Ladies and gentlemen, thank you for participating in the Second Quarter 2023 Earnings Conference Call of Melco Resorts & Entertainment Limited. At this time, all participants are in listen-only mode. After the call, we will conduct a question and session. Today's conference is being recorded. I’d now like to turn the call over to Ms. Jeanny Kim, Senior Vice President, Group Treasurer of Melco Resorts & Entertainment Limited.

Thank you, operator and thank you, everybody, for joining us today for our second quarter 2023 earnings call. On the call are Lawrence Ho, Geoff Davis, Evan Winkler and our Corporate 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 the federal securities law. 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 now turn it over to Mr. Lawrence Ho.

Thank you, Jeanny. With the strength in our Macau recovery, as evident in the 43% increase in GGR in the second quarter of 2023, compared to the first quarter. Mass drop increased month-to-month and turnover in our premium direct VIP segment continue to exceed 2019 levels during the second quarter. Mass drop further expanded into July, surpassing 2019 levels. And daily property reservation in July reached its highest point since Macau’s reopening. Labor supply issues in Macau have been largely resolved. We have been able to provide our customers with Melco’s full suite of services and amenities. We expect to add another 560 hotel rooms to our portfolio with the opening of the W Macau at Studio City in September and are well positioned to support the continuing increase of customers in Macau. The mass segment is also leading the recovery in the Philippines, continuing to outperform 2019 levels in the second quarter of 2023. In Cyprus, we opened City of Dreams Mediterranean to the public in July after a successful soft opening in June, and we’re excited for its prospects as we ramp up our operations there. With that, I turn the call over to Geoff to go through some of the numbers.

Thank you, Lawrence. Our group-wide adjusted property EBITDA for the second quarter of 2023 was approximately $257 million a 40% increase compared to our results in the first quarter of 2023. Luck-adjusted group-wide property EBITDA for the second quarter of 2023 came in at $277 million, a favorable win rate had a positive impact on COD Manila by around $2 million, while in Macau, unfavorable win rates at COD and Studio City had a negative impact of approximately $12 million. Macau OpEx increased to around $2.4 million per day in the second quarter of 2023, from around $2 million per day in the first quarter. This increase was largely due to the cost of running the residency concerts series at Studio City. If we were to exclude this cost, OpEx per day would have been around $2.1 million per day. As Lawrence mentioned, in his remarks, labor supply issues have largely been resolved. During our first quarter results call, we estimated that we would have approximately 2,000 fewer full-time employees, compared to 2019, including Studio City Phase 2. This Outlook remains unchanged. This is expected to translate into continued cost savings and increased operating leverage as we move forward. Depreciation and amortization increased in the second quarter of 2023 due to the additional depreciation associated with the opening of Studio City Phase 2 and City of Dreams Mediterranean. Similarly, the increase in interest expense during the quarter was related to lower capitalized interest after we completed construction of Studio City, Phase, 2 and COD Mediterranean. Turning to our cash and liquidity. As of June 30, 2023, we had around $1.6 billion of consolidated cash on hand. Melco, excluding its operations at Studio City, the Philippines and Cyprus, accounted for around $800 million. Of this, approximately $125 million was restricted, as collateral required for concession-related guarantees issued to the Macau government. Our total debt balance remains stable from the first quarter to the second quarter of 2023 and net debt decreased by approximately $100 million. We will continue to place priority on deleveraging with the excess cash generated as our operational cash flow expands. As we normally do, we will give you some guidance on non-operating line items for the upcoming third quarter of 2023. Total depreciation and amortization expense is expected to be approximately $140 million, corporate expense is expected to come in at approximately $20 million, consolidated net interest expense is expected to be approximately $125 million to $130 million, this includes finance liability interest of around $7 million relating to fees payable in relation to the Macau gaming concession and Cyprus gaming license and finance lease interest of $5 million to $10 million relating to City of Dreams, Manila That concludes our prepared remarks. Operator, back to you for the Q&A.

[Operator Instructions] Our first question comes from the line of George Choi from Citi. Please ask your question, George.

Thank you for taking my questions. I have a couple if I may. Firstly, on your last earnings call, you guys said, you expect about 20% of the OpEx you reduced during the COVID years to become permanent. Are you still standing by that guidance? And if so, how many percentage points in - improvement would that just may ensue? And my second question is, an accounting one. I see the capital expense being a little higher than usual. Was there any a one-timer in that figure? Thank you very much.

Hey Geoff, do you want to take both of those?

Sure. So, I recall that our guidance on the first quarter call was that 20% to 25% of our cost savings during COVID, we Believe will be translated into permanent savings. We are still comfortable with that guidance. That translates into approximately conservatively 200 basis points of margin improvement. I think that covers your first question George. And then on the second question for corporate, we do anticipate that coming down in the third quarter to approximately $20 million. The increase in the second quarter was related to some one-off aviation expense, as well as a legal cost, as well.

Understood. Thank you very much.

All right. Thank you, George. Our next question comes from the line of John DeCree from CBRE Securities. Please go ahead, John.

Hi, can you can you guys hear me?

Yes. The line is clear.

Yes, John.

Great. Great. Sorry about that. Thanks for taking my question. Geoff, I wonder if you could maybe talk about the unfavorable hold City of Dreams and Studio City. I think, if I call the number correctly in your prepared remarks, $12 million impact. Haven’t had a chance to go to go through all the financials yet. Was that all VIP and in the 1Q yet quite a headwind in mass market hold, as well? So just curious about the trends you're seeing there.

Yeah. Thank you for that question. All of our hold adjustment is strictly on VIP. So, we haven't made any adjustments for mass.

Got it. Thanks Geoff. And then, maybe a follow-up on the residency concert series at COD, there's been a bit of discussion about entertainment customers in attracting more entertainment customers, I am curious, if you could maybe Geoff or Lawrence give us a little bit of color on how well you think the concert series is doing in terms of driving additional visitation and what that looks like going forward?

Yeah. He, John, it’s Lawrence. Thanks for the question. We're very happy with the residency series that just ended last weekend. Maybe David or Kevin can provide more color. But it has been, it checks all the boxes for us. On one hand, the Macau government wants the operators to have more entertainment sporting events. And so, that was a key one. But more importantly, for us, internally and for Studio City in particular, it has raised the awareness of Studio City and we have seen firsthand how busy the property becomes once we have those events on-site. So, maybe, David and Kevin can add more color.

Sure, Lawrence. So, look, in terms of what we've seen with the, now we’ve done 34 shows between what we did with Joey Lee online and with Aaron Kwok, that just ended this last weekend as Lawrence said, but, if you look at the number of covers that we've drawn in our restaurants, the number of the visitation numbers have gone up quite a bit, we've seen a lot of impact with our hotel rooms, and the package that we've sold, we’ve seen the spending patterns go up considerably now with the customers that are coming in. So, it's been a really nice lift for us. And as Lawrence said, it's the level of awareness that’s been built now. We will continue to drive that level of visitation forward as we go into the third and fourth quarters here.

Great. Appreciate all the colors. Thanks for taking my questions, and nice quarter everyone.

Thank you. Our next question comes from the line of Praveen Choudhary from Morgan Stanley. Please ask your question Praveen.

Hi, can you hear me?

Yes, we can hear you.

Hey, thanks, thanks, Geoff. Thanks, Lawrence. Just a quick question for Geoff. What will be the OpEx when your W will be open in September, so let’s just say fourth quarter OpEx compared to $2.4 million? That's the first question. The second question is, assuming that your mass revenue is already running at higher than 2019 level and you just mentioned the costs are much lower. Can I assume that in July, you're already making more than 2019 level of EBITDA? Or are there are some other drivers or issues that we should be aware of? And then the last question for Lawrence is, a lot of people are watered that the mass – grind mass side of the business has not picked up as much as the premium mass. And I understand that you are playing in the premium side. But for Macau, do you have any thoughts of plateauing at these levels versus keep improving every month towards 2019 as higher? Thank you.

Hey, Geoff, do you want to take the first couple of questions? And then I'll deal with the last one.

Sure. So on OpEx, I can share, call it, an outlook for where we think that'll settle in for the third quarter. So, on a reported basis, I think, you'll see that in around the 2.5 million per day range. If we make the same adjustment that we did for second quarter by excluding the concert series, I would say that number normalizes into around 2.3 million to 2.4 million per day.

Thank you. Do you have any follow-up?

On the – sorry, let me – I have been answering to Praveen’s question, yes. On the grind mass, and the, the mass, mass question, the the transportation infrastructure is still coming online. It hasn't fully recovered. So, if you look at the air lifts going into Macau right now is probably at around 50%. And Macau, over the last six months since the recovery has started has become a very - very much a weak end-market. So going forward, when the infrastructure improves, transportation infrastructure improves, we believe that, the grind mass will probably fill out more of the weak day business and the tour groups or the tour groups are finally starting, but they haven't fully recovered yet. And so far, the recovery has exceeded everybody's expectation, but it's been driven really by premium mass. So, once the grind mass layer comes in, I think that will give us incremental growth.

Okay. Thanks Lawrence. I had one more follow-up for you, but also Geoff question was also there that we were asking about July being mass better, cost lower. Are we already at higher than 2019 EBITDA? So maybe - just kind of answer that. But one question for you Lawrence is, on the non-gaming side, is it correct that all the six players have submitted their non-gaming proposal? And that has not been approved and we are going back and forth in terms of what exactly government wants. Can you give a little bit more detail so for exactly are you working on? And what will be the final outcome? Thank you.

Sure. I think on the non-gaming, first of all the investment proposal, the original investment proposal was agreed by the Macau government when we did for the licenses last November, December. So that was the first approval. And then, I think by May and David can probably supplement and give more of a detailed account. I think it was approved again by May, but what we're seeing right now is that there is there's a lot of reporting on the all of the operators’ part. Monthly reporting quarterly reporting. So I think there's a lot of negotiations and discussions on do you do this, do you do that. I guess, maybe David you can provide a bit more color?

Sure. So, Praveen, there's obviously there's two types of things that we're doing related to the tender that we was approved for our initial plan. There's certain capital costs that were done for the casino that we're obviously executing on. And again, it's pretty well documented in terms of what we would normally do as we upgrade the casino or replace certain items or things as we're going along. The other one is kind of a collection of non-gaming kind of things. The non-gaming things can be in terms of capital or they can be in terms of events, concerts, sporting events, things that we’re sponsoring. So, everything we've said we're going to do with the government, we've done and we're executing on. As Lawrence said, there's a very significant measure that goes along in terms of whether it be a quarterly measurement with the DICJ, or MGTO or IPIM. Or it’s something that we do on a monthly basis. But they're monitoring it quite closely, trying to make sure everyone's doing what they're saying. But additionally, as we're going along, there's sometimes where certain things may not make sense that we said we were going to do back in 2022. So we work with the government to go back and make adjustments and slide other things into the programs or things that help kind of support some of the things the government is trying to do as we try to attract a lot more international visitation or try to build the MICE business in Macau.

But, Praveen, I think the most important thing for us as an operator is, we're going to stick to the number for the investment proposal that we put in when we got our license last December. So we might make changes in terms of defense or things that we're going to put in, but we're going to stick to that number.

It’s very clear, David. Thank you, Lawrence, for clarifying this. Can I still get the answer on the EBITDA in July considering mass and cost please, from Geoff?

Yeah.

Okay, circling back around I mean, Praveen, so, I don't want to get ahead of ourselves in respect to the third quarter results. I'm confident that we have taken share from the second quarter into July. But we are not quite at the levels of GGR to get us back to 2019 levels of EBITDA.

Very helpful. Thank you very much. And congratulations on those good results.

Thank you.

Thank you.

Thank you. [Operator Instructions] Our next question comes from the line of Simon Cheung from Goldman Sachs. Please ask your question, Simon.

Okay. Thanks, everyone. Thanks, Lawrence. Thanks, Jeff. In relation to what you mentioned about the success of hosting all these residential sold, I wanted to see whether you can help us to perhaps quantify some of the numbers, perhaps on the visitation number or even any retail sales number you can actually share with us. That would be helpful. That’s on the first question. And also in relation to that, obviously, you have done quite well and done quite a lot on the Studio City. How you are seeing the, maybe the potential opportunity to maybe further driving visitation and market share COD? We've been hearing a lot more competitions or people are giving of reinvestments in, for example, the dispo parlors and the others’ property. So, wondering, whether you can also comment about the competitions among the premium mass segment as well. Thank you.

Hey, Simon. So maybe I'll talk about the competition on premium mass and that hand it over to David to supplement. We're obviously, first quarter we started out slow, but I think we've gained some meaningful share in the second quarter. And so far, beginning the third quarter in July, we've had the best months, just like the entire Macau, we've had the best month since the reopening. But I think on mass drop and on premium direct growth, we are at over 100% of Q2 2019 level. So we're quite happy with that. In the market, there are competitors, especially, some, newer ones who are probably more aggressive in terms of the reinvestment and the referral fees that they pay. But at the same time, we are very comfortable with the product that we have and our sales team and the structure that we've built. But I guess, maybe David can talk more about that.

Sure. Thanks, Lawrence. And so I think, as you kind of look at what's happening with the residency concert series, one thing we've seen is a really nice pickup obviously on the visitation to the property, particularly with Studio City. That visitation, as I said before is driven, certainly a huge number of covers for us on both on that as we go through on that we can, but even after that time up to that period on the what's called the shorter periods for the concert series. So, we guess that Thursday, Friday, we started seeing a large pick up on that. The occupancies we’re seeing right now are running probably at Studio City now. We're running in the high 90s. There is sometimes where we’re completely sold out. This is also happening during a lot of the week days, as that level of awareness has been built. Further we were starting to see more and more traffic in our retail areas. I don't have the specifics on that in terms of how much our retail sales have gone up. But we are seeing more traffic, more customers going in and spending. We're seeing a lot more traffic in a lot of our - let's say our food and beverage outlets that are – that are let’s say our third-party outlet here hold those restaurants. They've seen a huge increase in the number of covers and they're quite happy. I think one of the nice things we've seen now as well as, it's really kind of ignited our water park, as well. The water park during the month of July was running at over 1,900 people a day. So, again, we've seen a really nice lift in overall in terms of the visitation, the level of spend over at Studio City. So, it's doing some good things for us. Additionally, we are also seeing as we've kind of gone from month-to-month here since we've opened up that big back in April, we've also seen a nice increase in the players that are coming in, as well, as we started seeing a recapture of some of the market share to where we're now over 4% of market share with Studio City. So, again, just a nice level of increase. We think that will continue to build as we get into the second – or excuse me - as we get into the third and fourth quarters.

Great. Thanks. Thanks a lot. Congrats on the first half results.

Thank you. I am showing no further questions. I'd now like to turn the conference back to Jeanny for closing remarks.

Thank you, and thank you all for participating in our conference call today. We look forward to speaking with you again next quarter. Thank you.

Thank you. That does conclude today's conference call. Thank you for participating. You may now disconnect.