Ladies and gentlemen, thank you for participating in the Second Quarter 2025 Earnings Conference Call of Melco Resorts & Entertainment Limited. 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.

Thank you, operator, and thank you, everyone, for joining us today for our second quarter 2025 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 provision of federal securities laws. 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 the call over to Mr. Lawrence Ho.

Thank you, Jeanny, and thank you all for joining us today. We achieved a strong set of results for the second quarter of 2025 in Macau. Macau property EBITDA grew by 35% year-over-year and 13% quarter-to-quarter. Gaming volumes and revenues were up with mass table games revenue at both City of Dreams and Studio City reaching all-time highs. OpEx was further refined, leading to increased margins while sustaining our market share in a very competitive environment. House of Dancing Water reopened in May with a refreshed storyline and enhanced visuals incorporating a variety of new technologies. We've had great feedback with occupancy of the theater at an average of around 98% since the opening, contributing to growing non-gaming revenue and visitation into Macau. Visitation to COD Macau increased 31% year-on-year over the second quarter. Average daily property visitation to our Macau properties has continued to grow, reaching record levels in July. We are continuing to work on a number of additional initiatives in Macau to drive traffic and revenue. We have started the renovation of the main entrance to City of Dreams, which will increase visibility and accessibility to the property. We are finalizing plans for the full renovation of the Countdown hotel, which we currently plan to open in the third quarter of 2026. The Macau will be newly branded with approximately 150 high-end luxury suites and an average room size in excess of 1,000 square feet. We believe the concept we have for this hotel will bring a one-of-a-kind experience to Macau and add to the high-end luxury hotel portfolio that we have at City of Dreams. Additionally, we continue to implement enhancements in our gaming areas across our Macau properties to broaden our service and product offerings and elevate the gaming experience for our premium mass customers. In the Philippines, the heightened competitive environment continued to impact performance in the second quarter of 2025. In response, we have implemented various cost reduction initiatives, including rationalization of our patron reinvestment and marketing expenses. We are already seeing the results of these initiatives with higher profitability, along with a recovery in gaming revenue in July. The strategic review that we have previously announced is continuing, and we will provide updates when we are able to do so. In Cyprus, City of Dreams Mediterranean and the satellite casinos were impacted by the Iran-Israel war in June. However, recovery has been faster than expected and GGR has now surpassed pre-war levels. Based on our forward bookings for the remainder of the summer, we're cautiously optimistic that the property can deliver strong results over the remainder of the peak season. And finally, we're very excited to open City of Dreams Sri Lanka tomorrow, August 1. City of Dreams Sri Lanka is the first integrated resort in Sri Lanka and in South Asia, catering to the premium segment of the Indian customer base. We look forward to the new opportunities that this brings. With that, I'll turn the call over to Geoff.

Thanks, Lawrence. Our group-wide adjusted property EBITDA for the second quarter of 2025 grew 25% year-over-year to approximately $378 million. Adjusted for VIP hold, our property EBITDA was approximately $354 million. Favorable win rates at COD Macau had a positive impact on our property EBITDA by approximately $31 million, while an unfavorable win rate at COD Manila had a negative impact of approximately $7 million. In the prior quarter, we had guided that our OpEx target for Macau was to exit the second quarter at $3 million per day, excluding House of Dancing Water and the residency concerts. We were able to outperform our earlier expectations and reduced OpEx down to approximately $3 million per day for the entirety of the second quarter. OpEx for House of Dancing Water was approximately $0.1 million per day, as previously mentioned. We saw a solid flow-through in the quarter with an increase in revenue and a reduction in costs. Our Macau property EBITDA margin reached 29.2% in the second quarter of 2025, the second highest on record. We are focused on remaining disciplined on cost as our business continues to grow. Turning to our balance sheet. Our liquidity position remains robust. We had available liquidity of $2.3 billion with consolidated cash on hand of approximately $1.2 billion as of the end of the second quarter of 2025. Melco, excluding its operations at Studio City, the Philippines, and Cyprus, accounted for approximately $644 million of the consolidated cash on hand. We had two bond maturities over the last couple of months, $1 billion in June at Melco and $222 million in July at Studio City. Melco's bonds were refinanced with a drawdown from its RCF, while Studio City's bonds were refinanced with a combination of a drawdown from its RCF and approximately $50 million in available cash. The RCFs were drawn in Hong Kong dollars given today's low HIBOR rates; we locked in these rates with interest rate swaps, allowing us to refinance at lower interest rates than the bonds that matured. We expect to pay down more debt over the second half of 2025 with free cash flow from operations. Over April and May, we repurchased approximately $120 million of Melco shares, taking advantage of the unique opportunity that the dislocation in the equity markets provided at the time. The average price of the repurchased shares in the second quarter was approximately $5 per ADS. We have always placed a priority on increasing shareholder value. And although our primary objective remains debt reduction, we will continue to monitor market conditions as we balance our capital allocation objectives. And a final note on our balance sheet for reference. As announced in June 2025, we will close Grand Dragon Casino and three Mocha Clubs over the second half of this year. As a result, we recognized an impairment in goodwill of approximately $56 million in the second quarter. We expect to continue operations of the three remaining Mocha Clubs subject to the legal and regulatory requirements in Macau. As we normally do, we'll give you some guidance on non-operating line items for the upcoming third quarter of 2025. Total depreciation and amortization expense is expected to be approximately $135 million to $140 million. Corporate expense is expected to come in at approximately $25 million to $30 million and consolidated net interest expense is expected to be approximately $115 million to $120 million. This includes finance liability interest of around $6 million relating to fees payable in relation to the Macau gaming concession and the Cyprus gaming license and finance lease interest of approximately $5 million relating to City of Dreams Manila. That concludes our prepared remarks. Operator, over to you for the Q&A.

Your first question comes from George Choi from Citi.

Congratulations on a very solid set of results. I have a couple of questions, if I may. Firstly, in your prepared remarks, you said you're going to remodel the Countdown hotel. I'm wondering if you guys are doing anything to your gaming floors at either COD or Studio City in the near term in light of new supplies by your competitors?

George, it's Lawrence. I'll begin and then pass it to Evan and possibly Tim to discuss COD. Over the past 18 months, we have been enhancing our product and reinvesting in the customer experience, which is reflected in our results. All the effort we put into these improvements is evident. In terms of the Countdown, we're transforming what was a 330-room hotel into 150 luxury suites, creating a unique product that is unlike anything else in the world. We're very excited about this development. Now, I'll turn it over to Evan or Tim to provide more details on the ongoing work on the casino floor.

Sure. Lawrence, this is Evan. I'll start and Tim can obviously join in. There's been a huge amount of work that's already been done this year and a number of projects that are going to be completed here in this quarter and then throughout the end of the year. You'll probably recall, we completed our new high-limit slot space. We took our old high-limit slots area, and we've now converted that over to mass gaming. Over the last weekend, we took the last remaining section of that high-limit slots gaming, and we created a unique clubhouse experience for our premium players that has 3 private salons in there, but it also has a golf simulator, a race simulator, ping pong, pool, darts, pinball, jukebox, some unique food and beverage offerings, and really a clubhouse environment for our players to enjoy as part of that premium gamer experience. In the months ahead, we've got on the main gaming floor a new redemption lounge opening. We have a new F&B counter that's going to be opening before Golden Week. We have carpet being replaced throughout COD. We have new column treatments going throughout COD. If you've been by our property, you've seen that we've taken down the fountain and stairs on the south entrance. That's now going to be a new entry experience that's going to allow much easier access into the property and much greater visibility into the property. And so we also have a number of new F&B concepts that we're going to be adding throughout the mall. So that's just on COD. At Studio City, we recently opened a new F&B offering for our Star Tower Gala to give customers a place not just for breakfast, but to have an all-day dining experience that's been well received. You probably saw prior to that that we had remodeled both lobby spaces. So now the Star and Celebrity lobbies have both been remodeled. We opened up a new food and beverage offering that's adjacent to our premium gaming space in the Epic Tower. And we're in the next few months going to get approval to sort of consolidate all that into a gaming space. So we're going to create more tables and a real premium customer environment in that unique casino experience that's just really geared at Epic and towards that premium mass. We've got a number of new F&B concepts, including a variety of coffees coming in at the front of Studio City. We opened up Nickelodeon Play space. We've got a unique concept in health where iRad will be opening, which has a full hospital license. It's going to be doing imaging and medical procedures, which have been requested by a number of our customers. So it's going to be something very unique within Macau. We've got a new concept coming in on the Level 2 Gourmet Walk at Studio City. And then if you've been on the Studio City floor, I think you've also seen that we really enhanced the lighting almost everywhere along with new layouts. We've consolidated the LTG gaming space, improved the flows, and improved the lighting throughout. And then as was alluded to in the prepared remarks, we've got new electronic products and tables that are going to filter through the system here by year-end. So you're going to see more product at the different integrated resorts. So I think I probably gave the laundry list. I don't know if Kevin or Tim will start giving me the thumbs up. But I think the short answer is we are very focused on making sure we continue to offer a premium experience to our customers.

That's a very long list. I'm sure I'll need to spend more time the next time I visit the COD. My second question is, considering the momentum in July and any visibility you might have for August, do you anticipate that your normalized EBITDA will improve sequentially?

I think the market is doing very well. The strength we observed in the first half has been excellent. We see the momentum continuing into Q3. I believe the Chinese economy is stabilizing, leading to increased consumer spending. This sets us up for a strong third quarter. I'm not sure if Geoff or Evan would like to add anything.

No. Look, I think we feel very good. I think we've carried the momentum that we saw in June into July. I think the market feels good right now. You've obviously seen some comments from some of our competitors that some people are modulating reinvestment. Right now, I think based on where we are with our product and service, we feel very good about where we are and very good on expense discipline. So if we sort of continue in the way that we feel that we can, I think we feel very, very good about Q3. Obviously, I don't have a crystal ball, but sitting here today, I think we all feel good about where we are.

Your next question comes from Ricardo Chinchilla from Deutsche Bank.

Congrats on the strong set of results. One of your competitors was mentioning that mid-quarter, they insignificantly increased reinvestment and that they will continue to monitor the market given that they experienced some market share declines. Have you guys seen anything meaningfully in terms of the competitive nature of the market? Or is it just business as usual?

Macau will always have its competitive dynamics, with competitors trying to capture market share. The competitor you mentioned has previously under-invested in the market but is now increasing their efforts. However, at Melco, we focus on competing through our product and services. What we have created at City of Dreams, with our luxury hotels, the House of Dancing Water, and our food and beverage offerings, stands strong on its own. We don't need to compete solely on having the best deals. Similarly, at Studio City, our family attractions and other unique offerings are distinctively positioned. Therefore, we do not need to be the most aggressive in offering the best deals in the market. This is where we will continue to focus our efforts.

No, I think Lawrence said it well. Obviously, we hear the same statements you're hearing. When one of the large operators makes a statement like that, you want to make sure you're monitoring what's going on. I think where we're sitting here today and what we've been doing over the last month is not any different than what we were doing through Q2. We continue to titrate our programs. We continue to look at it every week, but we've pretty much been business as usual. We're going to continue to look at it. If a bunch of other people followed suit, if something dramatically changed in the market, I think we would adjust. But based on what we're seeing right now, I think we're continuing with our current strategy.

Got it. That's great color. As my follow-up, I know that you guys have done a fantastic job with regards to managing expenses, particularly in Macau. So I was curious if you guys see an opportunity for further optimization of the expense base? Or if you guys, given that you're making some changes in foot traffic, are you feeling comfortable with increasing perhaps in the short term a little bit of dollars just to provide additional services to the consumer and then bring it close to that $3 million per day that you guys referenced before?

This is Geoff. So I think simply put, the $3 million per day of OpEx, I think that is a good number going into the third quarter, but maybe Evan has some additional color.

No, I think we feel good about where the expense base is. That’s not to say that we don’t spend all day every day looking for ways to optimize and improve. Generally speaking, we've done a lot of that work and feel pretty good about where we are. In terms of whether we would increase it going forward, we'd have to find an opportunity that could really move market share and generate EBITDA. I don’t have a current plan to increase the expense load. I think $3 million is a good number. However, we're always monitoring the market, and if we see something we could do opportunistically, I think we would approach Lawrence. We wouldn't hesitate to spend money to make money, but overall, we feel pretty good about our current position.

Your next question comes from Joe Stauff from Susquehanna.

I want to follow up on your question regarding the daily operating expenses in Macau. I understand you performed well this quarter regarding the overall figures, which include House of Dancing Water and residencies. Are there any plans to adjust or decrease the expenses for House of Dancing Water or residencies in the third quarter, beyond what is already included in the core numbers? Also, you provided a comprehensive list of new projects you're working on, which seems reasonable for product defense. Do you anticipate any construction disruptions in the second half of the year as a result?

Sure. Let me I guess on the first one, in terms of the overall expense number, and I'm assuming you're pointing towards residencies of House of Dancing Water. In terms of the residency program, that's trailed off. So Aaron had his last show on Monday. So for that component going forward, we do expect a reduction as that program has run off. We obviously will continue to have entertainment and concerts next year, but at a reduced level to what we've seen. In terms of House of Dancing Water, that number is probably about the right run rate. So we're starting to get things stabilized. We have very good take-up and occupancy. So again, it should be an EBITDA contributor. But in terms of its portion of the expense base, that's probably not a bad number going forward. In terms of all of the projects that we're doing on each of the properties, I probably gave you a list of ones that have already happened this year and ones that are going to be happening. Studio City, I would say we're essentially behind all of that. In terms of COD, we've actually been pretty successful, I think, if you go to the property on being able to hoard zone by zone to minimize any customer disruption. Even the front entrance is sort of its own separate zone. It's not within the casino property. So I do think we're able to do it with fairly limited impact in terms of a customer experience as we're getting all these things done. The team spent a lot of time looking at the phase in these projects. And so again, I'm not concerned about any disruption that would come from construction over the next 3 to 6 months.

I appreciate that. And is there anything you can share with us at maybe this point on the advanced look of sort of August activity in Macau?

I think it's probably a little early to say. The process starts tomorrow, so we're hopeful that we'll maintain the momentum, but it's a bit too soon for us to make any definitive statements on that.

Your next question comes from John DeCree from CBRE Capital Advisors.

Maybe ask one question on Sri Lanka, which is opening tomorrow. Congratulations on that. Maybe, Lawrence, can you give us a little bit of how you're thinking about performance there, the ramp, the time to ramp, expected returns? Obviously, it's a very new product in a new market. So a little bit tougher to hone in on. But any kind of initial thoughts on kind of what you're hoping or expecting would be helpful.

We're very excited about Sri Lanka, which we've been looking at for several years. It's the first integrated resort not just in Sri Lanka but in all of South Asia. This is a significant opportunity as we are effectively creating an entirely new industry. The current operators there are not on par with what we anticipate to establish, which represents a major shift in the market. This also allows us to open a new market in India, similar to what we experienced in Cyprus, which has developed into a strong market. While it may take some time, we are very optimistic about this venture. I'm not sure if Evan or Geoff has any additional insights to share.

Sure. Look, I think in this market, part of what attracted Lawrence to the market was the ability to bring really the IR model into a market where if you go there and look at what's there, it's not just sort of stand-alone casino product, but it's pretty antiquated stand-alone casino product with very limited offerings. And so what we've been able to create there, drafting off this amazing property that was built by our partner, John Keells, is really a true IR experience. And I think we believe over the medium term to long term, it's going to attract an entirely different customer base to come and experience that market. We've got a big jump. We're looking at a good opening for this weekend. But in terms of the ramp going up, there is going to be an education process into that consumer base for them to understand the quality of what's there and why they want to make that trip. So I do think it's going to be a ramp period before we really see the full potential.

Got it. That's exciting. Maybe if I can ask, I know there hasn't been too much discussion on this, and I appreciate satellite casinos are a relatively small piece of the overall business in Macau. But with closures, the ones you've announced and some others, how do you kind of think about the market evolving? Do those kind of customers find a new home? Any thoughts that you have on that change that's coming this year?

I think we're quite excited about the satellite closures in Macau because it presents a significant opportunity for Altira. Aside from the Cotai mega integrated resorts and a few casinos on the Macau Peninsula, Altira will essentially be the only option in Taipa. We're also closing three Mocha units, and we're enthusiastic about optimizing our gaming unit by relocating some of our gaming machines to City of Dreams and Studio City. Overall, this will help consolidate our business at the remaining casinos and integrated resorts. For the satellite casinos on the Peninsula, we’ll see if we can attract some of those customers to Taipa and Altira.

Your next question comes from Vitaly Umansky from Seaport Research Partners.

I wanted to revisit the discussion on player reinvestment we had earlier. Looking at the figures, it appears that player reinvestment at Studio City has remained relatively steady, considering changes in volume. However, at COD, the numbers have actually improved. The expectation is that the high end is fueling growth in Q2 and now Q3, leading to an increase in player reinvestment as a percentage of mass. This trend seems consistent across most Cotai properties at Sam's and MGM Cotai. You are the exception, and I anticipate that once we review other results, there may be other exceptions. Evan, you mentioned your strategies and how you're trying to differentiate, but COD appears to be experiencing a significantly different trend. Could you elaborate on what you're doing in player reinvestment that might set you apart? Are you using a different methodology or implementing a different set of player reinvestment initiatives that could explain this, as it's a significant aspect of what you've observed this quarter?

It's difficult for me to compare our approach to others, as I don't have insight into their strategies. However, we are focusing on leveraging improved data from Walker to gain better insights about our players. This allows us to be more strategic with our budget allocation for maximum impact. We're carefully adjusting our spending as the market evolves, so you'll see some fluctuations. Our aim is to ensure that we're rewarding the right contributors. Unfortunately, I can't comment on how our methods differ from others since I don't know how they manage their expenses.

Yes. That's fair. And maybe a second question, just broadly speaking, and I know we touched a little bit on this, but broadly speaking, the strength that we're seeing in June and July, it's largely been coming from a higher-end customer base. What do you think has changed in that player behavior? And correct me if I'm wrong on that, maybe you're seeing something different.

Again, I don't know if it depends on where you're cutting to the high end, but we are seeing, again, certainly at that middle but affluent tier, good volumes. I think what Lawrence said probably is a big part of the answer, which is a lot of the overhang and concern in China around the global economy seems to have dissipated. And so people who potentially were worrying about their own business or worrying about the global economic environment are both feeling a little more confident and a little more excited about traveling and spending again, and we're seeing the benefit of that.

Your next question comes from Praveen Choudhary from Morgan Stanley.

Congratulations for a very good set of results. A couple of questions from me. Of course, the focus is on OpEx and competitive dynamics where you've already answered all the questions. I have two questions, one on Philippines and another on House of Dancing Water. Both are for me, catalysts to take it to the next level from your stock price perspective and profitability. So would you be able to quantify or at least subjectively explain if House of Dancing Water is actually contributing positively to gaming business? I understand you mentioned that it might be EBITDA neutral on the non-gaming side. And is that helping or helped the Q2 number in City of Dreams? So that's the first question. The second question on Philippines, the weakness is all across Philippines. It's not just yours. So I just want to understand when does it stop getting worse? And then related to that was a transaction that you were working on. Any update if you can give us, that will be awesome.

Praveen, maybe I'll answer the first one on House of Dancing Water, and then I'll hand it off to Geoff Andres on Philippines and Geoff Davis can talk about the transaction. So, I think House of Dancing Water and maybe Evan and Tim can add. It's done wonders for us ever since the opening on May 7 because the House of Dancing Water IP is so closely aligned with City of Dreams. So if anything, the grand relaunch of House of Dancing Water was really relaunching City of Dreams as well. And I think since then, we have seen record visitation across the board. I think now consistently, we're getting over 40,000 property visitation in City of Dreams. So it certainly has contributed to the success that we saw in Q2 and part of that momentum into Q3. I don't know if you want to elaborate.

Sure. Look, on the days that it's running, it brings in 1,900 people twice. So it's 3,800 people come in to the property. It helps a lot on F&B coverage. It helps a lot on the retail environment. It helps in the overall environment. It provides a halo to the property. It was a positive EBITDA contributor in Q2. I would say that I think that there is still an opportunity for us to do an improved job on converting those customers into gaming customers. So we get a lot of mass tourists in general. We also know because we have the data that we are getting people who are coming from other properties who are likely to be gamers. I'm not as happy with our conversion rate. I think we have opportunities. So I don't think it necessarily did a huge amount of gaming revenue in Q2. And I think that's something that we're looking to optimize here in the quarters ahead.

So on the strategic review, as we said in the prepared remarks, we are still continuing to work through the process with our advisers on a short list of potential buyers. Nothing to announce at the moment. But when there is, we'll make the appropriate disclosures and remain cautiously optimistic on this opportunistic exploration that there'll be something to do in Manila.

This is Geoff Andres, Praveen. On the Manila market, there was indeed some softness experienced in the first half of the year. As a result, we have been implementing thoughtful and measured expense initiatives over the last five months, and we're beginning to see some positive results in July. Additionally, we observed market stabilization in July. There has also been a transition from the second to the third quarter regarding the VIP segment of our business, with some junkets exiting the market while we've signed new junkets that we believe will perform better. Therefore, we're feeling more optimistic as we head into the second half of the year.

And again, hopefully, this uptick continues. And once again, congratulations.

There are no further questions at this time. I'll now hand back to Jeanny for closing remarks.

Thank you for participating in our call today. We look forward to speaking with you again next quarter. Thank you.

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