Melco Resorts & Entertainment Limited Q2 FY2026 earnings call

• Core Strategic Priorities

  • Maintain focus on deepening customer engagement, attracting high-quality visitation, and ongoing property investments to align with evolving guest preferences
  • Pursue disciplined cost management and capital allocation, prioritizing high-return opportunities while protecting guest experience

• Macau Property Milestones & Developments

  • REM (previously referenced as RAM) has soft-opened, with a grand opening scheduled after October 2026 Golden Week; the offering is uniquely differentiated from existing luxury hotel and non-gaming products in Macau and complements COD's current five-star hotel portfolio
  • Opened a new 18-table gaming area at COD Macau near the Southwest entrance at the end of July 2026, positioned for easy access to attract incremental walk-in visitation, following the proven success of a similar 15-table area opened in October 2025
  • Commenced a full revamp of COD Macau's retail area, which will create a seamless property loop and add curated luxury offerings; the project will run through mid-2027 and is expected to elevate COD to the top tier of Macau integrated resorts

• Balance Sheet and Capital Updates

  • Robust liquidity position as of Q2 end 2026: ~$2.8 billion in available liquidity, with ~$1 billion in consolidated cash on hand
  • Completed successful capital structure improvements: extended and upsized the revolving credit facility (RCF) to $2.8 billion, with maturity extended to June 2031; Studio City completed bond refinancing to reduce future interest expense
  • Opportunistically repurchased ~25 million ADSs for $134 million in aggregate consideration in 2026 to date, repurchasing when management believes shares trade well below underlying company value; a recommencement of dividends is planned for 2027

Group-wide adjusted property EBITDA for Q2 2026 was ~$304 million, or ~$312 million when adjusted for VIP hold. An unfavorable 2.7% VIP win rate at City of Dreams (COD) Macau reduced EBITDA by ~$9 million. Non-Macau segments are: 1) City of Dreams Manila (Philippines): Property EBITDA of $31 million, representing 9% year-over-year growth; 2) City of Dreams Mediterranean and satellite casinos (Cyprus): Property EBITDA grew 60% year-over-year despite disruption from Middle East conflicts; 3) Sri Lanka casino operations: Recorded positive EBITDA of $3.5 million during its ongoing ramp-up. No specific revenue contribution percentages for individual segments were provided.

• Macau total daily OPEX is expected to remain steady at ~$3.3 to 3.4 million per day in coming quarters, including costs for House of Dancing Water and the ramp-up of REM, aligned with prior guidance
• For Q3 2026: depreciation and amortization is expected to be $140 to 145 million; corporate expense is expected to be $20 to 25 million; consolidated net interest expense is expected to be $115 to 120 million
• Full year 2026 group CapEx is guided to ~$225 million; 2027 group CapEx is expected to fall to a range of $275 to 300 million
• Dividend recommencement is maintained for 2027; management only intends to initiate a substantive, meaningful dividend rather than a nominal payout
• Post-World Cup visitation and gaming volumes in Macau have returned to pre-World Cup normal levels as of late July / early August 2026

• Elevated competition in Macau has created a challenging high-cost operating environment
• Lower than expected visitation and unfavorable VIP hold in Q2 2026 created margin pressure
• The 2026 World Cup created a larger-than-expected negative impact on Macau gaming volumes this cycle, as sports betting drew discretionary spending away from traditional casino gaming
• Retail renovation construction at COD Macau will run through mid-2027 and is expected to cause some guest disruption and near-term operational impact despite management mitigation efforts
• The company faces upcoming 2027 debt maturities that require refinancing, though management notes it has multiple options to address this obligation

Q: How does the new REM property differ from Melco's existing non-gaming offerings at COD Macau, and what is management's dividend policy? / A: REM has already soft-opened with a grand opening planned after October 2026 Golden Week. It is a highly unique luxury offering unlike any existing product in Macau or broader Asia, and it complements Melco's current five-star hotel portfolio well. On dividends, management pushed the recommencement from late 2026 to 2027, as it prioritizes opportunistic share repurchases when shares trade at a discount to intrinsic value. Management intends to bring back only a substantive, meaningful dividend rather than a nominal payout.

Q: With recent industry M&A and go-private activity driven by public valuations below intrinsic value, is Melco open to similar corporate actions? / A: Management is open-minded to strategic opportunities, consistent with its history of innovative transactions. However, the company's current core priority is digging out of post-COVID debt elevation, improving Macau operating performance, and scaling the newly opened Sri Lanka operation to crack the Indian market, leaving little bandwidth for major corporate activity at this time.

Q: Why was the 2026 World Cup more impactful to Melco's results than prior tournaments, and what is the outlook for post-World Cup demand and entertainment events? / A: This World Cup had a larger impact because widespread access to sports betting drew customer spending away from traditional casino gaming as a substitute. Post-World Cup, demand has returned to normal pre-tournament levels as of late July/early August. Management notes that not all large entertainment events are profitable, and the industry is pulling back on unprofitable large events in the second half of 2026, only pursuing events that reliably drive incremental visitation.

Q: Can you elaborate on the ongoing cost structure flexibility review that management noted? Are there specific changes being evaluated? / A: Management is conducting a broad review of all post-COVID cost additions, which included enhanced guest services across COD Macau. The review targets trimming spending in areas that do not deliver meaningful guest experience impact, with savings to be redeployed to higher return guest experience initiatives. Changes will not be seismic, but are expected to generate material savings while protecting premium guest experience.