Melco Reports 88% Revenue Decline in Second Quarter
Melco Resorts & Entertainment recently reported its unaudited financial reports for the second quarter in which it announced it had experienced an 88% drop in revenue. The business, which is involved in the development and operation of resorts in Asia and Europe that offer gambling services has had a torrid time during the second quarter of the year.
During the three months leading up to the 30th of June this year, the company reported operating revenues of just $0.8 billion, which marks an 88% decline in the second quarter of 2019, when $1.46 billion was generated. These results have been attributed to sub-standard performances across all gambling verticals offered by Melco.
The company has attributed the poor performance from its gambling and non-gambling endeavors to the COVID-19 pandemic that has caused nationwide lockdowns and economic uncertainty across the globe. For Melco, the novel coronavirus has led to a lower number of tourists visiting its resorts and, as a result, lower revenue from the resorts themselves as well as the casinos that are located within them.
During the second quarter, the company posted an operating loss of $370.8 million. The difference between this figure and the profit of $208.0 million that was reported by the business during the same period of 2019 is night and day.
The adjusted property earnings before interest, tax, depreciation, and amortization (EBITDA) for Melco stood at $156.3 million for the second quarter of the year. The EBITDA for the properties owned by Melco during the same time frame of 2019 was $448.0 million.
Overall, Melco Resorts & Entertainment reported that it had a net loss of $368.1 million over the second quarter of the year. This figure is equivalent to $0.77 per American depositary share (ADS). When compared to the net income that was attributable to the business of $101.8 million or $0.21 per ADS during the same time frame of 2019 it is clear to see the impact that COVID-19 has had on the operator.
The Chief Executive’s View
The chief executive of Melco, Lawrence Ho, emphasized the impact of COVID-19 on travel to the resorts operated by the company. Not only has there been difficulties with the outlawing of international travel from certain countries, but there has also been a reluctance from consumers to travel even when they are allowed to by governments.
According to the chief executive, Melco quickly recognized the difficulties that were in store for the business from the get-go. This helped the company to develop business strategies that allowed it to maintain its liquidity and improve its balance during the financially uncertain period. Additionally, the decision to improve its balance sheet by selling shares in the Crown Resorts Limited business and by suspending dividends to its shareholders the business was able to stay afloat.
The CEO is confident that Melco will be able to effectively sustain itself amidst the economic uncertainty that is plaguing the globe currently. There has been some return to relative normality for the resorts that are managed by the company. The return of tourists traveling from Guangdong to Melco’s Macau resort has provided a slight boost for the operator and operations resuming in the Cyprus Casino operated by the company shows promise for a return to profitability in the future.
Individual Resort Results
City of Dreams
The self-described premier resort in Macau, the City of Dreams, showed a severe decline in its year-on-year earnings during the second quarter. This period saw the resort generate a revenue of $105.4 million. Whilst this is no small sum, it dwindles in comparison to the $790.8 that was taken over the second quarter of the previous year.
The adjusted EBITDA for the City of Dreams resort was negative for the period. This figure stood at a loss of $79.3 million. In the second quarter of 2019, the adjusted EBITDA stood at a profit of $250.8 million. The difference in the earnings between the years was chalked down to the decreased non-gambling revenue generated by the resort as well as the decline in the amount of gaming taking place at the resort.
At the resort, there was a decrease in the revenue from mass-market table games. This vertical saw the amount of money it generated declined to $41.4 million during the period. The second quarter of 2019 saw such table games generate $1.37 billion at the City of Dreams resort in Macau. The hold percentage for these games was 31.5% over the second quarter of 2020 compared to 31.6% during the same period of 2019.
Another area of business at the resort that felt the pinch of the pandemic was the revenue generated from fixed-odds gambling machines. There was once again a monumental decline in the money taken from these machines between the second quarters of 2019 and 2020. For the former, $1.04 billion was generated from these machines and in the latter, the figure plummeted to $82.5 million.
Another Macau resort operated by Melco reported significant declines in profits over the three-month period. The Altira resort saw its revenue during this time slashed to $17.0 million. This is a significant decline compared to the $104.3 million that was taken over the second quarter of 2019.
When the revenue was adjusted to take taxes and depreciation into account, this represents a loss of $19.4 million for the operator over the three months leading up to the 30th of June of 2020. The figures from the second quarter of 2019 once adjusted showed a profit of $8.4 million. Once again, these lower figures between years have been attributed to the lower footfall in the venues as a result of the COVID-19 pandemic.
For table games, this resort saw a year-on-year decline in the revenue that was generated. In 2019, these games accounted for $150.0 million of the revenue that was accumulated during the second quarter. For 2020, however, this figure stood at just $14.5 million. The hold percentage also fell between the years. For 2019, there was a hold percentage of 22.5% percent compared to just 11.3% in 2020.
Additionally, there was a decline in the revenue from gaming machines at the Altira resort. In the second quarter of 2019, $83.5 million came from these machines but this figure fell to just $43.4 million during the equivalent period of 2020.
These results that were seen in Macau were also seen in the other resorts that are operated by Melco in different regions. Other destinations, such as those in Manila and Cyprus had similarly sub-par takings during the second quarter of the year. These financial results have capped a woeful first half to 2020 for the company that has seen disappointing revenue from all of its endeavors this year, in particular in Macau.