Melco Resorts & Entertainment Limited

Ladies and gentlemen, thank you for participating in the third quarter 2025 earnings conference call of Melco Resorts and Entertainment Limited. At this time, all participants are in a listen-only mode. After the presentation, we will conduct a question and answer session. Today's conference is being recorded. I would now like to turn the call over to Ms. Jeannie 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 2025 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'll turn the call over to Mr. Lawrence Hope.

Thank you, Jeannie, and thank you all for joining us today. Our properties in Macau delivered solid growth in the third quarter of 2025. with property EBITDA growing by 21% year-over-year, despite the negative impact of approximately 12 million due to the typhoon in September. Our momentum in Macau is continuing, and we did not see a slowdown in October following the holidays. In fact, our Macau GGR grew over 30% year-over-year post-Golden Week. and COD recorded its highest monthly mass tables GGR ever in October. We continue to introduce new initiatives to enhance the quality of engagement with our customers across all segments of our customer base. In July, we opened the signature clubhouse at City of Dreams for our premium mass customers, which includes private gaming salons, hair services, a Formula One simulator, and other exclusive amenities to provide a differentiated experience. In September, we reopened a gaming area featuring 15 gaming tables at City of Dreams near the Grand Hyatt, across from MGM Kotai and Wind Palace, and just steps away from the Macau Light Rail Station. This new area has been designed to appeal to walk-in crowd with lower table minimums and we have seen this area well utilized with a steady flow of new patrons. As we had announced previously, we closed Grand Dragon Casino and one of our MOCAs in September. The 15 tables from Grand Dragon were allocated to the new gaming space at COD, and 90 gaming machines from the MOCA closure were shifted to Studio City. We will close two more MOCAs before end of the year and the gaming machines will be reallocated across our three properties in Macau. We have started the renovation of the Countdown Hotel, which we currently expect to open in the third quarter of 2026. After completion, this hotel will bring a one-of-a-kind experience to Macau and the region. We plan to simultaneously upgrade retail and food and beverage in this precinct of COD and continue to elevate the quality of our product offerings. At Studio City, we unveiled a newly expanded high-limit gaming area along with four new private gaming salons at Epic Tower to provide an even more refined experience for our premium mass customers. In October, we relaunched the new iRad Hospital at Studio City. designed to further enhance Macau's tourism infrastructure with top-tier healthcare and wellness services. In the Philippines, property EBITDA grew 45% quarter over quarter, and we have seen good momentum in October. City of Dreams Mediterranean and the satellite casinos in Cyprus had their best quarter yet, with property EBITDA growing 53% year-over-year to $23 million. Despite the escalation of hostilities in the region at the beginning of the quarter, we're now in the shoulder season, but the property is coming into its own and showing solid year-over-year growth so far. In Sri Lanka, we opened City of Dreams Sri Lanka on August 1st as the first integrated resort in Sri Lanka and in South Asia. It is early days as we solidify our footing and continue to ramp up our operations there. With that, I turn the call over to Jeff.

Thank you, Lawrence. Our group-wide adjusted property EBITDA for the third quarter of 2025 grew 18 percent year-over-year to approximately 380 million. Adjusted for VIP hold, our property EBITDA was approximately 355 million. Favorable win rates at COD Macau and COD Manila had positive impacts on our property EBITDA by approximately 23 million and 2 million, respectively. We continue to remain focused on operational discipline, and our OPEX in Macau remained stable this quarter at approximately $3 million per day, excluding House of Dancing Water and the residency concerts. OPEX for House of Dancing Water was approximately $100,000 per day, as previously mentioned. Our Macau property EBITDA margin held steady at approximately 29% in the third quarter of 2025, which reflects our disciplined approach on costs as we drive sustained business growth. Turning to our balance sheet, our liquidity position remains robust. We had available liquidity of $2.6 billion with consolidated cash on hand of approximately $1.6 billion as of the end of the third quarter of 2025. Melco, excluding its operations at Studio City, the Philippines, Cyprus, and Sri Lanka, accounted for approximately $1.05 billion of the consolidated cash on hand. There was a quarter-over-quarter increase in MELCO's cash balance of approximately $360 million, which was largely due to the timing of the $500 million in bonds that we issued in September. As of the end of September, we had approximately $358 million of the bond proceeds remaining, net of $142 million, which had been used to settle a tender offer on the senior notes due 2026. In October, the remaining proceeds of the new bond were utilized to early redeem all of the outstanding senior notes due 2026, which had not been tendered. Following this exercise, the group does not have any material amount of debt maturing in 2026. We continue to reduce debt in the third quarter, with a total of $180 million being repaid, $70 million at Melco, and $110 million at Studio City. we repaid a further $180 million at Melco in October and November. In October, we also canceled $18.5 million of the approximately 32 million ADSs that were repurchased earlier this year at an average price of $5.10 per ADS. As we normally do, we'll give you some guidance on non-operating line items for the upcoming fourth quarter of 2025. Total depreciation and amortization expense is expected to be approximately $135 to $140 million. Corporate expense is expected to come in at approximately $25 to $30 million. And consolidated net interest expense is expected to be approximately $115 to $120 million. This includes finance liability interest of around $6 million relating to fees payable in relation to the Macau Gaming Concession and the Cypress Gaming License and finance lease interest of approximately $5 million relating to City of Dreams Manila. That concludes our prepared remarks. Operator, back to you for the Q&A.

Thank you. If you wish to ask a question, please press star 1 on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star 2. If you're on a speakerphone, please pick up the handset to ask your question. Your first question comes from George Choi with Citi. Please go ahead.

Hi, thank you very much for taking my questions. So you guys have introduced new cyber, just like everyone else does in Macau, to your operations over the last year or so. Would you say that they contributed positively to your recent growth, and would you be raising your theoretical hold rate anytime soon? And that's my first question. My second question is a housekeeping one. Would you please remind me the capex required for the renovation of the Countdown Hotel? Thank you very much.

Sorry, George, it's Lawrence. So, your first question was on the CEO hold rate for VIP?

Or perhaps, you know, mass hold rate trends that you are looking for.

Sure. So, again, the only one that we sort of publish something on and we adjust to is obviously on the rolling business, where we have a target of 3%. Based on what we're looking at from a data standpoint, and again, we continue to watch it, that number sitting here today is still a good number in terms of that business constituency and in terms of sort of the betting mix of those players. And I understand this varies some market by market, so there's some noise in the market about other markets raising that up substantially. But yet, today, we haven't yet seen a strong enough basis for us to adjust, but we're continuing to look at it. In terms of our mass business, obviously, as we've added more, it's been a positive uplift. I don't know that it's dramatic because we've gone from, you know, sort of the widely adopted on the banker six to the sevens bets. We are seeing a lift up, but I'm not sure that that's a massive driver as we sit here today. But obviously, it is improving as we're giving more options to our players in terms of our overall percentages.

And on the CapEx question for the countdown, that's about $125 million.

Thank you very much. Thank you.

Our next question comes from the line of Luis Ricardo Chinchilla Vargas. Please go ahead.

Hey guys, thank you so much for taking my questions. I wanted to start asking about the operating environment in terms of promotions. Have you guys seen any uptick or anything meaningful on that front?

Well, Macau is always going to be very dynamic and everyday. You're looking at how to compete. But I think I can say that I'm very proud of the team because throughout 2025, we've really held the line on reinvestment. And even this quarter, we keep track of the share shifts. on a daily basis, a weekly basis. And, you know, we're seeing some of that, but, you know, I think we've really held the line for throughout 2025 and we'll continue to observe it. And maybe I let Evan elaborate a bit more, but I think the environment is certainly, I would say is competitive, but stable.

I think that's fair. Again, you've probably seen some statements by some, you know, competitors talking about being more or less aggressive on certain programs. We sort of look by program, by player segment, and are evaluating constantly in terms of what we're doing. In Q3, while we're always tweaking and trying to optimize, we didn't see a big shift upward. Again, there's probably, if you look program by program, areas that we're going to look to tweak up and others that we're going to look to tweak down. We'll continue to monitor and respond to the competitive environment, but I think Lawrence said it well. It's very competitive, but at least right now it's not irrationally competitive.

Fantastic. That's a great caller. For my second question, I was hoping if you guys could give us some CAPEX guidance for next year, even though it might be early and you guys are still finalizing the budget.

You're right. We're in the midst of reviewing and finalizing and approving that budget. But as a placeholder for now, I think 400 for 2026 is a good number.

Wonderful. Thank you so much for taking my questions.

Thank you.

Thank you. Our next question comes from the line of John Decree with CBRE Capital Advisors. Please go ahead.

Hi, everyone. Thanks for taking my question. Lawrence, I apologize if I missed any prepared remarks. I dialed in a couple minutes late, but did you provide any color on Golden Week? And if so, I could get it offline to not make you repeat yourself, but interested in kind of what you guys see kind of pre and post around the seasonality and the shoulder periods, maybe relative to what you'd expect several years ago, or how strong are the peaks and how consistent is visitation on property kind of leading up into Golden Week, which I think typically be, you know, a little slower. And then have you seen any signs of slowdown after?

Hey, John, I think, you know, on Golden Week, the whole market was a bit disappointed because we were unlucky with there was a typhoon on, I think, day four. And then mid-autumn festival was effectively day six. And for mid-autumn festival, most people go back to their families and stuff. And so I think the whole market was quite disappointed by the first seven days. But throughout October, the last 21 days of October were extremely strong. And so I think the traffic that went, that skipped Golden Week or left early for Golden Week clearly came back. And so I think all in all, post-COVID, October was the best month. And I think for us as well, I think we've continued to, on a year-on-year basis, you know, kept up with the pace of growth in the market. So we're quite pleased. I don't know, maybe Evan has more.

No, no, I think Lawrence is spot on. Coming out of Golden Week, I think we all felt like it was a little soft and we were a little unlucky on the calendar and we were definitely unlucky on the weather. And then you normally get more of a drop off and it just sort of continued to stay strong and there was good tails going through October. So sitting here now, we look back and we're like, actually, October feels very good. I mean, we feel really good. But we didn't feel great immediately coming out of Golden Week. It was soft. But, you know, unusually, and as Lawrence said, I can't tell you if all the people who put off trips came back. We can't give you the precise causality of it. But we had a very, very strong period following it, much stronger than we would normally expect.

Awesome, Evan Lawrence, thank you for that. And maybe a quick one for Jeff on kind of OPEX per day. I know kind of maintaining cost discipline has been core to the story. You've given us a little cover in the past. Any change in kind of OPEX per day assumptions that you could see or could share or kind of study as it goes?

Maybe I'll take that. Jeff can add any color he wants. So we have a few things going on in Q4. we've got the China National Games where there's a fairly big level of support that we're going to be providing that's going to hit the P&L. You have the 10th anniversary of Studio City, and we actually have some pretty exciting promotional activity around that. So those are kind of one-offs that will be significant drivers in Q4. We also are entering a period where seasonally we tend to do a bit more promotion. And then also as the concerts or the residencies have dropped off which are normally excluded we are having some backfill activity to make sure that we have strong activation and so the net of all those is we're going to we're going to probably spike up here in q3 we're probably going to be more like in the three three ish range and we may again depending on some promotional and other activity that we're looking at drift a little bit higher but that should be coming down in in the subsequent quarters and I think probably premature to talk about how much, but we are going to see an uptick here in Q4 based on those things.

Great. Appreciate that, Kalar. Thanks, all.

Thank you. Our next question comes from the line of Joe Stoff with Susquehanna. Please go ahead.

Thank you. Thank you very much for taking the questions. A couple follow-ups just on that OpEx per day response that you had given. 3.3 all-in, including the one-times, is the right way to interpret that comment, correct?

That is the baseline, again, as we're looking at some promotional activity. It's not going to be lower than that. There are some things we're contemplating that could drift a little bit higher. But, yes, that's including the one-times.

Got it.

I wanted to zoom out.

For Q4. Q4, yes, of course.

Understood, understood. I wanted to zoom out. COD has been just a significant improvement and turnaround here over the past one and a half years. And just kind of zooming out and thinking about the strategic impact initiatives and investments you've made. Wondering if you could just maybe, like, rank what you think to be the most important investments and strategic initiatives that you've taken and made at COD to really kind of create this, you know, this impressive turnaround in results, especially year-to-date.

Well, we're all looking around each other. That's sort of one that was – Unexpected, but I'll give you my take and then maybe Lawrence or Tim or others will chime in. I'm not sure it's one individual thing. I think over the last 18 months, Lawrence has set a mandate that to some degree we need to kind of get our swagger and market leadership back at COD on product, service, and what we're doing. And so we've really done a breakdown on the business from soup to nuts at every position on every way that we provide service. looking at the customer experience, and then also sort of tying together what the customers experience on property. And so I don't have one big thing to point you to. It's literally been hundreds of items, and, you know, they're not on the call, but we have mid-level executives across the board that have contributed in big ways and small ways. So I've been really – happy and proud on how many different people have contributed in different ways. So, but it's been, you know, it's been a lot of small steps and then you kind of look back and you've climbed a pretty long way, but I don't know that there's one thing that's been the silver bullet.

No, I, I appreciate that. I know there are a lot of things going on, but you know, just curious of how you think about it. You know, there's always the market dynamic versus say the company specific say initiatives. And so that's the question.

No, and I think, I mean, add to that as well, you know, I think during COVID, we were, you know, barely surviving, right? So, and City of Dreams was always our flagship, you know, where Morpheus, new, you know, Forbes Lifestyle, and, you know, where we have the most Michelin star restaurants, and I think for a while during COVID, we just weren't living up to the brand, the brand promise and the brand proposition, and You know, I think with the new team coming on board and Tim in the leadership, I think we've revisited, like Evan said, we've revisited literally every single thing from like the tiniest amenities to much bigger attractions. And so I think we are, you know, I think we're, you know, finally post-COVID, you know, we've come out of that funk and we've rediscovered the swag of it.

Okay. Thank you for that. Just one quick one. Any update maybe on the process for strategic options for your Filipino asset? You know, any updates or reference points you can give us?

Sure. This is Jeff. We are approaching the end of the process with our advisors and should have a definitive assessment of our alternatives by the end of this year. This has always been an opportunistic exercise that's been driven by the potential for a one-off debt reduction event, not any specific desire to exit the manila market. So we have and will continue to be very valuation-driven on this exercise, and we'll continue to be disciplined in our approach to assessing the offers that we have for this business. But we hope to be back by year-end with a definitive answer.

Great. Thanks a lot.

Thank you. Our next question comes from the line of Praveen Chaudhry with Morgan Stanley. Please go ahead.

Thank you. Hi, Lawrence. Hey, Jeff. Thank you very much. I think the Macau market obviously is doing very well since May of this year. Q2 results, BGR being up 13%, October being up 16%. I guess investors are asking literally two questions. So I just wanted to ask you those two questions and see how you want to respond to it. One is obviously the margin which has been talked about where the competitive dynamics remain intense And the reinvestment cost is genuinely pretty high, which is why the margin could have been very high, but it's not. So any thoughts there that it is the bottom of that margin or peak of the reinvestment intensity? But the second question I had was on premium-driven business, meaning a very small number of people is driving a big chunk of the mass revenue and does the profit for the Macau business. And that is similar to, let's say, VIP-driven back in the days, which deserves lower multiple and so on. So the fact that Grindmas has been missing or at least been less available than we would like, is there anything you can talk about or are you seeing any early signs of that changing? That will be great. Sorry for the long-winded questions.

Hey Praveen, it's Lawrence. So maybe why don't I start and I'll hand it off to Evan and see if Jeff wanted to chime in as well. Um, you know, I think clearly when the VIP and the junket business went away, we had all hoped that margins would just, you know, rocket, you know, just, you know, go sky high. Um, and unfortunately that hasn't happened. And I, you know, I think it's well documented what some of our competitors have done. Um, And so, you know, I think as I mentioned earlier on in the Q&A, I'm very proud of the team because we've really held the line on reinvestment so far for the entirety of 2025. So theoretically, if all six concessionaires can kind of get their act together, you know, there should be margin expansion, you know, given that the market is growing and um and and so you know on one hand i think as mentioned as evan mentioned earlier you know i think we're past peak um competitiveness in terms of the intensity in the market but at the same time i think everybody is still you know thinking of ways to to try to steal business and and grab share and you know I would say as well, you know, I think every time I read a sell side research, everybody just talks about market share. So I don't blame some of our competitors for constantly focusing on that rather than being more focused on EBITDA. So, you know, again, you know, I think it's as rational as it has been in the last maybe 12, 18 months. But, Again, I'm pleading with our competitors and also sell-side research analysts to maybe place less emphasis on weekly, monthly market shares as well so that people don't feel like they are pressure to chase market. I don't know.

Maybe Evan want to... I guess, Privyen, on the two that you asked, from a margin standpoint, I agree obviously with Lawrence that there should be room to accrete upwards I'm not sure sitting here in the competitive market today that I bank on that one way or another. We could always be surprised. But look, right now, the market remains competitive. I think the dream for everyone is if everyone competed in a very rational way on product and service, that there should be upside within this market that I hope we realize. And also, I think I have a hope that as we continue to get more and more mass business into the market and you get sort of just a better supply-demand dynamic in terms of what's available, that that will continue to improve. When the junket business left, there's a lot of product and service that they were using that didn't get used, and that's sort of been backfilled by people going after that premium mass business. So you're seeing the effects of that from competition. So I think margins are stable, but I don't know if there's a near-term catalyst that'll do that, but I think the overall long-term trend is healthy. In terms of the premium-driven business, I'm not 100% sure if that was going after premium direct business, where yes, that business tends to be fairly clumpy, driven by pretty large players. We are seeing more players from more geographies around the world, so while that is the nature of that business, it feels pretty healthy. In terms of, if you meant premium mass, uh, yeah, we're always going after those premium players. Um, and we're not really going after grind, grind mass, but we are again, seeing new players coming into the market. So, uh, I don't know that that's, I wouldn't sort of signal that out. It's not healthy. I do think that we are getting a healthy drive on the, on the mass business overall. Um, we don't tend to be kind of a grind mass player. So I, I probably have less insight into that. Um, market demographic, but in terms of players coming into our system, I think we feel good about market growth.

That is very helpful. Can I just have a last follow-up question on Sri Lanka? You know, it's early days. I totally appreciate that. But when you entered the market, you had a view that it will be a return-accurative market, and eventually it will generate a certain kind of EBITDA. Is there anything you picked up in terms of either it's been too difficult or regulatory issues or visitation being weaker or you need to tweak business models slightly or you need to provide something? Anything you can share about that market? That would be very helpful. Thank you, Lawrence.

Hey, Praveen. I think super early days has only been open for three months. And for us, it's a whole new market because – You know, it's mainly targeted at the Indian market. So, you know, there's a lot for us to learn along the way. You know, I think we're very optimistic about the country and the tourism growth in that market. And I would say that we're learning every day. And, you know, there are, you know, new programs that we haven't really, you know, seen before. And anyway, I'm sure we'll have more to report in subsequent quarters.

Got it. Thank you.

No, no, I would just say, look, initially when you go into a market that already has some incumbents, it's a little bit of a steel share market where you have incumbents protecting the existing customer base. We're luring them with a better product and service, but you have promotional activity, and so we're kind of in the early days of that. I think our long-term strategy is we want to expand that market and change the kind of customer that's going into that market who expects more premium product. But that's not going to be, you know, done in a month or two. That's going to be done here over subsequent quarters. So as Lawrence said, we're early days. We're focused on getting that very valuable high-end guest. And that's going to be a journey from here to there.

Yeah, that's good, Colin. Ivan, thank you.

Thank you. Our next follow-up question comes from the line of George Choi with Citi. Please go ahead.

Thank you. So you guys have made significant progress on the leveraging, and if there's any positive results in this COD Manila strategy review, your hearing is going to go down further. So I'm just wondering if you have any new thoughts on your cash allocation strategy. Thank you.

Thanks, George. As you know, in the post-COVID period, we've been very laser-focused on debt reductions. And we've had some meaningful success in paying down some of the debt that we incurred during the three challenging years of COVID. However, going into next year, we plan to take a more balanced approach using our free cash. And while debt reduction will continue to be a primary mandate, we aim to potentially recommence the quarterly dividend by the end of next year.

That is encouraging. Thank you very much. Thank you.

There are no further questions at this time. I now hand back to Ms. Jeannie Kim for closing remarks.

Thank you, and thank you all for joining us again today. We will look forward to speaking to you next quarter. Thank you.

Thank you. That does conclude our conference for today. Thank you for participating. You may now disconnect.