Q2 2025 Melco Resorts & Entertainment Ltd Earnings Call
Nicole 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. Janie, Kim Senior Vice President Group Treasurer of Melco resorts and Entertainment limited.
Thank you operator, and thank you everyone for joining us today for our second quarter 2025 earnings call on the call are Lawrence Ho, Geoff Davis, Evan Winkler, and our property presidents in Macau and Manila in Cyprus before.
Before we get started please note that today's discussion may contain forward looking statements made under the safe Harbor provision of federal Securities laws. Our actual results could differ from our anticipated results. In addition, we may discuss non-GAAP measures a definition and reconciliation of each of these measures to the most comparable GAAP financial measures are included in the earnings release.
Finally, please note that our supplementary earnings slides are posted on our Investor Relations website with that I'll now turn the call over to Mr. Longfellow.
Jamie and thank you all for joining us today.
We achieved a strong set of results for the second quarter of 2025 in Macau.
Macau property EBITDA grew by 35% year over year, and 13% quarter to quarter.
Gaming volumes and revenues were up with mass table games revenue at both city of Dreams and studio city, reaching all time highs.
Opex was further refine leading to increased margins, while sustaining our market share in a very competitive environment.
House of dancing water reopened in may with a refreshed storyline and enhanced visuals, incorporating a variety of new technologies.
We've had great feedback with occupancy of the theater at an average of around 98% since the opening contributing.
Contributing to growing non gaming revenue and visitation into Macau.
Visitation to Macao increased 31% year on year over the second quarter.
Average daily property visitation to our Macao properties has continued to grow reaching record levels in July.
We are continuing to work on a number of additional initiatives in Macau to drive traffic and revenue.
We have started the renovation of the main entrance to city of dreams, which will increase visibility and accessibility to the property.
We are finalizing plans for the full renovation of the Countdown Hotel, which we currently plan to open in the second and the third quarter of 2026.
The hotel will be newly branded with approximately 150 high end luxury suites and in average room size in excess of 1000 square feet.
We believe the concept we have for this hotel will bring a one of our client experience to Macau and add to the high end luxury hotel portfolio that we have at city of dreams.
Additionally, we continue to implement enhancements in our gaming areas across our Macao properties to broaden our service and product offerings and elevate the gaming experience for our premium mass customers.
In the Philippines, the heightened competitive environment continue to impact performance in the second quarter of 2025.
In response, we have implemented various cost reduction initiatives, including.
Including rationalization of our patron reinvestment in marketing expenses.
We are already seeing the results of these initiatives with higher profitability, along with a recovery in gaming revenue in July.
The strategic review that we have had previously announced is continuing and we will provide updates when we are able to do so.
And fight for a city of dreams Mediterranean and the satellite casinos were impacted by the Iran. Israel War in June.
However, recovery has been faster than expected and <unk> has now surpassed pre <unk> levels.
On our foreign bookings for the remainder of the summer we're cautiously optimistic that the property can deliver strong results over the remainder of the peak season.
And finally, we're very excited to open city of Dreams for Lanka Tomorrow August one.
City of Dreams for Lanka as the first integrated resort in Sri Lanka, and in South Asia catering to the premium segment of the Indian customer base.
We look forward to the new <unk> new opportunities that this brings with that I'll turn the call over to Jeff.
Thanks Laurence.
Our group wide adjusted property EBITDA for the second quarter of 2025 grew 25% year over year to approximately $378 million.
Adjusted for VIP hold our property EBITDA was approximately $354 million.
Favorable win rates at CODI Macao had a positive impact on our property EBITDA by approximately $31 million, while an unfavorable win rate at Cod Manila had a negative impact of approximately $7 million.
In the prior quarter, we had guided that our opex target for Macau was to exit the second quarter at 3 million per day, excluding house of dancing water in the residency concert.
We were able to outperform our earlier expectations and reduced opex down to approximately $3 million per day for the entirety of the second quarter.
Opex for house of dancing water was approximately 0.1 million per day as previously mentioned.
We saw solid flow through in the quarter with an increase in revenue and a reduction in costs. Our Macau property EBITDA margin reached 29, 2% in the second quarter of 2025, the second highest on record.
We are focused on remaining disciplined on cost as our business continues to grow.
Turning to our balance sheet, our liquidity position remains robust we had available liquidity of $2 3 billion with consolidated cash on hand of approximately $1 2 billion as of the end of the second quarter of 2025.
Melco, excluding its operations at studio city, the Philippines in Cyprus accounted for approximately $644 million of the consolidated cash on hand.
We had two bond maturities over the last couple of months.
$1 billion in June at Melco, and $222 million in July at studio City.
<unk> bonds were refinanced with a drawdown from its Rcs, while studio city's bonds were refinanced with a combination of a drawdown from its rcs and approximately $50 million of available cash.
The Rcs were drawn in Hong Kong dollars, given todays low high bar rates.
We locked in these rates with interest rate swaps, allowing us to refinance at lower interest rates than the bonds that matured.
We expect to pay down more debt over the second half of $2025 with free cash flow from operations.
Over April and May we repurchased approximately $120 million of Melco shares taking advantage of the unique opportunity that the dislocation in the equity markets provided at the time.
The average price of the repurchase shares in the second quarter was approximately $5 per avs.
We have always placed priority on increasing shareholder value and although our primary objective remains debt reduction we will continue to monitor market conditions as we balance our capital allocation objectives.
And a final note on our balance sheet for reference as announced in June 2025, we will close Grand Dragon Casino and three mocha clubs over the second half of this year.
As a result, we recognized an impairment and goodwill of approximately $56 million in the second quarter. We expect to continue operations of the three remaining mocha clubs subject to the legal and regulatory requirements in Macau.
As we normally do we'll give you some guidance on nonoperating line items for the upcoming third quarter of 2025 total depreciation and amortization expense is expected to be approximately $135 million to $140 million.
Corporate expense is expected to come in at approximately $25 million to $30 million and consolidated net interest expense is expected to be approximately 115 to 120 million. This includes finance liability interest of around $6 million relating to fees payable in relation to the Macau gaming concession and the Cypress gaming license.
And finance lease interest of approximately 5 million relating to city of Dreams Manila.
That concludes our prepared remarks, operator over to you for the Q&A.
If you wish to ask a question. Please press star one on your telephone and wait for your name to be announced.
If you wish to cancel your request please press star two.
If you're on a speakerphone, please pick up the handset.
Jim.
Your first question comes from George Choi from Citi. Please go ahead.
Thank you very much guys and congratulations on a very solid set of results.
Questions if I may.
Firstly.
In your prepared remarks, you said youre going to remodel the countdown Hotel I'm wondering if you guys are doing anything to your gaming floors at <unk> city in the near term.
New supplies by your competitors.
Okay.
Hey, George as Laurence maybe I'll start off and.
I'll hand, it off to Evan and then also dropped him to talk about Vod, but over the loss.
18 months, we've been improving our product and.
Reinvesting in the customer experience.
So that has been very I think it's.
It shows in our results. So I think all of their hard work that we've put in.
In terms of improving that.
As part of the countdown what used to be at 330 room Hotel, we're really taking it down to 150 luxury suites and I think it is going to be a super unique product doesn't exist anywhere in the world.
So we're very excited about that but I think maybe I'll handoff to there's a lot of work being done on the casino floor for us constantly so I think maybe I'll hand, it off to.
There are no attempt to elaborate sure I can lawrence's under I'll start and Tim can obviously join and Theres been a huge amount of work that's already been done this year.
A number of projects that are going to be completed here in this quarter and then throughout the end of the year.
Youll, probably recall, we completed our new high limit slot space, we took our old high limit slot area and we've now converted that over to mass gaming over the last weekend. We took the last remaining section of that high limit slot gaming that we created a unique clubhouse experience for our premium players.
That has three private salons in there, but it also has a golf simulator array simulator Ping Pong pool darts pinball acute box.
Some unique food and beverage offerings.
And really our clubhouse environment for our players to enjoy as part of that premium gave our experience.
In the months ahead, we've got on the main gaming floor, new redemption lounger opening we have a new F&B counter thats going to be opening before Golden week, we have carpet being replaced throughout COPD, we have new column treatments going throughout <unk>.
<unk> been by our property you've seen that we've taken down the fountain and stairs on the south entrance, that's now going to be a new entry experience.
To allow much easier access into the property and much greater visibility into the property.
And so we also have a number of new F&B concepts that we're going to be adding throughout the mall. So thats just on CRD.
At studio city.
We recently opened.
New F&B offering for our Star Tower Gala.
To give customers.
Customers are play it's not just for breakfast, but to have an all day dining experience that's been well received.
You probably saw prior to that that we had re lobby remodel bulk lobby spaces. So now the star and celebrity lobbies have both been remodeled.
We opened up a new food and beverage offering that's adjacent to our premium gaming space in the epic tower.
And we're in the next few months is going to get approval to sort of consolidate date all of that into a gaming space. So we're going to create more tables and.
And a real premium customer environment in that.
Unique casino experienced suggest really geared at epic and towards that premium mass.
We've got a number of new F&B concepts spacek copies coming in at the front up studio city.
We opened up Nickelodeon play space.
Got a unique.
<unk>.
Concept.
On health, where Iran will be opening.
Which has a full hospital license, it's going to be doing imaging and medical procedures, which have been requested by a number of our customers. So it is going to be something very unique within Macau.
We've got a new concept coming in on the level two gourmet walk at studio city.
And then if you've been on the studio city floor I think you've also seen that we really popped up the lighting almost everywhere along with new layouts, we've consolidated the LPG gaming space improve.
Improve the flows and improve the lighting throughout.
And then as was alluded to in the prepared remarks, we've got new electronic product in tables that are going to filter through the system here by year end, so youre going to see more product at the different IRS.
So I think I, probably gave the laundry list I don't know, Kevin or Tim will start giving me the thumbs up but I think the short answer is we are <unk>.
Focus on making sure we continue to offer a premium experience to our customers.
Thank you very much guys.
Very long as I'm sure I'll have to spend a lot more along the time. The next time I visited <unk>.
My second question if I can.
Given the July momentum and whatever visibility you might have in August do you expect your whole normalized EBITDA to improve sequentially.
I think the market is doing very well and I think the strength that we saw.
In really in the first half we've had an excellent first half so Q1 Q2.
As.
We see it in Q3, as well and that momentum and I think at the end of the day as the Chinese economy stabilizing and.
People consuming more again and so I think.
It sets us up for a great <unk> I don't know Jeff for oven wanted to elaborate no look I think we feel very good I think we've carried the momentum that we saw in June into July.
I think the market feels good right now.
You've obviously seen some comments from some of our competitors.
Some people are modulating reinvestment right now I think based on where we are with our product and service we feel very good about where we are in very good expense discipline.
If we sort of continue in the way that.
We feel that we can I think we feel very very good about Q3.
Obviously, you don't have a crystal ball, but sitting here today.
Think we all feel good about where we are.
Thank you very much for the color I'll jump back in queue.
Thank you. Your next question comes from Ricardo Chinchilla from Deutsche Bank. Please go ahead.
Hey, guys. Thank you so much for taking the questions and congrats on the strong set of results one of your competitors with maintaining that mid quarter.
Significantly increase reinvestment.
And the B.
We will continue to monitor the market given that the screen some.
Market share declines have you guys seen anything meaningful in terms of the <unk>.
Competitive nature of the market.
Jews business as usual.
Hey, Ricardo as Lawrence I'll, maybe I'll, just answer and then hand it off to other Macao is.
It's always going to be competitive and we see competitors trying to grab share here and there.
I think the most important thing I think the competitor you're referring to is really then have under reinvested in the market previously and now doing it but at the same time, we now call we want to compete on product and services. So I think the what we have done at city of dreams in terms of the luxury experience.
And with the hotels and now have advancing water in the food and beverage.
That stands on its own so we don't necessarily need to match or compete on who has the best deal out there and equally at studio city in terms of the family attractions and other funding attractions.
Again as the differentiated products. So again, we don't have to.
The most aggressive who will give the best deal in the market. So I think that is an area, we'll continue to lean in on.
I don't know.
As Lawrence said it well, obviously, we hear the same statements here hearing.
When one of the large operators makes a statement like that you want to make sure you are monitoring whats going on.
Think where we're sitting here today and what we've been doing over the.
The last month is not any different than what we were doing through Q2.
We continue to titrate our programs, we continue to look at it every week, but we pretty much business as usual.
We're going to continue to look at it.
If a bunch of other people followed suit if something dramatically changed in the market I think we would adjust.
But based on what we're seeing right now.
I think we're continuing with our current strategy.
Got it that's great color my.
My follow up I know that you guys have done a fantastic job with regards to managing expenses.
Particularly in Macau.
Curious if you guys see an opportunity for further.
Limitation of the expense base or you guys, you know given that youre, making some changes.
And the foot traffic.
Feeling comfortable increasing perhaps in the short term a little we'd all of dollars just to provide.
<unk>.
From the consumer.
Being able to close that the mean.
Did you guys referenced before.
This is Jeff So I think.
We put the 3 million per day of Opex I think that is a good number going into the third quarter, but maybe even have some additional color.
I think we feel good about where the expense basis, that's not to say that we don't.
And Kevin are looking to me because obviously, we spend all day everyday looking for.
Ways that we can optimize and improve but I think generally speaking we've done a lot of that work and feel pretty good about where we are.
In terms of what we increase it going forward I think we'd have to feel like we found an opportunity that we could really.
Move market share and generate EBITDA. So I don't have some plan right now where we would increase the expense load going forward I think <unk> is a good number but.
But again, we're always watching the market. If we think there was something that we could do opportunistically I think we'd go to Laurence we wouldn't be afraid to spend money in order to make money, but I think we feel pretty good about where we are right now.
Thank you so much for all the color.
Thank you. Your next question comes from Joe Stauff from Susquehanna. Please go ahead.
Thank you very much.
Maybe just to build on that question about your.
Daily Opex per day.
I hear you on core.
You did better in the quarter.
In terms of the all in number including house dancing water presidencies is there any.
Expectation, maybe in the third quarter to bend.
Or to reduce the two other components, whether it be house of dancing water or residencies within say the all in number above and beyond core.
And then the second question on that is.
You gave.
A very long list of all the new projects that Youre working on certainly makes sense.
Are your defense of on product, but wondering if if that's going to create any construction disruption.
Over the next over the second half of the year.
Sure let me.
I guess on the first one.
In terms of the overall expense number and I'm, assuming you're pointing towards presidencies of house of dancing water.
<unk> of the residency program Thats trailed off.
Erinn had his last show on Monday.
So for that component going forward, we do expect a reduction.
As that program has run off we obviously will continue to have entertainment and concerts next year, but at a reduced level to what we've seen in terms of house of dancing water that number is probably about the right run rate.
So we're starting to get things stabilized we have very good take up of occupancy. So again, it should be an EBITDA contributor but in terms of its portion of the expense base, that's probably not a bad number going forward.
In terms of all of the projects that we're doing on each of the properties.
I, probably gave you a list of ones that have already happened this year and ones that are going to be happening.
Studio City I would say, we're essentially behind all of that.
In terms of <unk>.
We've actually been pretty successful I think if you go to the property on being able to afford zone by zone to minimize any customer disruption.
Even the front entrance it sort of its own separate zone. It is not within the casino property.
So I do think we're able to do it with fairly limited impact.
In terms of our customer experiences we're getting all of these things done. The team has spent a lot of time looking at the pacing of these projects.
So again.
Im not concerned about any disruption that would come from construction over the next three to six months.
I appreciate that.
Is there anything you can share with us maybe at this point.
On the advanced look of sort of August activity.
In Macau.
I mean, it's probably a little early to tell again where that is.
Starts tomorrow.
So.
I think we're hoping that we're going to continue the momentum through but a little bit early for us to maybe making a call on that.
Okay fair enough. Thanks.
Thanks, a lot nice quarter.
Thank you.
Okay.
Thank you. Your next question comes from John Decree from CBRE.
Jonathan Please go ahead.
Hi, everyone.
Well, maybe I'll ask one question on <unk>, which is opening tomorrow congratulations on that.
Laurence can you give us a little bit of how you were thinking about.
Performance there the ramp time to ramp expected returns, obviously, it's a very new product in a new market. So.
A little bit tougher to hone in on any kind of initial thoughts on kind of what youre, hoping or expecting would be helpful.
Hey, John we're very excited about for Lanka.
We have looked at it for a number of years and it is.
That's the first integrated resort in South Asia, and also ensure Lanka.
I think there is going to be definitely a key theme period because they in.
Effectively creating a whole new industry I think the current players there are.
Really.
Third world type of operators.
So I think it.
It's a whole new paradigm shift so we're very excited about that for us is really opening a.
A new market.
India as well.
And.
So I think were similar to what we did with Cypress, where it's grown into a very nice market in itself. It will take a little bit of time.
But I think we're very excited about it I don't know.
Evan has any more color additional color.
Sure look I think in this market.
Part of what attracted.
Lawrence to the market was the ability to bring really the IR model into a market, where if you you go there and look at what's there it's not just sort of standalone casino product, but its.
Pretty antiquated Standalone casino product with very limited offerings.
And so what we've been able to create their drafting off this amazing property that was built by our partner John <unk> is really a true <unk> experience.
And I think we believe over the.
Medium term to long term, it's going to attract an entirely different customer base to come and experience that market.
We've got a big job, we're looking at a good opening for this weekend, but in terms of the ramp going up there is going to be an education process into that consumer base for them to understand the quality of what's there and why they want to make that trip.
So I do think it's going to be a ramp period before we really see the full potential.
Got it that's exciting thanks, Laurence and even maybe if I can ask one I know there hasn't been too much discussion on this and I appreciate satellite casinos are relatively small.
Piece of the overall business in Macau, but with closures.
You've announced and some others.
How do you kind of think about the market evolving do those kind of customers signed a new a new home.
Any thoughts you have on that change that's coming this year.
Okay I think on for Ross in Macau, we are quite excited about some of the satellite closures because I think it gives it as an opportunity for Europe, because other than the Cotai Mega integrated resort in some of the casinos on Macau.
An inflow.
<unk> will be effectively the only game.
In Python and.
We're closing three moca units as well and so we're equally.
And <unk> about what we can do to optimize our gaming unit.
By moving some of those gaming machine to city of Dreams and studio city.
So I think all in all it will consolidate the business at the remaining casinos in the integrated resorts.
I think some of the satellites on the peninsula side.
We'll see if we could try to draw some of them over to the Python and altera.
Great. Thanks, Laurence I really appreciate the color guys.
Thank you. Your next question comes from digitally and then Keith from Seaport Research Partners. Please go ahead.
Yeah.
Hey, guys I wanted to follow up on the sales of investment discussion.
A bit earlier.
Just looking at the numbers it seems like studio city player reinvestment.
You kind of factor in volume changes et cetera.
CODI numbers.
Excellent.
They came down I think the expectation would be that.
At the high end is driving the growth in Q2.
Very.
At that plant reinvestment as a percentage of assets at a loss.
That seems to have been the case for most of the Costar property the plans and for MGM. Cotai you guys are an outlier and im assuming once we see the other results there'll be outliers as well.
Kevin you talked a little bit about kind of what you guys are doing and how you are trying to differentiate it seems like a very divergent trend that youre seeing in COPD can you maybe elaborate as to what youre doing and player investment that may be different is there a different methodology, you're incorporating is it a different set of player investment initiatives that you have.
That's leading to this because thats a big part of.
You've seen this quarter.
Well again, it's a little hard for us to comment on on how we're doing it relative to others because obviously.
Sitting with their teams.
What I would say is we're trying to utilize our <unk>.
As we're getting better and better data out of Walker and better and better insight into the player.
We're trying to be more strategic in terms of where we're putting those dollars to get the best Bang for our Buck.
And so we're trying to titrate it more carefully.
I think again, we were able to bring it down pretty successfully the market's dynamic we're constantly titrated yet so.
Then it'll bump up and down a little bit.
From where it is.
But I think again were.
We're trying to make sure we're rewarding the right folks who we think are really bringing in the contribution.
And it's hard for me to comment on what we're doing different than the others because I just I don't know exactly how they are apportioning their spend.
Yes, that's fair.
And maybe just a second question.
Just broadly speaking and I know, we touched a little bit on this but broadly speaking.
The strength that we're seeing in June and July.
Largely been coming from our higher end customer base.
What do you think has changed in.
And next to her behavior.
And correct me, if I'm wrong on that maybe you're seeing something different.
Again.
I don't know it depends on where you are cutting to the high end, but we are seeing.
Again, certainly at that middle, but affluent tier good volumes.
I think what Laurence said it probably is a big part of the answer which is a lot of the overhang and concern in China around global economy seems to have dissipated and so people who potentially.
Potentially we're worrying about their own business or worrying about the global economic environment are both feeling a little more confident in a little more excited about traveling and spending again.
We're seeing the benefit of that.
Okay, great. Thanks.
Thank you. Your next question comes from Praveen Choudhary from Morgan Stanley. Please go ahead.
Yes.
Thank you congratulations for very good set of results a couple of questions for me.
The focus is on Opex.
And competitive dynamics there you have already answered all the questions I have two questions one on Philippines, and another on the house of dancing water.
Both her for me catalysts to take it to the next level from your stock price perspective and profitability.
Would you be able to quantify or at least subjectively explain if house of dancing water is actually contributing positively to gaming business I understand you mentioned that it might be EBITDA neutral on a non gaming side.
And is that helping or help to Q2 number in Sydney.
City of dreams. So thats. The first question. The second question on the Philippines. The weakness is all across Philippines is not just yours. So just wanted to understand when does it stop getting worse and then related to that was a transaction that you were working on any.
If you can give us that'll be awesome. Thank you so much.
Hey, Praveen maybe.
I'll answer the first one on household dancing water and then I'll hand, it off to Geoff Andres on Philippines, and Jeff Davis can talk about that transaction.
So I think house of dancing water and maybe evident Tim can add.
<unk> done wonders for us ever since the opening on May seven because the house of dancing water.
He is so closely aligned with city of dreams, So if anything.
<unk> relaunch of house of dancing water was really re launching city of dreams as well and I think since then we have seen record visitation.
Across the board I think now consistently we're getting over 40.
Property visitation and city of dreams. So it certainly has contributed to the success that we saw in Q2 and part of that momentum into Q3 I don't know.
Sure look.
On the days that it's running it brings in.
9800 people twice.
It's 3800 people coming in to the property.
It helps a lot on F&B coverage that helps a lot on the retail environment. It helps in the overall environment. It provides a halo to the property.
It was a positive EBITDA contributor in Q2.
I would say that I think that there is still an opportunity for us to do an improved job on converting those customers into gaming customers.
So.
We get a lot of <unk>.
Mass tourists in general we also know because we have the data that we are getting people who are coming from other properties, who are likely to be gamers.
I'm not as happy with our conversion rate I think we have opportunities. So I don't think it necessarily did a huge amount of gaming revenue in Q2, and I think that's something that we're looking to try and optimize here in the quarters ahead.
So on the on the strategic review.
<unk> said in the prepared remarks, we are still continuing to work through the process with our advisers.
On a short list of potential buyers nothing to announce at the moment, but when there is we'll make the appropriate disclosures and.
Main cost cautiously optimistic.
This opportunistic exploration that there'll be something to do in Manila.
Thanks, Jeff.
I have a question on Philippines business, yes. Thank you.
Yes. This is Jeff Andros Praveen.
The mineral market Youre right. There was some softness that we all experienced in the first half of the year.
As a result of that we've really been taking.
Thoughtful and measured expense initiatives over the last five months that we're starting to see some.
Some of that bear fruit in July.
We've also seen stabilization in the market in July and as well there's been a transition I think in the from the second quarter going into the third quarter on the VIP part of the business. Some junk is transitioning out of the market and we've had signing up some new junkets that we think will be performed at a higher level and.
So we're feeling better going into the second half of the year.
Well. Thank you so much and again hopefully this.
Uptick continues and once again congratulations.
Yes.
Thanks Praveen.
Thank you there are no further questions at this time I'll now hand back to James.
Sure.
Thank you for participating in our call today, we look forward to speaking with you again next quarter. Thank you.
Yes.
Thank you that does conclude our conference for today. Thank you for participating you may now disconnect.