Studio City International Holdings Limited — FY2022 Form 20-F
Reporting period: Fiscal year ended December 31, 2022; this is an annual filing, not a standalone fourth-quarter report. Financial amounts below are in U.S. dollars unless stated otherwise. The company operates Studio City’s non-gaming business in Macau; Melco Resorts (Macau) operates the casino under its concession. The audited statements use U.S. GAAP.
Financial performance and liquidity
| Metric | FY2022 | FY2021 |
|---|---|---|
| Total operating revenue | $11.5 million | $106.9 million |
| Operating loss | $277.2 million | $191.6 million |
| Net loss attributable to Studio City International Holdings | $326.5 million | $252.6 million |
| Adjusted EBITDA (non-GAAP) | $(140.8) million | $(56.5) million |
| Net cash used in operating activities | $178.8 million | $136.8 million |
| Net cash used in investing activities | $453.4 million | $407.2 million |
- Revenue from the casino contract was negative $56.7 million, versus negative $1.5 million in 2021. The company recognizes the residual after the Gaming Operator deducts gaming taxes and operating costs; those deductions totaled $227.9 million in 2022. Studio City Casino generated $171.2 million of gross gaming revenue, which is not the company’s reported casino-contract revenue.
- Non-casino revenue included rooms of $17.9 million, food and beverage of $17.5 million, services fees of $21.9 million, mall revenue of $7.2 million, entertainment of $1.6 million, and retail and other revenue of $2.1 million.
- Hotel occupancy fell to 28% from 51%; average daily rate was $111 versus $123, and REVPAR was $31 versus $62.
- Cash and cash equivalents were $509.5 million at year-end, with $0.1 million restricted cash and $29.8 million of unused revolving-credit capacity subject to conditions. Current assets were $553.8 million and current liabilities $247.4 million.
- Outstanding debt principal totaled $2.45 billion; balance-sheet long-term debt, net of financing costs, was $2.43 billion. Principal included $500 million of 6.0% notes due 2025, $350 million of 7.0% secured notes due 2027, $500 million of 6.5% notes due 2028, and $1.1 billion of 5.0% notes due 2029. Net interest expense was $92.4 million; $49.6 million of interest was capitalized. Cash interest paid, net of capitalized amounts, was $87.9 million.
- Capital expenditures on an accrual basis were $427.7 million. Financing cash inflows included $350 million from the 2027 notes and $299.2 million net proceeds from the 2022 share placements.
Material changes versus FY2021
- Revenue declined 89.2%, reflecting Macau’s July casino shutdown and travel restrictions; operating loss widened by $85.6 million and attributable net loss widened by $73.9 million.
- Adjusted EBITDA deteriorated by $84.4 million. Its reported margin was negative 1,219.6%, versus negative 52.9%; the FY2022 percentage is especially distorted by the unusually low revenue denominator.
- Operating cash outflow increased by $41.9 million. Investing outflow rose to $453.4 million, mainly from $452.1 million of property and equipment purchases.
- Gross debt rose by approximately $350 million following issuance of the 2027 notes. The March 2022 private placement issued 400 million Class A shares for $300 million gross proceeds, increasing issued Class A shares from 370.4 million to 770.4 million by year-end.
Outlook, risks and unusual items
- Management said recovery remained highly uncertain and did not provide quantified financial guidance. It expected the first stage of Phase 2 to open in Q2 2023 and the second stage in Q3 2023; licensing procedures were still being finalized as of March 30, 2023.
- The land concession required full development by June 30, 2023. Failure to complete licensing by the deadline, or obtain an extension, could put the land concession and investment at risk. Construction was complete, but approvals remained pending.
- The Gaming Operator received a new Macau concession running from January 1, 2023 through December 31, 2032. Studio City itself does not hold a gaming license and depends on the Casino Agreement and its relationship with the affiliated operator.
- Macau visitor arrivals fell 26.0% and Macau gross gaming revenue fell 51.4% year over year in 2022, according to the filing. The casino was closed for 12 days in July. Further travel restrictions, public-health disruptions, regulatory changes, competition, and reduced visitor spending remain significant risks.
- The company reported negative operating cash flow for the year and substantial debt-service and capital-spending needs. It said available cash, revolving capacity, and potential future financing should meet anticipated needs, but could not assure that additional financing would be available. Both Moody’s and S&P ratings were reported with negative outlooks.
- Macau tax-exemption extensions for Studio City Entertainment were pending; the prior exemption expired in 2021. No cash dividends were declared, and the company does not expect to pay dividends in the foreseeable future.
- Management concluded internal control over financial reporting was effective, and the auditor issued unqualified opinions on the financial statements and internal controls. The auditor identified impairment assessment of long-lived assets as a critical audit matter; no impairment was recorded for 2022 despite continuing losses.
Most important facts for investors to verify
- Whether Phase 2 licensing and opening milestones were achieved, and whether the Macau land-concession development deadline was extended or satisfied.
- Cash burn, remaining Phase 2 spending, debt-service capacity, covenant compliance, and refinancing needs—especially the $500 million 2025 maturity.
- How casino-contract revenue and deductions are calculated under the amended agreement, and whether casino operations and visitation recover sufficiently to make the arrangement cash-generative.
- Whether tax-exemption applications were approved and what the resulting tax burden may be.
- Related-party service charges and allocations, the effect of the 2022 share issuance on per-share economics, and the continuing limits on distributions and dividends.