Business context and reporting period
Melco Resorts & Entertainment Limited is a Cayman Islands holding company that develops and operates integrated resorts, principally in Macau, with operations in the Philippines and Cyprus. Its Nasdaq-listed ADSs (MLCO) each represent three ordinary shares. This is the company’s annual Form 20-F for the fiscal year ended December 31, 2022, filed March 31, 2023—not a standalone fourth-quarter filing. The filing does not provide a clear standalone Q4 financial result.
All figures below are for the full year unless stated otherwise and are in U.S. dollars. Financial statements are audited and prepared under U.S. GAAP.
Financial performance and liquidity
| Metric | 2022 | 2021 |
|---|---|---|
| Operating revenue | $1.350 billion | $2.012 billion |
| Operating loss | $743.1 million | $577.5 million |
| Net loss attributable to Melco | $930.5 million | $811.8 million |
| Adjusted EBITDA | $(62.6) million | $165.0 million |
| Adjusted Property EBITDA | $0.6 million | $235.1 million |
| Net cash used in operating activities | $619.4 million | $268.8 million |
| Capital expenditures, accrual basis | $598.4 million | $782.2 million |
Revenue fell 32.9%. Operating loss margin widened to approximately 55.0% from 28.7%; net loss attributable to Melco was approximately 68.9% of revenue, versus 40.3%. The filing attributes the deterioration mainly to weaker Macau mass-market and rolling-chip gaming and non-gaming activity amid COVID-related restrictions and closures.
At December 31, 2022, cash and cash equivalents were $1.813 billion and restricted cash was $175.7 million. Gross debt was $8.449 billion; balance-sheet debt, net of financing costs and premiums, was $8.413 billion, including $322.5 million current. Total liabilities exceeded total assets, leaving a $314.4 million total equity deficit. Net cash provided by financing activities was $1.783 billion, substantially supporting cash while operating and investing activities used cash.
Interest expense, net of capitalized amounts, was $376.7 million, up from $350.5 million. Approximately 78% of debt carried fixed rates; management estimated a 100-basis-point HIBOR change would alter annual interest cost by about $19 million. The company reported negative operating cash flow and relied on borrowings and cash balances. Its $1.9 billion 2020 revolving facility was fully drawn at year-end, with covenant waivers extended through the March 31, 2024 test date. The filing states available draw capacity under other facilities was approximately $71.8 million, subject to conditions.
Material changes versus the prior comparable period
- Macau revenue declined sharply: Macau operations generated $844.7 million, down from $1.660 billion. City of Dreams revenue fell to $559.7 million from $1.147 billion; Studio City to $176.0 million from $372.3 million; and Altira Macau to $32.6 million from $56.2 million.
- City of Dreams Manila revenue increased to $396.4 million from $268.6 million, while Cyprus operations increased to $91.3 million from $52.6 million. These gains did not offset the Macau decline.
- Macau properties closed for 12 days in July 2022 under government orders. Macau visitor arrivals declined 26.0% year over year and Macau gross gaming revenue declined 51.4%, according to government data cited in the filing.
- Operating cash use increased by $350.7 million. Financing cash inflows rose to $1.783 billion, including $1.5 billion drawn under the 2020 Credit Facilities and $350 million from Studio City’s 7.0% 2027 secured notes.
- Melco repurchased shares for $189.2 million during 2022. It also completed a $200 million loan to controlling shareholder Melco International at 11% interest; the loan was repaid in January 2023.
Outlook, commentary, risks and unusual items
The filing gives no quantified operating or earnings guidance. Management said recovery remained highly uncertain and that it could not reasonably estimate the future effect of COVID-related disruption. At the filing date, Studio City Phase 2 was expected to open in stages in Q2 and Q3 2023, subject to licensing; City of Dreams Mediterranean was targeted for Q2 2023, subject to approvals. Both projects faced licensing and completion deadlines of June 30, 2023. Failure to meet those deadlines or obtain extensions could result in penalties, loss of land rights or investment, or license consequences.
- Macau concession and regulation: Melco’s new Macau concession runs from January 1, 2023 through December 31, 2032 and includes a committed investment plan of MOP11.824 billion (about $1.5 billion), including MOP10.008 billion for non-gaming investment. The concession can be terminated for specified non-compliance, with casino premises and gaming equipment potentially reverting without compensation.
- Leverage and liquidity: High debt service, restrictive covenants, cross-default provisions, covenant-waiver dependence, refinancing access and continued negative operating cash flow are material risks. Contractual obligations totaled $11.786 billion, including debt, interest, leases, concession fees and other commitments. Contracted capital commitments not yet incurred were $78.5 million.
- Construction and Cyprus funding: City of Dreams Mediterranean’s estimated project budget was $575–600 million, inclusive of land but excluding pre-opening and financing costs; $443 million had been incurred by year-end. Labor and contractor difficulties, inflation and financing availability could delay completion or raise costs.
- Tax and dividends: The quarterly dividend program remained suspended; no dividends were paid in 2021 or 2022. Macau gaming-profit tax exemptions and related arrangements required extensions, with applications pending as described in the filing. A Philippine tax authority circular sought to impose 12% VAT on gaming revenue; the company and other operators challenged it.
- Credit, gaming and geopolitical exposure: Casino credit losses, volatile gaming win rates, reduced Macau gaming-promoter activity, customer travel restrictions, PRC policy changes, competition, foreign exchange movements, inflation, interest rates and sanctions affecting Russian visitors to Cyprus could affect results.
- Unusual items and audit: The company recorded $40.0 million of property charges and other, including $19.1 million of restructuring-related costs and $10.4 million of asset impairments. The auditor highlighted long-lived-asset and goodwill impairment assessments as critical audit matters; management recorded no impairment for the reviewed long-lived asset groups or goodwill in 2022.
Management and the auditor reported effective internal control over financial reporting at December 31, 2022. Ernst & Young LLP issued unqualified opinions on the financial statements and internal controls.
Important facts for investors to verify
- Review subsequent results against the 2023 opening targets and confirm licensing and land-concession compliance for Studio City Phase 2 and City of Dreams Mediterranean.
- Check Macau visitation, gaming revenue and property-level recovery, including mass-market and rolling-chip volumes and win rates, rather than relying on annual headline revenue alone.
- Track operating cash flow, liquidity available after conditions precedent, debt maturities, HIBOR exposure and whether covenant waivers or refinancing are needed.
- Confirm the status and financial effects of Macau tax-exemption applications and the Philippine VAT dispute.
- Assess the final cost, funding and return prospects of Cyprus development and Macau concession investment commitments, alongside any changes to dividends or related-party transactions.