Melco Resorts & Entertainment Limited

Ladies and gentlemen, thank you for participating in the second quarter of 2021 earnings conference call of Melco Resorts and Entertainment Limited. At this time, all participants are in listen-only mode, and after the call, we'll conduct a question-and-answer session. Today's conference is being recorded. And I'd like to turn the call over to Mr. Robin Yuen, Director of Investor Relations of Melco Resorts and Entertainment Limited. Please go ahead.

Thank you all for joining us today for our second quarter 2021 earnings call. On the call are Lawrence Ho, Jeff 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 will now turn the call over to Mr. Ho.

Thank you, Robin. Before we begin to talk about our business performance, I would like to express our sympathy to the people who have been impacted by the flooding in China. We hope for a swift recovery of the situation soon. Our results in the second quarter continue to reflect the pandemic's impact on the business. However, on a sequential basis, we experienced a progressive recovery in business levels as tourists returned to Macau. First, we would like to thank the Macau and mainland Chinese governments for the efficient handling of the COVID-19 situation. As travel restrictions loosen and visitors gradually return, Macau has enjoyed a steady recovery in its integrated resorts industry and its overall economy. We have rolled out employee vaccination incentive programs to support the government's efforts to meet its community vaccination goal of 70%. Since mid-July, Macau's vaccination rate has reached over 30% and is on track to hit herd immunity before the end of the year. Here at Malco, our overall employee vaccination rate has reached almost 65%. We have followed the COVID-19 guidelines set by the Macau government, and we have dedicated substantial resources to create a safer environment for the community, our customers, and our colleagues. In Macau, our mass table games operation, which contributes the vast majority of our EBITDA, saw another quarter of sequential improvement. Continuing the trend from last quarter, we delivered positive property EBITDA for our Macau operations and our overall global operations. Our Macau operations registered an over 10% increase in GGR, while property EBITDA grew by a factor of 9. May Golden Week was a success and confirmed our expectations of pent-up demand from our customers. For the first five days of Golden Week, Industry GGR hit 50% of 2019 levels, and we experienced similar levels of strong growth driven by our premium mass market and premium direct businesses, highlighting our longstanding focus on the premium segment. In the Philippines, our gaming and hospitality operations at City of Dreams Manila were closed for the month of April due to government-imposed quarantine measures. We subsequently reopened at 50% capacity on May 1st and have seen a strong recovery in pent-up demand, especially led by mass market patrons. As such, we have repositioned some of our gaming space from VIP to premium mass. In Cyprus, we were pleased to reopen our casino operations in May after a government-mandated lockdown from the beginning of the year. with restrictions on patron capacity and gaming position. On June 10th, the restrictions on gaming positions were lifted, allowing us to accommodate our normal capacity. We are encouraged that Cyprus returned to profitability in June and that Cyprus has virtually breakeven in EBITDA for the quarter. Looking ahead, We're encouraged by the increasing vaccination rate in Macau, Hong Kong, and China. We remain optimistic on the recovery of our gaming business, especially in our premium math and premium direct segments. That said, the safety and well-being of our customers and colleagues remain our highest priority, and Melco will take the necessary precautions to guard against the pandemic. While COVID-19 has brought challenges, Melco remains committed to its global development program. In Macau, construction of Studio City Phase 2 remains ongoing, and we expect its completion no later than December 2022. Upon completion, the Phase 2 expansion will increase Studio City's hotel room inventory by approximately 60%, with two new luxury hotel towers offering approximately 900 luxury hotel rooms and suites. There will be additional gaming space, and non-gaming facilities, including a cineplex, fine dining restaurant, state-of-the-art MySpace, and one of the world's largest indoor-outdoor water parks. We launched the grand opening of the Phase 1 outdoor water park in May, with summer season passes for the water park quickly selling out. At City of Dreams, the newly renovated Nuwa Hotel reopened on March 31st. And we have continued building additional suites and guest rooms at our Morpheus Hotel. The Countdown Hotel closed at the end of March 2021 and is undergoing a transformation into a luxury hotel that is expected to reopen in 2023. Hosted at Studio City, we have announced a series of residency shows featuring an incredible lineup of A-list superstars, namely Aaron Kwok, Joey Yung, and Leon Lai for the next three years. Such entertainment offerings will differentiate us from the competition. This should enhance Studio City's brand and entertainment proposition and represent an opportunity to drive visitation across the entire Melco portfolio in Macau. At Altera, starting in the third quarter of this year, we've embarked upon a strategic shift that aligns Melco's first integrated resort with the company's broader focus on the high-margin premium mass segment. Consequently, we've shut down VIP operations at Altera and moved both its existing junket and premium direct VIP business to City of Dreams and Studio City. We will refocus some of the existing VIP gaming space to cater to the premium mass segment and reallocate non-gaming assets to support the premium mass initiative. Although historically focused on the VIP segment, Altera has always enjoyed a level of premium mass play, which we will enhance and reinforce through this strategic realignment. Accordingly, we've also reassessed the VIP cost structure at Altera and have made efforts to align its cost base with its new demographic positioning. We do not believe it will be necessary to incur material capital expenditure to implement this strategic shift. We expect the transformation to take approximately 12 months to complete. After the transformation, we expect Altera to emerge as a stronger, higher margin, more stable property in the portfolio. In the Greater Bay Area, Melco International, our Hong Kong listed parent company, recently announced they will build a theme park in Zhongshan City as part of a larger mixed-use property development with a local partner. The theme park is in alignment with the central government's desire to develop non-gaming assets in the area. The theme park and potentially other components of the overall development is expected to use Melco Resorts IP. which represents an excellent opportunity to highlight our brand in Guangdong. Turning to Cyprus, the construction progress of City of Dreams Mediterranean continues. After completion, it will be Europe's largest integrated resort, with more than 500 luxury hotel rooms, approximately 100,000 square feet of MySpace, an outdoor amphitheater, a family adventure park, a variety of fine dining outlets, and luxury retail. In Japan, we remain committed to bringing a world-leading integrated resort there and continue to pursue opportunities within the market where we remain actively engaged with our partners. COVID continues to present challenges for the country in terms of process timing and travel, but the development of the integrated resort industry in Japan has continued to move forward. We remain convinced that Japan represents the best potential new gaming market globally and that the quality of our assets and our focus on premium segments is a great fit for the country's tourism development. We remain patient and continue to maintain our disciplined approach with respect to all development activities, including in Japan. Finally, I remain optimistic in Malco's medium and long-term growth prospects. I am encouraged by the normalization of travel restrictions for all Guangdong visitors. Meanwhile, our balance sheet and liquidity profile have improved thanks to recent debt financing activity and improvement in our operating environment. In my view, Macau remains the most attractive integrated resort market in the world. We will overcome these near-term challenges and build towards a greater future. With that, I turn the call over to Jeff to go through some of the numbers.