Ladies and Gentlemen, thank you for participating in the Third Quarter 2024 Earnings Conference Call of Melco Resorts and Entertainment Limited. At this time, all participants are in a listen-only mode. After the call, we will conduct a question-and-answer session. Today's conference is being recorded. I'll now turn the call over to Ms.

Jeanny Kim, Senior Vice President, Group Treasurer of Melco Resorts and Entertainment Limited. Please go ahead..

Thank you, Operator, and thank you all for joining us today for our third quarter 2024 earnings call. On the call are Lawrence Ho, Geoff 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 securities laws. Our actual results could differ from our anticipated results. In addition, we may discuss non-GAAP measures.

A definition and reconciliation of each of these measures to the most comparable GAAP financial measures are included in the earnings release. Finally, please note that our supplementary earnings slides are posted on our investor relations website. With that, I'll now turn the call over to Mr. Lawrence Ho..

Thank you, Jeanny, and thank you all for joining us today. Our initiatives to activate areas throughout our properties and drive visitation are coming together. In September, we launched a revamped loyalty program including the Signature Club for our Premium mass customer base.

As part of this relaunch, we also introduced a new tier for our highest level of premium mass player that offers exclusive benefits and personalized experiences. This renewed loyalty program is starting to show the benefits of increasing efficiency in our player reinvestment.

We opened a new signature premium slot area at City of Dreams and at Studio City we opened the Dragon Zone, a highly themed slot area in partnership with Aristocrat Gaming. We are enhancing accessibility into City of Dreams starting with the entrance on the corner across from the MGM Cotai and Wynn Palace, which benefits from the highest footfall.

We completed a new light tunnel at that entrance, which is complemented by live performances. We also installed new large-scale interactive LED screens at Studio City to activate the area at the main entrance in front of the casino.

The installation of RFID tables is progressing well, and we have now converted all of the Baccarat tables at Studio City to RFID tables. Installation has gone relatively smoothly, and we are just scratching the surface in terms of utilizing the data.

We expect to complete the installation of RFID tables at City of Dreams within the first quarter of 2025. We have a pipeline of projects for 2025 to attract and retain high-quality, high-value patrons as the Macau gaming market continues to grow.

Some of the projects planned include continued enhancement of accessibility and customer flow around City of Dreams, a revamp of Studio City's high limited gaming area and, of course, the much-anticipated relaunch of the House of Dancing Water, which is currently expected in the second quarter of 2025.

In Manila, despite added competition, City of Dreams performance improved quarter-to-quarter. City of Dreams Mediterranean and our satellite casinos and Cypress continue to face challenges with the ongoing conflict in the region. But have had solid increases in GGR and EBITDA through the third quarter.

And finally, I'm excited to announce that City of Dreams Srilanka opened in October, with the 687 key Cinnamon Life Hotel run by our partner, John Kees. The casino and the Nuwa hotel are on track to open in the second half of 2025. With that, I turn the call over to Geoff to go through some of the numbers..

Thanks, Lawrence. Our group-wide adjusted property EBITDA for the third quarter of 2024 was approximately $323 million, a 7% increase compared to the second quarter. Favorable win rates at COD Macau and Studio City had a positive impact on our property EBITDA by around $27 million.

We have been focused on operational discipline, and our OpEx in Macau remained stable this quarter at approximately $2.9 million per day, excluding the cost of the Studio City residency conference. With stable OpEx and growth in EBITDA, our EBITDA margin in Macau expanded sequentially.

We expect this flow through to EBITDA to continue as we drive revenue. Our liquidity position remains robust. As of September 30, 2024, we had approximately $1.2 billion of consolidated cash on hand and over $3 billion in available liquidity.

Melco, excluding its operations at Studio City, the Philippines and Cypress, accounted for approximately $665 million of the consolidated cash on hand. Total debt declined by approximately $60 million in the third quarter following the repurchases of the Studio City bonds due 2025.

Melco also repurchased 20.7 million ADSs for approximately $12 million during the quarter. This is inclusive of the $38 million that was disclosed in August via a stock exchange filing. Of the ADSs repurchased, approximately 17.7 million have been cancelled. Both the bond and share repurchases were funded by cash on hand.

As we normally do, we'll give you some guidance on nonoperating line items for the upcoming fourth quarter of 2024. Total depreciation and amortization expense is expected to be approximately $135 million 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 million to $125 million.

This includes finance liability interest of around $7 million relating to fees payable in relation to the Macau gaming concession in the Cypress gaming license and finance lease interest of approximately $6 million relating to City of Dreams Manila. That concludes our prepared remarks. Operator, back to you for the Q&A..

Thank you. We will now begin the question-and-answer session. [Operator Instructions] We will now take our first question from the line of George Choi from Citi. Please ask your question, George..

Thank you very much. Firstly, congratulations on a strong set of results. First of all, I think October, obviously, was a very, very strong month for Macau as a whole. And if you can provide us with any color on how you did during Golden Week that we very much appreciated. And secondly, on the dividends.

So, we understand Melco's priority is to reduce gearing, but is there any estimated time line for you guys to resume your dividends? Thank you very much..

Hi George, it's Lawrence. So why don't I start off with the Golden Week question and then maybe hand it off to Evan and Tim and Kevin to provide supplemental information. I think everybody knows October was very strong. Golden Week was a great Golden week. At Melco, our mass drop was up more than 20% year-over-year.

And also, more significantly, we had a number of record mass for updates at both City of Dreams and Studio City during that period. So, we're very happy with it. And the hard work that we put in over the last couple of quarters since some of the management reshuffle is starting, I think, at the very beginning to pay off.

A lot of the improved accessibility and new attractions really came online in late September. So, I think we'll continue to benefit from it as the quarter develops and as we continue to reinvest in the properties and the businesses and on the service, we'll benefit from that over the coming quarters.

On dividend, I think our number one priority, as we've stated for the last probably 12, 18 months is still debt reduction. But I don't know if Geoff, do you want to add a bit more color in terms of dividend top line, then we can go back to Evan and Kevin and Tim to provide a little bit more color on October and Golden Week..

Thanks, Lawrence. Just to reiterate, debt reduction and delevering is definitely the key on our priority focus when we think about allocation of capital. However, we would like to become a return to being a dividend-paying company. We think it's potentially possible in the second half of next year, but subject to to business conditions, et cetera.

But eventually, we do see ourselves coming back into a dividend-paying mode and sometime in the second half of next year..

And I'll just add, I think Lawrence said it well. We had a strong Golden Week. We felt good about both the properties and how they're trending. Maybe to add a little bit more color. As Lawrence alluded to, we set some records at COD, three of our top 10 days all time for mass drop.

So, we had three of our top 10 days in the history of the company at COD from a mass drop standpoint. At Studio City, four of the top 10 days occurred during this last Golden Week, and that's not just post-COVID that's sort of throughout the history of the company. So, we did see some very good volumes coming through the system at both properties.

And I think coming out of October, we feel good about where the market is overall and again, the traction that we're getting within our own business..

Right. Thank you. Our next question comes from the line of John DeCree from CBRE. Please ask your question John..

Hi, good afternoon, everyone. Thank you for taking my questions. Maybe one on the promotional environment. I think we ask you every quarter, but as well as your peers, curious if you could give us an update on your current thinking on the promotional environment. It sounds like it remains intense, but stable.

So curious if you have any opinions or updated thinking there?.

John, sure. Again, maybe I'll let Evan elaborate more. But I think we're past the peak promotional intensity. And I think it's good that the market is becoming more rational.

And so, I think for the healthy development of the entire market going forward, I hope that all the operators continue to do that because at Melco, our primary focus is always -- it's always been on EBITDA. And so, I think, hopefully, with the promotional environment stabilizing, we'll continue to improve on our EBITDA margin model.

Evan?.

Yes, I think that's a good characterization. I don't think we've yet seen it really drop substantially, meaning we have seen let up, but I think it's too early for us to say that it's on the glide path down to more beneficial levels, although that's where we ultimately hope to get it.

I think from our standpoint, we certainly aren't looking at any elevated promotional spending we are looking at -- through our new player launch, how do we best sort of retain our top players, how do we create an aspirational path for those mid-levels and how do we spend dollars effectively on bringing new people into the system.

So, I think it's more of an allocation issue against the existing pool as we slowly bring it down but no major changes in the overall level..

Thanks, Evan. Lawrence, that's helpful. That’s helpful.

Maybe one for Lawrence or Geoff, you just spoke a little bit about getting back to dividend-paying mode with the priority still being deleveraging, but I wanted to ask about your appetite for further share repurchases next year given where the shares are trading at today? And realizing you have a finite pool of cash to allocate, how do you think about paying dividends versus buying back stock when you start to get to leverage levels that you're more comfortable with next year?.

Yes. I think we've had a -- I guess, Geoff, can you elaborate further. But I think over the past -- throughout the life of the company with return capital to shareholders, whether it's through share buybacks or in dividends. I think the recent share buyback in the was really a reaction to the extremely dislocated share price.

I think we'll always be opportunistic and see what's the best deployment of capital is. I wouldn't rule out share buybacks if we have another significant dislocation of equity value. I don't know, Geoff, if you want to....

Yes, the $112 million that we repurchased in the quarter was definitely opportunistic and reflecting the deep value that we saw in the shares. So, while we wouldn't rule it out, we're really unlikely to have programmic sort of share repurchase.

But looking forward, to the extent we have opportunities, we get that on the table of of potential measures that we could take..

Great. Thanks for all the color, guys. Really appreciate it..

Thank you. Our next question comes from the line of Ricardo Chinchilla from Deutsche Bank. Please go ahead, Ricardo..

Hey guys, thank you so much for taking the question. A few weeks ago, we heard that there was some pressure on luxury spend from the Chinese consumer. Obviously, we saw a very strong Golden Week visitation and spending.

Is there something -- is there some overlap that you're seeing between the pressure on luxury spend and on the highest end consumer and your premium as customer in Macau?.

Hey Ricardo, Traditionally, there was a strong correlation between Luxury retail in our industry. I think what we have seen post COVID is the Mainland Chinese customers are more into experiences rather than on the luxury goods. And I think we've seen in the last 12 months how the luxury retailers have struggled in China.

So no, I think we're very fortunate that people are still traveling, still enjoying the experiences and Macau nowadays in addition to gaming, there are a lot of reasons to go to Macau, for the concerts and events happening. So, we're very happy about that.

But I think longer term, that correlation hopefully, with a better Chinese economy, and we've seen the fiscal stimulus and I mean the monetary stimulus I think, hopefully, with more support from the Chinese government, with supportive Chinese quality, the Chinese economy will continue to recover.

And I think in that case, our industry will continue to do well. And hopefully, retail is not as big a component of our business, but longer term, it be great if everything was firing on all cylinders..

Perfect. That's a great comment.

I was also hoping if you could give us some guidance in terms of CapEx for the rest of the year and maybe preliminary plans for next year?.

Sure. So, for this year, in the fourth quarter, we are looking for total of CapEx of approximately $115 million. So, from earlier guidance at the beginning of the year, we pushed some of the CapEx from '24 into '25.

So, in 2025, while we're still going through the budgeting process now, we're targeting somewhere in the range of $400 million for CapEx next year. And just one further piece of color. Of that $400 million, about $70 million to $75 million will be for Srilanka..

Perfect. Thank you so much for taking my questions..

Thank you. And just one further piece of color. Of that $400 million, about $70 million to $75 million will be for Sri Lanka..

Perfect, thank you..

Thank you. Our next question comes from the line of Praveen Choudhary from Morgan Stanley. Please ask your question Praveen..

Hi. Thanks so much for taking my question and congratulations for quarterly growth. I have a couple of questions. The first question is about dividend. It's pleasing to hear that it could start in second half of '25.

Is there a number on net debt to EBITDA we should look at that will trigger that saying we have delivered enough? So that's the first question. The second question I had was mostly the potential of the company. I look at in 2019, we used to make more than $400 million of quarterly EBITDA in 3Q, for example.

So compared to that, even after spending on Studio City, new assets. We are below 70% of that number, suggesting that there's a lot of potential, a lot of EBITDA potential in the future. So, just wanted to understand what is the blue sky? How should I think about it? So those are the two questions for me. Thank you..

If you want to take the first....

Sure. So, on the dividend question, I would say no, we don't have a specific trigger for net debt to EBITDA that would then unleash the dividend. It's more of a holistic decision-making process where, of course, we're looking at our leverage ratios, but also other factors, other opportunities and just the outlook overall for the business.

So, while that's a significant component, we don't have a specific trigger in respect to leverage..

Praveen, on your second question, I think the myself and the entire management team, we totally agree with you. There is significant potential and at the same time and also speaks to -- there's a lot more work for us to do to get back to the 2019 levels, with the additional investments that Studio City Phase two and Cypress.

So, there's a lot more work for us to do. And I'm confident that the last couple of quarters, the path that we're taking, reinvesting in the service, in the quality of the business, reestablishing our brand promise and the brand quality that will ultimately take us back to the heights that we achieved back in 2019.

But definitely, there's a lot of untapped potential that we haven't quite reached. And we're hoping that 2025 is really going to be the year where all of the hard work will start paying off..

Thanks so much Lawrence. Just to follow up on that last point. Are you saying that in 2025, you can get back to 2019 level? Or are you saying that in 2025, you would try to get back to Top three casino or number three, can you get the market share back to where you deserve based on your CapEx and the asset quality..

It's funny is we -- I always -- that's one of my main complaints in terms of number of hotel rooms and CapEx. I think that's definitely the goal to get back to number three in 2025. In terms of -- there are -- some of our competitors have new hotel rooms and new projects are coming online as well in 2025.

So, I don't think we've set ourselves -- the long-term target is certainly get back to the market share in Macau of 2019. I don't know if we're going to get there in 2025 because we're still operating with less hotel rooms and less tables from back -- and compared to 2019.

But I think the goal of being third out of all the operators achievable, but again, a lot of work within our internal team..

Thank you. We wish you all the best. Thank you..

Thank you. Our next question comes from the line of Simon Cheung from Goldman Sachs. Please go ahead, Simon..

Hi, everyone. Thanks for taking my question. I have two questions. just Lawrence, earlier on, you mentioned a reramp up your promotional program for your -- to attract more players. Can you just perhaps elaborate a bit more on that? And you also did mention that you saw very strong performance during the Golden Week holiday, in terms of the volume.

Perhaps if you can share with us some of the other maybe qualitative trend that you observed. I'm not sure whether like Paycom or anything you observed on the ground that gives you more comfort that your market share is starting to stabilize or improve, that would be great. That's the first question.

And then my second question, just more like a housekeeping question on the daily OpEx, I hear that Geoff, you mentioned it was quite steady on a quarter-on-quarter basis. Wondering whether you can give us some guidance in the coming one or two quarters, in particular, with the Dancing Water coming back online by second quarter next year. Thank you..

Geoff, do you want to take the second 1 and then maybe, Evan the support of Tim and Kevin can take the first one?.

Sure. Thanks, Lawrence. So, we can reiterate the guidance we provided on our second quarter call, which was we think that we could see OpEx per day creep up to 3.0 by the end of the year. Obviously, we were stable from the second quarter sequentially into the third but that guidance remains intact.

And the next step function change that we see to our daily OpEx is with the opening of the House of Dancing Water sometime in the second quarter. And that also remains consistent with prior guidance that, that will be 0.1 per day..

Sure. On the promotional system in mid-September, we relaunched the player program. Essentially, what we've done is we've given a series of guaranteed benefits to our best players.

And so, they better understand our value proposition, and we're investing in that player category to make sure that we're continuing to retain and to grow the best players in the system. The other focus is around new promotional offerings for people that are just coming in. So, we're spending a little bit more there.

So, you have a little bit of a reallocation around the curve with the idea of bringing people into the system and then creating that aspirational environment so they move up the chain as they want to get towards the top. So, you have all the benefits that you get when you reach these higher categories.

In terms of Golden Week, I think the other statistics are commensurate with the ones that Lawrence already alluded to. So, in addition to drop being up by over 20%, we saw player hours up. We saw traffic up into all the properties.

And so, I think, candidly consistent with the market, there was a very sort of solid Golden Week and customer environment going on during that time. So, I don't know that there's a lot more that we could share other than the ones that I gave you, but we had good drop, and we also achieved a record drop throughout both from properties.

So again, feeling very good about what we achieved there and how we are coming out of October..

Great. Thanks for the color. Thank you..

Thank you. We have reached the end of the question-and-answer session. Thank you all very much for your questions. I'll now turn the conference back to Ms. Jeanny Kim for closing comments..

All right. Thank you for participating in our call today, and we look forward to speaking to you in the next quarter. Thank you..

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect..