Melco Resorts & Entertainment Limited (Nasdaq: MLCO) (“Melco” or the “Company”), a developer, owner and operator of casino gaming and entertainment casino resort facilities in Asia and Europe, today reported its unaudited financial results for the first quarter of 2020.
Total operating revenues for the first quarter of 2020 were US$0.81 billion, representing a decrease of approximately 41% from US$1.38 billion for the comparable period in 2019. The decrease in total operating revenues was primarily attributable to softer performance in all gaming segments and non-gaming operations as a result of the temporary casino closure in Macau and enhanced quarantine and social distancing measures to mitigate the COVID-19 outbreak in the first quarter of 2020.
Operating loss for the first quarter of 2020 was US$149.9 million, compared with operating income of US$191.1 million in the first quarter of 2019.
Adjusted Property EBITDA(1) was US$75.3 million for the first quarter of 2020 compared to Adjusted Property EBITDA of US$413.5 million in the first quarter of 2019, representing a decrease of 82%.
Net loss attributable to Melco Resorts & Entertainment Limited for the first quarter of 2020 was US$364.0 million, or US$0.76 per ADS, compared with net income attributable to Melco Resorts & Entertainment Limited of US$120.1 million, or US$0.25 per ADS, in the first quarter of 2019. The net loss attributable to noncontrolling interests during the first quarter of 2020 was US$42.0 million and the net income attributable to noncontrolling interests during the first quarter of 2019 was US$1.9 million, all of which were related to Studio City, City of Dreams Manila and the Cyprus Operations.
Mr. Lawrence Ho, our Chairman and Chief Executive Officer, commented, “With COVID-19 posing unprecedented challenges to the tourism industry and integrated resort facilities around the world, I would like to express my sincere gratitude to the PRC and the Macau SAR governments for their proactive response to contain the spread of the virus. I would also like to thank the Macau Chief Executive for his decisive leadership, which is exactly what we need in these difficult times.
“Melco continues to manage its balance sheet in a prudent manner. As of March 31, 2020, we had cash and cash equivalents of over US$1.2 billion. With the entry into a new senior facilities agreement in April 2020, we have undrawn revolver capacity of approximately US$1.6 billion. In addition, we further bolstered our balance sheet with our sale of the shares we held in Crown Resorts Limited, resulting in gross sales proceeds of approximately US$355 million.
“To preserve liquidity in light of the COVID-19 pandemic and to continue investing in our business, the board has decided to suspend the Company’s quarterly dividend program. This is a prudent course of action given current conditions. Melco remains committed to returning capital to shareholders with a regular quarterly dividend and will evaluate the resumption of its quarterly dividend as the operating environment evolves.
“While we are focused on managing costs during this challenging demand environment, we remain fully committed to the long term development of our valued colleagues. As an employer of choice with a strong and deep heritage in Macau, we believe that our long-term success is dependent on the hard work and dedication of our colleagues, and the development of Macau into a world-leading tourism and entertainment destination. Our commitment to employee development and community support is evidenced by our market-leading training programs and our recent donations to the Red Cross Society of China Hubei Branch, the Macao Federation of Trade Unions, the Women’s General Association of Macau, the Cyprus Ministry of Health and to the affected families and healthcare professionals in the Philippines.
“In the recently published 2020 Forbes Travel Guide, Melco was awarded with a record-breaking 107 stars, with Morpheus honored as the world’s first and only establishment to attain Forbes Five-Stars across its entire hotel, spa and dining facilities in its inaugural Forbes review.
“Sustainability remains a high priority in Melco’s operations. In March 2020, Melco was named the 2019 Best First Time Performer by CDP, the global non-profit environmental organization. We received an A- score earlier this year from CDP, attaining one of the highest ratings among disclosing companies in the Greater China region. These acknowledgements are a credit to Melco’s efforts in environmental protection, as well as its dedication and commitment to mitigating climate risks.
“Melco remains committed to its global development program. Construction on the expansion of Studio City is progressing. Upon completion, it will offer approximately 900 additional luxury hotel rooms and suites, one of the world’s largest indoor/outdoor water parks, a Cineplex, fine-dining restaurants and state-of-the-art MICE space. In Europe, we are developing City of Dreams Mediterranean, which, upon completion, will be Europe’s largest integrated resort with 500 luxury hotel rooms, a 1,500-seat amphitheater and approximately 10,000m2 of MICE space.
“Lastly, Japan continues to be a core focus for us. We believe our focus on the Asian premium segment, a portfolio of high-quality assets, devotion to craftsmanship, dedication to world-class entertainment offerings, market-leading social safeguard systems, established track record of successful partnerships, culture of exceptional guest service, and commitment to employee development puts Melco in a strong position to help Yokohama realize the vision of developing a world-leading IR with a unique, Japanese touch.”
City of Dreams First Quarter Results
For the quarter ended March 31, 2020, total operating revenues at City of Dreams were US$467.6 million compared to US$713.3 million in the first quarter of 2019. City of Dreams generated Adjusted EBITDA of US$61.0 million in the first quarter of 2020 compared with Adjusted EBITDA of US$228.6 million in the first quarter of 2019. The year-over-year decrease in Adjusted EBITDA was primarily a result of a softer performance in the mass market table games and gaming machines segments, lower non-gaming revenue as well as a higher provision for doubtful debts.
Rolling chip volume was US$8.65 billion for the first quarter of 2020 versus US$10.25 billion in the first quarter of 2019. The rolling chip win rate was 4.11% in the first quarter of 2020 versus 3.42% in the first quarter of 2019. The expected rolling chip win rate range is 2.85% – 3.15%.
Mass market table games drop decreased to US$0.57 billion in the first quarter of 2020 compared with US$1.32 billion in the first quarter of 2019. The mass market table games hold percentage was 33.7% in the first quarter of 2020 compared to 31.5% in the first quarter of 2019.
Gaming machine handle for the first quarter of 2020 was US$509.6 million, compared with US$980.4 million in the first quarter of 2019. The gaming machine win rate was 3.9% in the first quarter of 2020 versus 4.0% in the first quarter of 2019.
Total non-gaming revenue at City of Dreams in the first quarter of 2020 was US$47.0 million, compared with US$96.2 million in the first quarter of 2019.
Altira Macau First Quarter Results
For the quarter ended March 31, 2020, total operating revenues at Altira Macau were US$52.9 million compared to US$133.0 million in the first quarter of 2019. Altira Macau generated negative Adjusted EBITDA of US$9.1 million in the first quarter of 2020 compared with Adjusted EBITDA of US$15.3 million in the first quarter of 2019. The year-over-year decrease in Adjusted EBITDA was primarily a result of softer performance in all gaming segments.
Rolling chip volume was US$1.38 billion in the first quarter of 2020 versus US$4.96 billion in the first quarter of 2019. The rolling chip win rate was 4.48% in the first quarter of 2020 versus 3.81% in the first quarter of 2019. The expected rolling chip win rate range is 2.85% – 3.15%.
In the mass market table games segment, drop was US$64.4 million in the first quarter of 2020 versus US$139.2 million in the first quarter of 2019. The mass market table games hold percentage was 30.4% in the first quarter of 2020 compared with 22.4% in the first quarter of 2019.
Gaming machine handle for the first quarter of 2020 was US$39.1 million, compared with US$60.7 million in the first quarter of 2019. The gaming machine win rate was 2.5% in the first quarter of 2020 versus 5.1% in the first quarter of 2019.
Total non-gaming revenue at Altira Macau in the first quarter of 2020 was US$3.0 million, compared with US$6.7 million in the first quarter of 2019.
Mocha Clubs First Quarter Results
Total operating revenues from Mocha Clubs were US$18.0 million in the first quarter of 2020 compared to US$31.1 million in the first quarter of 2019. Mocha Clubs generated US$0.1 million of Adjusted EBITDA in the first quarter of 2020 compared with US$6.0 million in the same period in 2019.
Gaming machine handle for the first quarter of 2020 was US$385.9 million, compared with US$664.3 million in the first quarter of 2019. The gaming machine win rate was 4.7% in both the first quarters of 2020 and 2019.
Studio City First Quarter Results
For the quarter ended March 31, 2020, total operating revenues at Studio City were US$136.6 million compared to US$330.4 million in the first quarter of 2019. Studio City generated negative Adjusted EBITDA of US$9.4 million in the first quarter of 2020 compared with Adjusted EBITDA of US$96.4 million in the first quarter of 2019. The year-over-year decrease in Adjusted EBITDA was primarily a result of softer performance in all gaming segments.
Studio City’s rolling chip volume was US$1.38 billion in the first quarter of 2020 versus US$2.66 billion in the first quarter of 2019. The rolling chip win rate was 3.31% in the first quarter of 2020 versus 3.34% in the first quarter of 2019. The expected rolling chip win rate range is 2.85% – 3.15%.
Mass market table games drop decreased to US$352.8 million in the first quarter of 2020 compared with US$851.4 million in the first quarter of 2019. The mass market table games hold percentage was 25.9% in the first quarter of 2020 compared to 28.4% in the first quarter of 2019.
Gaming machine handle for the first quarter of 2020 was US$311.1 million, compared with US$560.6 million in the first quarter of 2019. The gaming machine win rate was 3.2% in the first quarter of 2020 versus 3.3% in the first quarter of 2019.
Total non-gaming revenue at Studio City in the first quarter of 2020 was US$21.0 million, compared with US$50.9 million in the first quarter of 2019.
City of Dreams Manila First Quarter Results
For the quarter ended March 31, 2020, total operating revenues at City of Dreams Manila were US$110.3 million compared to US$142.4 million in the first quarter of 2019. City of Dreams Manila generated Adjusted EBITDA of US$29.6 million in the first quarter of 2020 compared to US$60.5 million in the comparable period of 2019. The year-over-year decrease in Adjusted EBITDA was primarily a result of softer performance in all gaming segments.
City of Dreams Manila’s rolling chip volume was US$1.16 billion in the first quarter of 2020 versus US$2.29 billion in the first quarter of 2019. The rolling chip win rate was 3.72% in the first quarter of 2020 versus 3.18% in the first quarter of 2019. The expected rolling chip win rate range is 2.85% – 3.15%.
Mass market table games drop decreased to US$156.9 million for the first quarter of 2020, compared with US$184.3 million in the first quarter of 2019. The mass market table games hold percentage was 33.5% in the first quarter of 2020 compared to 30.6% in the first quarter of 2019.
Gaming machine handle for the first quarter of 2020 was US$859.2 million, compared with US$907.5 million in the first quarter of 2019. The gaming machine win rate was 4.1% in the first quarter of 2020 versus 5.8% in the first quarter of 2019.
Total non-gaming revenue at City of Dreams Manila in the first quarter of 2020 was US$25.6 million, compared with US$28.6 million in the first quarter of 2019.
Cyprus Operations First Quarter Results
The Company is currently operating a temporary casino, the first casino in the Republic of Cyprus, and four satellite casinos. Upon the completion and opening of City of Dreams Mediterranean, the Company will continue to operate the four satellite casinos while operation of the temporary casino will cease.
For the quarter ended March 31, 2020, total operating revenues at Cyprus Casinos were US$18.8 million compared to US$21.3 million in the first quarter of 2019. Cyprus Casinos generated Adjusted EBITDA of US$3.2 million in the first quarter of 2020 compared with Adjusted EBITDA of US$6.7 million in the first quarter of 2019.
Mass market table games drop was US$24.9 million in the first quarter of 2020 versus US$38.2 million in the first quarter of 2019. The mass market table games hold percentage was 21.5% in the first quarter of 2020 compared to 20.4% in the first quarter of 2019.
Gaming machine handle for the first quarter of 2020 was US$270.1 million, compared with US$243.5 million in the first quarter of 2019. The gaming machine win rate was 5.0% in the first quarter of 2020 versus 5.5% in the first quarter of 2019.
Other Factors Affecting Earnings
Total net non-operating expenses for the first quarter of 2020 were US$261.0 million, which mainly included other net non-operating expenses of US$179.4 million primarily related to the fair value losses on investment securities and interest expenses, net of amounts capitalized of US$78.2 million.
Depreciation and amortization costs of US$162.3 million were recorded in the first quarter of 2020 of which US$14.3 million related to the amortization expense for our gaming subconcession and US$5.7 million related to the amortization expense for the land use rights.
The negative Adjusted EBITDA for Studio City for the three months ended March 31, 2020 referred to in this press release is US$8.7 million less than the negative Adjusted EBITDA of Studio City contained in the earnings release for Studio City International Holdings Limited (“SCIHL”) dated May 14, 2020 (the “Studio City earnings release”). The Adjusted EBITDA of Studio City contained in the Studio City earnings release includes certain intercompany charges that are not included in the Adjusted EBITDA for Studio City contained in this press release. Such intercompany charges include, among other items, fees and shared service charges billed between SCIHL and its subsidiaries and certain subsidiaries of Melco. Additionally, Adjusted EBITDA of Studio City included in this press release does not reflect certain costs related to the table games operations at Studio City Casino.
Financial Position and Capital Expenditures
Total cash and bank balances as of March 31, 2020 aggregated to US$1.22 billion, including US$54.9 million of restricted cash, which was primarily related to Studio City. Total debt, net of unamortized deferred financing costs at the end of the first quarter of 2020 was US$4.65 billion.
Capital expenditures for the first quarter of 2020 were US$96.8 million, which primarily related to various projects at City of Dreams and the Phase 2 construction at Studio City.
Year to date, the Company has repurchased approximately 3 million ADSs, worth approximately US$45 million, under the US$500 million share repurchase program the Company announced in November 2018 and the maximum dollar value that may yet be purchased under this share repurchase program is approximately US$299 million.
Dividend Suspension
To preserve liquidity in light of the COVID-19 pandemic and to continue investing in our business, the board has decided to suspend the Company’s quarterly dividend program.
Recent Developments
The COVID-19 outbreak continues to have a material effect on our operations, financial position and prospects during the second quarter of 2020.
Our Macau operations continue to be impacted by significant travel bans, restrictions and quarantine requirements imposed by the governments in Macau, Hong Kong and certain provinces in China on nearly all visitors traveling to and from Macau. Additionally, health-related precautionary measures remain in place at all of our properties, which could impact visitation and customer spending.
Our Philippines casino gaming operations were closed due to the enhanced community quarantine for the entire island of Luzon, including Metro Manila, which was initiated on March 16, 2020 and was extended to May 15, 2020. On May 12, 2020, the Philippines government announced the implementation of a modified enhanced community quarantine, which is scheduled to take effect from May 16, 2020 to May 31, 2020, during which our Philippines casino gaming operations will continue to remain closed.
Our Cyprus operations were closed with effect from March 16, 2020 as a result of measures imposed by the Cyprus government. While the government has announced a gradual relaxation of the measures designed to contain the spread of COVID-19, casino operations are currently not expected to resume until July 2020 at the earliest.
The COVID-19 outbreak has also impacted the construction of the Studio City Phase 2 project and the progress of construction works at the City of Dreams Mediterranean project. We currently expect additional time will be needed to complete the construction of both projects.
As the disruptions from the COVID-19 outbreak are ongoing, any recovery from such disruptions will depend on future developments, such as the duration of travel and visa restrictions and customer sentiment, including the length of time before customers will resume travelling and participating in entertainment and leisure activities at high-density venues, all of which are highly uncertain.
Conference Call Information
Melco Resorts & Entertainment Limited will hold a conference call to discuss its first quarter 2020 financial results on Thursday, May 14, 2020 at 8:30 a.m. Eastern Time (8:30 p.m. Hong Kong Time). To join the conference call, please use the dial-in details below:
An audio webcast will also be available at http://www.melco-resorts.com.
To access the replay, please use the dial-in details below:
US Toll Free 1 844 760 0770
US Toll / International 1 347 549 4094
HK Toll 852 3018 8307
HK Toll Free 800 906 613
Japan Toll 81 3 4503 6004
Japan Toll Free 012 092 5482
UK Toll Free 080 0051 4241
Australia Toll 61 290 833 216
Australia Toll Free 1 800 754 642
Philippines Toll Free 1 800 1612 0312
Passcode 2969539
Safe Harbor Statement
This press release contains forward-looking statements. These statements are made under the “safe harbor” provisions of the U.S. Private Securities Litigation Reform Act of 1995. Melco Resorts & Entertainment Limited (the “Company”) may also make written or oral forward-looking statements in its periodic reports to the U.S. Securities and Exchange Commission (the “SEC”), in its annual report to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. Statements that are not historical facts, including statements about the Company’s beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties, and a number of factors could cause actual results to differ materially from those contained in any forward-looking statement. These factors include, but are not limited to, (i) growth of the gaming market and visitations in Macau, the Philippines and the Republic of Cyprus, (ii) capital and credit market volatility, (iii) local and global economic conditions, (iv) our anticipated growth strategies, (v) gaming authority and other governmental approvals and regulations, and (vi) our future business development, results of operations and financial condition. In some cases, forward-looking statements can be identified by words or phrases such as “may”, “will”, “expect”, “anticipate”, “target”, “aim”, “estimate”, “intend”, “plan”, “believe”, “potential”, “continue”, “is/are likely to” or other similar expressions. Further information regarding these and other risks, uncertainties or factors is included in the Company’s filings with the SEC. All information provided in this press release is as of the date of this press release, and the Company undertakes no duty to update such information, except as required under applicable law.
Non-GAAP Financial Measures
(1) “Adjusted EBITDA” is earnings before interest, taxes, depreciation, amortization, pre-opening costs, development costs, property charges and other, share-based compensation, payments to the Philippine parties under the cooperative arrangement (the “Philippine Parties”), land rent to Belle Corporation and other non-operating income and expenses. “Adjusted Property EBITDA” is earnings before interest, taxes, depreciation, amortization, pre-opening costs, development costs, property charges and other, share-based compensation, payments to the Philippine Parties, land rent to Belle Corporation, Corporate and Other expenses and other non-operating income and expenses. Adjusted EBITDA and Adjusted Property EBITDA are presented exclusively as supplemental disclosures because management believes they are widely used to measure the performance, and as a basis for valuation, of gaming companies. Management uses Adjusted EBITDA and Adjusted Property EBITDA as measures of the operating performance of its segments and to compare the operating performance of its properties with those of its competitors. The Company also presents Adjusted EBITDA and Adjusted Property EBITDA because they are used by some investors as ways to measure a company’s ability to incur and service debt, make capital expenditures, and meet working capital requirements. Gaming companies have historically reported Adjusted EBITDA and Adjusted Property EBITDA as supplements to financial measures in accordance with U.S. GAAP. However, Adjusted EBITDA and Adjusted Property EBITDA should not be considered as alternatives to operating income as indicators of the Company’s performance, as alternatives to cash flows from operating activities as measures of liquidity, or as alternatives to any other measure determined in accordance with U.S. GAAP. Unlike net income, Adjusted EBITDA and Adjusted Property EBITDA do not include depreciation and amortization or interest expense and, therefore, do not reflect current or future capital expenditures or the cost of capital. The Company compensates for these limitations by using Adjusted EBITDA and Adjusted Property EBITDA as only two of several comparative tools, together with U.S. GAAP measurements, to assist in the evaluation of operating performance.
Such U.S. GAAP measurements include operating income, net income, cash flows from operations and cash flow data. The Company has significant uses of cash flows, including capital expenditures, interest payments, debt principal repayments, taxes and other recurring and nonrecurring charges, which are not reflected in Adjusted EBITDA or Adjusted Property EBITDA. Also, the Company’s calculation of Adjusted EBITDA and Adjusted Property EBITDA may be different from the calculation methods used by other companies and, therefore, comparability may be limited. Reconciliations of Adjusted EBITDA and Adjusted Property EBITDA with the most comparable financial measures calculated and presented in accordance with U.S. GAAP are provided herein immediately following the financial statements included in this press release.
(2) “Adjusted net income” is net income before pre-opening costs, development costs, property charges and other, loss on extinguishment of debt and costs associated with debt modification, net of noncontrolling interests and taxes calculated using specific tax treatments applicable to the adjustments based on their respective jurisdictions. Adjusted net income attributable to Melco Resorts & Entertainment Limited and adjusted net income attributable to Melco Resorts & Entertainment Limited per share (“EPS”) are presented as supplemental disclosures because management believes they are widely used to measure the performance, and as a basis for valuation, of gaming companies. These measures are used by management and/or evaluated by some investors, in addition to income and EPS computed in accordance with U.S. GAAP, as an additional basis for assessing period-to-period results of our business. Adjusted net income attributable to Melco Resorts & Entertainment Limited and adjusted net income attributable to Melco Resorts & Entertainment Limited per share may be different from the calculation methods used by other companies and, therefore, comparability may be limited. Reconciliations of adjusted net income attributable to Melco Resorts & Entertainment Limited with the most comparable financial measures calculated and presented in accordance with U.S. GAAP are provided herein immediately following the financial statements included in this press release.
