Melco Resorts and Entertainment Ltd Shs Sponsored American Deposit Receipt Repr 3 Shs Aktie

Ladies and gentlemen, thank you for participating in the First Quarter 2026 Earnings Conference Call of Melco Resorts & Entertainment Limited. [Operator Instructions] 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, everybody, for joining us today for our first quarter 2026 earnings call. We apologize for the earnings release materials being later than usual. We had a bit of an IT issue, and we wanted to give all of you a little bit more time to review the materials that were released. As usual, 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 provisions 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 turn the call over to Mr. Lawrence Ho.

Thank you, Jeanny, and thank you all for joining us today. We delivered a strong first quarter with both group property EBITDA and Macau property EBITDA growing by 12% year-over-year. Our GGR in Macau increased by approximately 10% year-over-year with solid growth across all segments. In March, we officially announced the upcoming launch of REM, our new luxury hotel at COD. We remain on track to begin a phased opening early in the third quarter of 2026. We expect REM to represent a meaningful enhancement to the COD product portfolio and to redefine contemporary luxury across Macau.

At the same time, we have commenced a refresh of the retail areas at COD and have plans underway to enhance our food and beverage offering, further elevating the guest experience and product quality. Moving on to the Philippines. Despite competitive pressures and broader industry headwinds that continued into 2026, property EBITDA for the first quarter of 2026 grew 24% year-over-year, while GGR increased 9% -- we continue to punch above our weight in the market and are expanding our marketing initiatives across Southeast Asia to drive additional growth.

City of Dreams Mediterranean and the satellite casinos in Cyprus were impacted by the conflict in the Middle East that escalated in late February. With the recent developments in the region, we've seen significant improvement in occupancy, visitation and play levels in April. We remain operationally flexible in preparation for a further recovery in travel demand.

Our casino operations in Sri Lanka recorded positive EBITDA in 1Q 2026. We remain focused on the progressive ramp of operations throughout the year. And finally, we announced today that we purchased the subsidiary of Melco International that owns the trademarks that were subject to the trademark license agreement. These trademarks are integral to Melco's business. This purchase gives us full control of the IP and allows us flexibility to expand our brand without any incremental cost.

With that, I turn the call over to Geoff.

Thank you, Lawrence. Our group-wide adjusted property EBITDA for the first quarter of 2026 grew 12% year-over-year to approximately $381 million. Adjusted for VIP hold, our property EBITDA was approximately $356 million. Favorable win rates at COD Macau and COD Manila had positive impacts on our property EBITDA by approximately $20 million and $5 million, respectively. Daily OpEx in Macau, excluding House of Dancing Water for the first quarter of 2026 was approximately $3.2 million per day, in line with our prior guidance. Total OpEx per day, including House of Dancing Water and residency concerts for the last 4 quarters has been relatively stable, and we were able to see the benefits of operating leverage this quarter with our Macau property EBITDA margin increasing to approximately 28%. We continue to be focused on managing our costs to increase flow-through and margins going forward.

Turning to our balance sheet. Our liquidity position remains robust. We had available liquidity of approximately $2.4 billion with consolidated cash on hand of approximately $1.1 billion as of the end of the first quarter of 2026. Melco Resorts, excluding its operations at Studio City, the Philippines, Cyprus and Sri Lanka accounted for approximately $543 million of the consolidated cash on hand. In the first quarter of 2026, we repaid $60 million in debt at Melco Resorts and $10 million in debt at Studio City. The group does not have any material debt maturities in 2026. As of April 29, 2026, we repurchased approximately $2.5 million of our ADSs for a total consideration of approximately $14 million year-to-date in 2026. We have been opportunistic in our share repurchases in the past, and we expect to continue to make opportunistic repurchases going forward. We believe our share price is meaningfully undervalued, especially when recent trading levels of our ADSs imply a free cash flow yield of over 20%.

We also announced today that the board approved a new $500 million share repurchase program. This is incremental to the existing program and increases our share repurchase authorization to $710 million. We remain focused on reducing debt and leverage, and we'll continue to evaluate our capital allocation strategy in a disciplined manner, considering cash availability, prevailing market conditions and our share price. As Lawrence mentioned, we announced today the purchase of key trademarks from Melco International for $375 million. The transaction was the result of arm's length negotiations between the independent members of the 2 audit committees and a professional valuation services firm who was engaged to assist in the evaluation.

Trademark license fee for the first quarter of 2026 was approximately $13.4 million, implying a purchase price of just under 7x the annualized first quarter fee. This is in line with Melco's current trading multiple and below the trading multiples of our Macau peers. The purchase of the trademarks provides MLCO with full ownership and control of the trademarks and eliminates any uncertainty with respect to potential increases in fees at the end of the prior royalty fee arrangements. As a result of the purchase, we have an immediate increase in EBITDA and cash flow. The purchase will be funded by a combination of a drawdown from our credit facility and internal funds, but the additional debt is immaterial to our credit profile. Debt-to-EBITDA post transaction is expected to increase by less than half a turn, and we expect to leverage our return back down to first quarter 2026 levels before the end of 2026. And finally, as we normally do, we'll give you some guidance on nonoperating line items for the upcoming second quarter of 2026.

Total depreciation and amortization expense is expected to be approximately $140 million to $145 million. Corporate expense is expected to come in at approximately $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, back to you for the Q&A.

[Operator Instructions] Your first question comes from George Choi with Citi.

I just want to say that we appreciate the purchase of the trademark license from Melco International. I think that's a very good deal. But 2 questions from me, if that's all right. Firstly, perhaps for Lawrence or Evan, how do you view your current OpEx level, in particular, player investments? And secondly, for the upcoming Labor Day holidays, which is a few hours away, if you can provide us with any color in terms of the upcoming holidays, that would be very much appreciated.

George, it's Lawrence. So maybe I'll take the second question first and then let Evan and Geoff elaborate a little bit on the OpEx question. For May Golden Week, if anything, I think with the conflict in the Middle East, we're seeing people travel shorter distance in China. So I see there's -- I read somewhere that there's 10% cancellation of flights from China to international markets. So if anything, that has really benefited us. So I think so far for May Golden Week, we're seeing both occupancy and player quality improve on a year-on-year basis. So we're quite happy about that and excited about tomorrow effectively starting. On OpEx, maybe I'll hand it off to Evan and Geoff to elaborate.

Sure. Why don't I start and Geoff can join in. I think from an OpEx perspective, we're fairly stable on where we are. Market remains very competitive. So we did see player reinvestment levels tick up. I think Lawrence has set the tone to begin with, which is we're not leading the market up. But when you go through periods of intense competition, we obviously react to the market. And so in an environment where it's very competitive, we have seen some increase in player reinvestment levels. I think they're stable for now. We don't see anything on the horizon that would make them increase, but we also don't see anything on the near-term horizon that would decrease those levels.

As I look into the next quarter, we are seeing just our typical salary increase takes place on April 1. So we're going to see a tick up related to that. We have a little bit of enhancement in terms of some higher-level Butler and other service amenities around our suite product. As you know that within Macau, that's continued to be an area of customer focus. Some of our competitors have made some announcements of things that they're looking to do prospectively. I think luckily, a lot of ours were already from a hardware position better, but from a software position, we will have a slight tick up there.

And then the biggest jump up is going to be in Q3 as we start to open REM. REM, we've probably got another $30,000 to $40,000 a day in operating expenses. I think we view that as a big positive. We've got 149 keys opening, just walked the product today with Lawrence and Tim, and it looks spectacular. I think it's going to be highly differentiated in the market. We spent a lot of time on that property, making sure that we have the right mix. It's very heavily weighted towards the 1-bedroom suite product with some flexibility in terms of combining suites and combining rooms with lock-off rooms.

So I think we feel like we're going to be hitting the market with a very good product here going into Q3, and we'll have some slight expense from that, but should receive obviously a pretty big revenue uplift as that ramps.

And if I can ask a follow-up question. So given your purchase of the Tremont license, any change in your CapEx for this year at all?

So total CapEx for this year has come down from about $450 to approximately $425 -- and with the amount spent in the first quarter, we've got approximately $350 million to go for the remainder of this year.

[Operator Instructions] Our next question comes from Karl Choi with Bank of America.

Two questions here. Number one is, can you discuss a little bit about the timing of resuming your dividend, the trademark purchase? Does that mean that we may be pushing back the timing of a resumption towards 2027? And second part on competition, understanding that maybe the reinvestment rate for now, you expect it to be stable near term. But sort of how much -- one of your larger competitors has been quite vocal about stepping up service offerings and things like that. And so do you feel like you still need to respond further beyond what you have said on the call?

Karl, so maybe I'll -- it's Lawrence. So let me -- I think our goal is still to resume the dividend at the end of this year, but I think maybe we'll let Geoff elaborate on our capital priorities.

Yes. So all things being equal, we would definitely like to resume the dividend by year-end. That said, of course, we'll look at the opportunity set out there, and that would include our share price over the course of this year as well. As you know, we've been opportunistic over time and thus far this year in buying back the stock when we think it's on sale, and we think it's on sale at these levels. So it's all dependent on a variety of different variables, but we would like to recommence the dividend and think that the balance sheet should be in shape for that by the end of this year.

And Karl, on your reinvestment question, I'm sure you guys are super smart and you can back out the fact that Melco is the most disciplined in terms of our reinvestment. And it's a constant internal discussion as well, which is sort of an annoying one because we see our competitors keep picking it up. And as Evan mentioned earlier on, we don't want to lead that race. But I don't know, I'll let Evan elaborate on it further.

No. Look, I think we feel good on where we are on a relative basis sitting here today. I think as you remarked, a number of our competitors have done more aggressive things in the marketplace over the last few months and we've responded. I don't get the sense that they're going to double down on that because I think they've experienced that you sort of hit a point where the incremental benefit of that spend is very muted and you end up having dilution, obviously, in profitability.

So that's why I say I feel like we've hit a stable point. I don't see in the near term a need for us to ratchet up -- that being said, as Lawrence articulated, if one of our competitors did something relative to the status quo that was very, very aggressive and the market followed, we probably would reluctantly need to change our approach. But again, I think we are fighting to be disciplined and obviously are encouraging our other competitors to compete in a healthy way in the marketplace. So sitting here today, I think we feel like we're stable.

Yes. And we respect the fact that Macau being the biggest market in the world is always going to be very competitive. But I think we've always encouraged that we should compete based on product and service and not rebates and commissions and stuff like that. But it's unfortunate that we can't -- this is out of our control. But at the same time, I think on a product and service standpoint, we've talked -- Evan talked quite a bit about REM. We're very excited about the all-new suite product there. I think in due course, we're happy to show it off with our phase opening in Q3 because it's truly a unique product in -- not only in Macau, but Macau, Hong Kong and probably the entire Asia. It's probably something that's never been done before.

And at the same time, we're also redoing our retail at City of Dreams. If anything, we've always felt that with our partnership with DFS ending, that was always an area of weakness. So I think from a product offering standpoint, starting next year, we're going to have some exciting new brands that we're dealing directly with where we think will really complement the luxury proposition of City of Dreams.

Got it. That's good to hear. If I may ask a follow-up question. I just want to go back to the GGR trends for a second. Good to hear about the good color about the upcoming May holiday. But I just want to go back to April, there's some market chatter that I think for the sector overall win rate was low. But more specifically, there was some chatter that VIP volume was also weak. Just want to see if that's something you've seen? And also if that's the case, is that really more transitory, nothing to be worried about, especially as you look forward? Or that's something that you have to pay attention?

It's harder for us to answer that sort of market-wide. For us, it was probably not the strongest month. But to be fair, that is a business that we track almost player by player given the concentration that exists in some of the large VIP play. And so some of the players that had come in Q1 are due to be coming later in the quarter. So I don't know that April set the world on fire for VIP. At the same time, I don't think there was anything we saw that was concerning in terms of the future health of that business.

Your next question comes from D.S. Kim with JPMorgan.

And as George said earlier, I really appreciate also us purchasing trademark at a reasonable, if not attractive valuation, kudos to that. But just wanted to check on very high-level stuff, if I may, because we and the market came across news or government announcement last month that they want to establish, I think, a MOP 20 billion fund to support economic diversification. And they target to raise, if I'm not mistaken, up to MOP 9 billion from private capital private parties. So just wondering, has there been any discussion between -- with the government as to if we need to or if we want to participate in that fund? And if that's the case, is it going to come out of our previous commitment for the non-gaming commitment at the license signing? Or would there be additional burden or commitment that we need to do in the future?

D. S, and again, thank you for the question, and thank you for the comment on the trademark. On the Macau government fund, we really can't comment too much about it. But all I can say is that what we had committed as part of the license renewal back at the end of 2022 remains. So that amount is not going to increase. So -- and just to remind everybody, we're lucky to have the lowest commitment among the 6 concessionaires, and there will be no change to that amount.

Congrats again on a strong quarter.

Your next question comes from George Choi with Citi.

Just a quick follow-up, on the aforementioned refresh on CODs retail. How should we think about disruption, if any?

Maybe I'll take that one and others can add. So if you've been by the property, we've already started. So if you go into sort of the front by the Cotai Strip in the luxury retail arc, the north section already hoarded. We're already underway in terms of the remodel. Tim and the team here have developed a very good phasing plan. So we're not going to have any period where we think the property is going to be massively impacted, but we are going to be going zone by zone in really creating a brand-new retail experience throughout that podium level. That's going to take place from now, and it's really going to go on for the next 10 to 12 months.

We're zoning it very carefully, but there is going to be construction in various zones throughout that period. We're also, again, going to go through a period with our tenants where we're keeping some old friends, but on a direct basis, we're making a lot of new friends with the new exciting names that we're glad are going to be joining us. And during this next 3 to 4 quarters, we're working with them and at various times as they're disrupted, obviously, providing relief to those tenants as they are committed to us and sticking with us during this transformational period. I guess what I would say is we're very excited about where we're going to end up.

I think there's going to be some work to do during the journey, but very proud of Tim and the construction team for really coming up with a really good phased plan with some good ideas around hoarding and property activations that should minimize the disruption during that period.

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

Thank you, everybody, for joining the call again today, and we'll see you next quarter. Thank you.

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

Ladies and gentlemen, thank you for participating in the Fourth Quarter 2025 Earnings Conference Call of Melco Resorts & Entertainment Limited. [Operator Instructions] Today's conference is being recorded.

I would now like to turn the call over to Jeanny Kim, Senior Vice President, Group Treasurer of Melco Resorts & Entertainment Limited. Please go ahead.

Thank you, operator, and thank you all for joining us today for our fourth 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 turn the call over to Mr. Lawrence Ho.

Thank you, Jeanny, and thank you all for joining us today. 2025 was a year of growth and recovery, supported by disciplined cost management and margin expansion. We recorded $1.4 billion in group property EBITDA for the full year of 2025, growing by 17% compared to 2024. In Macau, our dedicated efforts to enhance the customer experience have proven to be a successful strategic focus with fourth quarter Macau property EBITDA growing 24% year-over-year and full year Macau property EBITDA growing 25% compared to 2024.

We've had a strong start to 2026 with Macau market GGR up by 24% year-over-year and our market share increasing so far in the first quarter of 2026. Chinese New Year looks strong with higher-yielding cash ADRs compared to 2025. We have a pipeline of new initiatives that we're planning to implement in 2026 to further differentiate our offerings with the largest project being the opening of the renovated Countdown hotel. We are on track to progressively start opening in the third quarter of 2026. The completed hotel is expected to introduce a truly distinctive experience and set a new benchmark in Macau.

We have also started on a revamp of the retail area at COD and have plans to upgrade our F&B offerings, continuing to further enhance our product quality. In the Philippines, competitive pressures and industry headwinds continue to impact our performance in the fourth quarter of 2025. However, we're encouraged by the positive developments in that market, including visa-free travel for Chinese nationals, upgrades to the Macau -- to the Manila Airport to facilitate increasing international tourism and rationalization of the online gaming market.

We have also concluded our evaluation of the strategic alternatives for COD Manila. Although we considered various alternatives, we did not feel that any of those options would allow the value and potential of the property to be fully realized. We're confident that business will rebound, and we may reevaluate the situation in the future.

Moving on to Cyprus. City of Dreams Mediterranean and the satellite casinos in Cyprus achieved 78% year-over-year growth in property EBITDA to $21 million for the fourth quarter of 2025, despite seasonality typically being slower in these months. And finally, in Sri Lanka, we continue to focus our efforts to progressively ramp up operations and have seen promising green shoots so far in 2026.

With that, I turn the call over to Geoff.

Thank you, Lawrence. Our group-wide adjusted property EBITDA for the fourth quarter of 2025 grew 12% year-over-year to approximately $331 million. Adjusted for VIP hold, our property EBITDA was approximately $323 million. Favorable win rates at COD Macau and COD Manila had positive impacts on our property EBITDA by approximately $7 million and $3 million, respectively. We had guided in the prior quarterly call -- as we had guided in the prior quarterly call, OpEx in Macau increased in the fourth quarter compared to the prior quarter, primarily due to events, including the China National Games, Studio City's 10th anniversary and the Macau Grand Prix.

Excluding these fourth quarter events as well as House of Dancing Water, Macau OpEx was approximately $3.1 million per day. EBITDA in the fourth quarter of 2025 was also impacted by additional bad debt provisions that were taken as a result of a settlement that we reached with one of the previous junket operators. Adjusting for these event-driven costs, Macau's property EBITDA margin for the fourth quarter of 2025 would have been over 27% on an actual basis. Looking forward to the first quarter of 2026, we expect Macau daily OpEx, excluding House of Dancing Water, to come in at approximately $3.2 million, given increased marketing activity around Chinese New Year and new brand campaigns across our Macau properties.

Turning to our balance sheet. Our liquidity position remains robust. We had available liquidity of approximately $2.4 billion with consolidated cash on hand of approximately $1.2 billion as of the end of 2025. Melco, excluding its operations at Studio City, the Philippines, Cyprus and Sri Lanka, accounted for approximately $550 million of the consolidated cash on hand. In the fourth quarter of 2025, Melco redeemed the remaining $358 million of the senior notes due 2026. In addition, we repaid $210 million in debt at Melco and $32 million at Studio City. In total, the Melco Group paid down approximately $400 million of debt over the course of 2025. And we continue to reduce debt in 2026. Melco has repaid $35 million in debt in January and will repay a further $25 million this month. The group does not have any material amount of debt maturing in 2026.

Before we move on to the nonoperating line items, we thought it would be helpful to take a few minutes to provide information on the trademarks license agreement with Melco International. Melco International owns and manages certain trademarks utilized by Melco Resorts and its operations. The terms of the trademark license agreement were negotiated on an arm's length basis, factoring in the ranges of fees typically observed in the industry. The agreement has an initial term of 10 years, which commenced on January 1, 2024, and thereafter is automatically renewed for consecutive periods of 12 months unless either party gives prior notice of nonrenewal.

Under the agreement, the trademark license fee payable is up to 1.5% of the gross revenues of City of Dreams Macau, excluding Grand Hyatt, unless agreed otherwise by the parties to the agreement. The trademark license fee was 1% in 2025 and will increase to 1.5% from the first quarter of 2026. The agreement does not include an annual cap, but the total fees for the full year of 2025 amounted to approximately $33 million, dramatically lower than those of our peers. The trademarks owned by Melco International are integral to the long-term strategy and brand identity of Melco Resorts and the formalized agreement facilitates a standard approach as we continue to grow and expand the portfolio.

And finally, as we normally do, we'll give you some guidance on nonoperating line items for the upcoming first quarter of 2026. Total depreciation and amortization expense is expected to be approximately $140 million to $145 million. Corporate expense is expected to come in at approximately $35 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, back to you for the Q&A.

[Operator Instructions] And today's first question comes from Joe Stauff at Susquehanna.

I wanted to ask about the additional traffic, obviously being generated by House of Dancing Water and kind of where you are with respect to being able to convert that additional daily visitation into both gaming and obviously, other parts of your business. What is the opportunity from here as we think about that?

Joe, it's Lawrence. So since we've opened House of Dancing Water in May -- reopened House of Dancing Water in May of last year, we've seen meaningful uptick in property's visitation. The show is open pretty much twice a day for 5 days of the week. And during those days that adds, each show is about 1,800, 1,900 people. So that drives additional headcount into the property. I think we're seeing meaningfully good spend across non-gaming during and after the show. And even on our mass drop, I think from pre-May to post-May, we had seen a decent uptick. I think that's kind of -- as with any non-gaming entertainment concerts attractions in Macau, how does that -- how can we directly track that scientifically. I don't think we have an answer for that. I'll maybe let Evan talk about it. But I think overall, we see it's driving traffic and energy into the building and...

It's a little more -- as Lawrence has pointed out, it's a little more difficult from a direct drive standpoint. It's very helpful in activating the property. We do see a big uptick, obviously, in food and beverage spending on property during the show. Generally, when people are coming from outside the property to the show for that initial event, sometimes they're coming with family and friends. So a very small percentage go from that directly to gaming. The benefit we have is it does introduce thousands of more people with each show to the property and to COD to our product, to food and beverage. And so I think over time, it's generating repeat visits back to the property, but it's hard to go from who exited the show that day to who comes back later on. So I think we drive, but we don't have a direct formula that we can give you because if you look at the individual people coming out of the show on the night that they go to show to see the show, that's not a high number. But overall, we're seeing uplift in the business.

And our next question today comes from Timothy Chau at Citigroup.

Can you hear me clearly, please?

Yes, we can hear you.

All right. So a question for me. What is your view on the competitive intensity in Macau? And more specifically, what are your expectations on your EBITDA margins, particularly in Macau this year, please?

Timothy, it's Lawrence. So maybe I'll start and then I'll hand it over to Evan and Geoff. I think the competition is still very intense in Macau, but can be expected. I would say that we anticipate this level of competition to be what we will expect for the rest of the year. In terms of -- mass is still growing. So I think we're comfortable with our margin. And I think we've been very, very disciplined throughout 2025 in terms of our reinvestment. And we've seen some of our competitors ratcheted up throughout the year. And so I think we're -- I don't know, unless there's anything you want to supplement, Evan...

No. Look, I think from where we're sitting coming out of Q4 and into this quarter, we're not seeing a ratchet up in terms of levels of spend directly on gaming programs from where we are now. Competition remains, as Lawrence said, intense within the marketplace. We're not looking at any catalysts that would immediately bring that down. The hope that we always have is as people look at things that you have easing up among players. So as Lawrence has said and I've said in the past, we don't ever drive up in the marketplace. We tend to be very disciplined. We'll make strategic moves at times when we need to look at market share or move around with individual segments, but we certainly would never leave the market up. Based on what we're seeing now, I think we're stable. I don't see anything that's going to bring us down in the near term, but I also don't see anything that's going to ratchet it up.

I think on margin, we've done a pretty good job in terms of managing our operating costs throughout 2025. That's part of the company philosophy as well. So I think that -- you'll see that ongoing throughout 2026.

[Operator Instructions] Our next question today comes from D. S. Kim at JPMorgan.

My first question is regarding the operating expense. As Geoff mentioned earlier, I think we had quite a bit of nonrecurring items this quarter, 10-year anniversary National Games and even junket-related bad debt. And can you help quantify each of this in dollar terms for us, if it's possible? And can I confirm the spending related to National Games and Grand Prix were included in OpEx operating expense above EBITDA line and not in the corporate expense?

Those expenses are in our property margins. The additional bad debt was approximately $5 million for the quarter, and we expect that to come back down to more normal levels going forward. And then we had about $6 million from the anniversary.

And our next question today comes from John DeCree of CBRE.

Maybe just one on CapEx, Geoff, I apologize if I missed it. Did you give us the CapEx number for the year? And could you break it out for major projects maybe by COD or Studio City at the property level, what we should expect?

Sure. So our total CapEx for this year, which reflects a little bit of carryforward from money we anticipated spending in '25 that's pushed into '26. The total is $450 million. The only material one that I would call out would be the Countdown hotel, which is approximately $100 million for 2026. Broken out by jurisdiction, the total CapEx in Macau is roughly $375 million, $35 million to $40 million in Manila, $35 million to $40 million in Cyprus.

And that concludes the question-and-answer session. I'd like to turn the conference back over to Jeanny Kim for any closing remarks.

Thank you, operator, and thank you all for joining. We will see you next quarter.

Thank you.

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

Ladies and gentlemen, thank you for participating in the Third Quarter 2025 Earnings Conference Call of Melco Resorts & Entertainment Limited. [Operator Instructions] 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. Please go ahead.

Thank you, operator, and thank you all for joining us today for our third 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 turn the call over to Mr. Lawrence Ho.

Thank you, Jeanny, and thank you all for joining us today. Our properties in Macau delivered solid growth in the third quarter of 2025, with property EBITDA growing by 21% year-over-year despite the negative impact of approximately $12 million due to the typhoon in September.

Our momentum in Macau is continuing, and we did not see a slowdown in October following the holidays. In fact, our Macau GGR grew over 30% year-over-year post Golden Week, and COD recorded its highest monthly mass tables GGR ever in October. We continue to introduce new initiatives to enhance the quality of engagement with our customers across all segments of our customer base.

In July, we opened the Signature Clubhouse at City of Dreams for our premium mass customers, which includes private gaming salons, hair services, a Formula One simulator and other exclusive amenities to provide a differentiated experience.

In September, we reopened a gaming area featuring 15 gaming tables at City of Dreams near the Grand Hyatt across from MGM Cotai and Wynn Palace and just steps away from the Macau Light Rail Station. This new area has been designed to appeal to walk-in crowd with lower table minimums, and we have seen this area well utilized with a steady flow of new patrons. As we had announced previously, we closed Grand Dragon Casino and one of our Mochas in September.

The 15 tables from Grand Dragon were allocated to the new gaming space at COD and 90 gaming machines from the Mocha closure were shifted to Studio City. We will close 2 more Mochas before end of the year, and the gaming machines will be reallocated across our 3 properties in Macau. We have started the renovation of the Countdown Hotel, which we currently expect to open in the third quarter of 2026.

After completion, this hotel will bring a one-of-a-kind experience to Macau and the region. We plan to simultaneously upgrade retail and food and beverage in this precinct of COD and continue to elevate the quality of our product offerings. At Studio City, we unveiled a newly expanded high-limit gaming area along with 4 new private gaming salons at Epic Tower to provide an even more refined experience for our premium mass customers.

In October, we relaunched the new iRAD hospital at Studio City, designed to further enhance Macau's tourism infrastructure with top-tier health care and wellness services. In the Philippines, property EBITDA grew 45% quarter-over-quarter, and we have seen good momentum in October. City of Dreams Mediterranean and the satellite casinos in Cyprus had their best quarter yet, with property EBITDA growing 53% year-over-year to $23 million.

Despite the escalation of hostilities in the region at the beginning of the quarter, we're now in the shoulder season, but the property is coming into its own and showing solid year-over-year growth so far. In Sri Lanka, we opened City of Dreams Sri Lanka on August 1 as the first integrated resort in Sri Lanka and in South Asia. It is early days as we solidify our footing and continue to ramp up our operations there.

With that, I turn the call over to Geoff.

Thank you, Lawrence. Our group-wide adjusted property EBITDA for the third quarter of 2025 grew 18% year-over-year to approximately $380 million. Adjusted for VIP hold, our property EBITDA was approximately $355 million. Favorable win rates at COD Macau and COD Manila had positive impacts on our property EBITDA by approximately $23 million and $2 million, respectively.

We continue to remain focused on operational discipline and our OpEx in Macau remained stable this quarter at approximately $3 million per day, excluding House of Dancing Water and the Residency concerts. OpEx for House of Dancing Water was approximately $100,000 per day, as previously mentioned. Our Macau property EBITDA margin held steady at approximately 29% in the third quarter of 2025, which reflects our disciplined approach on costs as we drive sustained business growth.

Turning to our balance sheet. Our liquidity position remains robust. We had available liquidity of $2.6 billion with consolidated cash on hand of approximately $1.6 billion as of the end of the third quarter of 2025. Melco, excluding its operations at Studio City, the Philippines, Cyprus and Sri Lanka, accounted for approximately $1.05 billion of the consolidated cash on hand.

There was a quarter-over-quarter increase in Melco's cash balance of approximately $360 million, which was largely due to the timing of the $500 million in bonds that we issued in September. As of the end of September, we had approximately $358 million of the bond proceeds remaining, net of $142 million, which had been used to settle a tender offer on the senior notes due 2026.

In October, the remaining proceeds of the new bond were utilized to early redeem all of the outstanding senior notes due 2026, which had not been tendered. Following this exercise, the group does not have any material amount of debt maturing in 2026. We continue to reduce debt in the third quarter with a total of $180 million being repaid, $70 million at Melco and $110 million at Studio City.

We repaid a further $180 million at Melco in October and November. In October, we also canceled $18.5 million of the approximately 32 million ADSs that were repurchased earlier this year at an average price of $5.10 per ADS. As we normally do, we'll give you some guidance on nonoperating line items for the upcoming fourth 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, back to you for the Q&A.

[Operator Instructions] Your first question comes from George Choi with Citi.

So you guys have introduced new side just like everyone else does in Macau to your operations over the last year or so. Would you say that they contributed positively to your recent EBITDA growth?

And would you be raising your theoretical hold rate anytime soon? And that's my first question. My second question is a housekeeping one. Would you please remind me the CapEx required for the renovation of the Countdown Hotel?

Sorry, George, it's Lawrence. So your first question was on the fee hold rate for VIP?

Or perhaps mass hold rate trends that you are looking for?

Sure. So again, the only one that we sort of publish something on and we adjust to is obviously on the rolling business, where we have a target of 3%. Based on what we're looking at from a data standpoint, and again, we continue to watch it, that number sitting here today is still a good number in terms of that business constituency and in terms of sort of the betting mix of those players.

And I understand this varies some market by market. So there's some noise in the market about other markets raising that up substantially. But yet today, we haven't yet seen a strong enough basis for us to adjust, but we're continuing to look at it. In terms of our mass business, obviously, as we've added more, it's been a positive uplift. I don't know that it's dramatic because we've gone from sort of the widely adopted on the Banker 6 to the 7s bets.

We are seeing a lift up, but I'm not sure that, that's a massive driver as we sit here today. But obviously, it is improving as we're giving more options to our players in terms of our overall percentages. And on the CapEx question for the countdown, that's about $125 million.

Our next question comes from the line of Luis Ricardo Chinchilla Vargas.

I wanted to start asking about the operating environment in terms of promotions. Have you guys seen any uptick or anything meaningful on that front?

Well, Macau is always going to be very dynamic. And every day, you're looking at how to compete. But I think I can say that I'm very proud of the team because throughout 2025, we've really held the line on reinvestment -- and even this quarter, we keep track of the share shift on a daily basis, a weekly basis, and we're seeing some of that.

But I think we've really held the line throughout 2025, and we will continue to observe it. And maybe I'll let Evan elaborate a bit more, but I think the environment is certainly, I would say, is competitive but stable.

I think that's fair. Again, you've probably seen some statements by some competitors talking about being more or less aggressive on certain programs. We sort of look by program, by player segment and are evaluating constantly in terms of what we're doing. In Q3, while we're always tweaking and trying to optimize, we didn't see a big shift upward.

Again, there's probably, if you look program by program areas that we're going to look to tweak up and others that we're going to look to tweak down. We'll continue to monitor and respond to the competitive environment. But I think Lauren said it well. It's very competitive. But at least right now, it's not irrationally competitive.

Fantastic. That's great color. For my second question, I was hoping if you guys could give us some CapEx guidance for next year, even though it might be early and you guys are still finalizing the budget.

You're right. We're in the midst of reviewing and finalizing and approving that budget. But as a placeholder for now, I think $400 million for 2026 is a good number.

Our next question comes from the line of John DeCree with CBRE Capital Advisors.

Lawrence, I apologize if I missed any prepared remarks, I dialed in a couple of minutes late. But did you provide any color on Golden Week? And if so I could get it offline, not make you repeat yourself, but interested in kind of what you guys see kind of pre and post around the seasonality in the shoulder periods, maybe relative to what you'd expect several years ago?

Or how strong are the peaks? And how consistent is visitation on property kind of leading up into Golden Week, which I think could typically be a little slower? And then have you seen any signs of slowdown after?

John, I think on Golden Week, the whole market was a bit disappointed because we were unlucky with -- there was a typhoon on, I think, day 4 and then mid-autumn festival was effectively day 6. And for mid-autumn festival, most people go back to their families and stuff. And so I think the whole market was quite disappointed by the first 7 days.

But throughout October, the last 21 days of October were extremely strong. And so I think the traffic that went -- that skipped Golden Week or left early for Golden Week clearly came back. And so I think all in all, post-COVID, October was the best month. And I think for us as well, I think we've continued to on a year-on-year basis, kept up with the pace of growth in the market. So we're quite pleased.

I don't know. Maybe Evan has more.

No, I think Lawrence is spot on. We -- coming out of Golden Week, I think we all felt like it was a little soft, and we were a little unlucky on the calendar, and we were definitely unlucky on the weather. And then you normally get more of a dropoff and it just sort of continued to stay strong and there was good tails going through October.

So sitting here now, we look back and we're like actually October feels very good. I mean we feel really good. But we didn't feel great immediately coming out of Golden Week, it was soft. But unusually, and as Lawrence said, I can't tell you if all the people who put off trips came back. We can't give you the precise causality of it, but we had a very, very strong period following it, much stronger than we would normally expect.

Awesome everyone. And maybe a quick one for Geoff on kind of OpEx per day. I know kind of maintaining cost discipline has been core to the story. You have given us a little cover in the past. Any change in kind of OpEx per day assumptions that you could see or could share or kind of steady as it goes?

Maybe I'll take that. Geoff can add any color he wants. But -- so we have a few things going on in Q4. We've got the China National Games where there's a fairly big level of support that we're going to be providing that's going to hit the P&L. You have the 10th anniversary of Studio City, and we actually have some pretty exciting promotional activity around that.

So those are kind of one-offs that will be significant drivers in Q4. We also are entering a period where seasonally, we tend to do a bit more promotion. And then also as the concerts or the residencies have dropped off, which are normally excluded, we are having some backfill activity to make sure that we have strong activation. And so the net of all those is we're going to probably spike up here in Q3.

We're probably going to be more like in the 3-ish range. And we may, again, depending on some promotional and other activity that we're looking at, drift a little bit higher, but that should be coming down in the subsequent quarters. I think probably premature to talk about how much, but we are going to see an uptick here in Q4 based on those things.

Our next question comes from the line of Joe Stauff with Susquehanna.

A couple of follow-ups just on that OpEx per day response that you had given. 3.3 all in, including the onetimes is the right way to interpret that comment, correct?

That is the baseline, again, as we're looking at some promotional activity, it's not going to be lower than that. There are some things we're contemplating that could drift a little bit higher. But yes, that's including the onetimes. For Q4 -- normal run rate.

Got it. I wanted to -- Q4, Understood. Understood. I wanted to zoom out COD has been just a significant improvement in turnaround here over the past 1.5 years.

And just kind of zooming out and thinking about the strategic initiatives and investments you've made, wondering if you could just maybe like rank what you think to be the most important investments and strategic initiatives that you've taken and made at COD to really kind of create this impressive turnaround in results, especially year-to-date.

Well, we're all looking around each other. That's sort of one that was unexpected. But I'll give you my take and then maybe Lawrence or Tim or others will chime in. I'm not sure it's one individual thing. I think over the last 18 months, Lawrence has set a mandate that to some degree, we need to kind of get our swagger and market leadership back at COD on product, service and what we're doing.

And so we've really done a breakdown on the business from soup to nuts at every position on every way that we provide service, looking at the customer experience and then also sort of tying together what the customers experience on property. And so I don't have one big thing to point you to. It's literally been hundreds of items, and they're not on the call, but we have mid-level executives across the board that have contributed in big ways and small ways.

So I've been really happy and proud on how many different people have contributed in different ways, but it's been a lot of small steps and then you kind of look back and you've climbed a pretty long way. But I don't know that there's one thing that's been the silver bullet.

No, I appreciate that. I know there are a lot of things going on. But just curious of how you think about it. There's always the market dynamic versus, say, the company-specific, say, initiatives. And so that's the question.

No. I think let me add to that as well. I think during COVID, we were barely surviving, right? So and City of Dreams was always our flagship, where Morpheus new lifestyle. -- and where we have the most Michelin to our restaurants. And I think for a while during COVID, we just weren't living up to the brand, the brand promise and the brand proposition.

And I think with the new team coming on board and Tim in the leadership, I think we've revisited -- like Evan said, we've revisited literally every single thing from like the tiniest amenities to much bigger attractions. And so I think we're -- finally, post-COVID, we've come out of that funk and we're -- we've rediscovered the swagger.

Okay. Just one quick one. Any update maybe on the process for strategic options for your Filipino asset? Any updates or reference points you can give us?

Sure. This is Geoff. We are approaching the end of the process with our advisers and should have a definitive assessment of our alternatives by the end of this year. There's always -- this has always been an opportunistic exercise that's been driven by the potential for a one-off debt reduction event, not any specific desire to exit the Manila market.

So we have and will continue to be very valuation-driven on this exercise, and we'll continue to be disciplined in our approach to assessing the offers that we have for this business. But we hope to be back by year-end with a definitive answer.

Our next question comes from the line of Praveen Choudhary with Morgan Stanley.

I think the Macau market obviously is doing very well since May of this year. Q2 results, GGR being up 13%, October being up 16%. I guess investors are asking literally 2 questions. So I just wanted to ask you those 2 questions and see how you want to respond to it. One is obviously the margin, which has been talked about where the competitive dynamics remains intense.

And the reinvestment cost is generally pretty high, which is why the margin could have been very high, but it's not. So any thoughts there that it is the bottom of that margin or peak of the reinvestment intensity. But the second question I had was on premium-driven business, meaning a very small number of people is driving a big chunk of the mass revenue and thus the profit for the Macau business.

And that is similar to, let's say, VIP driven back in the days, which deserves lower multiple and so on. So the fact that grind mass has been missing or at least been less available than we would like, is there anything you can talk about? Or are you seeing any early signs of that changing? That will be great. Sorry for the long-winded question.

Praveen, it's Lawrence. So maybe why don't I start and I'll hand it off to Evan and see if Geoff wants to chime in as well. I think clearly, when the VIP and the junket business went away, we had all hoped that margins would just rocket just go sky high. And unfortunately, that hasn't happened. And I think it's well documented what some of our competitors have done.

And so I think as I mentioned earlier on in the Q&A, I'm very proud of the team because we've really held the line on reinvestment so far for the entirety of 2025. So theoretically, if all 6 concessionaires can kind of get their act together, there should be margin expansion, given that the market is growing.

And so on one hand, I think as mentioned -- as Evan mentioned earlier, I think we're past peak competitiveness in terms of the intensity in the market. But at the same time, I think everybody is still thinking of ways to try to steal business and grab share. And I would say as well, I think every time I read a sell-side research, everybody just talks about market share.

So I don't blame some of our competitors for constantly focusing on that rather than being more focused on EBITDA. So again, I think it's as rational as it has been in the last maybe 12, 18 months. But again, I'm seeing with our competitors and also sell-side research analysts to maybe place less emphasis on weekly, monthly market shares as well so that we don't feel like they are pressure to chase market. I don't know, maybe Evan, you want to add.

I guess, Praveen, on the 2 that you asked from a margin standpoint, I agree, obviously, with Lawrence, that there should be room to accrete upward. I'm not sure sitting here in the competitive market today that I bank on that one way or another. We could always be surprised. But look, right now, the market remains competitive.

I think the dream for everyone is if everyone competed in a very rational way on product and service, that there should be upside within this market that I hope we realize. And also, I think I have a hope that as we continue to get more and more mass business into the market and you get sort of just a better supply-demand dynamic in terms of what's available that, that will continue to improve.

When the junket business left, there's a lot of product and service that they were using that didn't get used, and that's sort of been backfilled by people going after that premium mass business. So you're seeing the effects of that from competition. So I think margins are stable, but I don't know that there's a near-term catalyst that will do that, but I think the overall long-term trend is healthy.

In terms of the premium-driven business, I'm not 100% sure if that was going after premium direct business where, yes, that business tends to be fairly clumpy driven by pretty large players. We are seeing more players from more geographies around the world. So while that is the nature of that business, it feels pretty healthy.

In terms of -- if you meant premium mass, yes, we're always going after those premium players, and we're not really going after a grind, grind mass, but we are, again, seeing new players coming into the market. So I don't know that, that's -- I wouldn't sort of signal that out as not healthy. I do think that we are getting a healthy drive on the mass business overall. We don't tend to be kind of a grind mass player.

So I probably have less insight into that market demographic. But in terms of players coming into our system, I think we feel good about market growth.

That is very helpful. Can I just have a last follow-up question on Sri Lanka. It's early days. I totally appreciate that. But when you entered that market, you had a view that it will be a return accretive market and eventually, it will generate a certain kind of EBITDA.

Is there anything you picked up in terms of either it's been too difficult or regulatory issues or visitation being weaker or you need to tweak business models slightly or you need to provide something? Anything you can share about that market? That will be very helpful.

Praveen, I think it's super early days. It's only been open for 3 months. And for us, it is a whole new market because it's mainly targeted at the Indian market. So there's a lot for us to learn along the way.

I think we're very optimistic about the country and the tourism growth in that market. And I would say that we're learning every day, and there are new programs that we haven't really seen before. And anyway, I'm sure we'll have more to report in subsequent quarters.

No, no. I would just say, look, initially, when you go into a market that already has some incumbents, it's a little bit of a steel share market where you have incumbents protecting the existing customer base. we're lowering them with a better product and service, but you have promotional activity.

And so we're kind of in the early days of that. I think our long-term strategy is we want to expand that market and change the kind of customer that's going into that market who expects more premium product. But that's not going to be done in a month or 2. That's going to be done here over subsequent quarters.

So as Lawrence said, we're early days. We're focused on getting that very valuable high-end guest, and that's going to be a journey from here to there.

Our next follow-up question comes from the line of George Choi with Citi.

So you guys have made significant progress on deleveraging. And if there's any positive results from this COD Manila strategic review, your gearing is going to go down further, right? So I'm just wondering if you have any new thoughts on your cash allocation strategy.

Thanks, George. As you know, in the post-COVID period, we've been very laser-focused on debt reduction, and we've had some meaningful success in paying down some of the debt that we incurred during the 3 challenging years of COVID.

However, going into next year, we plan to take a more balanced approach using our free cash. And while debt reduction will continue to be a primary mandate, we aim to potentially recommence the quarterly dividend by the end of next year.

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

Thank you, and thank you all for joining us again today. We will look forward to speaking to you next quarter. Thank you.

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

Ladies and gentlemen, thank you for participating in the Second Quarter 2025 Earnings Conference Call of Melco Resorts & Entertainment Limited. [Operator Instructions] 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, Jeannie, 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 second -- 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 had 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-wall 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 2 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 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 nonoperating 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.

[Operator Instructions] 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. Maybe I'll start off, and I'll hand it off to Evan and then also perhaps Tim to talk about COD. But over the last 18 months, we've been improving our product and reinvesting in the customer experience. So that has been very -- I think it shows in our results. So I think all the hard work that we put in, in terms of improving that. So as part of the countdown, what used to be a 330-room hotel, we're really taking it down to 150 luxury suites. And I think it's going to be a super unique product doesn't exist anywhere in the world. So we're very excited about that. But I think maybe I'll hand off to -- there's a lot of work being done on the casino floor for us constantly. So I think maybe I'll hand it off to Evan or Tim to elaborate.

Sure. I can -- Laurence, 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, [indiscernible] of coffees coming in at the front of Studio City. We opened up Nickelodeon Play space. We've got a unique concept on 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 popped up 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 product 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 IRs. 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 have to spend a lot more -- a longer time the next time I visited the COD. My second question, if I can, given the July momentum and whatever visibility that you might have in August, do you expect your whole normalized EBITDA to improve sequentially?

I think the market is doing very well. And I think the strength that we saw in -- really in the first half, we've had an excellent first half. So Q1, Q2 is -- we see it in Q3 as well in that momentum. And I think at the end of the day, is the Chinese economy stabilizing and people consuming more again. And so I think it sets us up for a great 3Q. I don't know if Geoff or Evan want to elaborate.

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?

Ricardo, it's Lawrence. Maybe I'll just answer and then hand it off to other. Macau is it's always going to be competitive. And we see competitors trying to grab share here and there. But I think the most important thing, I think the competitor you're referring to has really been -- have under reinvested in the market previously and it's now doing it. But at the same time, we -- at Melco, we want to compete on product and services. So I think the -- what we have done at City of Dreams in terms of the luxury experience with the hotels and now House of Dancing Water and the food and beverage, that stands on its own. So we don't necessarily need to match or compete on who has the best deal out there. And equally, at Studio City, in terms of the family attractions and other fun attractions, again, it's a differentiated product. So again, we don't have to be the most aggressive will give the best deal in the market. So I think that is an area we'll continue to lean in on. I don't know if...

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 -- Tim and Kevin are looking at me because, obviously, we spend all day every day looking for ways that we can optimize and improve. But I think, generally speaking, we've done a lot of that work and feel pretty good about where we are. In terms of would we increase it going forward, I think we'd have to feel like we found an opportunity that we could really move market share and generate EBITDA. So I don't have some plan right now where we would increase the expense load going forward. I think 3 is a good number. But again, we're always watching the market if we think there was something that we could do opportunistically I think we go to Lawrence, we wouldn't be afraid to spend money in order to make money. But I think we feel pretty good about where we are right now.

Your next question comes from Joe Stauff from Susquehanna.

Maybe just to build on that question about your Macau daily OpEx per day. I hear you on core, you did better in the quarter in terms of the all-in number, including House of Dancing Water and residencies. Is there any expectation maybe in the third quarter to bend or to reduce the 2 other components, whether it be House of Dancing Water or residencies within, say, the all-in number above and beyond core? And then the second question on that is you gave a very long list of all the new projects that you're working on, certainly makes sense in terms of your defense of -- on product. But wondering if that's going to create any construction disruption over the second half of the year?

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 it maybe at this point on the advanced look of sort of August activity in Macau?

I mean it's probably a little early to tell. Again, we're -- that starts tomorrow. So I think we're hoping that we're going to continue the momentum through, but a little bit early for us to be making a call 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.

John, we're very excited about Sri Lanka. We have looked at it for a number of years. And it is -- it's the first integrated resort in South Asia and also in Sri Lanka. I think there is going to be definitely a key thing period because we're effectively creating a whole new industry. I think the current players there are really third world type operators. So I think it's a whole new paradigm shift. So we're very excited about that for us is really opening a new market in India as well. And so I think we're similar to what we did with Cyprus, where it's grown into a very nice market in itself. It will take a little bit of time. But I think we're very excited about it. I don't know if Evan has any more color -- additional color or Geoff?

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 on -- for us in Macau, we're quite excited about some of the satellite closures because I think it gives -- it's an opportunity for Altira because other than the Cotai mega integrated resorts and some of the casinos on Macau Peninsula, Altira will be effectively the only game in Taipa. And we're closing 3 Mocha units as well. And so we're equally enthusiastic about what we can do to optimize our gaming unit by moving some of those gaming machines to City of Dreams and Studio City. So I think all in all, it will consolidate the business at the remaining casinos and integrated resorts. I think some of the satellites on the Peninsula side, we'll see if we could try to draw some of them over to Taipa and Altira.

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

I wanted to follow up on the player reinvestment discussion that we had a bit earlier. Just looking at the numbers, it seems like Studio City player reinvestment was relatively flat if you kind of factor in volume changes, et cetera. But COD, the numbers actually improved. They came down. I think the expectation would be that at the high end is driving the growth in Q2 and now Q3 that, that player reinvestment as a percentage of mass would go up. That seems to have been the case for most of the Cotai properties at Sam's and for MGM Cotai. You guys are an outlier. And I'm assuming once we see the other results, there'll be outliers as well.

I know, Evan, you talked a little bit about kind of what you guys are doing and how you're trying to differentiate, but it seems like a very divergent trend that you're seeing at COD. Can you maybe elaborate as to what you're doing on player reinvestment that may be different? Is there a different methodology you're incorporating? Is it a different set of player reinvestment initiatives that you have that's leading to this because that's a big part of the -- that you've seen this quarter.

Well, again, it's a little hard for us to comment on how we're doing it relative to others because obviously, I'm not sitting with their teams. What I would say is we're trying to utilize our sort of as we're getting better and better data out of walker and better and better insight into the player, we're trying to be more strategic in terms of where we're putting those dollars to get the best bang for our buck. And so we're trying to titrate it more carefully.

I think, again, we were able to bring it down pretty successfully. The markets dynamic. We're constantly titrating it. So again, it will bump up and down a little bit from where it is. But I think, again, we're trying to make sure we're rewarding the right folks who we think are really bringing in the contribution. And it's hard for me to comment on what we're doing different than the others because I just -- I don't know exactly how they're apportioning their spend.

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 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 2 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 Dream. 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 try and 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.

There was also another question on Philippines business.

This is Geoff Andres, Praveen. On the Manila market, you're right. There was some softness that we all experienced in the first half of the year. As a result of that, we've really been taking thoughtful and measured expense initiatives over the last 5 months that we're starting to see some of that bear fruit in July. And we've also seen a stabilization in the market in July. And as well, there's been a transition, I think, in the -- from the second quarter going into the third quarter on the VIP part of the business, some junkets transitioning out of the market, and we've had signing up some new junkets that we think will be performing at a higher level. And so we're feeling better going 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.