Melco Resorts (MLCO) Q3 2026 Earnings Call Transcript

DATE

Wednesday, Nov. 4, 2026

CALL PARTICIPANTS

• Senior Vice President, Group Treasurer - Jeanny Kim

TAKEAWAYS

• Group-wide Adjusted Property EBITDA -- $288 million for the third quarter of 2026, representing the company's operating performance across all regions.
• Adjusted for VIP Hold EBITDA -- $298 million, accounting for win rate fluctuations in the VIP segment during the third quarter.
• VIP Win Rate Impact (City of Dreams Macau) -- Negative $14 million impact on EBITDA due to unfavorable outcomes in the high-stakes segment.
• VIP Win Rate Impact (Manila and Sri Lanka) -- Positive $2 million impact at each property, partially offsetting losses in Macau.
• Daily Operating Expenses (Macau) -- $3.2 million, which included costs for The House of Dancing Water and remained below previous guidance.
• Total Liquidity -- $2 billion as of Sept. 30, 2026, providing a buffer for ongoing operations and debt management.
• Cash and Cash Equivalents -- $887 million, including restricted cash, as of the end of the third quarter.
• Melco Resorts Cash Holdings -- $474 million, excluding amounts held by Studio City, the Philippines, Cyprus, and Sri Lanka.
• Debt Redemption (Studio City) -- $165 million in 6.5% senior notes due 2028, reducing future interest expenses.
• Debt Redemption (Melco Resorts) -- $600 million in 5.625% senior notes due 2027, funded via revolving credit facilities.
• Share Repurchases (Current Period) -- $160 million for approximately 33.1 million ADSs between July 1 and Nov. 3, 2026.
• Total 2026 Share Repurchases -- $236 million for 47.1 million ADSs through early November.
• Depreciation and Amortization Guidance -- $140 million to $145 million for the fourth quarter of 2026.
• Corporate Expense Guidance -- $20 million to $25 million anticipated for the final quarter of the year.
• Consolidated Net Interest Expense Guidance -- $115 million to $120 million for the fourth quarter.
• Finance Liability and Leased Interest -- $11 million combined for gaming concessions and the Manila property lease.
• CapEx Guidance (Q4 2026) -- $95 million, bringing the total yearly capital expenditure to $375 million.
• CapEx Guidance (2027) -- $275 million, reflecting a reduction from previous investment estimates.
• October Macau GGR -- 10% year-over-year decline in the broader market, despite company-specific outperformance.
• City of Dreams Manila EBITDA -- $33 million, showing stability compared to the previous quarter despite economic pressures.
• REM Hotel Inventory -- 150 keys, which is expected to result in a minor increase in group operating costs.

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RISKS

• Lawrence Ho stated, "The Macau market remains extremely competitive," requiring more disciplined resource allocation and reinvestment strategies.
• Evan Winkler warned that broad economic softness in China affected multiple customer segments entering October.
• Evan Winkler stated the company is focused on avoiding "unhealthy levels in reinvestment" during periods of lower demand.

SUMMARY

Melco Resorts & Entertainment Limited (NASDAQ:MLCO) reported third quarter results characterized by debt reduction and reinvestment in its Macau properties. Management highlighted the opening of the REM hotel and ongoing retail renovations at City of Dreams as initiatives to capture evolving customer demand. The company executed multiple debt redemptions and continued its share repurchase program, which leadership identified as a priority for capital allocation. Management reported that the company outperformed the broader Macau market in October following internal adjustments to its sales force and player club programs.

• Management reported that the new REM hotel and retail renovations at City of Dreams are expected to be substantially complete before the Chinese New Year.
• The Morpheus hotel at City of Dreams was awarded three Michelin Keys, becoming one of only four hotels in Greater China to receive the distinction.
• Geoff Davis noted that the company currently has no debt maturities scheduled for 2027 following recent redemptions.
• The company is launching a new player club to improve disciplined reinvestment and maintain margins amidst lower market demand.
• Evan Winkler stated, "the approach that we're taking and we're signaling to the market is we think the right thing to be doing here is to continue to be disciplined in what we're doing going forward."
• Management indicated a potential reinstatement of dividends toward the end of 2027, though timing remains dependent on share repurchase opportunities.

INDUSTRY GLOSSARY

• ADS: American Depositary Share, a US dollar-denominated equity share of a foreign-based company available for purchase on an American stock exchange.
• Adjusted Property EBITDA: A non-GAAP financial measure used to evaluate the operating performance of specific resort properties.
• GGR: Gross Gaming Revenue, representing the difference between the total amount wagered by players and the amount they won.
• Integrated Resort: A major resort property that includes a hotel, casino, retail space, and entertainment facilities.
• Macau Gaming Concession: The legal right or license granted by the Macau government to operate casino gaming.
• The House of Dancing Water: A large-scale water-based stage production at City of Dreams Macau.
• VIP Hold: The percentage of chips wagered by high-stakes players that the casino retains as revenue.

Full Conference Call Transcript

Operator: Ladies and gentlemen, thank you for participating in the third quarter 2026 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 Ms. Jeanny Kim, Senior Vice President, Group Treasurer of Melco Resorts & Entertainment Limited.

Jeanny Kim: Thank you, operator, and thank you all for joining us today for our third quarter 2026 earnings call. On the call are Lawrence Ho, Geoff 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 provisions of federal securities laws. Our actual results could differ from our anticipated results. In addition, we may discuss non-GAAP measures. Definitions and reconciliations 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 now turn the call over to Mr. Lawrence Ho.

Lawrence Ho: Thank you, Jeanny, and thank you all for joining us today. We continue to be confident in the long-term prospects of our business in Macau. We're focused on disciplined execution of our strategy to drive strong returns. Our distinctive product portfolio in Macau reflects the best in luxury and innovation. Coupled with the opening of our newly branded hotel, REM, and the renovation of our retail space at City of Dreams, we believe we're well-positioned to capture the demands of our evolving customer base, supporting long-term growth. We're also proud that Morpheus at City of Dreams has been awarded three Michelin Keys, becoming the first hotel in Macau and one of only four in Greater China to receive this distinction.

This recognition underscores our commitment to delivering exceptional hospitality and guest experiences. We continue to enhance our product offerings through improvements to City of Dreams retail and food and beverage experiences. Work is underway. We expect to unveil completed areas progressively from the end of this year, with a substantial portion coming on stream before Chinese New Year and construction continuing into summer of 2027. Once complete, City of Dreams will offer the most interactive retail and dining experience in Macau, one that is truly second to none. The Macau market remains extremely competitive. We have been increasingly disciplined in allocating resources, with a sharper focus on customer acquisition and reinvestment, and ensuring every dollar invested strengthens returns.

Alongside these efforts, our performance has improved, with our business outperforming the broader Macau market in October. Turning to the operations outside Macau. In the Philippines, despite broader economic pressures, City of Dreams Manila demonstrated resilience with adjusted property EBITDA remaining steady at approximately $33 million in the third quarter of 2026 compared to the prior quarter. In Cyprus, City of Dreams Mediterranean and our satellite casinos continue to show strong growth, recording the highest quarterly EBITDA since the start of operations. In Sri Lanka, we continue to build on our understanding of the market and customer preferences as we ramp up operations. With that, I turn the call over to Geoff.

Geoff Davis: Thank you, Lawrence. Our group-wide adjusted property EBITDA for the third quarter of 2026 was approximately $288 million. Adjusted for VIP hold, our adjusted property EBITDA was approximately $298 million. Unfavorable VIP win rates at City of Dreams Macau negatively impacted property EBITDA by approximately $14 million, partially offset by favorable VIP win rates at City of Dreams Manila and Sri Lanka, which positively impacted property EBITDA by approximately $2 million at each property. Total daily OPEX in Macau declined to approximately $3.2 million during the third quarter of 2026, inclusive of The House of Dancing Water and below our prior guidance.

While the operating environment remains competitive, we continue to review our operating structure and adjust spending in response to changes in demand and business volumes while maintaining the highest standards of service and product offerings. Turning to our balance sheet, we continue to maintain a strong liquidity position. As of September 30, 2026, we had total liquidity of approximately $2 billion, including approximately $887 million of cash and cash equivalents and restricted cash. Melco Resorts, excluding Studio City, the Philippines, Cyprus, and Sri Lanka, accounted for approximately $474 million of cash and cash equivalents. During the quarter, Studio City redeemed $165 million in aggregate principal amount of a 6.5% senior notes due 2028.

The redemption was funded principally through a drawdown under Studio City's senior secured credit facility and cash on hand, which reduces interest expense. In September, Melco Resorts also redeemed $600 million in aggregate principal amount of its 5.625% senior notes due 2027 in full. The redemption was funded through a drawdown under Melco's revolving credit facilities and also resulted in reduced interest expense. We currently do not have any debt maturities in 2027. From July 1st through November 3rd, 2026, we repurchased approximately 33.1 million of our ADSs for consideration of approximately $160 million. This brings total repurchases in 2026 to approximately 47.1 million ADSs for aggregate consideration of approximately $236 million.

As we normally do, we will give you some guidance on non-operating line items for the upcoming fourth quarter of 2026. Total depreciation and amortization expense is expected to be approximately $140 million-$145 million. Corporate expense is expected to come in at approximately $20 million-$25 million, and consolidated net interest expense is expected to be approximately $115 million-$120 million. This includes finance liability interest of approximately $6 million relating to fees payable in relation to the Macau gaming concession and the Cyprus gaming license, and financed leased interest of approximately $5 million relating to City of Dreams Manila. That concludes our prepared remarks. Operator, back to you for the Q&A.

Operator: Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two. If you are on a speakerphone, please pick up your handset to ask your question. Your first question comes from David Bain with Texas Capital Bank. Please go ahead.

David Bain: Great. Thank you. I guess, first, during the quarter, we saw, I would call it, notable volatility and share price dislocation with MLCO. Recognizing liquidity makes it difficult to be opportunistic, I guess, in the open market, it kind of reopened the debate, I think, around potential consolidation. Just given your focus on deleveraging and maybe even the upcoming dividend this year, does consolidating MLCO corporate structure, does that rank somewhere within the priority list? Or just any kind of color around what kind of conditions could things evolve that direction?

Lawrence Ho: Hey, David, Lawrence.

David Bain: Hi.

Lawrence Ho: Maybe I'll start and Geoff can supplement. I think our corporate priority, as we've stated for the last two or three years, has been to delever. But recognizing there is a massive dislocation of share prices versus what we believe the fair market value of Melco Resorts is, as Geoff said in his prepared remarks, we have bought back a lot of shares at Melco. Any sort of Studio City consolidation, that is not a priority at all. But at the same time, we're always open to look at what is the optimum structure.

David Bain: Got it. That makes sense. Okay. Could we also get your take on the recent Macau government guidance fund? Just given the reinvestment or the investment counts towards the mandatory quotas, does that alleviate maybe uncertainty in terms of non-gaming physical extension disruption? Is this a better result for you and your requirement? Does it even more broadly have any theoretical impact on 2032 renewals, either from a goodwill perspective or structurally?

Lawrence Ho: Well, I think we think so. We're always happy to support the government in their initiatives. I think the most important thing for Melco and our fellow competitors in the industry is that this counts towards our stated investment. So, I think if anything, it does remove some of the uncertainties of having to do more events or other things. So all in all, I think it's a good outcome.

David Bain: Okay, great.

Geoff Davis: David, if there was an accounting question in there is going to be a difference in how we treat it at MIDL with IFRS versus US GAAP for MLCO. For MIDL, the accounting will record the investment as an asset, likely an intangible asset, but we are still finalizing that with our auditors. Similarly, at Melco, we are still working with our auditors on the final treatment there. But we do anticipate accounting for it as an asset downstairs as well.

David Bain: All right, perfect. Thanks, Geoff. Thanks, guys.

Operator: Your next question comes from Praveen Choudhary with Morgan Stanley. Please go ahead.

Praveen Choudhary: Thank you. Hi, Lawrence. Hi, Geoff. Hi, Evan. Greetings, and congrats on steady business and grand opening of REM Hotel. I have two questions. The first one is financial. Could you tell us if you have a deleveraging target, either over the next 12 months or over a medium period? Also, do you have dividend reinstatement targets? That is the first question. The second question is just asking about the current demand environment, especially if you can talk about second half of October, November. There has been some slowdown in the premium segment, and then how are you looking at it right now? Thank you.

Lawrence Ho: Hey, Praveen, maybe I will take the second question first and let Geoff answer the first one, and Evan can supplement it. The market is challenging right now, and I think everybody saw that October was down 10%. Let's not forget last year, last October 2025, I mean, we had typhoons, and then I think Mid-Autumn Festival was stuck in there, so it was already kind of a low base. So it is, I think on other calls, we have also listened. I don't think there is one factor. I think the main thing is really the consumption part of the Chinese economy tends to be a bit weak right now.

There could be aftereffects of the World Cup, the overseas tax issues. So, I think it is a little bit of a perfect storm. I don't think it affects our long-term thesis of the durability of this market. I think at the same time, we were happy to see that we made some changes over August and September, and those are starting to play out for us in October. I think maybe Evan can talk about it more.

Evan Winkler: Yeah. No, I think, Praveen, as you talk about the market, I think we saw similar to what others have seen, which is there is some softness going into October. I don't think it was only at the high end, although people talk about sort of different points on what the high end is. We did see some softness going in. I think, as Lawrence alluded to, our relative positioning, because we have been going through some changes in our sales force and other things in the August, September timeframe, bore some fruit. So we did a little bit better in October from a company standpoint.

From an overall market standpoint, I think, as Lawrence said, we have hit a little bit of a soft pocket. I think some of that is just the general overall China economy coming through. I am not sure that I would point, and I know others have acutely, only to the high end. It is not just in the sort of top players that we are seeing. We are seeing some general softness as you go down, which makes us sort of feel like it is probably a little bit more overall China economy than just the specific tax one that is sort of getting the highlights.

As Lawrence said, I think as we look forward, I don't think we view it as a permanent structural change. I think we view it more as a soft pocket, and we are working through it. Praveen, on your first question, as Lawrence said, deleveraging is our number one priority with our free cash flow. We don't have a specific target to share, but we'd like to be a lot closer to where we were in 2019 versus where we are today. On the dividend, perhaps to echo what we said on the second quarter call, we would still aim to recommence a dividend potentially towards the end of next year.

That'll be very hard to predict the exact timing, given that we will have potentially other opportunities to continue to buy back stock. We have prioritized buying back stock at these very dislocated levels of valuation, and you can expect us to continue to buy stock if the shares stay at or around these levels. Dividend is still something we would endeavor to do on the horizon, but timing is difficult to pinpoint.

Praveen Choudhary: Thank you so much. Those are very clear. Can I have a follow-up question? I wanted to ask about the competitive intensity. First of all, the OPEX number looks good, so clearly everyone, but also you are working on your OPEX. The issue is that now our GGR numbers for the market has turned negative. When revenue was great, our cost was also up for the industry, and now that GGR is negative, even though we are working on OPEX and reinvestment, I'm worried that EBITDA growth is not visible. I just wanted to understand from your perspective, sitting there, what could you do to ensure that your EBITDA is not falling, or you can maintain at this level?

What else can you do? Thank you so much.

Evan Winkler: Why don't I lead off, and Lawrence and Geoff may also comment. Again, I think from where we are as a market and what we're focused on very much so is that as you go into a period of lower demand, that you're not trying to chase to unhealthy levels in reinvestment to get the business that's there. We actually, as we speak, are launching our new player club tomorrow morning.

So we've gone back over the last couple of months in the wake of some changes that we've made in our sales force to make sure that we're taking an appropriate and disciplined approach to how we're looking at reinvestment relative to player performance across the board, and trying to make sure that we're putting in guide rails and everything else to make sure that we maintain margins moving forward.

I think the approach that we're taking and we're signaling to the market is we think the right thing to be doing here is to continue to be disciplined in what we're doing going forward, because it's very easy to chase everybody down to the bottom, especially if you're in a market where people feel like they need to grab a little bit of share because revenue is soft. I think we feel good about where we are and what we're doing, but the market's going to continue to be dynamic, and the market right now continues to be competitive.

What I would tell you is we, with Lawrence's direction, put in place programs that we think are customer attractive but that preserve margin. We're going to have to see how that plays out over the next month or two, because obviously we're going to react to what others do. But the hope is that others will sort of follow the lead and take a rational approach, because again, as demand softens, you don't want to double the impact by having a circumstance where everyone is throwing money at getting the remaining share and driving down margins disproportionately.

So, I'd say we're a leader in rationality, but whether or not everyone decides to follow suit or to check themselves into the asylum, we will see over the next month or so.

Praveen Choudhary: Cool. Thanks so much. Again, thanks for being disciplined. Congrats on REM, on buyback, and getting share in October.

Evan Winkler: Thanks, Praveen.

Operator: Your next question comes from Timothy Chau with Citigroup. Please go ahead. Timothy, your line has been unmuted. You may proceed with your question.

Timothy Chau: Hi. Sorry, I think I was on mute just now. I actually have two questions here. First of all, thank you so much for the opportunity. The first one is about REM. If I remember correctly from last quarter's guidance, I think the opening of REM should not have significant impact on the costing of the overall group. I'm just wondering if this guidance still stands, seeing REM is currently operating normally now. The second question is about the CapEx guidance. I'm just wondering if there's any change or any color on how we should be looking at the CapEx guidance, sorry, CapEx by end of this year and also next year. Thank you.

Evan Winkler: Sure. This is Evan. Maybe I'll take REM, and then Geoff will do CapEx. I think the guidance that we gave you in the last call is correct in the sense that Tim and the team at COD have worked very hard to try and move bodies around, not to increase incremental costs in terms of opening up the additional room count. We are going to see a tick up in expenses overall, just because it still is an incremental 150 keys. But we're trying to find other places where we can rationalize expense. So, I would say it's not a dramatic move up, but there will be a tick up now that we've got REM fully operational.

Geoff Davis: And on the second question on CapEx, we've been able to bring down CapEx for the remainder of 2026 and for 2027 as compared to prior guidance. So for the fourth quarter of this year, we're looking at about $95 million of CapEx, bringing the total to roughly $375 million. And then for next year, we're looking for total CapEx of around $275 million.

Timothy Chau: That's very clear. Thank you so much for the color.

Operator: Thank you. There are no further phone questions at this time. I will now hand back to Jeanny Kim for closing remarks.

Jeanny Kim: Thank you for participating in the conference call today, and we look forward to speaking to you again next quarter. Thank you.

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

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