Luis Chinchilla

Luis Ricardo Chinchilla asked for commentary on the revenue cadence during the second quarter and any sequential improvement observed in July.

Answer

CEO Daniel Lee and President Lewis Fanger confirmed that the American Place property has been 'rock solid,' showing consistent monthly growth in both revenue and EBITDA, a trend that continued into July. For the Chamonix property in Cripple Creek, they explicitly stated that performance in July improved sequentially from the second quarter, driven by the new management team's focus on cost savings and revenue-building initiatives. They also noted the Silver Slipper is trending positively, and Tahoe is performing well given significant closures at the host hotel.

Asked about recent trends in customer visitation and spending, and followed up with a question about CapEx and liquidity expectations for the second half of the year.

Answer

The company has not observed significant macro-driven changes in customer behavior, attributing any softness to property-specific factors like weather or construction. Regarding financials, liquidity is strong. They plan to fund the initial stages of the permanent American Place from cash flow and refinance their existing debt within the next year to fund the full construction. They have low maintenance CapEx and do not expect to pay cash taxes until at least 2029, giving them flexibility to wait for favorable market conditions.

Requested more detail on the ramp-up at Chamonix, including January performance and what a normalized daily operating expense would be with the new cost-saving measures. Also asked for the company's CapEx plans for the upcoming year.

Answer

Management projects Chamonix could reach $10-15 million in EBDIT in the current year, with a long-term target of $50 million by 2030. They are focused on staffing up profitable amenities like the spa and salon and have made significant management changes to improve operations. For CapEx, the plan is about $7 million for maintenance and small projects, plus an initial $20 million for American Place in the second half of the year, with the bulk of the project's spending occurring in later years.

Luis Chinchilla asked if management had observed any changes in customer visitation frequency or spend per trip, differentiating between high-end and low-end customers. He followed up with a question on CapEx and liquidity expectations for the second half of the year.

Answer

CEO Daniel Lee stated they have not seen clear signs of a consumer slowdown, attributing performance variations to property-specific factors like weather or construction rather than economic pressure. Regarding liquidity, management explained their position is strong. While near-term cash flow will fund early design work for the permanent American Place, the major financing event is about a year away. They noted maintenance CapEx is low, and they do not expect to pay cash taxes until at least 2029, providing significant financial flexibility.

Luis Ricardo Chinchilla of Deutsche Bank asked about Melco's response to competitors increasing reinvestment rates and whether there is potential for further OpEx optimization in Macau or if spending might increase to drive traffic.

Answer

Chairman and CEO Lawrence Ho Yau Lung stated that Melco competes on superior product and services rather than matching competitor reinvestment. President & Director Evan Winkler added that while they monitor the market, they are continuing with their current strategy. On expenses, EVP & CFO Geoffrey Stuart Davis confirmed the $3 million per day OpEx target is a good run-rate for Q3. Winkler elaborated that they feel good about the current cost base and would only increase spending opportunistically to drive EBITDA, with no current plans to do so.

Luis Ricardo Chinchilla from Deutsche Bank asked about the competitive environment in Macau, particularly in response to a competitor increasing reinvestment, and questioned if there were opportunities for further cost optimization.

Answer

Chairman and CEO Lawrence Ho Yau Lung stated that Melco competes on differentiated product and service, not just on reinvestment rates. President & Director Evan Winkler added that while they monitor competitors, their strategy remains 'business as usual.' On costs, EVP & CFO Geoffrey Stuart Davis confirmed the ~$3 million daily OpEx target for Macau is a good run-rate for Q3, and Winkler noted they feel good about the current expense base with no immediate plans to increase it.

Ricardo Chinchilla from Deutsche Bank asked about recent gaming floor trends, seeking to identify any signs of consumer weakness post-Golden Week, and requested guidance on CapEx for the remainder of 2025 and 2026.

Answer

CEO Yau Ho and Executive Evan Winkler confirmed continued strength post-Golden Week with no signs of a pullback, attributing momentum to attractions like the reopened House of Dancing Water and supportive Chinese domestic travel policies. CFO Geoffrey Davis reiterated the full-year 2025 CapEx guidance of $415 million, highlighting the completion of the Sri Lanka project as the main focus.

Luis Chinchilla asked about the capital allocation strategy for potential proceeds from the City of Dreams Manila sale, specifically the balance between debt reduction and share buybacks. He also sought clarification on post-Golden Week business volumes and requested detailed 2025 CapEx guidance.

Answer

Executive Geoffrey Davis stated that debt reduction is the primary objective for capital allocation, but the company will also consider capital-light investments and opportunistic share buybacks given the stock's valuation. Executive Yau Ho confirmed that business volumes post-Chinese New Year have been very strong. Geoffrey Davis provided 2025 CapEx guidance of approximately $415 million.

Luis Chinchilla questioned if pressure on luxury spending among Chinese consumers is affecting Melco's premium mass segment and requested CapEx guidance.

Answer

CEO Lawrence Ho explained that the correlation between luxury retail and gaming has weakened post-COVID, as consumers now prioritize experiences, which benefits Macau's diverse offerings. CFO Geoff Davis provided CapEx guidance of approximately $115 million for Q4 2024 and a target of around $400 million for 2025, with $70-$75 million of the 2025 budget allocated to the Sri Lanka project.