Melco Resorts & Entertainment Limited (NASDAQ:MLCO) Q4 2022 Earnings Call Transcript

·5 min read

Melco Resorts & Entertainment Limited (NASDAQ:MLCO) Q4 2022 Earnings Call Transcript March 1, 2023

Operator: Ladies and gentlemen, thank you for participating in the Fourth Quarter 2022 Earnings Conference Call of Melco Resorts and Entertainment Limited. 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 Melco Resorts Entertainment Leader. Please go ahead.

Jeanny Kim: Thank you, operator and thank you for joining us today for our fourth quarter 2022 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 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 turn the call over to Mr. Lawrence Ho.

Lawrence Ho Yau Lung: Thank you, Jeanny. The performance of our Macau properties in 2023 has been so far highly encouraging. During the peak days of Chinese New Year this year, we saw EBITDA reach 6 million a day and CO GGR exceeds what we recorded during Chinese New Year in 2019. Volume post Chinese New Year is holding up well and our daily average mass volume in February has been in line with January. This recent performance supports our continued belief in the return of pent-up demand and our view that Macau will continue to develop as a leading international destination for entertainment and leisure. I would like to express my appreciation to the Macau government for the award of a gaming concession to continue to operate in Macau for the next 10 years.

We greatly appreciate the consideration given to our proposal and our investment proposition that we believe will continue to build on our existing strengths in entertainment and nongaming attractions. We are excited to execute on our investment commitments to continue to bring best-in-class attractions and facilities to the Macau market. Construction of Studio City Phase 2 is complete. The first stage opening is targeted for the second quarter which will include 1 of the hotel towers along with the indoor water park which is expected to be the largest of its kind in Asia. The remainder of Phase 2 is currently expected to open in the third quarter. In the Philippines, gaming volumes are very close to pre-pandemic levels and we expect continued growth with more international travel into the Philippines and increased junket activity.

Cyprus has exceeded pre-pandemic volume and GGR and we are excited for the future as we target opening a City of Dreams Mediterranean in the second quarter of 2023. With that, I turn the call over to Geoff to go through some of the numbers.

hotel, beach, chair, hands, holiday, summer, woman, resort, sunlight, leisure, two, honeymoon, deck, travel, pair, sitting, peace, down, happiness, adult, sunny, male,
hotel, beach, chair, hands, holiday, summer, woman, resort, sunlight, leisure, two, honeymoon, deck, travel, pair, sitting, peace, down, happiness, adult, sunny, male,

Kaspars Grinvalds/

Geoffrey Davis: Thanks, Laurence. Our group-wide property EBITDA for the fourth quarter of 2022 was approximately negative $7 million. Our group-wide property EBITDA for the full year of 2022 was just above breakeven despite all of the challenges that we faced throughout the year due to COVID-related restrictions. This reflects the benefit of our diversified portfolio of integrated resorts. Luck-adjusted group-wide property EBITDA for the fourth quarter of 2022 came in at negative $4 million. A favorable VIP win rate positively affected EBITDA at COD Macau and Cyprus by close to $8 million, while an unfavorable win rate negatively impacted COD Manila by around $10 million. COD Manila was also impacted by approximately $6 million of one-off expenses.

Our OpEx from Macau for the fourth quarter of 2022 came in at approximately $1.7 million per day, a slight increase from the per $1.6 million per day in 3Q 2022 but in line with prior quarters. As you may recall, our OpEx per day in 3Q 2022 benefited from 2 weeks of casino closures. We continue to focus on cost control as visitation returns. Turning to our cash and liquidity. As of December 31, 2022, we had close to $2 billion of consolidated cash on hand. Melco, excluding its operations at Studio City, the Philippines and Cyprus, accounted for around $1.2 billion. Of this, approximately $176 million was restricted and includes cash collateral required for concession-related guarantees issued to the Macau government. Around $50 million of this restricted cash was released in January.

We had fully drawn on the RCF by the end of the fourth quarter to fund the commitments under the gaming concession. In January, Melco International repaid the full $200 million it had drawn under an intercompany loan with Melco Resorts in 2022. Since December 31, 2022, we have reduced our leverage by approximately $500 million by repaying amounts drawn under our revolving credit facility. As we normally do, will give you some guidance on nonoperating line items for the upcoming first quarter of 2023. Total depreciation and amortization expense is expected to be approximately $125 million, Corporate expense is expected to come in at approximately $20 million. Consolidated net interest expense is expected to be approximately $100 million to $105 million which includes finance lease interest of $5 million to $10 million relating to City of Dreams Manila and around $15 million to $20 million of capitalized interest.

That concludes our prepared remarks. Operator, back to you for the Q&A. Operator, we can commence the Q&A session whenever you're ready.

See also 16 High Growth Non-Tech Stocks That Are Profitable and 11 High Growth UK Stocks to Buy.

To continue reading the Q&A session, please click here.