What Melco Resorts & Entertainment (MLCO) Said on Its Q3 Earnings Call

Key Points

• Macau competition and softer demand weighed on the business: third-quarter adjusted property EBITDA was about $288 million ($298 million adjusted for VIP hold), while October’s Macau market was down 10%. Management called the weakness a temporary “soft pocket” and is prioritizing margins over unprofitable market-share gains.
• Melco is upgrading City of Dreams, including retail and dining areas expected to begin opening by the end of 2026, while REM has recently opened. Outside Macau, Manila EBITDA held steady at about $33 million, and the company’s Cyprus properties recorded their highest quarterly EBITDA since opening.
• Debt reduction and shareholder returns remain priorities: Melco had about $2 billion in total liquidity and repurchased roughly $236 million of shares during 2026. It expects 2026 capital spending of about $375 million, has no debt maturities in 2027, and is targeting a possible return to dividends toward the end of 2027.

Melco Resorts & Entertainment NASDAQ: MLCO reported third-quarter 2026 adjusted property EBITDA of approximately $288 million, or about $298 million after adjusting for VIP hold, as the Macau gaming market remained highly competitive and the company continued to emphasize cost discipline, customer acquisition and capital returns.

Founder Lawrence Ho said the company remains confident in Macau’s long-term prospects despite current market softness. He pointed to the opening of the newly branded REM hotel and ongoing upgrades to retail and dining at City of Dreams as initiatives intended to support growth with an evolving customer base.

“The Macau market remains extremely competitive,” Ho said. “We have been increasingly disciplined in allocating resources, with a sharper focus on customer acquisition and reinvestment, and ensuring every dollar invested strengthens returns.”

Ho said Melco outperformed the broader Macau market in October after making operational changes during August and September. He also said Morpheus at City of Dreams received three Michelin Keys, making it the first hotel in Macau and one of four in Greater China to receive the distinction.

Macau upgrades and market conditions

Melco said work is underway to improve City of Dreams’ retail and food-and-beverage offerings. The company expects to progressively unveil completed areas beginning at the end of 2026, with a substantial portion expected to be available before Chinese New Year. Construction is expected to continue into the summer of 2027.

During the question-and-answer session, Ho described Macau’s October market conditions as challenging, noting that the market was down 10%. He said there was not one clear factor behind the decline, pointing instead to softer consumption in China, potential aftereffects from the World Cup and overseas tax issues.

President Evan Winkler said the company saw softness across more than just the high-end customer segment, suggesting the environment reflected broader Chinese economic conditions rather than only one issue affecting premium players. However, he said management views the decline as a temporary “soft pocket” rather than a permanent structural change.

Winkler said Melco is seeking to protect margins by remaining disciplined on player reinvestment rather than pursuing market share at unprofitable levels. The company was preparing to launch a new player club intended to establish appropriate reinvestment levels based on customer performance, he said.

“As you go into a period of lower demand, that you’re not trying to chase to unhealthy levels in reinvestment to get the business that’s there,” Winkler said.

International operations and operating costs

Outside Macau, Ho said City of Dreams Manila remained resilient despite broader economic pressures. Adjusted property EBITDA at the Philippine property was approximately $33 million in the third quarter, steady compared with the prior quarter.

City of Dreams Mediterranean and Melco’s satellite casinos in Cyprus posted their highest quarterly EBITDA since operations began, according to Ho. The company is also continuing to build its understanding of market conditions and customer preferences in Sri Lanka as it ramps up operations there.

Chief Financial Officer Geoff Davis said unfavorable VIP win rates at City of Dreams Macau reduced third-quarter property EBITDA by approximately $14 million. This was partly offset by favorable VIP win rates at City of Dreams Manila and Sri Lanka, which each added approximately $2 million to property EBITDA.

Total daily operating expenses in Macau declined to approximately $3.2 million during the quarter, including costs associated with The House of Dancing Water, and came in below the company’s previous guidance. Davis said Melco continues to review its operating structure and adjust spending in response to demand and business volumes while maintaining service and product standards.

Winkler said the REM opening is expected to result in some incremental expenses because it adds 150 hotel keys, though management has sought to limit the cost increase by reallocating staff and rationalizing expenses elsewhere.

Liquidity, debt reduction and capital returns

Melco reported approximately $2 billion of total liquidity as of Sept. 30, including approximately $887 million of cash, cash equivalents and restricted cash. Melco Resorts, excluding Studio City, the Philippines, Cyprus and Sri Lanka, held approximately $474 million in cash and cash equivalents.

During the quarter, Studio City redeemed $165 million of its 6.5% senior notes due 2028, principally using a drawdown under its senior secured credit facility and cash on hand. Melco Resorts also redeemed in full $600 million of its 5.625% senior notes due 2027 in September, funded through a drawdown on Melco’s revolving credit facilities. Davis said the transactions reduced interest expense, and the company has no debt maturities in 2027.

From July 1 through Nov. 3, Melco repurchased approximately 33.1 million American depositary shares for about $160 million. Total 2026 repurchases reached approximately 47.1 million ADSs for aggregate consideration of roughly $236 million.

Ho said deleveraging remains Melco’s corporate priority, while the company continues to view its shares as substantially dislocated from what it considers fair value. He said a potential Studio City consolidation is not a priority, although management remains open to considering the optimal corporate structure.

Winkler said the company has not established a specific deleveraging target but wants to move closer to its 2019 leverage position. Melco continues to aim to potentially resume dividend payments toward the end of 2027, though he said the timing is difficult to predict because the company may continue repurchasing shares if valuations remain at current levels.

Capital spending and fourth-quarter outlook

Davis said Melco reduced its expected capital spending outlook. The company expects approximately $95 million of capital expenditures in the fourth quarter, bringing full-year 2026 capital spending to roughly $375 million. For 2027, it expects total capital expenditures of around $275 million.

For the fourth quarter, Melco expects depreciation and amortization expense of approximately $140 million to $145 million, corporate expense of approximately $20 million to $25 million, and consolidated net interest expense of approximately $115 million to $120 million.

The interest-expense outlook includes approximately $6 million of finance liability interest related to fees payable for the Macau gaming concession and Cyprus gaming license, as well as approximately $5 million of finance lease interest related to City of Dreams Manila.

About Melco Resorts & Entertainment (NASDAQ:MLCO)

Melco Resorts & Entertainment Limited is a developer, owner and operator of integrated resort facilities focused on gaming, hospitality, entertainment, dining, retail and convention services. The company's properties combine casinos with luxury hotels, restaurants, shopping areas, theaters and other leisure attractions.

Melco operates several major resorts in Macau, including City of Dreams, Altira Macau and Studio City. Its Macau operations also include the Mocha Clubs electronic gaming-machine business.

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