Ladies and gentlemen, thank you for participating in the Second Quarter 2017 Earnings Conference Call of Melco Resorts & 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 would now like to turn the call over to Mr.

Ross Dunwoody, Vice President, Development and Investor Relations of Melco Resorts & Entertainment Limited. Over to you, sir..

Thank you, Operator. Thank you for joining us today for our second quarter 2017 earnings call. On the call today are Lawrence Ho, Geoff Davis, and our property presidents in Macau and Manila.

Before we get started, please note that today's discussions may contain forward-looking statements made under the safe harbor provision of federal securities laws. Our actual results could differ from our anticipated results. I will now turn the call over to Lawrence..

Thank you, Ross. Hello everyone. Macau has now delivered its 11 months of year-over-year in GGR and is tracking over 17% growth for the first half of 2017 exceeding our expectations for the year so far.

It is becoming instantly evident than Macau has entered into a new phase of growth, was driven by increasing visitation patterns and increasingly well-traveled and sophisticated outbound tourists, particularly from Macau cold feeder market China.

I believe it is inevitable these trends are only going to continue and Macau is going to be a key beneficiary. Overnight guests and length of stay continues to increase which is driven by an increasingly mobile outbound tourism market. Primarily from Mainland China and supported by new supply of quality hotel room and other non-gaming amenities.

This in turn facilitates greater penetration and what is a very underserved leisure and tourism market across Asia. We believe these trends will accelerate with the imminent opening of the Hong Kong [indiscernible] and the ongoing development of [indiscernible] Island.

Recognizing these strength several years ago, we've designed and built integrated resorts that catered to these evolving customer taste and preferences. Highlighted by City of Dreams, Macau is leading premium focus integrated resort and Studio City a unique mass-market entertainment focus integrated resort.

City of Dreams Macau is undergoing a final phase of development which when completed will result in the property once again setting new benchmarks in luxury and premium focus entertainment and hospitality in Asia.

Phase 3 which opens in less than 12 month will add almost 800 incredible luxury rooms suite to complement a unique array of new restaurant concepts never before seen in Macau. We experienced some meaningful hold great issues in premium asset City of Dreams Macau during the quarter which Geoff will discuss.

However, our mass drop expanded sequentially in 2Q '17 despite the quarter's typical week seasonality highlighting the properties leading position in premium mask and direct the IP segments. Despite the opening of several major integrated resorts in Cotai.

This leadership position is set to continue upon completion of the final development phase of City of Dreams.

Studio City delivered a strong quarter of results with GGR increasing 27% sequentially and almost 130% on a year-over-year basis which drove property EBITDA to increase almost 20% on a sequential basis and almost 230% on a year-over-year basis.

We delivered these results despite the ongoing construction issues that are evident at the Lotus Bridge immigration border which we are hopeful will be alleviated in the coming quarters.

In Manila, City of Dreams delivered the six straight quarter of record property EBITDA growing over 70% on a year-over-year basis with record GGR recorded in the VIP and mass table segments.

While we remain fully committed to driving operational and financial performance across our current operations, we also continue to evaluate new markets which we believe will drive long-term value for shareholders.

This approach is highlighted by our decision to invest in the Philippines, which is now delivering return on invested capital metrics of close to 30%. While there are range of potential opportunities abroad, securing a license in Japan remains our key development objective.

We believe that this market represents one of the most exciting integrated resort opportunities in the world. Japan already offers one of the most incredible tourism experiences with its dynamic modern cities, historical attraction and unrivaled hospitality.

However, with the introduction of Japan style integrated resorts which offer world-class and high quality hospitality and entertainment offerings, this tourism experience an inbound visitation will be further enhanced.

Given the significantly underpenetrated nature of Asian integrated resort market, we believe that Japan's undoubted success will now come at the expense of other market including Macau. With that, I'll turn to Geoff to go over some of the numbers..

Thanks, Lawrence. We reported group-wide property EBITDA of approximately $330 million in the second quarter of 2017 increasing by more than 34% from the second quarter of 2016 while luck-adjusted property EBITDA increased by over 32% on a year-over-year basis to approximately $315 million.

At City of Dreams Macau, our luck-adjusted EBITDA was broadly comparable to our reported EBITDA while in Studio City EBITDA was positively impacted by a favorable VIP win rate by approximately 5 million in the second quarter of 2017.

The EBITDA contribution from our non VIP segments represented more than 90% of luck-adjusted EBITDA at City of Dreams Macau and on Macau wide basis. The luck-adjusted property EBITDA margin in Macau was approximately 25% down slightly from 26% in the prior quarter and up from 22% in the second quarter of 2016.

As Lawrence mentioned, we experienced a lower than usual hold percentage in our premium mass operation at City of Dreams.

While we do not adjust for this in our luck-adjusted EBITDA calculations which only just a rolling chip win rates, if we were to hold at rates similar to the preceding 12 months in premium mass, EBITDA would have been over 20 million higher than reported at City of Dreams.

City of Dreams Manila delivered total property EBITDA of $63 million representing an increase of over 70% year-over-year. The property's EBITDA margin was 36% in the second quarter of 2017 compared to 39% in the prior quarter and 30% in the same period last year.

Our luck-adjusted basis, Manila's property EBITDA would have been approximately 55 million representing 57% year-over-year increase with luck-adjusted EBITDA margins expanding by almost 400 basis points on a year-over-year basis to 36%.

To provide more clarity regarding our capital structure within our core group, we had cash of approximately 650 million and gross debt of just under 1.5 billion excluding Studio City in the Philippines at the end of the second quarter of 2017 on a segment reporting basis.

As we normally do, we'll give you some guidance on non-operating line items for the upcoming quarter. Total depreciation and amortization expense is expected to be approximately $135 million to $140 million including approximately $47 million at Studio City.

Corporate expense is expected to come in at approximately $33 million to $36 million and consolidated net interest expense is expected to be approximately $64 million which includes finance lease interest of $10 million relating to City of Dreams Manila and $10 million of capitalized interest.

For those that follow City of Dreams Manila more closely, our building lease payment for the second quarter of 2017 was approximately $8 million. That concludes our prepared remarks, operator back to you for the Q&A..

Thank you, sir. [Operator Instructions] We have the first question from the line of Billy Ng of Bank of America Merrill Lynch. Please ask your question..

Hi, good evening. I have questions regarding multi - can you tell us a little bit more on the gaming opportunities of multi. We understand that maybe additional gaming stage but in terms of gaming tables, roughly speaking how many tables that we can have depending - of course it depends on the government approval process.

And also want to get a comment on the opening date of the Morpheus?.

Billy, it's Lawrence here. We are incredibly excited about the opening of Morpheus.

Based on what we talked about in the last call, we see Morpheus as a massive catalyst to lunch COD 2.0 as of next year COD is going to be nine years old, but at the same time given the improvement that we have made to COD as part of its retail propositions, you know, we have recently opened new restaurants and of course that center piece is going to be more fierce.

And so that will, you know, COD next year is going to feel like a brand new property.

There is dedicated gaming space within Morpheus at various levels because it is a whole, there is a vertical building, we have always looked at Morpheus as the third and final phase of city of dreams and it comes with a significant price tag, you know, I don't think any architecture in any building in Macau is remotely close to Morpheus.

And so, based on the government some track record as reward operators for investments in terms of diversification and beautifying Macau. I think we check all of those boxes, naturally it's out of our control in terms of how many tables we get, but within the property we can easily house 50 plus tables. So, we have -- we are going to be 50 plus tables.

So, we have, we are going to be submitting our relevant documentation to the government and we will see where it goes.

Oh, and then -- sorry, Billy, you want to know about opening, you know, we are tracking very well, you know, I think Morpheus had a very unfortunate accident a couple of weeks ago but I am pleased to say that, you know, a world class construction team have, you know, done their investigation and I think the government is pleased and with the efficiency and thoroughness of our investigation and we believe the site will resume activity tomorrow, so that's very short-time and again credit to our world class team.

And so the completion date we don't anticipate any delays and we are still targeting sometime around Q1 or Q2 of next year..

One follow-up is how much un-spend CapEx for the project?.

I think for that I hand over to Geoff..

So, the overall CapEx for the project is approximately a billion..

And for the un-spend like how much more we need to put in?.

Well, we anticipate, you know, leveraging the existing infrastructure. But given the number of rooms in the food and beverage outlets, you know, there will be an increase in headcount as a result of that. We are still going through the, you know, finalization of those budgets.

But, you know, very much, you know, the inline with, you know, what do you expect for any 800 room hotel but we do anticipate, you know, leverage in the infrastructure to improve margin overall..

I am sorry, really one last question.

As how many additional staff we should expect for the projects, once its operational?.

Why don't we get Gab to talk about it?.

Hey, it's Gabe. We don't have a final on that number of that, it's significantly lower obviously than bringing to a new operation. I would say we will have that probably in another three months from now..

Okay, thanks..

Thank you. The next question comes from the line of Anil Daswani from Citigroup. Please ask your question..

Hi, Lawrence, how are you? With regards to the premium net hold issue, can you comment if you have seen that rebound at all into July, and what the outlook would be for the third quarter? Should we be expecting to get back to normal levels? And if you were to look at the margin for COD on a luck adjusted basis and premium mass as well, how would that have looked?.

Hey, it's Lawrence. So I think on that, I will leave Gabe to talk about that level, and also what we are seeing in July, I think needless to say we have seen a rebound and we are pleased with what's happening, but the detail, let me get Gabe, and I think on the margin question, Geoff can chime in..

Hey, Anil, it's Gabe. Yes, we have seen in July the premium mass in overall mass holds are right back up in the expected range..

It's Geoff, on margin at City of Dreams if you adjust for both VIP and mass hold adjustment that you mentioned, it's approximately a 30% margin, Macau property overall is approximately 26% and the group-wise margin is approximately 27%..

Thank you.

As a bit of a follow-up to the previous question on Morpheus, can I guess that you know if you do get 50 additional payables of the Morpheus you would assign those to premium mass in that given its proximity to your best hotel rooms in the project?.

Yes absolutely because Morpheus was designed for past in-house customers and there is significant work being done at COD over the next few months to integrate Morpheus into the existing building of City of Dreams and also there is work being done on the Main Casino to have really the pinnacle of premium mass experiences anywhere in the universe and so certainly most of the tables, if we get them if we're lucky enough to get them from back to the government will be for our bread and better business which is premium mass..

Thanks.

My last question is on the Philippines following the nasty event that took place at one of your competitors, have things got back to normal in July and again are we back on the trajectory pre the events of early June?.

Hey, I think before I hand it off to Geoff Andres, our Property President in Manila, I think as we said in the prepared remarks, we are extremely pleased and excited about how the Philippines market is developing, it's broadly surpassed our initial expectations and a lot of that is thanks to the group and the team there.

So I think Geoff maybe you can give a bit more color on what is happening in the Philippines..

Thanks, Lawrence.

After the tragic events happened at resort, there was an initial decrease in some of our international hotel reservations but that is - that bounced back by the end of the month and all of our business continue to be quite strong and the Philippines overall continues to enjoy double-digits, tourism growth across all their major tourist markets, Korea, USA, China and Japan.

So it continues to be a very good story here in the Philippines..

Thank you very much guys..

Thanks, Anil..

Thank you. The next question comes from the line of Kenneth Fong from Credit Suisse. Please ask your question..

Great, thanks for taking my question. I have two questions.

One is on the overall competitive landscape, so how do you see this change over the past few quarters versus your competitor opened gradually in quartile and then my second question is how should we think about the potential for further ramp up for Studio City going forward? Let's say 50% of your projected growth or how do we think about its potential over next two years? Thank you..

Hi, Kenneth, let me do the first part, when there has been two major integrated resorts that New Cotai and Provision that has opened in the last within the last 12 months. So naturally and also you have Studio City and Galaxy Phase 2 ramping up.

So naturally I think with some of the new properties we have seen a increase in terms of promotion and marketing but I think fortunately there are not you know crazily out of, out of the normal realm.

So all in all I think that the market is developing nicely I think for us speaking on behalf of you know Melco and also City of Dreams and even Studio City we have been extremely disciplined.

In terms of what we're doing with respect to reinvestment so, I think over hopefully over the time that it will normalize and you know even some of the properties who are very desperate to ramp up we'll get back into the normal range.

In terms of Studio City I mean I'll hand it off to David to give us more details but I still think you know the Studio City is significantly hampered by access issues.

Our main access point which is Lotus Bridge continues to be blocked off with the construction of the light rail and so the walk that should be 30 seconds in the future when the footpath is open and the footpath is built and it's subject to government when they were they want to open it but now that the current environment they walk to Studio City as both just unpleasant and hazardous.

So I think there are phenomenal days ahead but in the meantime maybe I'll let David talk about more the details.

Sure. Hi, Kenneth. So, I think there's a few areas can I think one as you continue to look at our ramp up on the VIP business we've been incredibly surprised and very grateful in terms of the way it's ramped up and it's continued for us.

Our jackets performed very well on our premiere director continues to and continues to build and you look at towards our premium mass as we look to optimize in our spaces they're really kind of done more with the signature space in terms of opening up that entry way and kind of reposition at Staples.

We continue to see good growth there and then as we also down the main for has looked at some of our table pricing and trying to get into an answer pricing on the listed some of our achievable pricing and trying to again to enhance the pricing on the floor to take advantage of the traffic that we have there we've really pushed up our limits more now to where I'd say we're really attracting a really nice mass plus customer as well as a good overall mass customers have got coming in.

Overall based on those things I think we're seen continue to see growth from our customer base that's coming in has Lawrence said as you look out towards the Lotus Bridge entry point we think there's a tremendous opportunity there once we get that area opened up.

We're hopeful that, that will happen sometime wait for quarter, we continue to petition the government to try to get that opens as soon as possible for us because we see such huge potential particularly without opening but also which is the general growth of what's going on intention.

So we're positive on the future we're very positive on the continued ramp for Studio City..

Got it. Thank you very much..

Thank you. Thank you. There are no further questions at this time. I would like to turn the conference back to the speakers. Please go ahead sir..

Thanks everybody for joining and look forward to speaking you next quarter..

Thank you. Ladies and gentlemen, that does conclude our conference for today. Thank you all for your participation. You may all disconnect lines now. Thank you..