Melco Resorts & Entertainment Limited — FY2023 Form 20-F
Reporting period: Year ended December 31, 2023. This annual filing includes audited FY2023, FY2022 and FY2021 financial statements; it does not provide a separate Q4-only results summary. Figures are in U.S. dollars unless noted. The company develops and operates integrated resorts, principally in Macau, with operations in the Philippines and Cyprus. Financial statements use U.S. GAAP.
Financial and operating results
| Metric | FY2023 | FY2022 |
|---|---|---|
| Operating revenue | $3.775 billion | $1.350 billion |
| Operating income (loss) | $65.0 million | $(743.1) million |
| Net loss attributable to Melco shareholders | $(326.9) million | $(930.5) million |
| Adjusted EBITDA (non-GAAP) | $961.8 million | $(62.6) million |
| Cash from (used in) operations | $622.7 million | $(619.4) million |
| Capital expenditures | $252.5 million | $598.4 million |
| Cash and cash equivalents at year-end | $1.311 billion | $1.813 billion |
| Gross debt at year-end | $7.500 billion | Not stated in the supplied debt table |
Revenue rose 179.7%, reflecting stronger gaming and non-gaming activity after Macau’s COVID-related restrictions eased, plus the 2023 openings of Studio City Phase 2 and City of Dreams Mediterranean. Casino revenue was $3.077 billion, 81.5% of total revenue; non-casino revenue was approximately $697.9 million. Operating margin was approximately 1.7%; net margin attributable to Melco shareholders was approximately negative 8.7%.
Macau remained the main revenue base. City of Dreams generated $1.930 billion, Studio City $958.4 million, Altira Macau $110.8 million, and Mocha and Other $117.7 million. City of Dreams Manila generated $495.1 million and Cyprus operations $159.4 million. Reported Macau visitor arrivals and gross gaming revenue rebounded sharply in 2023 versus 2022 but remained below 2019 levels.
Changes, liquidity and capital structure
- Operating loss in FY2022 turned to operating income in FY2023; attributable net loss narrowed by about $603.6 million but remained substantial.
- Operating cash flow improved by about $1.242 billion to positive $622.7 million. Cash, cash equivalents and restricted cash together were $1.436 billion at year-end, down from $1.988 billion. Of that, $125.1 million was restricted cash.
- FY2023 investing cash outflow was $48.5 million, versus $806.1 million in FY2022. Financing cash outflow was $1.129 billion, mainly reflecting debt repayments, the Studio City note tender and share repurchases, partly offset by new revolving-credit drawdowns.
- Gross debt was $7.500 billion, largely senior and Studio City notes, plus $1.053 billion under the 2020 revolving credit facilities. The company reported $848.5 million of available capacity under those facilities, subject to conditions. Scheduled debt principal includes approximately $2.450 billion due in 2025.
- Interest expense, net of capitalized amounts, increased to $492.4 million from $376.7 million. About 86% of debt was fixed-rate; management estimated a 100-basis-point HIBOR change would alter annual interest cost by approximately $10.5 million.
- Current assets were $1.544 billion and current liabilities $1.104 billion. Total liabilities exceeded total assets, and shareholders’ deficit was $840.1 million.
- No dividends were declared to ordinary shareholders in 2023. The quarterly dividend program remains suspended. The company repurchased 40.4 million shares from its controlling shareholder for approximately $169.8 million in March 2023.
Outlook, risks and unusual items
- Management said it believes cash, operating cash flow and available facilities can support operations and capital expenditures for at least 12 months after the financial statements were issued. It also cautioned that recovery, travel demand and future results remain uncertain; the filing gives no specific revenue or earnings guidance.
- Under Macau’s concession, Melco committed to investment of MOP13.827 billion (about $1.72 billion) by December 2032 after 2023 gaming revenue triggered an additional non-gaming investment obligation. It reported MOP1.331 billion (about $165.4 million) of qualifying investment carried out by year-end.
- A $207.6 million impairment was recorded for Altira Macau, attributed to weaker forecast performance, market conditions, COVID-related disruption and the earlier cessation of gaming-promoter arrangements. Property charges also included junket-player-deposit litigation claims, restructuring costs and a gain on disposal of Japanese land.
- Key exposures include dependence on Macau and visitors from mainland China; gaming regulation and concession compliance; travel restrictions and economic weakness; intense competition; gaming-revenue volatility; promoter and credit-collection risks; high debt and refinancing needs; and foreign-exchange, interest-rate, cyber, data-protection and geopolitical risks. Cyprus operations may also be affected by regional conflicts and restrictions on some customers.
- The company’s Macau gaming concession runs through December 31, 2032. Its Cyprus resort opened to the public in July 2023; Studio City Phase 2 opened in stages during 2023. The House of Dancing Water remained closed and was expected to reopen in late 2024.
- The independent auditor issued an unqualified opinion on the financial statements and internal controls. The audit identified Altira impairment measurement and Mocha goodwill impairment assessment as critical audit matters.
Investor verification priorities
- Confirm the pace and durability of Macau recovery, including property-level revenue, gaming volumes, hold rates and performance versus 2019.
- Review the full debt maturity schedule, refinancing plans, covenant compliance, facility availability and the sources of funds for required concession investment.
- Assess Altira’s impairment assumptions and whether further impairments or operating changes may be needed.
- Verify the cash-flow conversion and year-end liquidity, including restrictions on cash, debt service and intercompany transfers.
- Track the status and financial exposure of junket-related litigation claims, Philippine VAT matters, and other disclosed legal or regulatory contingencies.
- Check whether Macau gaming tax exemptions, Cyprus license obligations, and the suspended dividend policy change; the filing does not promise a dividend resumption.