponsored American Deposit Receipt Repr 3, Sponsored American Deposit Receipt Repr 3, Yeah, happy to take that.
Speaker Change: That's obviously going to raise costs as we go into next year when the show reopens. I will say I think we're less worried about that because obviously the show in and of itself has always been an EBITDA positive element for the company, so not just a significant thing.
Speaker Change: Traffic Driver into the property but also profit making in its own right and so not as concerned there. On the residencies in terms of when they will they extend for one more year in terms of from a financial standpoint when they're being
Jeff Davis: As we normally do, we'll give you some guidance on non-operating line items for the upcoming third quarter of 2024. Total depreciation and amortization expense is expected to be approximately 135 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 to 125 million. This includes finance liability interest of around 7 million relating to fees payable in relation to the Macau gaming session and the Cyprus gaming license and finance lease interest of approximately 6 million relating to City of Dreams of Manila.
Jeff: stop being booked in this year, I might defer over to Jeff. I don't know on the top of my head on how the accounting of that is going to play out for the next couple of quarters. I don't know, Jeff, if that's one you can comment on. Yeah.
Geoff Davis: So if we think about the cost of the residency shows in the second quarter, that was about point two. So with the 2.9 that we talked about, the gross number, I suppose, is more like 3.1. We're looking for the residency daily OPEX impact in the third quarter to be more like 0.15 and then zero in the fourth quarter. So on an apples-to-apples basis with the 2.9 that we referenced in the second quarter of 2024, we think over the second half of 2024, we might see that drift up to something more like 3.0 by year end. So, as Evan said, we saw the stair step that we telegraphed for the second quarter and then fairly modest incremental expense going into the second half of the year up to three. Perfect.
Jeff: Yeah, happy to take that. So if we think about the cost of the residency shows in the second quarter, that was about .2. So with the 2.9 that we talked about, the gross number, I suppose, is more like 3.1.
Speaker Change: We're looking for the residency daily OPEX impact in the third quarter to be more like 0.15 and then zero in the fourth quarter.
Unknown Executive: That concludes our prepared remarks, operator, over to you for the Q&A. Thank you. As a reminder for asking questions, please press star one and one on your telephone and wait for your name to be announced. Do we grow your question? Please press star one and one again. Once again, please press star one and one on your telephone and wait for your name to be announced. Do we grow your question? Please press star one and one again. Thank you.
Jeff: So, on an apples-to-apples basis, with the 2.9 that we referenced,
Jeff: in the second quarter of 2024.
Jeff: We think over the second half of 2024, we might see that drift up to something more like 3.0 by year end. So as Evan said, we saw the stair step that we telegraphed for the second quarter and then fairly modest incremental expense.
George Owl: We are now going to proceed with our first question. The questions come from the line of George Owl from City, please ask your question. Thank you very much.
Evan Kim: going into the second half of the year, up to three.
Speaker Change: Perfect. Thank you so much for taking my questions.
Lawrence Ho: I guess I'll start with a topical question, I guess this is for Lawrence, which please share with us your view on the criminalization of illegal cash exchange activities and you think it hits GGR materially. And secondly, on our recent visit to Macau, we saw some construction works at the City of Dreams mass gaming floor. We should please share with us any details about the upgrades you're doing to the gaming floor, please.
Speaker Change: We are now going to proceed with our next question.
Operator: Thank you so much for taking my question. We are now going to proceed with our next question. The questions come from the line of Joe Greff from J.P. Morgan. Please ask a question. Hello, everybody.
Speaker Change: A question has come from the line of Joe Greff from J.P. Morgan. Please ask your question.
Lawrence Ho: Lawrence, how are our things in Macau, like retail sales, performing? It looks like at least the City of Dreams non-gaming revenues as a percentage of GGR. Sponsored American Deposit Receipt Repr 3, A sense of how things performed later in the QQ and along all of the lines, how it's— Sponsored American Deposit Receipt Repr 3, Hey, hi, Joe. Well, I think Macau, similar to Hong Kong and the rest of China from a retail perspective, is still quite weak.
Joe Greff: Thank you. Thank you.
Joe Greff: Hello everybody. Lawrence, how are things in Macau, like retail sales, performing?
Speaker Change: It looks like, at least at City of Dreams, non-gaming revenues as a percentage of GGR.
Lawrence Ho: Thank you very much. All right. Hey, thanks, George. You know, I think on the money-changer issue, it's not new. It's been talked about for over a year now. So, and it's, again, it's not a surprise to us. For us, you know, of course, it has a bit of an impact in terms of liquidity to players, but I think the bigger issue in terms of the softness in June, and we saw growth in July already, and August is off to a very good start.
Speaker Change: You know, fell sequentially. You know, obviously we're seeing, you know, trends in luxury retail sales in greater China.
Speaker Change: It's a little bit soft, if you can give us a sense of how things perform later in the 2Q and along those lines, how it's performing thus far in the 3Q.
Lawrence Ho: And, you know, fortunately, we have a retail partner and DFS at City of Dreams. And at Studio City, we've, as part of the repositioning into a premium family-friendly, integrated resort, filled the retailers with, you know, more affordable and high volume business. And so I think on that front, you know, Studio City. I think if you go to Studio City on any day now, it's just jam packed with people, which helps with where we want to take the positioning of the property.
Speaker Change: Hi Joe, I think Macau, similar to Hong Kong and the rest of China, from a retail perspective, is still quite weak.
Lawrence Ho: It's more related to the Euro Cup, which lasted from mid-June to mid-July, and also this year, the Chinese school holidays started two weeks later, so it didn't really start until mid-July. So, again, it's, you know, what does the Euro Cup, which happens every four years, just like the World Cup, or Chinese school holidays where, you know, parents want to stay home and make sure the kids, you know, done with final exams before they travel.
Speaker Change: and um...
Speaker Change: I think fortunately we have a retail partner in DFS at City of Dreams.
Speaker Change: And at Studio City, we've, as part of the repositioning into a premium family-friendly integrated resort, we have filled the retailers with, you know, more affordable and high-volume...
Lawrence Ho: So, I think, you know, some of the softness that was seen in June and July, that was the more of an impact rather than money-changers. And, you know, with regards to the money-changers, we've seen this in Macau over the years. You know, I think this has been a story, you know, ten years in the making. You know, more union pay, state terminals, less union pay, you know, IBS, you know, the frequency of people being able to visit, decreases.
Speaker Change: business. And so I think on that front, you know, Studio City, I think if you go to Studio City on any day now, it's just jam-packed with people.
Speaker Change: which helps with
Lawrence Ho: For City of Dreams, where the high-end retailers, the luxury retailers are, it has been solved in line with the rest of China and Hong Kong. And so, you know, I think naturally, everybody's hoping for the Chinese economy to recover. Because ultimately, the long-term success of any business in the greater China area depends on the health of the Chinese economy. You know, I think fortunately for Macau, Macau has its unique advantages compared to, you know, Hong Kong or, say, Hainan Island for that matter.
Speaker Change: where we want to take the positioning of the property. For City of Dreams, where the high-end retailers, the luxury retailers are, it has been solved in line with the rest of China and Hong Kong. And so...
Lawrence Ho: So, again, it's nothing. I don't think it's going to change the thesis into Macau dramatically. So, if anything, we're very positive and optimistic about the future. I think what we've seen so far in August is a more typical summer. And so, you know, we're happy heading into the second half of the year. And I believe that, you know, we will continue to see growth on the gaming floor changes that you saw.
Speaker Change: I think, naturally, everybody is hoping for the Chinese economy to recover because, ultimately, the long-term success of any businesses in the Greater China Area depends on the health of the Chinese economy. I think, fortunately for Macau, Macau has its unique advantages.
Geoff Davis: So again, you know, I guess, you know, that's everybody's hoping for the Chinese economy to recover quickly. And Geoff, can you remind us of your capex for the balance of this year and if you could disclose that by geography that would be helpful? Yeah, so the total Joe for the remainder of the year is about 255 million that'll bring us to ballpark of around 340, By region For Macau I'd say we've got on the order of $170 million, left to go in Macau, fairly de minimis across the other areas, but about $11 million for corporate, $25 million for Manila, $12 million for Cyprus, and then the remainder of that would be some of our project capex with tail amounts on Studio City Phase 2, Cyprus, as well as about $32 million for Sri Lanka.
Speaker Change: compared to, you know, Hong Kong or, say, Hainan Island, for that matter. So, again, you know, I guess, you know, everybody's hoping for the Chinese economy to recover quickly.
Lawrence Ho: So, again, I think since our Q1 call, we've talked about the need to reinvest in our people, to reinvest in what was the brand promise of city of dreams. And of course, we've done a lot of work as real city as well. You know, city of dreams is our flagship. And, you know, I think post-COVID, I think we've admitted that, you know, there were works that needed to be done from a maintenance standpoint.
Speaker Change: Yeah, so the total, Joe, for the remainder of the year is about $255 million. That'll bring us to a ballpark of around $340 million.
Speaker Change: By region, for Macau, I'd say we've got
Lawrence Ho: And at the same time, to maintain our, well, to, you know, to reestablish our former premium mass leadership position, that's why we're reinvesting into the gaming floor. And, you know, I think by Q4, hopefully by Golden Week, we would have a probably the nicest VIP slot area that will open at that time, subject to, you know, approvals and regulations. And at the same time, I think, you know, perhaps Evan can talk about more of some of the exciting stuff that we're doing in city of dreams, including reactivating the entrance that directly faces MGM co time win.
Joe Greff: on the order of $170 million.
Joe Greff: left to go in Macau.
Joe Greff: Um...
Joe Greff: Fairly de minimis across the other areas, but about 11 million for corporate
Joe Greff: $25 million for Manila, $12 million for Cyprus
Joe Greff: and then the remainder of that would be some of our project CapEx with tail amounts on Studio City Phase 2, Cyprus, as well as about $32 million for Sri Lanka.
Joe Greff: Thank you.
Lawrence Ho: So, I think that entrance has never really been open for 15 years and given the busyness of that corner right now. Again, that is something that we're working on for Q4. I don't know, Evan, you want to add... Sure. I guess circling back specifically on Studio City, if you'd been there over the last couple of months, we had a lot of porting going up and it looked fairly dramatic. What we were initially doing was stripping off some of the stone flooring, repairing the raised floor and putting in carpets so that we could do a more fulsome floor set as that property is continued to get better volumes.
Speaker Change: Thank you. We are now going to proceed with our next question.
Operator: Thank you. We are now going to proceed with our next question. The questions come from the line of John DeCree from CBRE. Please ask your question. Hi, good evening, everyone.
Speaker Change: The questions come from the line of John Decree from CBRE. Please ask your question.
John Decree: Thanks for taking my questions. Maybe one to start at a high level of capital allocation. I think, you know, Lawrence Jeff, you've been pretty clear that leveraging has been the key priority, but you know, we kind of look at where the valuation of the equity is, and it looks quite compelling and attractive to us. I imagine the same for you. So, you know, curious, if you've given much thought to share repurchases or, in the past, in these calls, we've talked a little bit about resuming the dividend at some point.
John Decree: Hi, good evening, everyone. Thanks for taking my questions.
John Decree: maybe one to start at a high-level capital allocation. I think, you know, Lawrence, Jeff, you've been pretty clear that deleveraging has been the key priority, but we kind of look at where
Speaker Change: evaluation of the equity is, you know, looks...
Speaker Change: Quite compelling and attractive to us. I imagine the same for you. So, you know, curious if you've given much thought or if share repurchases or I know in the past, you know, on these calls, we've talked a little bit about resuming the dividend at some point. So, I'm curious to get your high-level thoughts on capital allocation at this point.
John Decree: And so, you're curious to get your high-level thoughts on capital allocation at this point. Hey, hi, John, maybe I'll get Jeff to elaborate. But later, obviously, our number one objective is still debt reduction and de-levering.
Lawrence Ho: We've actually shifted some table inventory over there. And reset the floor. So that was the primary focus of that. In addition, if you've been there recently, we just reopened or I'm sorry, opened our new stadium, which looks great. There are a couple of new slot areas that are in the works that will be happening here in the near term. We've got some enhanced food and beverage stations that you've probably seen on the floor.
Speaker Change: Thank you very much for joining us today.
Speaker Change: Hey, hi, John. Maybe I'll get Jeff to elaborate, but...
Speaker Change: later
Speaker Change: Obviously, our number one objective is still debt reduction and de-levering. In the prepared remarks, as you can hear, we've done a lot of work, great work from Jeff and the team on that basis over the last 12 months.
Lawrence Ho: In the prepared remarks, as you can hear, we've done a lot of work, great work from Jeff and the team on that basis over the last 12 months. And we've extended some maturities as well. So I think our balance sheet is in much better shape today than it was coming out of the pandemic. We're not quite down to the pre-COVID levels yet.
Lawrence Ho: And then as we look forward, prospectively, we're going to do a little work opening up our higher limit area that as you walk into the floor on your right, there's been a wall there that sort of precluded some of the traffic. And so it's not a big tweak, but we think by opening up and giving a little better visibility there, we're going to get some better play and flow into those areas.
Jeff: and we've extended some maturities as well. So I think our balance sheet is in much better shape today than, you know, coming out of the pandemic. We're not quite down to the pre-COVID levels yet. Those are levels that we would be more comfortable with.
Lawrence Ho: Those are levels that we would be more comfortable with. But talking about our share price and valuation, yeah, it is shocking, you know, in terms of, you know, the fact that we were well beyond COVID when we had zero revenue. And we're close to those levels.
Lawrence Ho: As Kevin would tell you, it was sort of something we should have thought about our own, but a happy coincidence when we moved our loyalty areas up to the front of the property, not surprisingly when people saw it just coming in in loyalty and redemption, it's enhanced signups. And so it's done well for our database. And so those areas that are getting sort of built out and refined are going to stay there in terms of having the customer service and promotional areas right as you walk in on the gaming floor.
Jeff: But talking about our share price and valuation, yeah, it is shocking, you know, in terms of, you know, the fact that, you know, we're well beyond COVID when we were zero revenue.
Lawrence Ho: So I think we're looking at it very, very closely. And it's extremely, you know, tempting, seeing these share prices, because it just makes no sense at this stage. I think, on a relative basis, Studio City is, you know, a lot more valuable, and then MLCO, and Melco International, the holding company, is trading at a 50% premium to MLCO as well.
Jeff: and we're close to those levels. So I think we're looking at it very, very closely.
Jeff: And it's extremely, you know, tempting seeing these share prices because it just makes no sense at this stage. I think, you know, on a relative basis, you know, Studio City is, you know, a lot more valuable than MLCO.
Lawrence Ho: So that's primarily at its studio city. As Lawrence alluded to at City of Dreams, we've got a series of short term and long term activations in the very short term. We felt we weren't taking advantage of enough of the traffic that we're getting sort of at the corner that exists between us and a couple of our competitors where you get people and as they walk forward right now, there's construction disruption, but as that goes away, making sure that we capture those people.
Geoff Davis: So I think all in all, you know, it is very interesting days. And we're really looking at it closely. I don't know, Jeff, if you have any... I suppose really just to reiterate the point that we see tremendous value in the shares. We will maintain our discipline in addressing debt reduction. But at these levels, it's very tempting.
Jeff: Malco International, the holding company, is trading at a 50% premium to MLCO as well. So I think all in all, you know, it is...
Jeff: very interesting days and we're really looking at it closely. I don't know, Jeff, if you have any...
Jeff: I suppose really just to reiterate the point that we see tremendous value in the shares.
Lawrence Ho: So we're looking at creating short term entrance into the property and activating that and then also doing some activations up on the light rail level going into the property. In addition, we've got a new exhibition that's going to come in Q4 coinciding with the anniversary of the handover of Macau. And that's going to be in the space we call the White Gallery, which is the part of retail right by Nua, which is going to be an incremental traffic driver.
Geoff Davis: And I think you'll probably see us divert some small percentage of our free cash towards some share repurchase at these, you know, kind of, severely discounted levels from an evaluation perspective. Thanks, Lawrence and Jeff, certainly appreciate those comments and your prudence of deleveraging, and we agree entirely. Maybe a fundamental follow-up quickly on about some headwinds there. There's obviously a lot of stuff going on in that market.
Speaker Change: We will maintain our discipline in addressing debt reduction.
Speaker Change: But at these levels, it's very tempting, and I think you'll probably see us divert some small percentage of our free cash towards some share repurchase at these, you know, kind of...
Speaker Change: severely discounted levels from evaluation perspective.
Speaker Change: Thanks Lawrence and Jeff, certainly appreciate those comments and your prudence of deleveraging and we agree entirely. You know maybe a fundamental follow-up quickly on
Lawrence Ho: If you've been there on the weekend, you've already seen that we've got sports cars in the lobby and that we've got concerts on the weekend that have attracted some pretty good crowds. So we've got a number of very near term activations that are going on now and continuing on to Q4 as Lauren said in terms of making sure that city of dreams is activated and we're getting the football that we want into that property.
Geoff Davis: I was wondering if you could maybe help synthesize kind of what you know, what you're facing as the pogos are closing, and you know, curious about the economic picture, and maybe your just outlook or high-level view on Manila would be helpful. And that's all for me. I appreciate it. Hey, um, John, I think I'll hand it off to Jeff Andres because I don't want to steal his thunder. But Manila has been a fantastic cash cow for us over the years. I think next year is going to be our 10th year.
Speaker Change: talked about some headwinds there. There's obviously a lot of a lot of stuff going on in that market. I was wondering if you could maybe help synthesize kind of what you know what you're what you're facing and the pogos are closing and you know here's the economic picture and maybe your just outlook or high level view on on Manila would be helpful and that's all for me. I appreciate it everyone.
Jeff Andres: But hey, Jeff, you want to talk about the highlights of Manila. Thank you, Lawrence. And thank you, John, for the question. Manila is a pretty interesting market right now. You mentioned the Pogo has been fairly controversial with the government of the Philippines. And the President recently announced that the Pogos need to be phased out, and they will be phased out by the end of this year.
Lawrence Ho: Thank you very much for the color. And by the way, those are sports cars. I saw a few of those and they were amazingly good looking and I think you guys strategically put them at the NGM, basing in terms of which I think it's very smart. I would certainly do the Q. Thank you very much. Thank you.
Speaker Change: Hey, John, I think I'll hand it off to Jeff Andres, because I don't want to steal his thunder, but Manila has been a fantastic cash cow for us over the years. I think next year is going to be our 10th year, but hey Jeff, do you want to talk about the highlights of Manila?
Jeff Andres: Thank you, Lawrence, and thank you, John, for the question. Manila is a pretty interesting market right now. You mentioned the Pogo has been
Valano Riccardo Chinchilla: We are not going to proceed the next question. The questions come from Valano Riccardo Chinchilla from Deutsche Bank.
Evan Winkler: Please ask a question. What is some color with regards to, you know, how those trends have evolved in July and into, you know, August and if you are seeing any change or, you know, any sort of escalation or de-escalation of some of the previews that are being offered to customers there. Hey Riccardo, you know, we're incredibly disciplined in our reinvestment. You know, for a player reinvestment, we're laser focused on the best incremental margin per reinvestment dollar. You know, naturally Macau is a very competitive environment and, you know, I think we have chosen to focus on competing on service, on the quality of the resorts and the amenities that we offer.
Jeff Andres: Fairly controversial with the government of the Philippines, and the President recently announced that Pogo's need to be phased out, and they will be phased out by the end of this year.
Jeff Andres: And, There's been a little also been from a headwind standpoint; there's some increased supply in the market. And so, especially with this, if you're familiar with the geography of Manila, up north, it takes a good hour to drive down. And so some of that increased supply being up there, we're seeing a small diversion of some of the trips from guests. But overall, I still remain very optimistic about Manila in the Philippines, strong mass business, and, of course, increased international capacity and increased commitment to tourism from the government, which I think will benefit us well into the future. Great. Thanks, everyone. We are now going to proceed with our next question. The question comes from the line of Praveen Choudhary from Morgan Stanley. Please ask your question.
Jeff Andres: There's been a little, also from a headwind standpoint, there's some increased supply in the market.
Jeff Andres: And so that's especially what the...
Jeff Andres: if you're familiar with the.
Jeff Andres: Geography of Manila up north takes a good hour to drive down and so some of that increased supply being up there we're seeing a small diversion of some of the trips from guests.
Jeff Andres: But overall, I still remain very optimistic about Manila and the Philippines, strong mass business and, of course, increased international capacity and increased commitment to tourism from the government, I think will benefit us well into the future.
Speaker Change: Yau, Jeanny Kim
Speaker Change: Great. Thanks, everyone.
Evan Winkler: But with regards to more details, maybe, you know, Evan, you can provide a bit more updates. Sure, but I think with respect to what we're doing, we're not elevating our aggregate level of spend. I think we continue to believe that for the long term, we're probably at an elevated period in the history of the market and that it will eventually unwind and come down. But it remained, I don't think that it accelerated, but it remained high through Q2.
Speaker Change: We are now going to proceed with our next question.
Speaker Change: The questions come from the line of Praveen Chowdhury from Morgan Stanley. Please ask your question.
Operator: Thank you. Thanks for taking my question. And congratulations on getting, you know, GGR up in a quarter, which is seasonally weak. I hope that continues for the next couple of quarters, as well as years.
Praveen Chowdhury: Thank you. Thanks for taking my question, and congratulations on getting GGR up in a quarter which is seasonally weak. I hope that continues for the next couple of quarters as well as years. My questions are simpler, three questions. The first one is the timing of House of Dancing Water.
Evan Winkler: In terms of specific things, you've probably seen for us. We started out by, you know, flooding the floor for everybody with food and beverage. I think there was probably a period at the beginning of Q2 that, you know, everyone in Macau was at risk of diabetes given the amount of snacks that were being given out on the mass floor. And we've pulled that back and we've now refined our offerings to where we have sort of fewer things on the mass floor and targeting more of our premium players with premium food and beverage offerings and higher quality to sort of drive higher level play into those areas.
Praveen Chowdhury: Personally, I want to go and check it out. The second question is, you had mentioned theoretical...
Speaker Change: Property EBITDA was 89%
Speaker Change: in first quarter. I'm just trying to see should we see that improving over time and what was this in Q2.
Speaker Change: And final question is on employee cost.
Speaker Change: You mentioned your OPEX went from 2.7 to 2.9.
Speaker Change: You mentioned labor cost has gone up by two and a half percent.
Speaker Change: We did not see this OPEX increase in others in Macau. I'm sure everybody had to give two and a half percent increase. So, self-cost seems to be more than just this one-time increase. Can you talk about...
Evan Winkler: And so we've been refining things across the board in terms of where we're putting those promotional dollars. So if I were to characterize what we've done, I don't know that we have been able to reduce significantly the aggregate spending Q2, but I will say that we have refined it. And I think we're getting a better sense on where we get better return on those dollars. And we're going to continue to do that into Q3. I don't necessarily in the near term see it coming down significantly, but I don't see it going up.
Speaker Change: What is different and and how should we find that back in your returns or EBITDA growth or market share growth in the near future? Thank you so much.
Praveen Choudhary: My questions are simpler. There are three: the first one is about the timing of House of Dancing Water.
Speaker Change: Hey Praveen, it's Lawrence. So maybe I'll take the health of dancing water question and then
Evan Kim: I think Evan can elaborate on the employee calls question because he talked about it. He talked about it on the previous call in Q1. So for House of Dancing Water, it's not just a return of the old show. I think we are adding some new elements into it.
Evan Winkler: God, that's very helpful. If I may follow up on, you know, your opax, you guys are obviously adding a lot of very, you know, exciting things to CDO dreams to fulfill, you know, the best service for your guests. So it's hoping you could comment on your opax expectations. Have we seen the peak of opax or should we, you know, consider that there's, you know, additional investment that you're going to do in opax, you know, as these new amenities are opening. And if you could also comment on, you know, the cost of the CDCD residences and, you know, how long does that going to extend into the second half of the year.
Evan Kim: You know by next year will be close to 15 years since we first opened it So there's been some advancement in technology, so if anything House of Dancing Water the grand reopening We want it to be a real spectacle
Praveen Choudhary: Personally, I want to go and check it out. The second question is, as you mentioned theoretically, Property EBITDA was 89% in the first quarter. I'm just trying to see whether we should see that improving over time and what it was in Q2. And the final question is on employee cost. You mentioned your OPEX went from 2.7 to 2.9. You mentioned labor costs have gone up by two and a half percent. We did not see this OPEX increase in others in Macau. I'm sure everybody had to give a two and a half percent increase.
Praveen Choudhary: So, soft cost seems to be more than just this one-time increase. Can you talk about what is different and how should we find that back in your returns or EBITDA growth or market share growth in the near future? Thank you so much. Hey Praveen, it's Lauren, so maybe I'll take the House of Dancing Water question and then I think Evan can elaborate on the employee calls question because he talked about it, he talked about it on the previous call in Q1, so for House of Dancing Water, it's not just a return of the old show, I think we are adding some new elements into it and... You know, by next year will be close to 15 years since we first opened it.
Praveen Choudhary: So there's been some advancement in technology. So if anything, House of Dancing Water, the grand reopening, we want it to be a real spectacle. So we're still targeting, you know, hoping for the end of the year. But given how it's a technologically heavy show with a lot of machinery.
Speaker Change: So we're still targeting, you know, hoping for end of the year, but given how, you know, it's a
Speaker Change: technologically heavy show with a lot of machinery. I think we are having some difficulties with some of the machinery. So I think potentially it will probably open in Q1. And at the same time, I don't want to...
Lawrence Ho: You know, I think we are having some difficulties with some of the machinery. So I think, potentially, it will probably open in Q1. And at the same time, I don't want to. Because there's a grand reopening, I don't want to eliminate certain acts from it at the beginning.
Jeff Davis: Thank you. So. So, let me start with the overall costs when we look at both SC and City of Dreams over the last several months. We've done a pretty significant ratchet up in terms of product and service. And I would say that the lion's share of that has been done. I wouldn't say that there's nothing left but I think we're into the late innings in terms of doing that. And now it is refining, training, making sure that all of our new colleagues and new members of the Melco family are delivering the kind of service that guests have come to expect from Melco and that it's leading the market.
Lawrence Ho: So I want to make sure that everything is available from day one. So we're very excited about it. House of Dancing Water traditionally has given us, you know, thousands of people in traffic, additional traffic to City of Dreams, Macau. And, you know, it's always been an icon of the Tourism Office of Macau.
Speaker Change: Because it's a grand reopening, I don't want to eliminate like certain acts from it at the beginning So I want to make sure that everything is available from day one. So we're very excited about it House of Dancing Water traditionally has
Speaker Change: giving us thousands of people of traffic, additional traffic to City of Dreams, Macau.
Speaker Change: and you know it's always been a icon of the tourism office of Macau so we're excited about that I think and maybe just to supplement and to reiterate for a prior call the impact of OPEX per day will be about 0.1
Lawrence Ho: So we're excited about that. I think, and maybe just to supplement and to reiterate for a prior call, the impact of OPEX per day will be about 0.1. As that show comes online and becomes part of our recurring fixed cost, Sponsored American Deposit Receipt Repr 3, I think, Evan, you talked about it on the Q1 call. Sir, so I apologize. The OPEX number or the drift up is not just the 2.5% which we agree is consistent.
Jeff Davis: And so while I could see them continuing to trickle up a little bit, I think the mass majority of that is behind us. There are some distinct there from, so for example, House of Dancing Water at City of Dreams will be its own cost line item. That's obviously going to raise costs as we go into next year when the show reopens. I will say I think we're less worried about that because obviously the show in and of itself has always been an even positive element for the company, so not just a significant traffic driver into the property but also profit making in its own right and so not as concern there.
Speaker Change: as that show comes online and becomes part of our recurring fixed cost base.
Evan Winkler: Sponsored American Deposit Receipt Repr 3, We were just trying to make sure that the bulk of that is really incremental FTEs, and those are FTEs across the board, meaning we've added a huge number of people, mainly Hotel F&B on the service side.
Speaker Change: For more information visit www.FEMA.gov
Speaker Change: and on the Op-Ex. Oh, on the Op-Ex!
Speaker Change: Evan, you talked about it on the Q1 call.
Evan Kim: Sure, so I apologize for the confusion here. The OPEX number or the drift up is not just the 2.5%, which we agree is.
Evan Winkler: Sponsored American Deposit Receipt Repr 3, Shs Sponsored American Deposit Receipt Repr 3 We have the right product, so we can drive customer traffic against the new floor set, and so, It really is the ramp up that we talked about in Q1 in terms of product. I think our hope and expectation is that we'll start seeing dividends in that in the near term, as we are, Sponsored American Deposit Receipt Repr 3, Driving for Metal Rift. Excellent Thank you so much. I have one more question for Lawrence, if you're okay with that. It's related to Thailand. It sounds like it's moving very, very fast.
Evan Kim: consistent with raises that were given by other operators throughout the market. We were just trying to make sure that people understood it was inclusive of the raises that we gave. But the bulk of that is really incremental FTEs, and those are FTEs across the board, meaning we've added a huge number of people in.
Jeff Davis: On the residencies in terms of when they will they extend for one more year in terms of from a financial standpoint, when they're being stopped being booked in this year, I might defer over to Jeff. I don't know on the top of my head on on how the accounting of that is is going to play out for the next couple of quarters. I don't know Jeff, if that's one you can comment on.
Evan Kim: Hotel F&B on the service side.
Evan Kim: We've added servers and people to serve as gaming guests. We've added more dealers to get more opening hours to drive.
Evan Kim: what will hopefully be increased incremental revenues on the gaming floor to make sure that we have the right parts of the floor open throughout the day so we can drive customer traffic against the new floor set.
Jeff Davis: Yeah, happy to take that. So if we think about the cost of the residency shows in the second quarter, that was about point two. So with the 2.9 that we talked about, the gross number I suppose is more like 3.1.
Evan Kim: And so it really is the ramp up that we talked about in Q1 in terms of product and service in getting to where we want to be. I think our hope and expectation is that we'd start seeing dividends in that.
Jeff Davis: We're looking for the residency daily off X impact in the third quarter to be more like 0.15 and then zero in the fourth quarter. So on an apples to apples basis with the 2.9 that we referenced in the second quarter of 2024, we think over the second half of 2024, we might see that drift up to something more like 3.0 by year ahead. So as Evan said, we saw the stair step that we telegraphed for the second quarter and then fairly modest incremental expense going into the second half of the year up to 3. Perfect.
Evan Kim: in the near term, that we're, as we're getting our service and our product exactly where we want it to be, that it's gonna be felt by our guests and we're gonna get higher return rates, better quality of guests, drive incremental revenues, all the things that you would hope to do by improving product and service.
Lawrence Ho: Excellent. Thank you so much. I have one more question for Lawrence, if you're okay with that. It's related to Thailand. It sounds like it's moving very, very fast. But you have businesses in a lot of geographies. Should we assume that you will continue to still...
Lawrence Ho: But you have businesses in a lot of geographies. Should we assume that you will continue to go into Thailand and make your headway there as well? And if that's the case, how do you fund these things, et cetera?
Unknown Executive: Thank you so much for taking my questions.
Speaker Change: Go into Thailand and make your headway there as well. And if that's the case, how do you fund these things, etc.? Thank you.
Joe Greff: We are not going to proceed with our next question. A question has come from the line of Joe Greff from J.P. Morgan, please ask a question.
Lawrence Ho: Thank you. Praveen, Thailand is a generational opportunity and based on our experience with Japan and some of the other jurisdictions, these things take time and yes it's progressed very quickly at the Thailand level but again I'm sure over time with all the bidding it will still be a year or so away so I don't think it's counteracts our debt reduction priority so I think we'll continue to of course anybody would be interested in in such an amazing opportunity and we are looking at it but I honestly don't think there's going to be any meaningful amount of money spent on that in the foreseeable future.
Lawrence Ho: Hey Praveen, so you know Thailand is a generational opportunity and you know based on our experience with you know Japan and some of the other jurisdictions these things take time.
Lawrence Ho: Hello everybody. Lawrence, how are things in Macau like retail sales performing? It looks like at least a city of dreams, non-gaming revenues as a percentage of GGR fell sequentially. Obviously we're seeing trends in luxury retail sales in greater China, a little bit soft. If you can give us a sense of how things perform later in the QQ and along those lines how it's performing thus far in the 3Q Hey, Hydro, what I think Macau is similar to Hong Kong and the rest of China on a from a retail perspective is still quite weak and you know I think fortunately we have a retail partner in DFS as a city of dreams and at Studio City we've as part of the repositioning into a premium family, family, integrated resort.
Speaker Change: Yes, it's progressed very quickly at the Thailand level, but again, I'm sure over time with all the bidding...
Speaker Change: It will still be a year or so away, so I don't think it's...
Speaker Change: you know, it counteracts our, you know, debt reduction priority. So, I think we'll continue to, of course, anybody would be interested in...
Speaker Change: in such an amazing opportunity. And we are looking at it, but I honestly don't think there's going to be any meaningful amount of money spent on that in the foreseeable future.
Lawrence Ho: Very helpful. Thank you very much. We are now going to proceed with our next question. The questions come from the line of George Howe from Citi. Please ask your question. Thanks, guys. I just don't want to add a follow-up to my last visit to see the city.
Speaker Change: Very helpful. Thank you very much.
Operator: I saw some smart tables that haven't been rolled out on the gaming floor, but I didn't see any smart gaming tables at the City of Dreams, which please remind us of your smart table rollout schedule, please. Thank you very much. Sure, George.
Speaker Change: We are now going to proceed with our next question.
Speaker Change: The questions come from the line of George Howe from City. Please ask your question.
George Howe: Thanks, guys. I just want to add a follow-up.
Lawrence Ho: We have filled the retailers with you know more affordable and high volume business and so I think on that front you know Studio City I think if you go to Studio City on any day now it's just jam packed with people. Which helps with where we want to take the positioning of the property for city of dreams where the high end retailers the luxury retailers are it has been solved in line with the rest of China and Hong Kong and so I think naturally everybody is hoping for the Chinese economy to recover because ultimately the long term success of any businesses in the greater China area.
George Howe: On my last visit to Studio City, I saw some smart tables haven't been rolled out at the Gaming Floor, but I didn't see any smart gaming tables at the City of Dreams. Would you please remind us your smart table rollout schedule, please? Thank you very much.
Lawrence Ho: You know, I think we have 30 tables on the floor at Studio City, which is kind of in line with two of our other competitors in terms of the pace of the rollout of the tables. I think contractually we will get all the tables at Studio City, 215 of them by the end of October, and I think contractually by the end of March, we'll get all the tables at City of Dreams as well.
Speaker Change: Sure, George. I think we have 30 tables on the floor at Studio City, which is kind of in line with two of our other competitors in terms of the pace of rollout of the tables.
Speaker Change: I think contractually we are...
Speaker Change: We will get all the tables at Studio City, 215 of them, by the end of October. And I think contractually, by the end of March, we'll get all the tables at City of Dreams as well. So I think that's the current rollout schedule.
Lawrence Ho: So I think that's the current rollout schedule. Sponsored American Deposit Receipt Repr 3, is so they've been on the floor for a number of weeks. If you guys have been following Sponsored American Deposit Receipt Repr 3, it starts by different people doing their adoption. So we wanted to be a little bit prudent as we were rolling.
Lawrence Ho: It depends on the health of the Chinese economy you know I think fortunately for Macau you know Macau has its unique advantages compared to you know Hong Kong or say Hainan Island for that for that matter so again you know I guess you know let's everybody is hoping for the Chinese economy to recover quickly.
Geoff Davis: Sponsored American Deposit Receipt Repr 3, Shs Sponsored American Deposit Receipt Repr 3 are rolled out, given what we're seeing from a system standpoint and the initial baby, all of which, Yeah, this is Geoff. The only thing I'd add to that is the gap between delivery and becoming operational is about one month, so roughly November timeframe to have those 215. Sponsored American Deposit Receipt Repr 3, We have no further questions at this time.
Speaker Change: And the only thing I'd add, Lawrence, is again, we sort of wanted to see how these are, so they've been on the floor for a number of weeks.
Speaker Change: If you guys have been following sort of the rollout of smart tables there
Speaker Change: Obviously, there have been some bits and starts by different people doing their adoption, so we wanted to be a little bit prudent as we were rolling it out. At least so far, knock on wood, things have been going very, very well, so I think we feel very good about where we are and being able to continue our rollout.
Jeff Davis: Great and Jeff can you remind us of your cat backs for the balance of this year and he could disclose that by geography that would be helpful. Yeah so the total Joe for the remainder of the years about 255 million that will bring us to all part of around 340 by region for Macau I'd say we've got on the order of 170 million left to go in Macau. Fairly de minimis across the other areas but about 11 million for corporate 25 million for Manila 12 million for Cyprus and then some the remainder of that would be some of our project cat backs with tail amounts on studio city phase 2 Cyprus as well as about 32 million. For Sri Lanka.
Unknown Executive: Thank you.
Speaker Change: given what we're seeing from a system standpoint and the initial 30, all of which have continued to be open since the day we turned them on.
Speaker Change: [inaudible]
Geoff Davis: I will now hand back to Ms. Jeanny Kim for closing remarks. Thank you for participating in the call today, and we look forward to speaking with you again next quarter. Thank you. This concludes this conference call. Thank you all for participating. You may now disconnect.
Speaker Change: [inaudible]
Speaker Change: We have no further questions at this time. I will now hand back to Ms. Jeanny Kim for closing remarks.
Jeanny Kim: Thank you for participating in the call today and we look forward to speaking with you again next quarter. Thank you.
John Decree: Thank you we are now going to proceed with our next question. The questions come from the line of John Decree from CBRE please ask a question. Hi good evening everyone thanks for taking my questions.
Lawrence Ho: Maybe one to start at a high level capital allocation. I think, you know, Lawrence Jeff, you've been pretty clear that the leveraging has been the key priority, but you know, we kind of look at where valuation of the equity is, you know, it looks quite compelling and attractive to us. I imagine the same for you. So, you know, curious, if you've given much thought or if Sherry purchases or I know in the past, you know, in these calls, we've talked a little bit about resuming the dividend at some point.
Lawrence Ho: And so, you're curious to get your high level thoughts on capital allocation at this point. Hey, hi, John. Maybe I'll get Jeff to elaborate. But later, obviously, our number one objective is still debt reduction and the delivering in the prepared remarks. As you can hear, you know, we've done a lot of work, you know, great work from Jeff and the team on that basis over the last 12 months. And we've extended some maturities as well.
Lawrence Ho: So, I think our balance sheet is in much better shape today than, you know, coming out of the pandemic. We're not quite down to the pre-COVID levels yet. Those are levels that we would be more comfortable with, but talking about our share price and valuation. Yeah, it is shocking, you know, in terms of, you know, the fact that, you know, we're well beyond COVID when we were zero revenue. And we're close to those levels.
Lawrence Ho: So, I think we're looking at it very, very closely and it's extremely, you know, tempting seeing these share prices because it just makes no sense at this stage. I think, you know, on a relative basis, you know, studio city is, you know, a lot more valuable and then MLCO and, you know, Malcolm International, the holding company is trading at a 50% premium to MLCO as well. So, I think all and all, you know, it is a very interesting days and we're really looking at it closely.
Lawrence Ho: I don't know if Jeff, if you have any. I suppose really just to reiterate the point that we see tremendous value in the shares, you know, we will maintain our discipline in addressing debt reduction. But at these levels, it's very tempting and I think you'll probably see us divert some small percentage of our free cash towards some share repurchase at these, you know, kind of severely discounted levels from a valuation perspective.
Lawrence Ho: Yeah, thanks Lawrence and Jeff feel certainly appreciate those comments and your prudence of the leveraging and then we agree entirely. You know, maybe a fundamental follow up quickly on. I talked about some headwinds there. There's obviously a lot of a lot of stuff going on in that market. I was wondering if you could maybe help synthesize kind of what, you know, what you're, what you're facing and the pogo's are closing and, you know, curious, the economic picture and maybe you're just outlook or high level view on on vanilla would be helpful and that's off for me.
Lawrence Ho: I appreciate it. Hey, John, I think I'll hand it off to Jeff Andres because I don't want to feel a thunder, but vanilla has been a fantastic cash cow for us over the years. I think next year is going to be our 10th year, but hey Jeff, you want to talk about the highlights of vanilla. Thank you, Lawrence. And thank you, John, for the question. Manila is a pretty interesting marker right now.
Lawrence Ho: You mentioned the Pogo has been fairly controversial with the government of the Philippines and the President recently announced that the Pogo's need to be phased out and they will be phased out by the end of this year. And there's been a little bit of, from the headwind standpoint, there's some increased supply in the market. And so that's especially what the, if you're familiar with the geography of Manila, up north, it takes a good hour to drive down.
Lawrence Ho: And so some of that increased supply being up there, we're seeing a small diversion of some of the trips from guests. But overall, I still remain very optimistic about Manila and the Philippines, strong mass business. And of course, increase international capacity and increase commitment to tourism from the government. I think we'll benefit as well into the future.
Jeff Davis: Great.
Unknown Executive: Thanks, everyone.
Praveen Choudhary: We are not going to proceed with our next question. The questions come from the line of Praveen Childery from Morgan Stanley. Please ask a question.
Praveen Choudhary: Thank you. Thanks for taking my question. And congratulations on getting, you know, GGR up in a quarter, which is seemingly weak. I hope that continues for the next couple of quarters, as well as yours. My questions are simpler. Three questions. The first one is the timing of house of Downsing Water. Personally, I want to go and check it out. The second question is, you had mentioned theoretical property, a bit, was 89% in first quarter.
Praveen Choudhary: I'm just trying to see, should we see that improving over time and what was this in Q2? And final question is on employee cost. You mentioned your OPEX meant from 2.7 to 2.9. You mentioned labor cost has gone up by 2.5%. We did not see this OPEX increase in others in Macau. I'm sure everybody had to give 2.5% increase. So, Sofka seems to be more than just this one time increase. Can you talk about what is different and how should we find that back in your returns or every dog growth or market share growth in the near future?
Lawrence Ho: Thank you so much. Hey, Praveen, it's Lauren. So, maybe I'll take the house of Downsing Water question. And then I think Evan can elaborate on the employee cost question because he talked about it. He talked about it on the previous call in Q1. So, for House of Downsing Water, it's not just a return of the old show. I think we are adding some new elements into it and by next year will be close to 15 years since we first opened it.
Lawrence Ho: So, there's been some advancement in technology. So, if anything, House of Downsing Water, the grand reopening we wanted to be a real spectacle. So, we're still targeting, you know, hoping for end of the year, but given how, you know, it's a... Technologically heavy show with a lot of machinery. I think we are having some difficulties with some of the machinery. So I think potentially it will probably open in Q1 and at the same time I don't want to because it's a grand reopening.
Lawrence Ho: I don't want to eliminate certain acts from it at the beginning. So I want to make sure that everything is available from day one. So we're very excited about it. House of Dance and Water traditionally has given us thousands of people of traffic, additional traffic to City of Dreams, Macau. And it's always been an icon of the tourism office of Macau. So we're excited about that. I think, and maybe just to supplement and to reiterate for a prior call, the impact of OpEx per day will be about 0.1 as that show comes online and becomes part of our recurring fixed cost base.
Lawrence Ho: And then on the OpEx. Oh, on the OpEx. I think Evan, you talked about it on the Q1 call. Sure. So I, and I apologize for the confusion here. The OpEx number or the drift up is not just the 2.5% which we agree is consistent with races that were given by other operators throughout the market. But we were just trying to make sure that people understood it was inclusive of the races that we gave.
Lawrence Ho: But the bulk of that is really incremental FTEs. And those are FTEs across the board, meaning we've added a huge number of people in hotel F&B on the service side. We've added servers and people to service gaming guests. We've added more dealers to get more opening hours to drive what will hopefully be increased incremental revenues on the gaming floor to make sure that we have the right parts of the floor open throughout the day so we can drive customer traffic against the new floor set.
Lawrence Ho: And so it really is the ramp up that we talked about in Q1 in terms of product and service in getting to where we want to be. I think our hope and expectation is that we'd start seeing dividends in that in the near term that were, as we're getting our service and our product exactly where we want it to be that it's going to be felt by our guests. And we're going to get higher return rates, better quality of gas driving for mental revenues, all the things that you would hope to do by improving product and service.
Lawrence Ho: Excellent. Thank you so much. I have one more question for Lawrence if you if you're okay with that. It's related to Thailand. It sounds like it's moving very, very fast. But you have businesses in a lot of geographies. Should I should be assumed that you will continue to still go into Thailand and make your headway there as well. And if that's the case, how do you fund these things, etc. Thank you.
Lawrence Ho: So Thailand is a generational opportunity and based on our experience with Japan and some of the other jurisdictions, these things take time. And yes, it's progressed very quickly at the Thailand level, but again, I'm sure over time with all the bidding, it will still be a year or so away. So I don't think it counteracts our debt reduction priority. So I think we'll continue to, of course, anybody would be interested in such an amazing opportunity. And we are looking at it, but I honestly don't think there's going to be any meaningful amount of money spent on that in the foreseeable future.
Unknown Executive: Thank you. Very helpful.
Unknown Executive: Thank you very much.
George Owl: We are now going to proceed with our next question. The questions come from the line of George from City. Please ask a question. Thanks, guys. I just don't want to add a follow-up.
Lawrence Ho: On my last visit to Tuesday's city, I saw some smart tables having haven't been rolled out at the gaming floor, but I didn't see any smart gaming tables at the City of Dreams. Would you please remind us your smart table rollout schedule? Please, thank you very much. Sure, George. You know, I think we have 30 tables on the floor at Studio City, which is kind of in line with two of our other competitors in terms of the pace of rollout or the tables.
Lawrence Ho: I think contractually we will get all the tables at Studio City, 215 of them by the end of October, and I think contractually by the end of March, we'll get all the tables at City of Dreams as well. So I think that's the current rollout schedule. And the only thing I want to mention is, again, we sort of wanted to see how these are. So they've been on the floor for a number of weeks.
Lawrence Ho: If you guys have been following sort of the rollout of smart tables, there obviously have been some fits and starts by different people doing their adoption. So we wanted to be a little bit prudent as we were rolling it out. At least so far, knock on wood, things have been going very, very well. So I think we feel very good about where we are and being able to continue our rollout. Given what we're seeing from a system standpoint and the initial show, all of which have continued to be open since the day we turned them on. Yeah, this is Jeff. The only thing I'd add to that is the gap between delivery and becoming operational is about one month. So roughly November time frame to have those 215 tables live on the site.
Jeanny Kim: We have no further questions on this panel when I hand back to me. Jenny Kim is refusing remarks.
Unknown Executive: Thank you for participating in the call today and we look forward to speaking with you again next quarter. Thank you.
Unknown Executive: This concludes this conference call. Thank you all for participating. You may now disconnect your lines. Thank you. You