Melco Resorts & Entertainment Limited (NASDAQ:MLCO) 2023 Q4 Financial Results Call Record February 29, 2024
Melco Resorts & Entertainment Limited missed profit expectations. Reported EPS was -$0.36, compared to estimate of $0.03. Melco Resorts & Entertainment Limited isn't among the 30 most popular stocks among hedge funds at the end of the third quarter (Please see here for the detail).
operator: Thank you, everyone, for joining Melco Resorts & Entertainment Limited's 2023 Fourth Quarter Earnings Conference Call. All participants are currently in listen-only mode. After the call ends, there will be a question and answer session. Today's meeting is being recorded. I would now like to hand over the call to Ms. Jeannie Kim, Senior Vice President and Group Financial Officer of Melco Resorts & Entertainment Limited.
Jeannie Kim: Dear operators, thank you for joining us today for our fourth quarter 2023 financial results briefing. Lawrence Ho, Jeff Davis, Evan Winkler and real estate presidents from Macau, Manila and Cyprus will be on the call. Before we begin, please be aware that today's discussion may include forward-looking statements made under the safe harbor provisions of the federal securities laws. Actual results may differ from expected results. Additionally, we may discuss non-GAAP measures. Definitions of each of these measures and reconciliations to his most similar GAAP financial measures are included in the earnings release. Finally, please note that our financial supplemental slides are posted on our Investor Relations website. I will now hand over to Mr. Lawrence Ho.
Lawrence Ho: Thank you, Jeannie, and thank you for joining us today. Many of you may already know that Macau COO David Sisk has resigned. The Company plans to undertake a thorough search process to identify and appoint talented individuals to advance the Company's business in Macau. In the meantime, Evan and I will be actively involved in the day-to-day operations of the Macau facility. As we move forward, our focus is to ensure Melco leads the market in all aspects of our business through innovation and collaboration. With this in mind, we are adding to our leadership team with new appointments in gaming operations, retail, hotel and food and beverage. We expect these new additions to our leadership team and changes in management to strengthen us as a team to ensure a stronger and more competitive future.
Return to results. Macau continues to demonstrate its exceptional growth potential and is showing resilience despite China's uncertain macroeconomic outlook. The number of visitors to Macau during this month's Lunar New Year holiday period approached 2019 levels, and the number of visitors from China exceeded his 2019 year. Our bulk GGR and Macau real estate's EBITDA during this RMB holiday period significantly exceeded the 2019 level. 2023 was a year of post-pandemic recovery and the opening of new facilities, City of Dreams Mediterranean and Studio City Phase 2. The Epic Hotel Tower at Studio City Phase 2 will offer guests a luxury hotel product never before available. Previously, Studio City included two- and three-bedroom suites and villas.
A new high-limit gaming area that opened in December on Epic Tower's second floor is drawing a high-end customer base to the property and driving gaming demand. The ABT generated by this customer base is reaching levels never seen before in Studio City, and Studio City's daily squares and slot GGR are at record levels. 2024 is going to be another exciting year for us. Among the various events and projects currently underway, a residency concert series at Studio City is scheduled to begin in March. We have begun construction on the cineplex at Studio City Phase 2 and aim to bring back the award-winning show “House of Dancing Water” by the end of the year. We will also begin the renovation of Countdown Hotel, providing a new high-end luxury hotel for premium mass customers.
In the Philippines, City of Dreams Manila has gained significant market share in popular table games and slots and continues to generate solid revenues. The City of Dreams Mediterranean in Cyprus continues to be affected by the Israeli conflict, and it is unclear how long this situation will last. But so far this year, there are some signs that demand is improving. Now, I'm going to give the phone to Jeff and check some numbers.
Jeff Davis: Thank you, Lawrence. Group-wide adjusted real estate EBITDA for the fourth quarter of 2023 was approximately $303 million. Luck-adjusted real estate EBITDA for the entire group in Q4 2023 was $320 million. Favorable winning odds had a positive impact of approximately $3 million on COD Manila, while unfavorable winning odds had a negative impact of approximately $20 million on COD Macau, Studio City, and Cyprus. Details of these adjustments can be found in the supplemental earnings slides available on our Investor Relations website. Macau's operating costs increased from approximately $2.5 million per day in the third quarter of 2024 to approximately $2.6 million per day in the first quarter of 2024, in line with guidance. This was primarily due to the full quarter impact of W Macau at Studio City, which opened in early September 2023.
Let's take a look at the balance sheet. The Company will repay an additional $200 million of its revolving credit facility during the fourth quarter of 2023 and repurchased $100 million of Studio City's debt through a cash bid. On a consolidated basis, the Company reduced total debt by $950 million during 2023 and will continue to focus on debt reduction in 2024. As of December 31, 2023, our consolidated cash on hand was approximately $1.4 billion. Melco's sales, excluding its Studio City, Philippines and Cyprus operations, were approximately $750 million. Approximately $125 million of this amount was restricted as collateral required for concession-related guarantees issued to the Macau government. Another notable move on the balance sheet in Q4 2023 is the approximately $200 million impairment charge on Altira.
Altira faces some challenges with changes to its VIP segment and continues to reposition its facilities. Altira expects it to reach breakeven in the fourth quarter of 2023, with improved performance in 2024. As usual, we will provide some guidance regarding non-operating items for the upcoming first quarter of 2024. Total depreciation and amortization expense will be approximately $135 million to $140 million. Corporate expenses are expected to be approximately $20 million and consolidated net interest expense is expected to be approximately $125 million to $130 million. This includes approximately $6 million in financial debt interest related to fees and accruals, namely fees payable in connection with the Macau Government Gaming Concession and Cypress Gaming License, and approximately $600 million related to City of Dreams Manila. Includes $1,000,000 of finance lease interest.
This concludes my prepared remarks. Operator, back to Q&A.
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