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Melco Crown Entertainment Limited (NASDAQ:MLCO) First Quarter 2023 Earnings Conference Call Transcript May 10, 2023
operator: Ladies and gentlemen, thank you for participating in the Melco Crown Entertainment Limited First Quarter 2023 Earnings Conference Call. [Operator Instructions] Today’s meeting is being recorded. I would now like to turn the call over to Ms. Jeanny Kim, Senior Vice President and Group Treasurer, Melco Crown Entertainment Limited. please continue.
Jenny King: Thank you, Operator, and thank you all for joining us today for our Q1 2023 earnings call. Joining the call are Lawrence Ho, Geoff Davis, Evan Winkler and our presidents in Macau, Manila and Cyprus. Before we begin, please note that today’s discussion may contain forward-looking statements made under the safe harbor provisions of the federal securities laws. Our actual results may differ from those anticipated. Additionally, we may discuss non-GAAP measures. Definitions and reconciliations of each of these measures to the most comparable GAAP financial measure are included in the earnings release. Finally, please note that our supplemental earnings slideshow is posted on our Investor Relations website. With that, I will now turn the call over to Mr. Lawrence Ho.
Lawrence Ho: Thank you, Jenny. Following the easing of border restrictions in early January, we see a very encouraging start to Macau’s recovery in the first quarter of 2023, and the recovery is progressing faster than we expected. We continue to see momentum in April and solid performance during Golden Week in May. Quality decline and quality GGR during this last week exceeded the same period in 2019 and turnover in our premium direct sales segment more than doubled. We’re rolling out some exciting new initiatives in April. We hosted Macau’s first residency concert series at Studio City, kicking off with the opening of the Epic Hotel tower and indoor water park, Studio City Phase 2.
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We also plan to open the W Tower in September, which will complete our hotel portfolio in Macau. These moves reinforce our long-term commitment to bringing a unique world-class entertainment and hospitality offering to Macau. We are planning various events for the future, which we believe will continue to drive international tourism and position Macau as a prime destination for leisure and entertainment. We see strength in the Philippines and a steady recovery. City of Dreams Manila’s adjusted real estate EBITDA in Q1 2023 exceeds Q1 2019. Cyprus also performed strongly, with both GGR and Adjusted Real Estate EBITDA exceeding 2019 levels. The results of our pop-up and satellite casino operations are evidence of strong demand in Cyprus.
We are delighted to open City of Dreams Mediterranean in mid-June and showcase our expertise with the first integrated resort of its kind in the region. With that, I turn the call over to Jeff to check some numbers.
Jeffrey Davis: Thank you, Lawrence. For the first quarter of 2023, our Group-wide Adjusted Real Estate EBITDA was approximately $191 million. Luck-adjusted group-wide real estate EBITDA of US$197m in Q1 2023, with favorable win ratios positively impacting COD Manila by approximately US$14m, while in Macau, COD and Studio City were hit by nearly US$20m The negative impact of the dollar negatively affects the win rate. COD Macau and Studio City’s property EBITDA was also negatively impacted by quality holdings, below our historical average. If we normalize both VW and VIP, Macau real estate EBITDA would be US$192m in 1Q23, compared to our reported result of US$121m, holding an adjusted real estate EBITDA margin of approximately 28.5%.
We’ve been able to achieve significant cost savings over the past few years and this remains a focus of our hiring to support the recovery. We estimate that once we ramp up, we will have approximately 2,000 fewer full-time employees compared to 2019, including those required for the opening of Epic, W and Studio City water parks. We remain disciplined in our cost management and expect to retain at least 20% to 25% of the savings we have achieved during COVID as permanent savings. Turning to our cash and liquidity. As of March 31, 2023, we had nearly $1.5 billion in consolidated cash on hand. Melco, excluding its Studio City, Philippines and Cyprus operations, accounted for about $750 million.
Of this, approximately US$125 million is restricted, including the cash collateral required to provide concession-related guarantees to the Macau government. Total debt was reduced by approximately $550 million in the first quarter of 2023 as our revolving credit facility is repaid. As always, we’ll provide some guidance on non-operating items for the upcoming second quarter of 2023. Total depreciation and amortization expense is expected to be approximately $140 million. The higher amount compared to previous guidance was due to the recognition of the new Macau gaming concession as an intangible asset on 1 January and the associated amortized cost. Corporate expenses are expected to be approximately $20 million and consolidated net interest expense is expected to be approximately $120 million to $125 million.
This includes approximately US$5 million in interest on finance liabilities related to fees payable related to the Macau gaming concession, US$5 million to US$10 million in interest on finance leases related to City of Dreams Manila and approximately US$5 million to US$10 million in capitalized interest. This concludes our prepared remarks. Operator, back to your question-and-answer session.
operator: [Operator Instructions] I’m showing that we have a question from George Choi from Citigroup.
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