Q3 2025 Melco Resorts & Entertainment Ltd Earnings Call

Speaker #2: Ladies and gentlemen , thank you for participating in the third quarter 2020 Earnings Conference call of Melco Resorts and Entertainment Limited . At this time , all participants are in a listen only mode .

Speaker #2: After the presentation , we will conduct a question and answer session . Today's conference is being recorded . I would now like to turn the call over to Miss Jeannie Kim , Senior Vice President , Group treasurer of Melco Resorts and Entertainment Limited .

Speaker #2: Please go ahead .

Speaker #3: Thank you . Operator . And thank you all for joining us today for our third quarter 2020 earnings call . On the call are Lawrence Ho .

Speaker #3: Geoffrey 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 laws .

Speaker #3: 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 .

Speaker #3: 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 .

Speaker #4: Thank you . Jenny , and thank you all for joining us today . Our properties in Macau delivered solid growth in the third quarter of 2025 , with property EBITDA growing by 21% year over year .

Speaker #4: Despite the negative impact of approximately $12 million due to the typhoon in September . Our momentum in Macau is continuing and we did not see a slowdown in October following the holidays .

Speaker #4: In fact , our Macau Ggr grew over 30% year over year post Golden Week and Cod recorded its highest monthly mass tables ever in October .

Speaker #4: We continue to introduce new initiatives to enhance the quality of engagement with our customers across all segments of our customer base . Base .

Speaker #4: In July , we opened the signature Clubhouse at City of Dreams for a premium mass customers , which includes private gaming salons , hair services , a formula one simulator , and other exclusive amenities to provide a differentiated , differentiated experience .

Speaker #4: In September , we reopened a gaming area featuring 15 gaming tables at City of Dreams near the Grand Hyatt , across from MGM Cotai and Wynn Palace , and just steps away from the Macau Light Rail station .

Speaker #4: This new area has been designed to appeal to walk in crowd with lower table minimums , and we have seen this area well utilized with a steady flow of new patrons .

Speaker #4: As we had announced previously , we closed Grand Dragon Casino in one of our mochas in September . The 15 tables from Grand Dragon were allocated to the new gaming space at Cod and 90 gaming machines from the mocha closure were shifted to Studio City .

Speaker #4: We will close two more mochas before end of the year , and the gaming machines will be reallocated across our three properties in Macau .

Speaker #4: We have started the renovation of the countdown Hotel , which we currently expect to open in the third quarter of 2026 , after completion , this hotel will bring a one of a kind experience to Macau and the region .

Speaker #4: We plan to simultaneously upgrade retail and food and beverage in this precinct of Cod and continue to elevate the quality of our product offerings at Studio City , we unveiled a newly expanded high limit gaming area , along with four new private salons at Epic Tower to provide an even more refined experience for our premium mass customers .

Speaker #4: gaming In October , we relaunched the new Erad Hospital at Studio City , designed to further enhance Macau's tourism infrastructure with top tier healthcare and wellness services in the Philippines .

Speaker #4: Property EBITDA grew 45% quarter over quarter and we have seen good momentum in October . City of dreams , Mediterranean and the satellite casinos in Cyprus had their best quarter yet , with property EBITDA growing 53% year over year to 23 million .

Speaker #4: Despite the escalation of hostilities in the region at the beginning of the quarter , we're now in the shoulder season . But the property is coming into its own and showing solid year over year growth so far in Sri Lanka .

Speaker #4: We opened City of Dreams , Sri Lanka on August 1st as the first integrated resort in Sri Lanka and in South Asia . It is early days as we solidify our footing and continue to ramp up our operations there .

Speaker #4: With that , I turn the call over to Jeff .

Speaker #5: Thank you Lawrence . Our group wide adjusted property EBITDA for the third quarter of 2025 grew 18% year over year to approximately 380 million .

Speaker #5: Adjusted for VIP hold . Our property EBITDA was approximately 355 million . Favorable win rates at Cod , Macau and Cod Manila had positive impacts on our property .

Speaker #5: EBITDA by approximately 23,000,002 million , respectively . We continue to remain focused on operational discipline and our OpEx in Macau remained stable this quarter at approximately 3 million per day , excluding House of Dancing Water and the residency concerts .

Speaker #5: OpEx for House of Dancing Water was approximately 100,000 per day . As previously mentioned , our Macau Property EBITDA margin held steady at approximately 29% in the third quarter of 2025 , which reflects our disciplined approach on costs as we drive sustained business growth .

Speaker #5: Turning to our balance sheet , our liquidity position remains robust . We had available liquidity of 2.6 billion with consolidated cash on hand of approximately 1.6 billion as of the end of the third quarter of 2025 .

Speaker #5: Melco , excluding its operations at Studio City , the Philippines , Cyprus and Sri Lanka , accounted for approximately 1.05 billion of the consolidated cash on hand .

Speaker #5: There was a quarter over quarter increase in Melco's cash balance of approximately 360 million , which was largely due to the timing of the 500 million in bonds that we issued in September .

Speaker #5: As of the end of September , we had approximately 358 million of the bond proceeds remaining net of 142 million , which had been used to settle a tender offer on the senior notes due 2026 .

Speaker #5: In October , the remaining proceeds of the new bond were utilized to early redeem all of the outstanding senior notes due 2026 , which had not been tendered .

Speaker #5: Following this exercise , the group does not have any material amount of debt maturing in 2026 . We continue to reduce debt in the third quarter with a total of 180 million being repaid , 70 million at Melco and 110 million at Studio City .

Speaker #5: We repaid a further 180 million at Melco in October and November . In October , we also cancelled 18.5 million of the approximately 32 million ads that were repurchased earlier this year , at an average price of $5.10 per ADSs .

Speaker #5: As we normally do . We'll give you some guidance on non-operating line items for the upcoming fourth quarter of 2025 . Total depreciation and amortization expense is expected to be approximately 135 to 140 million .

Speaker #5: Corporate expense is expected to come in at approximately 25 to 30 million , and consolidated net interest expense is expected to be approximately 115 to 120 million .

Speaker #5: This includes finance liability , interest of around 6 million relating to fees payable in relation to the Macau Gaming concession and the Cyprus Gaming License , and Finance lease interest of approximately 5 million relating to City of Dreams , Manila .

Speaker #5: That concludes our prepared remarks . Operator , back to you for the Q&A .

Speaker #2: Thank you . If you wish to ask a question , please press star One on your telephone and wait for your name to be announced .

Speaker #2: If you wish to cancel your request , please press star two . If you are on a speakerphone , please pick up the handset to ask your question .

Speaker #2: Your first question comes from George Choi with Citi . Please go ahead .

Speaker #6: Hi . Thank you very much for taking my questions . So you guys have introduced new sites as just like everyone else does in Macau to your backyard operations over the last year or so .

Speaker #6: What do say that they contributed positively to your recent Ebit , EBITDA growth ? And would you be raising your theoretical hurdle rate in time soon ?

Speaker #6: And that's my first question . My second question is housekeeping one . Would you please remind me the CapEx required for the renovation of the hotel ?

Speaker #6: Thank you very much .

Speaker #4: Sorry , George . It's Lawrence . So your first question was on the Theo hote rate for VIP .

Speaker #6: Or perhaps , you know , mass hole rate trends that you are looking for .

Speaker #5: Sure . So again . the only one that we sort of published something on and we adjust to is obviously on the , on the rolling business where we have a target of 3% based on what we're looking at from a data standpoint .

Speaker #5: And again, we continue to watch it. That number sitting here today is still a good number in terms of that business constituency.

Speaker #5: And in terms of sort of the betting mix of those players . And I understand this varies some market by market . So there's some noise in the market about other markets raising that up substantially .

Speaker #5: But yet today we haven't yet seen a strong enough basis for us to adjust . But we're continuing to look at it in terms of our mass business .

Speaker #5: Obviously , as we've added more , it's been a positive uplift . I don't know that it's dramatic because we've gone from , you know , sort of the the widely adopted on the on the banker six to the sevens bets .

Speaker #5: We are seeing a lift up , but I'm not sure that that's a massive driver . As we sit here today . But obviously it is improving as we're giving more options to our players in terms of our overall percentages .

Speaker #5: And on the CapEx question for the countdown , that's about 125 million .

Speaker #6: Thank you very much .

Speaker #2: Thank you . Our next question comes from the line of Louis Ricardo Chinchilla Vargas . Please go ahead .

Speaker #7: Hey , guys . Thank you so much for taking my questions . I wanted to start asking about , you know , the operating environment in terms of promotions .

Speaker #7: Have you guys seen any uptick or anything meaningful to on , you know , on that front ?

Speaker #4: Well , Macau is always going to be very dynamic . And every day you're looking at , you know , how to compete .

Speaker #4: But I think I can say that I'm very proud of the team because , you know , throughout 2025 we've really held the line on reinvestment and , you know , even this quarter , you know , we've you know , we keep track of the share shift on a daily basis , or weekly basis .

Speaker #4: And , you know , we're seeing some of that . But , you know , I think we've really held the line for throughout 2025 .

Speaker #4: And we will continue to observe it . And maybe I'll let Evan elaborate a bit more . But I think the environment is certainly I would say is competitive .

Speaker #4: But stable .

Speaker #5: I think that's fair . Again , you probably seen some statements by some , you know , competitors talking about being , you know , more or less aggressive on certain programs .

Speaker #5: We sort of look by program , by player segment and are evaluating constantly in terms of what we're doing in Q3 , while we're always tweaking and trying to optimize .

Speaker #5: We didn't see a big shift upward . Again , there's probably if you look program by program areas that we're going to look to tweak up and others that we're going to look to tweak down .

Speaker #5: We'll continue to monitor and respond to the competitive environment , but I think Lawrence said it well , it's it's very competitive . But at least right now it's not irrationally competitive .

Speaker #7: Fantastic . That's great color . For my second question , I was hoping if you guys could give us some CapEx guidance for next year , even though it might be early and you guys are still finalizing the budget .

Speaker #5: You're right . We're in the midst of reviewing and finalizing and approving that . That budget . But as a placeholder for now , I think 400 for 2026 is a good number .

Speaker #7: Wonderful . Thank you so much for taking my questions .

Speaker #4: Thank you .

Speaker #2: Thank you . Our next question comes from the line of John Decree with CBRE Capital Advisors . Please go ahead .

Speaker #8: Hi everyone . Thanks for taking my question , Lawrence . I apologize if I if I missed any prepared remarks . I dialed in a couple of minutes late , but did you provide any color on Golden Week ?

Speaker #8: And if so , I could get it offline , not make you repeat yourself , but interested in kind of what you guys see kind of pre and post around the around the seasonality and the shoulder periods .

Speaker #8: Maybe relative to what you'd expect several years ago or how strong are the peaks and how consistent is visitation on property kind of leading up into Golden Week , which I think typically be , you know , a little slower and then have you seen any signs of slowdown after .

Speaker #4: Hey , hey , John , I think , you know , on Golden Week , the whole market was a bit disappointed because we were unlucky with there was a typhoon on I think day four .

Speaker #4: And then , you know , Mid-Autumn Festival was effectively day six . And for Mid-Autumn Festival , most people go back to their families and stuff .

Speaker #4: And so I think the whole market was quite disappointed by the first seven days . But throughout October , the last 21 days of October were extremely strong .

Speaker #4: And so I think the traffic that went , you know , that skipped Golden Week or left early for Golden Week clearly came back .

Speaker #4: And so , you know , I think all in all , you know , post Covid October was the best month . And you know , I think for for us as well , you know , I think we've continued to on a year on year basis , you know , kept up with the pace of growth in the market .

Speaker #4: So we're quite pleased . I don't know , maybe Evan has more .

Speaker #5: No , I think that Lawrence is spot on . We coming out of Golden Week ? I think we all felt like it was a little soft and we were a little unlucky on the calendar .

Speaker #5: And we were definitely unlucky on the weather . And then you normally get more of a drop off and it just sort of continued to stay strong and there was good tales going through October .

Speaker #5: So sitting here now , we look back and we're like , actually October feels very good . I mean , we feel really good , but we didn't feel great immediately coming out of Golden Week .

Speaker #5: It was soft , but , you know , unusually , and I as Lawrence said , I can't tell you if all the people who put off trips came back , we can't give you the precise causality of it .

Speaker #5: But we had a very , very strong period following it . Much stronger than we would normally expect .

Speaker #8: Awesome . Evan Lawrence , thank you for that . And maybe a quick one for Jeff on kind of opex per day . I know , kind of maintaining cost discipline has been core to the story .

Speaker #8: You have given us a little cover in the in the past . Any change in kind of opex per day assumptions that you that you could see or could share or kind of steady as it goes .

Speaker #5: Maybe I'll take that . Jeff can add any color he wants , but so we have a few things going on in Q4 .

Speaker #5: We've got the China National Games where there's a fairly big level of support that we're going to be providing that's going to hit the PNL .

Speaker #5: You have the 10th anniversary of Studio City , and we actually have some pretty exciting promotional activity around that . So those are kind of one offs that will be significant drivers in Q4 .

Speaker #5: We also are entering a period where seasonally , we tend to do a bit more promotion , and then also as the concerts or the residencies have dropped off , which are normally excluded , we are having some backfill activity to make sure that we have strong activation .

Speaker #5: And so the net of all those is we're going to we're going to probably spike up here in Q3 . We're probably going to be more like in the three three ish range .

Speaker #5: And we may again , depending on some promotional and other activity that we're looking at , drift a little bit higher , but that should be coming down in in the subsequent quarters .

Speaker #5: I think probably premature to talk about how much , but we are going to see an uptick here in Q4 based on those things .

Speaker #8: Great. I appreciate that color. Thanks, all.

Speaker #2: Thank you . Our next question comes from the line of Joe Stoff with Susquehanna . Please go ahead .

Speaker #9: Thank you . Thank you very much for taking the questions . A couple follow ups just on that opex per day response that you had given .

Speaker #9: 33 all in, including the one times, is the right way to interpret that comment. Correct.

Speaker #5: That that is the baseline . Again , as we're looking at some promotional activity , it's not going to be lower than that .

Speaker #5: There are some things we're contemplating . It could drift a little bit higher . But yes , that's including the one times .

Speaker #9: Got it . I wanted to zoom out .

Speaker #5: For Q4 .

Speaker #10: For Q4 ,

Speaker #9: Q4 , yes , of .

Speaker #10: Course .

Speaker #4: Normal run rate .

Speaker #9: Understood . Understood . I wanted to zoom out . You know , you Cod has been , you know , just a significant improvement in turnaround here over the past one and a half years .

Speaker #9: And , you know , just kind of zooming out and thinking about the strategic initiatives and investments you've made , wondering if you could just maybe like , rank what you think to be the most important investments and strategic initiatives that you've taken and made at Cod to really kind of create this , you know , this impressive turnaround and results , especially year to date .

Speaker #5: Well , you're you're we're all looking around each other . That's sort of one that was unexpected . But I'll give you my take .

Speaker #5: And then maybe Lawrence or Tim or others will chime in . I'm not sure it's one individual thing . I think over the last 18 months , you know , Lawrence has set a mandate that to some degree we need to kind of get our our swagger and market leadership back at Cod on product service .

Speaker #5: And what we're doing . And so we've really done a breakdown on the business from soup to nuts at every position , on every way that we provide service .

Speaker #5: Looking at the customer experience . And then also sort of tying together what the customer experience on , on property . And so I don't have one big thing to point you to .

Speaker #5: It's literally been hundreds of items . And , you know , they're not on the call . But we have mid-level executives across the board that have contributed in big ways and small ways .

Speaker #5: So I've been really happy and proud . On how many different people have contributed in different ways , but it's been , you know , it's been a lot of small steps .

Speaker #5: And then you kind of look back and you've climbed a pretty long way . But I don't know that there's one thing that's been the the silver bullet .

Speaker #9: No , I appreciate that . I know there are a lot of things going on , but , you know , just curious of how you think about it .

Speaker #9: You know , there's always the market dynamic versus , say , the company specific , say , initiatives . And so that's the question .

Speaker #9: And maybe .

Speaker #11: I think , I mean .

Speaker #4: Add to that as well . You know , I think during Covid we were , you know , barely surviving , right ? So and City of Dreams was always our flagship , you know , is where Morpheus knew , you know , Forbes five star and you know , where we have the most Michelin star restaurants .

Speaker #4: And I think for a while during Covid , we just weren't living up to the brand . The brand promise and the brand proposition .

Speaker #4: And , you know , I think with the new team coming on board and Tim in the leadership , I think we've revisited , like Evan said , we've revisited literally every single thing from like the tiniest amenities to much bigger attractions .

Speaker #4: And so I think we are , you know , I think we're , you know , finally post Covid , you know , we've come out of that funk and we're , you know , we've we've rediscovered the swagger .

Speaker #9: Okay . Thank you for that . Just one quick one . Any any update maybe on on the process for strategic options for your Filipino asset .

Speaker #9: You know any any updates or reference points you can give us .

Speaker #5: Sure . This is Jeff . We are approaching the end of the process with our advisors and should have a definitive assessment of our alternatives by the end of this year .

Speaker #5: There's always this has always been an opportunistic exercise that's been driven by the potential for a one off debt reduction event , not any specific desire to exit the Manila market .

Speaker #5: So we have and we'll continue to be very valuation driven on this exercise , and we'll continue to be disciplined in our approach to assessing the offers that we have for this business .

Speaker #5: But we hope to be back by by year end with a definitive answer .

Speaker #9: Great . Thanks a lot .

Speaker #2: Thank you . Our next question comes from the line of Praveen Chaudhuri with Morgan Stanley . Please go ahead .

Speaker #12: Thank you . Hi , Lawrence . Hey , Jeff . Hi . Thank you very much . I think Macau market obviously is doing very well since May of this year .

Speaker #12: Q3 result , being up 13% . October being up 16% . I guess investors are asking literally two questions . So I just wanted to ask you those two questions and see how you want to respond to it .

Speaker #12: One is obviously the margin , which has been talked about where the competitive dynamics remains intense in the reinvestment cost is genuinely pretty high , which is why the margin could have been very high .

Speaker #12: But it's not so . So any thoughts there that it is the bottom of that margin or peak of the reinvestment intensity . But the second question I had was on premium driven business , meaning very small number of people is driving big chunk of the revenue and thus the profit for the Macau business .

Speaker #12: And that is similar to , let's say , VIP driven back in the days , which deserves lower , multiple and so on .

Speaker #12: So the fact that grind mass has been missing , or at least been less available than we would like , is there anything you can talk about or are you seeing any early signs of that changing ?

Speaker #12: That will be great . Sorry for the long winded question .

Speaker #4: Hey Praveen , it's Lawrence , so maybe why don't I start ? I'll hand it off to Evan and see if Jeff wanted to chime in as well .

Speaker #4: You know , I think clearly when the VIP and the junket business went away , we had all hoped that margins would just , you know , rocket , you know , just , you know , go sky high and unfortunately , that hasn't happened .

Speaker #4: And I , you know , I think it's well documented what some of our competitors have done . And so , you know , I think as I mentioned earlier on in the Q&A , I'm very proud of the team because we've really helped align on reinvestment so far for the entirety of 2025 .

Speaker #4: So theoretically , if all six concessionaires can kind of get their acts together , you know , there should be margin expansion , you know , given the , you know , the market is growing .

Speaker #4: And so , you know , on one hand , I think as mentioned , as Evan mentioned earlier , you know , I think we're past peak competitiveness in terms of the intensity in the market .

Speaker #4: But at the same time , I think everybody is still , you know , thinking of ways to to try to steal business and , and grab , share .

Speaker #4: And , you know , I would say as well , you know , I think every time I read a sell side research , everybody just talks about market share .

Speaker #4: So I don't blame some of our competitors for constantly focusing on that rather than being more focused on EBITDA . So , you know , again , you know , I'm think it's as rational as it has been in the last maybe 12 , 18 months .

Speaker #4: But again , you know , I'm pleased with our competitors and also sell side research analysts to maybe place less emphasis on weekly , monthly market shares as well .

Speaker #4: So that we really don't feel like they are pressured to to chase market . I don't know , maybe .

Speaker #5: I guess on the two that you asked from a margin standpoint , agree obviously with Lawrence , that there should be room to accrete upward .

Speaker #5: I'm not sure . Sitting here in the competitive market today , that I , I bank on that one way or another . We could always be surprised .

Speaker #5: But look , right now the market remains competitive . I think the dream for everyone is if everyone competed in a very rational way on product and service , that there should be upside within this market , that I hope we realize .

Speaker #5: And also , I think I , I have a hope that as we continue to get more and more mass business into the market and you get sort of just a better supply demand dynamic in terms of of what's available , that that will continue to improve when the junket business left .

Speaker #5: There's a lot of product and service that they were using that didn't get used . And that's sort of been backfilled by people going after that premium mass business .

Speaker #5: So you're seeing the effects of that from competition . So I , I think margins are stable , but I don't know that there's a near-term catalyst that will do that .

Speaker #5: But I think the overall long term trend is healthy in terms of the premium driven business . I'm not 100% sure if that was going after , you .

Speaker #5: Premium direct business , where , yes , that business tends to be fairly clumpy , driven by pretty large players . We are seeing more players from more geographies around the world .

Speaker #5: So while that is that the nature of that business , it feels pretty healthy in terms of if you meant premium mass . Yeah , we're always going after those premium players and we're not really going after grind , grind mass , but we are again , seeing new players coming into the market .

Speaker #5: So I don't know that that's I wouldn't sort of signal that out as not healthy . I do think that we are getting a healthy drive on the on the mass business overall , we don't tend to be kind of a grind mass player .

Speaker #5: So I , I probably have less insight into that market demographic . But in terms of players coming into our system , I think we feel good about market growth .

Speaker #12: That is that is very helpful . Can I just have a last follow up question on Sri Lanka ? You know , it's early days .

Speaker #12: I totally appreciate that . But when you entered that market you had a view that it will be a return accretive market and eventually it will generate certain kind of EBITDA .

Speaker #12: Is there anything you picked up in terms of either as being too difficult or regulatory issues or visitation being weaker , or you need to tweak business models slightly , or you need to provide something , anything you can share about that market that will be very helpful .

Speaker #12: Thank you . Lawrence .

Speaker #4: Hey Praveen , I think , you know , it's super early days . It's only been open for three months and for for us is a whole new market because , you know , it's mainly targeted at the Indian market .

Speaker #4: So , you know , there's a lot for us to learn along the way . You know , I think we're we're very optimistic about the country and the tourism growth in , in that market .

Speaker #4: And I would say that we're learning every day . And , you know , there there are , you know , new programs that we haven't really seen before .

Speaker #4: And anyways , I'm sure we'll have more to report in subsequent quarters .

Speaker #12: Got it . Thank you once again .

Speaker #11: I want to know .

Speaker #5: No , I would just say , look , initially when you go into a market that already has some incumbents , it's a little bit of a steal share market where you have incumbents protecting the existing customer base .

Speaker #5: We're luring them with a better product and service , but you have promotional activity . And so we're kind of in the early days of that , I think our long term strategy is we want to expand that market and change the kind of customer that's going into that market .

Speaker #5: Who expects more premium product , but that's not going to be , you know , done in a month or two . That's going to be done here over subsequent quarters .

Speaker #5: As Lawrence said, we're in the early days. We're focused on getting that very valuable high-end guest, and that's going to be a journey from here to there.

Speaker #12: Yeah , that's a good color . Ivan , thank you .

Speaker #2: Thank you . Our next follow up question comes from the line of George Choi with Citi . Please go ahead .

Speaker #6: Thank you . So you guys have made significant progress on deleveraging . And if there's any positive result from this Cod Manila Strategic review , you gearing is going to go down further .

Speaker #6: So I'm just wondering if you have any new thoughts on your cash allocation strategy . Thank you .

Speaker #5: Thanks , George . As you know in the post Covid period , we've been very laser focused on debt reduction and we've had some meaningful success in paying down some of the debt that we incurred during the three challenging years of Covid .

Speaker #5: However , going into next year , we plan to take a more balanced approach using our free cash . And while debt reduction will continue to be a primary mandate , we aim to potentially recommence the quarterly dividend by the end of next year .

Speaker #6: That's encouraging . Thank you very much .

Speaker #2: Thank you . There are no further questions at this time . I now hand back to Miss Jeannie Kim for closing remarks .

Speaker #3: Thank you . And thank you all for joining us again today . We will look forward to speaking to you next quarter . Thank you .