Studio City International Holdings Limited Announces Unaudited First Quarter 2020 Earnings

Rhea-AI Summary

Studio City International Holdings reported a significant decrease in Q1 2020 revenues of US$37.1 million, down from US$151.1 million in Q1 2019, attributed to COVID-19 impacts. Gross gaming revenue fell to US$146.7 million from US$348.9 million, amid temporary casino closures. The company faced an operating loss of US$63.4 million versus income of US$38.5 million in 2019. Notably, net loss reached US$70.9 million, compared to net income of US$2.9 million in the same period. Total cash stood at US$299.4 million, reflecting ongoing operational challenges.

Positive

• None.

Negative

• Operating loss of US$63.4 million compared to income of US$38.5 million in Q1 2019.
• Net loss of US$70.9 million, down from net income of US$2.9 million in Q1 2019.
• Total operating revenues dropped 75.5% year-over-year from US$151.1 million to US$37.1 million.
• Gross gaming revenues decreased by 58% from US$348.9 million to US$146.7 million.
• Rolling chip volume fell from US$2.66 billion to US$1.38 billion.
• Mass market table games drop decreased from US$851.4 million to US$352.8 million.
• Negative Adjusted EBITDA of US$18.2 million, down from US$84.2 million year-over-year.

MACAU, May 14, 2020 (GLOBE NEWSWIRE) -- Studio City International Holdings Limited (NYSE: MSC) (“Studio City” or the “Company”), a world-class gaming, retail and entertainment resort located in Cotai, Macau, today reported its unaudited financial results for the first quarter of 2020.

Total operating revenues for the first quarter of 2020 were US$37.1 million, as compared to US$151.1 million in the first quarter of 2019. The decrease in total operating revenues was due to the decrease in revenues from the provision of gaming related services and lower non-gaming revenues as a result of the temporary casino closure and enhanced quarantine and social distancing measures to mitigate the COVID-19 outbreak in the first quarter of 2020.

Revenues from the provision of gaming related services are derived from the provision of facilities for the operations of Studio City Casino by Melco Resorts (Macau) Limited (the “Gaming Operator”), a subsidiary of Melco Resorts & Entertainment Limited (“Melco”) and holder of a gaming subconcession, and services related thereto.

Studio City Casino generated gross gaming revenues of US$146.7 million and US$348.9 million for the first quarters of 2020 and 2019, respectively.

Studio City’s rolling chip volume was US$1.38 billion for the first quarter of 2020 versus US$2.66 billion in the first quarter of 2019. The rolling chip win rate was 3.31% in the first quarter of 2020 versus 3.34% in the first quarter of 2019. The expected rolling chip win rate range is 2.85% - 3.15%.

Mass market table games drop decreased to US$352.8 million in the first quarter of 2020 compared with US$851.4 million in the first quarter of 2019. The mass market table games hold percentage was 25.9% in the first quarter of 2020 compared to 28.4% in the first quarter of 2019.

Gaming machine handle for the first quarter of 2020 was US$311.1 million, compared with US$560.6 million in the first quarter of 2019. The gaming machine win rate was 3.2% in the first quarter of 2020 compared to 3.3% in the first quarter of 2019.

Total gaming taxes and the costs incurred in connection with the operation of Studio City Casino deducted from gross gaming revenues were US$141.2 million and US$258.5 million in the first quarters of 2020 and 2019, respectively.

Revenues from the provision of gaming related services were US$5.5 million and US$90.4 million for the first quarters of 2020 and 2019, respectively. Revenues from the provision of gaming related services are net of gaming taxes and the costs incurred in connection with the operation of Studio City Casino deducted by the Gaming Operator pursuant to the Services and Right to Use Arrangements.

Total non-gaming revenues at Studio City for the first quarter of 2020 was US$31.6 million, compared with US$60.7 million for the first quarter of 2019.

Operating loss for the first quarter of 2020 was US$63.4 million, compared with operating income of US$38.5 million in the first quarter of 2019.         

Studio City generated negative Adjusted EBITDA⁽¹⁾ of US$18.2 million in the first quarter of 2020, as compared to Adjusted EBITDA of US$84.2 million in the first quarter of 2019. The year-over-year decrease in Adjusted EBITDA was mainly attributable to the decrease in revenues from the provision of gaming related services and lower non-gaming revenues.

Net loss attributable to Studio City International Holdings Limited for the first quarter of 2020 was US$70.9 million, compared with net income attributable to Studio City International Holdings Limited of US$2.9 million in the first quarter of 2019. The net loss attributable to participation interest was US$21.3 million in the first quarter of 2020, compared with net income attributable to participation interest of US$0.9 million in the first quarter of 2019.  

Other Factors Affecting Earnings

Total net non-operating expenses for the first quarter of 2020 were US$29.0 million, which mainly included interest expenses, net of amounts capitalized, of US$25.8 million.

Depreciation and amortization costs of US$40.8 million were recorded in the first quarter of 2020 of which US$0.8 million related to the amortization expense for the land use right.

The negative Adjusted EBITDA for Studio City for the three months ended March 31, 2020 referred to in Melco’s earnings release dated May 14, 2020 (“Melco’s earnings release”) is US$8.7 million less than the negative Adjusted EBITDA of Studio City contained in this press release. The Adjusted EBITDA of Studio City contained in this press release includes certain intercompany charges that are not included in the Adjusted EBITDA for Studio City contained in Melco’s earnings release. Such intercompany charges include, among other items, fees and shared service charges billed between the Company and its subsidiaries and certain subsidiaries of Melco. Additionally, Adjusted EBITDA of Studio City included in Melco’s earnings release does not reflect certain costs related to the table games operations at Studio City Casino.

Financial Position and Capital Expenditures

Total cash and bank balances as of March 31, 2020 aggregated US$299.4 million (December 31, 2019: US$327.2 million), including US$43.4 million of restricted cash (December 31, 2019: US$27.9 million). Total debt, net of unamortized deferred financing costs at the end of the first quarter of 2020, was US$1.44 billion (December 31, 2019: US$1.44 billion).

Capital expenditures for the first quarter of 2020 were US$45.0 million.

Recent Developments

The COVID-19 outbreak continues to have a material effect on our operations, financial position and prospects during the second quarter of 2020.

Our operations continue to be impacted by significant travel bans, restrictions and quarantine requirements imposed by the governments in Macau, Hong Kong and certain provinces in China on nearly all visitors traveling to and from Macau. Additionally, health-related precautionary measures remain in place at our property, which could impact visitation and customer spending. In addition, we continue to monitor the impact of COVID-19 on the construction of Studio City Phase 2.  Prior to the COVID-19 outbreak, we estimated a construction period of approximately 32 months for Phase 2. With the disruptions from the COVID-19 outbreak, the construction period is likely to extend beyond the estimated approximately 32 months.

As the disruptions from the COVID-19 outbreak are ongoing, any recovery from such disruptions will depend on future developments, such as the duration of travel and visa restrictions and customer sentiment, including the length of time before customers will resume travelling and participating in entertainment and leisure activities at high-density venues, all of which are highly uncertain.

Safe Harbor Statement

This press release contains forward-looking statements. These statements are made under the “safe harbor” provisions of the U.S. Private Securities Litigation Reform Act of 1995. Studio City International Holdings Limited (the “Company”) may also make written or oral forward-looking statements in its periodic reports to the U.S. Securities and Exchange Commission (the “SEC”), in its annual report to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. Statements that are not historical facts, including statements about the Company’s beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties, and a number of factors could cause actual results to differ materially from those contained in any forward-looking statement. These factors include, but are not limited to, (i) growth of the gaming market and visitations in Macau, (ii) capital and credit market volatility, (iii) local and global economic conditions, (iv) our anticipated growth strategies, (v) gaming authority and other governmental approvals and regulations, and (vi) our future business development, results of operations and financial condition. In some cases, forward-looking statements can be identified by words or phrases such as “may”, “will”, “expect”, “anticipate”, “target”, “aim”, “estimate”, “intend”, “plan”, “believe”, “potential”, “continue”, “is/are likely to” or other similar expressions. Further information regarding these and other risks, uncertainties or factors is included in the Company’s filings with the SEC. All information provided in this press release is as of the date of this press release, and the Company undertakes no duty to update such information, except as required under applicable law.

Non-GAAP Financial Measures

1. "Adjusted EBITDA" is defined as earnings before interest, taxes, depreciation, amortization, pre-opening costs, property charges and other, other non-operating income and expenses. We believe that Adjusted EBITDA provides useful information to investors and others in understanding and evaluating our operating results. This non-GAAP financial measure eliminates the impact of items that we do not consider indicative of the performance of our business. While we believe that this non-GAAP financial measure is useful in evaluating our business, this information should be considered as supplemental in nature and is not meant as a substitute for the related financial information prepared in accordance with U.S. GAAP. It should not be considered in isolation or construed as an alternative to net income/loss, cash flow or any other measure of financial performance or as an indicator of our operating performance, liquidity, profitability or cash flows generated by operating, investing or financing activities. The use of Adjusted EBITDA has material limitations as an analytical tool, as Adjusted EBITDA does not include all items that impact our net income/loss. In addition, the Company’s calculation of Adjusted EBITDA may be different from the calculation methods used by other companies and, therefore, comparability may be limited. Investors are encouraged to review the reconciliation of the historical non-GAAP financial measure to its most directly comparable GAAP financial measure. Reconciliations of Adjusted EBITDA with the most comparable financial measures calculated and presented in accordance with U.S. GAAP are provided herein immediately following the financial statements included in this press release.
    
2. “Adjusted net income/loss” is net income/loss before pre-opening costs, property charges and other, loss on extinguishment of debt and costs associated with debt modification, net of participation interest. Adjusted net income/loss is presented as supplemental disclosure because management believes it provides useful information to investors and others in understanding and evaluating our performance, in addition to income/loss computed in accordance with U.S. GAAP. Adjusted net income/loss may be different from the calculation methods used by other companies and, therefore, comparability may be limited. Reconciliations of adjusted net income/loss with the most comparable financial measures calculated and presented in accordance with U.S. GAAP are provided herein immediately following the financial statements included in this press release. 

About Studio City International Holdings Limited

The Company, with its American depositary shares listed on the New York Stock Exchange (NYSE: MSC), is a world-class gaming, retail and entertainment resort located in Cotai, Macau. For more information about the Company, please visit www.studiocity-macau.com.

The Company is strongly supported by its single largest shareholder, Melco Resorts & Entertainment Limited, a company with its American depositary shares listed on the NASDAQ Global Select Market (NASDAQ: MLCO). 

For investment community, please contact:
Richard Huang
Director, Investor Relations
Tel: +852 2598 3619
Email: richardlshuang@melco-resorts.com

For media enquiries, please contact:
Chimmy Leung
Executive Director, Corporate Communications
Tel: +852 3151 3765
Email: chimmyleung@melco-resorts.com 

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Studio City International Holdings Limited and Subsidiaries
Condensed Consolidated Statements of Operations
(In thousands of U.S. dollars, except share and per share data)
	Three Months Ended
	March 31,
	2020			2019
		(Unaudited)			(Unaudited)
Operating revenues:
67%; width:67%; min-width:67%;">Provision of gaming related services	1%; width:1%; min-width:1%;">$	13%; width:13%; min-width:13%;">5,506	1%; width:1%; min-width:1%;">	2%; width:2%; min-width:2%;">	1%; width:1%; min-width:1%;">$	13%; width:13%; min-width:13%;">90,391	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">
Rooms		8,659				20,960
Food and beverage		8,199				17,513
Entertainment		868				6,172
Services fee		8,757				9,052
Mall		4,527				6,382
Retail and other		557				633
Total operating revenues		37,073				151,103
Operating costs and expenses:
Provision of gaming related services		(5,653	)			(5,782	)
Rooms		(4,414	)			(5,638	)
Food and beverage		(10,505	)			(15,024	)
Entertainment		(1,218	)			(6,767	)
Mall		(1,553	)			(2,734	)
Retail and other		(365	)			(490	)
General and administrative		(31,521	)			(30,440	)
Pre-opening costs		(28	)			(2,489	)
Amortization of land use right		(832	)			(823	)
Depreciation and amortization		(39,960	)			(42,315	)
Property charges and other		(4,405	)			(129	)
Total operating costs and expenses		(100,454	)			(112,631	)
Operating (loss) income		(63,381	)			38,472
Non-operating income (expenses):
Interest income		391				1,504
Interest expenses, net of amounts capitalized		(25,779	)			(34,054	)
Loan commitment fees		(104	)			(103	)
Foreign exchange (losses) gains, net		(3,402	)			913
Other (expenses) income, net		(88	)			693
Loss on extinguishment of debt		-				(2,995	)
Costs associated with debt modification		-				(579	)
Total non-operating expenses, net		(28,982	)			(34,621	)
(Loss) income before income tax		(92,363	)			3,851
Income tax credit (expense)		210				(66	)
Net (loss) income		(92,153	)			3,785
Net loss (income) attributable to participation interest		21,259				(873	)
Net (loss) income attributable to Studio City International Holdings Limited	$	(70,894	)		$	2,912
Net (loss) income attributable to Studio City International Holdings Limited per Class A ordinary share:
Basic and diluted	$	(0.293	)		$	0.012
Net (loss) income attributable to Studio City International Holdings Limited per ADS:
Basic and diluted	$	(1.173	)		$	0.048
Weighted average Class A ordinary shares outstanding used in net (loss) income attributable to Studio City International Holdings Limited per Class A ordinary share calculation:
Basic and diluted		241,818,016				241,818,016

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Studio City International Holdings Limited and Subsidiaries
Condensed Consolidated Balance Sheets
(In thousands of U.S. dollars, except share and per share data)
	March 31,		December 31,
	2020			2019
		(Unaudited)			(Audited)
ASSETS
Current assets:
67%; width:67%; min-width:67%;">Cash and cash equivalents	1%; width:1%; min-width:1%;">$	13%; width:13%; min-width:13%;">256,056	1%; width:1%; min-width:1%;">	2%; width:2%; min-width:2%;">	1%; width:1%; min-width:1%;">$	13%; width:13%; min-width:13%;">299,367	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">
Restricted cash		43,260				27,735
Accounts receivable, net		157				1,397
Amounts due from affiliated companies		14,988				61,990
Inventories		10,211				9,763
Prepaid expenses and other current assets		11,016				14,188
Total current assets		335,688				414,440
Property and equipment, net		2,120,374				2,107,457
Long-term prepayments, deposits and other assets		53,486				57,087
Restricted cash		131				130
Operating lease right-of-use assets		14,282				14,238
Land use right, net		118,588				118,888
Total assets	$	2,642,549			$	2,712,240
LIABILITIES, SHAREHOLDERS' EQUITY AND PARTICIPATION INTEREST
Current liabilities:
Accounts payable	$	3,194			$	3,337
Accrued expenses and other current liabilities		86,596				82,553
Income tax payable		33				33
Amounts due to affiliated companies		15,947				14,248
Total current liabilities		105,770				100,171
Long-term debt, net		1,436,377				1,435,088
Other long-term liabilities		3,767				3,149
Deferred tax liabilities, net		1,250				1,453
Operating lease liabilities, non-current		14,024				13,720
Total liabilities		1,561,188				1,553,581
Shareholders’ equity and participation interest:
Class A ordinary shares, par value $0.0001; 1,927,488,240 shares authorized; 241,818,016 shares issued and outstanding		24				24
Class B ordinary shares, par value $0.0001; 72,511,760 shares authorized; 72,511,760 shares issued and outstanding		7				7
Additional paid-in capital		1,655,602				1,655,602
Accumulated other comprehensive income		11,697				269
Accumulated losses		(835,428	)			(764,534	)
Total shareholders’ equity		831,902				891,368
Participation interest		249,459				267,291
Total shareholders’ equity and participation interest		1,081,361				1,158,659
Total liabilities, shareholders' equity and participation interest	$	2,642,549			$	2,712,240

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Studio City International Holdings Limited and Subsidiaries
Reconciliation of Net (Loss) Income Attributable to Studio City International Holdings Limited to
Adjusted Net (Loss) Income Attributable to Studio City International Holdings Limited
(In thousands of U.S. dollars, except share and per share data)
	Three Months Ended
	March 31,
	2020			2019
	(Unaudited)		(Unaudited)
67%; width:67%; min-width:67%;">Net (loss) income attributable to Studio City International Holdings Limited	1%; width:1%; min-width:1%;">$	13%; width:13%; min-width:13%;">(70,894	1%; width:1%; min-width:1%;">)	2%; width:2%; min-width:2%;">	1%; width:1%; min-width:1%;">$	13%; width:13%; min-width:13%;">2,912	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">
Pre-opening costs		28				2,489
Property charges and other		4,405				129
Loss on extinguishment of debt		-				2,995
Costs associated with debt modification		-				579
Participation interest impact on adjustments		(1,023	)			(1,428	)
Adjusted net (loss) income attributable to Studio City International Holdings Limited	$	(67,484	)		$	7,676
Adjusted net (loss) income attributable to Studio City International Holdings Limited per
Class A ordinary share:
Basic and diluted	$	(0.279	)		$	0.032
Adjusted net (loss) income attributable to Studio City International Holdings
Limited per ADS:
Basic and diluted	$	(1.116	)		$	0.127
Weighted average Class A ordinary shares outstanding used in adjusted net (loss)
income attributable to Studio City International Holdings Limited per Class A ordinary share calculation:
Basic and diluted		241,818,016				241,818,016

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Studio City International Holdings Limited and Subsidiaries
Reconciliation of Operating (Loss) Income to Adjusted EBITDA
(In thousands of U.S. dollars)
	Three Months Ended
	March 31,
	2020			2019
	(Unaudited)		(Unaudited)
68%; width:68%; min-width:68%;">Operating (loss) income	1%; width:1%; min-width:1%;">$	13%; width:13%; min-width:13%;">(63,381	1%; width:1%; min-width:1%;">)	2%; width:2%; min-width:2%;">	1%; width:1%; min-width:1%;">$	13%; width:13%; min-width:13%;">38,472	1%; width:1%; min-width:1%;">
Pre-opening costs		28				2,489
Depreciation and amortization		40,792				43,138
Property charges and other		4,405				129
Adjusted EBITDA	$	(18,156	)		$	84,228

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Studio City International Holdings Limited and Subsidiaries
Reconciliation of Net (Loss) Income Attributable to Studio City International Holdings Limited
to Adjusted EBITDA
(In thousands of U.S. dollars)
	Three Months Ended
	March 31,
	2020			2019
	(Unaudited)		(Unaudited)
68%; width:68%; min-width:68%;">Net (loss) income attributable to Studio City International Holdings Limited	1%; width:1%; min-width:1%;">$	13%; width:13%; min-width:13%;">(70,894	1%; width:1%; min-width:1%;">)	2%; width:2%; min-width:2%;">	1%; width:1%; min-width:1%;">$	13%; width:13%; min-width:13%;">2,912	1%; width:1%; min-width:1%;">
Net (loss) income attributable to participation interest		(21,259	)			873
Net (loss) income		(92,153	)			3,785
Income tax (credit) expense		(210	)			66
Interest and other non-operating expenses, net		28,982				34,621
Property charges and other		4,405				129
Depreciation and amortization		40,792				43,138
Pre-opening costs		28				2,489
Adjusted EBITDA	$	(18,156	)		$	84,228

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Studio City International Holdings Limited and Subsidiaries
Supplemental Data Schedule
						Three Months Ended
						March 31,
							2020				2019
Room Statistics(3):
	Average daily rate (4)			$	137			$	134
	Occupancy per available room			43	%			100	%
	Revenue per available room (5)		$	58			$	133
Other Information(6):
	Average number of table games			252				294
	Average number of gaming machines			747				974
	Table games win per unit per day (7)		$	7,051			$	12,507
	Gaming machines win per unit per day (8)	$	174			$	211
(3) Room statistics exclude rooms that were temporarily closed or provided to staff members during the three months ended March 31, 2020 due to the COVID-19 outbreak
(4) Average daily rate is calculated by dividing total room revenues including complimentary rooms (less service charges, if any) by total occupied rooms including complimentary rooms
(5) Revenue per available room is calculated by dividing total room revenues including complimentary rooms (less service charges, if any) by total rooms available
(6) Table games and gaming machines that were not in operation during the three months ended March 31, 2020 due to government-mandated closures or social distancing measures in relation to the COVID-19 outbreak have been excluded
(7) Table games win per unit per day is shown before discounts, commissions, non-discretionary incentives (including the point-loyalty programs) as administered by the Gaming Operator and allocating casino revenues related to goods and services provided to gaming patrons on a complimentary basis
(8) Gaming machines win per unit per day is shown before non-discretionary incentives (including the point-loyalty programs) as administered by the Gaming Operator and allocating casino revenues related to goods and services provided to gaming patrons on a complimentary basis

FAQ

What were Studio City's total operating revenues for Q1 2020?

Studio City's total operating revenues for Q1 2020 were US$37.1 million.

How did Studio City's net income for Q1 2020 compare to Q1 2019?

Studio City reported a net loss of US$70.9 million in Q1 2020, compared to net income of US$2.9 million in Q1 2019.

What was the gross gaming revenue for Studio City in Q1 2020?

The gross gaming revenue for Studio City in Q1 2020 was US$146.7 million.

What impact did COVID-19 have on Studio City's operations in Q1 2020?

COVID-19 significantly impacted Studio City's operations, leading to a decrease in both gaming and non-gaming revenues.

What is the future outlook for Studio City following the COVID-19 outbreak?

The future outlook for Studio City remains uncertain due to ongoing travel bans and health precautions affecting visitation and spending.