Melco announces record Adjusted Property EBITDA in the Q1 2018

Melco Resorts & Entertainment Limited, a developer, owner and operator of casino gaming and entertainment casino resort facilities in Asia, today reported its unaudited financial results for the first quarter of 2018.

Net revenue for the first quarter of 2018 was US$1,313.1 million, representing an increase of approximately 3% from US$1,277.2 million for the comparable period in 2017. The increase in net revenue was primarily attributable to higher group-wide gross gaming revenues in all gaming segments, partially offset by higher commissions reported as a reduction in revenue upon the Company's adoption of a new revenue recognition standard issued by the Financial Accounting Standards Board. The Company adopted the New Revenue Standard using the modified retrospective method from January 1, 2018. Results for the period beginning after January 1, 2018, are presented under the New Revenue Standard, while prior year amounts are not adjusted and continue to be reported in accordance with the previous basis. Under the previous basis, before the adoption of the New Revenue Standard, net revenue for the first quarter of 2018 would have been US$1,412.9 million, which would have represented an increase of approximately 11% from the US$1,277.2 million for the comparable period in 2017.

Operating income for the first quarter of 2018 was US$221.1 million, compared with operating income of US$158.5 million in the first quarter of 2017, representing an increase of 40%.

Adjusted property EBITDA(1) was US$401.8 million for the first quarter of 2018, as compared to Adjusted property EBITDA of US$353.3 million in the first quarter of 2017, representing an increase of 14%. The year-on-year improvement in Adjusted property EBITDA was mainly attributable to the higher contribution from Studio City and Altira Macau driven by increased gross gaming revenues in all gaming segments.

Net income attributable to Melco Resorts & Entertainment Limited for the first quarter of 2018 was US$156.6 million, or US$0.32 per ADS, compared with US$113.4 million, or US$0.23 per ADS, in the first quarter of 2017. The net income attributable to noncontrolling interests during the first quarter of 2018 of US$6.7 million was related to Studio City and City of Dreams Manila.

Mr. Lawrence Ho, our Chairman and Chief Executive Officer, commented "Macau has had a strong start to the year with year-to-date gaming revenue growth at approximately 22% compared to the same period in 2017. We continue to be optimistic on the outlook of the Macau market as the city's gaming and entertainment markets continue to benefit from the improving demand environment, the anticipated completion of the Hong Kong-Zhuhai-Macau Bridge and the ongoing build-out of Cotai.

"Despite multiple new resorts opening, Melco remains the leader in Macau's premium mass market with our dedication to quality recognized by the 2018 Michelin Guide Hong Kong Macau and Forbes Travel Guide, which awarded Melco with 7 Stars and 83 Stars, respectively, making us the integrated resort operator with the most Michelin-starred restaurants and Forbes Star awards in Asia. With the eagerly awaited opening of Morpheus, we expect to further solidify our leadership position in this important market segment as we will deliver a genuine landmark for all of Macau.

"At Studio City, we are embarking on a series of property upgrades to refine the entertainment offerings and improve accessibility into the resort, which we believe will facilitate the continuing ramp up that the property has experienced over the past several quarters. As previously announced, the Macau government has recently granted an extension of the development period under the Studio City land concession contract to July 2021, enabling us to continue to develop our construction plan for the phase 2 expansion of Studio City, which we believe will augment the existing room inventory and entertainment offerings, as well as contribute to the continued growth and development of this property.

"In the Philippines, City of Dreams Manila delivered another strong quarter, despite new supply coming on stream within Entertainment City. The 44% year-over-year increase in mass table gross gaming revenue in the first quarter was particularly encouraging and highlights our commitment to drive high-quality earnings growth.

"Aimed at optimizing our operating excellence, we announced the redeployment of our senior operating management in January. I am pleased to report that we have started seeing early signs of improvement, with City of Dreams' mass hold rate trending up to over 32% and its mass table gross gaming revenue increasing over 8% sequentially in the first quarter of 2018.

"As also previously announced, the Board has recently approved a new US$500 million share repurchase program, which is consistent with our strategy of, where appropriate, returning excess capital to shareholders.

"Lastly, Japan continues to be a core focus for us. With the anticipated passage of the Integrated Resorts (IR) implementation bill later this year, the country will take a major step forward toward the development of the next generation of integrated resorts that will operate in this incredibly exciting, yet currently underpenetrated, tourism destination. With our focus on the premium end of the market, high quality assets, dedication to world-class entertainment offerings, market-leading social safeguards and compliance culture, and our commitment to being an ideal partner to local governments and communities alike, we believe Melco is in a strong position to help Japan realize the vision for integrated resort development with unique Japanese touches."

City of Dreams First Quarter Results

For the quarter ended March 31, 2018, net revenue at City of Dreams was US$640.5 million compared to US$693.2 million in the first quarter of 2017. City of Dreams generated Adjusted EBITDA of US$208.0 million in the first quarter of 2018 compared with Adjusted EBITDA of US$213.5 million in the first quarter of 2017.

Rolling chip volume totaled US$11.1 billion for the first quarter of 2018 versus US$12.6 billion in the first quarter of 2017. The rolling chip win rate was 3.0% in the first quarter of 2018 versus 2.7% in the first quarter of 2017. The expected rolling chip win rate range is 2.7%-3.0%.

Mass market table games drop increased to US$1,182.2 million compared with US$1,059.8 million in the first quarter of 2017. The mass market table games hold percentage was 32.1% in the first quarter of 2018 compared to 36.9% in the first quarter of 2017.

Gaming machine handle for the first quarter of 2018 was US$1,000.7 million, compared with US$1,025.9 million in the first quarter of 2017. The gaming machine win rate was 5.0% in the first quarter of 2018 versus 3.4% in the first quarter of 2017.

Total non-gaming revenue at City of Dreams in the first quarter of 2018 was US$72.8 million, compared with US$77.8 million in the first quarter of 2017.

Altira Macau First Quarter Results

For the quarter ended March 31, 2018, net revenue at Altira Macau was US$120.4 million compared to US$109.1 million in the first quarter of 2017. Altira Macau generated Adjusted EBITDA of US$18.0 million in the first quarter of 2018 compared with Adjusted EBITDA of US$3.7 million in the first quarter of 2017. The year-on-year increase in Adjusted EBITDA was primarily a result of better performance in all gaming segments.

Rolling chip volume totaled US$5.6 billion in the first quarter of 2018 versus US$4.1 billion in the first quarter of 2017. The rolling chip win rate was 3.0% in the first quarter of 2018 versus 3.1% in the first quarter of 2017. The expected rolling chip win rate range is 2.7%-3.0%.

In the mass market table games segment, drop totaled US$139.3 million in the first quarter of 2018, representing an increase from US$99.7 million generated in the comparable period in 2017. The mass market table games hold percentage was 19.4% in the first quarter of 2018 compared with 20.6% in the first quarter of 2017.

Gaming machine handle for the first quarter of 2018 was US$26.0 million, compared with US$8.0 million in the first quarter of 2017. The gaming machine win rate was 5.4% in the first quarter of 2018 versus 5.8% in the first quarter of 2017.

Total non-gaming revenue at Altira Macau in the first quarter of 2018 was US$6.7 million, compared with US$6.6 million in the first quarter of 2017.

Mocha Clubs First Quarter Results

Net revenue from Mocha Clubs totaled US$30.4 million in the first quarter of 2018 as compared to US$31.1 million in the first quarter of 2017. Mocha Clubs generated US$6.9 million of Adjusted EBITDA in the first quarter of 2018 compared with US$7.1 million in the same period in 2017.

Gaming machine handle for the first quarter of 2018 was US$654.6 million, compared with US$603.1 million in the first quarter of 2017. The gaming machine win rate was 4.6% in the first quarter of 2018 versus 5.0% in the first quarter of 2017.

Studio City First Quarter Results

For the quarter ended March 31, 2018, net revenue at Studio City was US$368.4 million compared to US$277.9 million in the first quarter of 2017. Studio City generated Adjusted EBITDA of US$110.1 million in the first quarter of 2018 compared with Adjusted EBITDA of US$67.8 million in the first quarter of 2017. The year-on-year improvement in Adjusted EBITDA was primarily a result of better performances in all gaming segments.

Rolling chip volume totaled US$6.6 billion for the first quarter of 2018 versus US$3.6 billion in the first quarter of 2017. The rolling chip win rate was 2.7% in the first quarter of 2018 versus 2.4% in the first quarter of 2017. The expected rolling chip win rate range is 2.7%-3.0%.

Mass market table games drop increased to US$825.2 million in the first quarter of 2018 compared with US$656.3 million in the first quarter of 2017. The mass market table games hold percentage was 27.4% in the first quarter of 2018 compared to 26.4% in the first quarter of 2017.

Gaming machine handle for the first quarter of 2018 was US$581.6 million, compared with US$497.4 million in the first quarter of 2017. The gaming machine win rate was 3.7% for both quarters ended March 31, 2018 and 2017.

Total non-gaming revenue at Studio City in the first quarter of 2018 was US$48.2 million, compared with US$50.8 million in the first quarter of 2017.

City of Dreams Manila First Quarter Results

For the quarter ended March 31, 2018, net revenue at City of Dreams Manila was US$142.2 million compared to US$157.4 million in the first quarter of 2017. City of Dreams Manila generated Adjusted EBITDA of US$58.8 million in the first quarter of 2018 compared to US$61.1 million in the comparable period of 2017.

Rolling chip volume totaled US$2.8 billion for the first quarter of 2018 versus US$2.4 billion in the first quarter of 2017. The rolling chip win rate was 2.9% in the first quarter of 2018 versus 3.4% in the first quarter of 2017. The expected rolling chip win rate range is 2.7%-3.0%.

Mass market table games drop increased to US$188.2 million for the first quarter of 2018, compared with US$153.9 million in the first quarter of 2017. The mass market table games hold percentage was 33.8% in the first quarter of 2018 compared to 28.7% in the first quarter of 2017.

Gaming machine handle for the first quarter of 2018 was US$820.9 million, compared with US$729.9 million in the first quarter of 2017. The gaming machine win rate was 5.6% in the first quarter of 2018 versus 6.2% in the first quarter of 2017.

Total non-gaming revenue at City of Dreams Manila in the first quarter of 2018 was US$29.6 million, compared with US$27.6 million in the first quarter of 2017.

Other Factors Affecting Earnings

Total net non-operating expenses for the first quarter of 2018 were US$55.9 million, which mainly included interest expenses, net of capitalized interest, of US$58.7 million. We recorded US$11.2 million of capitalized interest during the first quarter of 2018 relating to the development of Morpheus at City of Dreams.

Depreciation and amortization costs of US$129.7 million were recorded in the first quarter of 2018 of which US$14.3 million was related to the amortization of our gaming subconcession and US$5.7 million was related to the amortization of land use rights.

Financial Position and Capital Expenditures

Total cash and bank balances as of March 31, 2018 were US$1.4 billion, including US$5.0 million of bank deposits with original maturities over three months and US$84.4 million of restricted cash, primarily related to Studio City. Total debt, net of unamortized deferred financing costs at the end of the first quarter of 2018, was US$3.5 billion.

Capital expenditures for the first quarter of 2018 were US$89.9 million, which predominantly related to Morpheus and other various projects at City of Dreams.