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Melco edging towards net profit as revenue rockets in Q3

| By Robert Fletcher
Melco Resorts & Entertainment moved closer to turning a net profit in Q3 after a 320.6% rise in revenue allowed it to slash net loss for the period.
Macau Q1

Revenue in the three months to 30 September reached US$1.02bn (£826.7m/€952.5m), up from $241.8m last year. Casino was the catalyst for this growth at Melco, with revenue here in Q3 jumping 346.2% to $812.1m.

Melco says the sharp revenue increase was due to the relaxation of pandemic measures in Macau earlier this year. The operator had to contend with a host of restrictions in Q3 last year due to strict rules in the region.

While the spike in revenue was not quite enough to push Melco into the black for Q3, the operator came close. Net loss was $16.3m, compared to $243.8m in 2023. This was also an improvement on Q2’s $23.4m net loss.

“Macau’s recovery continued to grow from strength to strength into the third quarter of 2023, especially during the summer months, with our property visitation and casino player hours benefiting from this growth,” Melco chairman and CEO Lawrence Ho said.

“We had solid performance over the October Golden Week and we saw a robust recovery during the remainder of October. Both gaming and non-gaming segment revenues improved, reinforced by our commitment to invest in world class entertainment and enhance our non-gaming amenities. 

“City of Dreams Manila continues to generate solid earnings with a strong margin profile. On the other hand, after a successful opening, City of Dreams Mediterranean has been impacted by the conflict in Israel. Our teams are working on re-aligning our marketing strategy.”

Widespread growth for Melco in Q3

Breaking down Melco’s performance in Q3, casino was the main revenue source at $812.1m. The operator also noted growth in all other segments, with rooms revenue rising 269.9% to $96.1m, food and beverage 235.6% to $60.4m and entertainment, retail and other revenue 205.7% to $48.6m.

As for property performance, City of Dreams in Macau led the way with revenue of $506.2m. Also in Macau, revenue from Studio City reached $277.7m and Altira Macau $24.2m. Mocha and other operations in the region generated a further $30.1m in revenue.

Outside of Macau and into the Philippines, the City of Dreams Manila reported total revenue of $124.9m in Q3. In addition, the opening of the City of Dreams Mediterranean in Cyprus helped drive European revenue. Total revenue from Melco’s three Cyprus casinos amounted to $53.4m in Q3.

Costs more than double to $922m

Turning to spending in Q3, total operating costs for Q3 at Melco were 109.5% higher year-on-year at $922.5m. The main outgoing for Melco, by some margin, was casino expenses at $533.3m.

The rise in costs had been expected due to increased activities across the board in Q3 after the relaxation of pandemic restrictions.

Non-operating costs amounted to $129.5m, leaving a pre-tax loss of $34.8m, in contrast to last year’s $284.6m.

Melco close to moving from red to black 

Melco paid $2.0m in income tax in Q3 but was able to take off $20.5m in losses that it says were attributable to non-controlling interests. As such, net loss attributable to Melco in Q3 hit $16.3m, much lower than $243.8m last year.

In addition, Melco posted $280.6m in positive adjusted EBITDA for the quarter. This was compared to a loss of $34.9m in the same period in 2022.

Could Melco return to net profit in the full year?

Looking to how this impacted year-to-date performance, revenue at Melco during the nine months to 30 September was $2.68bn, up 164.8% on the previous year.

Gaming contributed $2.18bn to this total. Hotel revenue amounted to $234.8m, food and beverage $142.7m and entertainment, retail and other $123.7m. All areas were higher on a year-on-year basis.

Operating costs jumped 62.0% to $2.52bn, with non-operating expenses reaching $349.2m in Q3. As such, Melco was left with a pre-tax loss of $189.9m, compared to a loss of $798.5m last year.

Melco received $1.3m in tax benefits and also took $67.6m in losses attributable to non-controlling interest. This meant net loss for Melco was $121.0m, a significant improvement from $678.6m in 2022 – giving the operator an outside chance of entering the black for the full year.

In addition, adjusted EBITDA rocketed 10,017.8% from just $7.3m last year to $738.6m.

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