Melco Resorts Q2 revenue drops 5% on new accounting method

Melco Resorts Q2 revenue drops 5% on new accounting method

Asian casino operator Melco Resorts & Entertainment Ltd. reported a 5 percent decline in its net revenue after adopting a new accounting method for revenue recognition.

Despite seeing an improvement in adjusted property earnings before interest, taxation, depreciation, and amortization (EBITDA), Melco Resorts announced that its net revenue dropped to $1.23 billion in the second quarter of 2018 from $1.3 billion for the comparable period in 2017.

Melco Resorts Q2 revenue drops 5% on new accounting methodMelco adopted its new revenue standard using the modified retrospective method from Jan. 1, 2018. Using the previous accounting method, Melco Resort’s net revenue would have been $1.34 billion, representing an increase of about 3 percent from a year earlier.

“The decrease in net revenue was primarily attributable to higher commissions reported as a reduction in revenue upon the Company’s adoption of a new revenue recognition standard issued by the Financial Accounting Standards Board,” Melco said in a statement.

Melco resorts also saw its operating income in April to June 2018 period fall by 8 percent to $118.1 million. On the bright side, Melco’s adjusted property EBITDA climbed by 8 percent to $355.5 million thanks to the “higher contributions it received from City of Dreams Manila (COD Manila) and Altira Macau.”

COD Manila recorded adjusted EBITDA of $87.3 million in Q2, 39 percent higher than the same period last year, on better performance in all COD Manila’s gaming segments.

COD Manila’s mass market table games drop rose 15 percent to $196.9 million, while gaming machine handle climbed 12.77 percent to $855.9 million.

Rolling chip turnover in COD Manila dropped by 6.25 percent to $3 billion, while rolling chip win rate climbed to 3.7 percent.

COD Manila’s non-gaming revenue rose 3.5 percent to $29.2 million from $28.1 million in the same period last year.

With the implementation of new accounting method, COD Manila’s net revenue was $173.9 million compared to $176.2 million in the second quarter of 2017. Using the previous method, COD Manila’s revenue would have increased 8 percent to $191 million.

Like COD Manila, Altira Macau’s gaming segment performed well in Q2, with net revenue up 14.4 percent to $123.1 million and adjusted EBITDA up threefold to $18.3 million.

Altira Macau’s rolling chip volume hit $4.8 billion, up 20 percent from Q2 2017, while rolling chip win was 3.6 percent. Gaming machine handle was $30 million, an increase of 294 percent, while machine win rate rose 0.3 points to 6.3 percent.

Meanwhile, bad luck struck COD Macau as its net revenue slipped 10.36 percent to $577.8 million. The property’s adjusted EBITDA was down 2.2 percent to $171.5 million.

COD Macau’s rolling chip turnover was down to $10.5 billion in Q2 from $12.2 billion in the same period last year. The integrated resort’s saving grace was its mass market table game drop and gaming machine handle, which rose to $1.18 billion and $1.12 billion, respectively.

Studio City—60 percent owned by Melco Resorts—also saw a lower adjusted EBITDA of $73.2 million versus $80.7 million a year earlier. Its rolling chip volume rose to $6.1 billion from $4.7 billion in the prior-year period.

However, Studio City’s rolling chip win rate was down to 2.7 percent from 3.3 percent in Q2 2017. Mass-market table games drop increased to $814.3 million from $661.4 million, while mass hold fell 2.3 points to 24.5 percent.

“I think we’ve had very bad luck in the second quarter … but at the end of the day we don’t think there’s anything fundamentally wrong with how we’re operating. It’s purely luck,” Melco Resorts Chairman and CEO Lawrence Ho said in a conference call.

Ho said that the group was shifting its focus on Japan, which recently passed the controversial Integrated Resorts Implementation Bill. According to the executive, “Melco is in a strong position to help Japan realize the vision for integrated resort development with a unique Japanese touch.”