Melco Resorts & Entertainment : Explanatory Note Melco Resorts Finance Limited's Quarterly Report for the Three and Nine Months Ended September 30, 2023 - Form 6-K

Explanatory Note

Melco Resorts Finance Limited's Quarterly Report

for the Three and Nine Months Ended September 30, 2023

This quarterly report provides Melco Resorts Finance Limited's unaudited condensed consolidated financial statements, comprising condensed consolidated balance sheets, condensed consolidated statements of operations and condensed consolidated statements of cash flows, for the three and nine months ended September 30, 2023, together with the related information.

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Melco Resorts Finance Limited

Report for the Third Quarter of 2023

TABLE OF CONTENTS

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INTRODUCTION

In this quarterly report, unless otherwise indicated:

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This quarterly report includes our unaudited condensed consolidated financial statements for the three and nine months ended September 30, 2023.

Certain monetary amounts, percentages, and other figures included in this report have been subject to rounding adjustments. Any discrepancies in any table between totals and sums of amounts listed therein are due to rounding. Accordingly, figures shown as totals in certain tables may not be an arithmetic aggregation of the figures preceding them.

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This quarterly report contains forward-looking statements that relate to future events, including our future operating results and conditions, our prospects and our future financial performance and condition, all of which are largely based on our current expectations and projections. Known and unknown risks, uncertainties and other factors may cause our actual results, performance or achievements to be materially different from any future results, performances or achievements expressed or implied by the forward-looking statements. Moreover, because we operate in a heavily regulated and evolving industry in Macau where the new gaming law was adopted and implemented by the Macau government and may become highly leveraged, new risk factors may emerge from time to time and it is not possible for our management to predict all risk factors, nor can we assess the impact of these factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those expressed or implied in any forward-looking statement. 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) COVID-19 outbreaks, and the impact of its consequences on our business, our industry and the global economy, (ii) risks associated with the newly adopted gaming law in Macau and its implementation by the Macau government, (iii) changes in the gaming market and visitations in Macau, (iv) capital and credit market volatility, (v) local and global economic conditions, (vi) our anticipated growth strategies, (vii) gaming authority and other governmental approvals and regulations, and (viii) 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.

The forward-looking statements made in this quarterly report relate only to events or information as of the date on which the statements are made in this quarterly report. Except as required by law, we undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, after the date on which the statements are made or to reflect the occurrence of unanticipated events. You should read this quarterly report with the understanding that our actual future results may be materially different from what we expect.

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GLOSSARY

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EXCHANGE RATE INFORMATION

The majority of our current revenues are denominated in H.K. dollars, while our current expenses are denominated predominantly in Patacas and H.K. dollars, and in connection with a portion of our indebtedness and certain expenses, in U.S. dollars. The non-financial pages of this quarterly report include all translations from H.K. dollars to U.S. dollars and from U.S. dollars to H.K. dollars at a rate of HK$7.830731 to US$1.00, unless otherwise noted.

The H.K. dollar is freely convertible into other currencies (including the U.S. dollar). Since October 17, 1983, the H.K. dollar has been officially linked to the U.S. dollar at the rate of HK$7.80 to US$1.00. The market exchange rate has not deviated materially from the level of HK$7.80 to US$1.00 since the peg was first established. However, in May 2005, the Hong Kong Monetary Authority broadened the trading band from the original rate of HK$7.80 per U.S. dollar to a rate range of HK$7.75 to HK$7.85 per U.S. dollar. The Hong Kong government has stated its intention to maintain the link at that rate range, and, acting through the Hong Kong Monetary Authority, has a number of means by which it may act to maintain exchange rate stability. However, no assurance can be given that the Hong Kong government will maintain the link at HK$7.75 to HK$7.85 per U.S. dollar or at all.

The Pataca is pegged to the H.K. dollar at a rate of HK$1.00 to MOP1.03. All translations from Pataca to U.S. dollar in the non-financial pages of this quarterly report were made at the exchange rate of MOP8.065622 to US$1.00.

In this quarterly report, U.S. dollar equivalents of H.K. dollar amounts of indebtedness are based on the prevailing exchange rate on the relevant transaction date, except for the indebtedness balance translations as of the balance sheet date.

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FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in connection with our unaudited condensed consolidated financial statements included elsewhere in this quarterly report. Our unaudited condensed consolidated financial statements have been prepared in accordance with U.S. GAAP. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements for the year ended December 31, 2022. The historical results are not necessarily indicative of the results of operations to be expected in the future. Certain statements in this "Financial Condition and Results of Operations" are forward-looking statements.

Summary of Financial Results

For the third quarter of 2023, our total operating revenues were US$846.1 million, an increase of 519.3% from US$136.6 million of total operating revenues for the third quarter of 2022. The increase in total operating revenues was primarily attributable to improved performance in all gaming segments and non-gaming operations at City of Dreams and Altira Macau, as well as increased casino revenues generated from the operations of Studio City Casino by our subsidiary, Melco Resorts Macau, the gaming concessionaire. Such increase mainly resulted from the relaxation of COVID-19 related restrictions in Macau in January 2023. Net income/loss from Studio City Casino gaming operations are reimbursed to/from Studio City Entertainment for the operation of the Studio City Casino pursuant to the Studio City Casino Agreement. Such reimbursement is included in general and administrative expenses.

Net loss for the third quarter of 2023 was US$26.6 million, compared with net loss of US$211.4 million for the third quarter of 2022. The decrease in net loss was primarily attributable to the improved performance at City of Dreams and Altira Macau mentioned above and higher interest income, partially offset by higher interest expenses and trademark license fees expenses in the third quarter of 2023.

The following summarizes the results of our operations:

Results of Operations

City of Dreams Third Quarter Results

For the quarter ended September 30, 2023, total operating revenues at City of Dreams were US$542.5 million, compared with US$81.5 million in the third quarter of 2022. The year-over-year increase in the total operating revenues was primarily a result of better performance in all gaming segments and non-gaming operations.

Rolling chip volume was US$4.43 billion for the third quarter of 2023 versus US$332.2 million in the third quarter of 2022. The rolling chip win rate was 2.48% in the third quarter of 2023 versus 4.53% in the third quarter of 2022. The expected rolling chip win rate range is 2.85%-3.15%.

Mass market table games drop increased to US$1.32 billion in the third quarter of 2023, compared with US$133.5 million in the third quarter of 2022. The mass market table games hold percentage was 32.1% in the third quarter of 2023, compared with 28.6% in the third quarter of 2022.

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Gaming machine handle for the third quarter of 2023 was US$807.5 million, compared with US$137.4 million in the third quarter of 2022. The gaming machine win rate was 3.6% in the third quarter of 2023 versus 4.3% in the third quarter of 2022.

Total non-gaming revenue at City of Dreams in the third quarter of 2023 was US$100.2 million, compared with US$34.2 million in the third quarter of 2022.

Altira Macau Third Quarter Results

For the quarter ended September 30, 2023, total operating revenues at Altira Macau were US$25.2 million, compared with US$2.5 million in the third quarter of 2022. The year-over-year increase in the total operating revenues was primarily a result of better performance in the mass market segment and non-gaming operations.

In the mass market table games segment, drop was US$140.0 million in the third quarter of 2023 versus US$18.4 million in the third quarter of 2022. The mass market table games hold percentage was 18.9% in the third quarter of 2023, compared with 4.8% in the third quarter of 2022.

Gaming machine handle for the third quarter of 2023 was US$86.5 million, compared with US$33.2 million in the third quarter of 2022. The gaming machine win rate was 3.9% in the third quarter of 2023 versus 2.9% in the third quarter of 2022.

Total non-gaming revenue at Altira Macau in the third quarter of 2023 was US$5.4 million, compared with US$1.3 million in the third quarter of 2022.

Mocha and Other Third Quarter Results

Total operating revenues from Mocha and Other were US$30.6 million in the third quarter of 2023, compared with US$18.8 million in the third quarter of 2022.

Mass market table games drop was US$47.3 million in the third quarter of 2023 versus US$17.8 million in the third quarter of 2022. The mass market table games hold percentage was 18.6% in the third quarter of 2023 versus 20.3% in the third quarter of 2022.

Gaming machine handle for the third quarter of 2023 was US$515.8 million, compared with US$327.6 million in the third quarter of 2022. The gaming machine win rate was 4.5% in the third quarter of 2023 versus 4.7% in the third quarter of 2022.

Other Factors Affecting Third Quarter Earnings

Total net non-operating expenses for the third quarter of 2023 were US$82.4 million, which mainly included interest expenses of US$87.1 million, partially offset by interest income of US$7.1 million, compared with total net non-operating expenses of US$71.0 million for the third quarter of 2022, which mainly included interest expenses of US$68.3 million.

Nine Months' Results

For the nine months ended September 30, 2023, our total operating revenues were US$2.25 billion, an increase of 209.2% from US$726.7 million for the nine months ended September 30, 2022. The increase in total operating revenues was primarily attributable to improved performance in all gaming segments and non-gaming operations at City of Dreams and Altira Macau, as well as increased casino revenues generated from the operations of Studio City Casino by our subsidiary, Melco Resorts Macau, the gaming concessionaire. Such increase mainly resulted from the relaxation of COVID-19 related restrictions in Macau in January 2023.

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Net loss for the nine months ended September 30, 2023 was US$145.9 million, compared with net loss of US$545.7 million in the comparable period of 2022. The decrease in net loss was primarily attributable to improved performance in City of Dreams and Altira Macau mentioned above, nil amortization of gaming subconcession and higher interest income in the nine months ended September 30, 2023, partially offset by higher interest expenses, trademark license fees expenses and amortization of the intangible asset related to the Macau gaming concession in the nine months ended September 30, 2023.

Liquidity and Capital Resources

We have relied and intend to rely on cash generated from our operations and debt and equity financings to meet our financing needs and repay our indebtedness, as the case may be. We expect to have significant capital expenditures in the future as we continue to develop our properties. Any other future developments may be subject to further financing and a number of other factors, many of which are beyond our control.

As of September 30, 2023, we held cash and cash equivalents of US$625.3 million and restricted cash of US$124.3 million (mainly being cash collateral for a concession-related bank guarantee issued in favor of the Macau government and security under credit facilities). Further, HK$5.06 billion (equivalent to US$645.9 million) of the revolving credit facility under the 2020 Credit Facilities and HK$1.0 million (equivalent to US$0.1 million) of the revolving credit facility under the 2015 Credit Facilities were available for future drawdown, subject to satisfaction of certain conditions precedent.

Cash Flows

The following table sets forth a summary of our cash flows for the periods indicated:

Operating Activities

Operating cash flows are generally affected by changes in operating income and accounts receivable related to VIP table games play and hotel operations conducted on a cash and credit basis and the remainder of the business, including mass market table games play, gaming machine play, food and beverage, and entertainment that are conducted primarily on a cash basis.

Net cash provided by operating activities was US$114.7 million for the third quarter of 2023, compared to net cash used in operating activities of US$97.4 million for the third quarter of 2022.

Net cash provided by operating activities was US$196.0 million for the nine months ended September 30, 2023, compared to net cash used in operating activities of US$449.4 million for the nine months ended September 30, 2022. Both changes were primarily due to the improved performance of operations as described in the foregoing section and decreased working capital for operations.

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Investing Activities

Net cash used in investing activities was US$2.8 million for the third quarter of 2023, compared to net cash used in investing activities of US$171.3 million for the third quarter of 2022. The change was primarily due to the funds to an affiliated company in the third quarter of 2022.

Net cash used in investing activities of US$2.8 million for the third quarter of 2023 mainly included payments for acquisition of property and equipment of US$2.7 million.

Net cash used in investing activities of US$171.3 million for the third quarter of 2022 mainly included funds to an affiliated company of US$160.0 million and payments for acquisition of property and equipment of US$11.4 million.

Payments for the acquisition of property and equipment for the third quarters of 2023 and 2022 were mainly associated with our development projects as well as enhancement to our integrated resort offerings.

Net cash used in investing activities was US$8.9 million for the nine months ended September 30, 2023, compared to net cash used in investing activities of US$559.2 million for the nine months ended September 30, 2022. The change was primarily due to the net repayments of funds to an affiliated company in the nine months ended September 30, 2023.

Net cash used in investing activities of US$8.9 million for the nine months ended September 30, 2023 mainly included payments for acquisition of property and equipment of US$17.2 million and payments for acquisition of intangible assets of US$3.7 million, partially offset by the net repayments of funds to an affiliated company of US$12.0 million.

Net cash used in investing activities of US$559.2 million for the nine months ended September 30, 2022 mainly included funds to an affiliated company of US$521.9 million, payments for acquisition of property and equipment of US$28.8 million and payments for acquisition of intangible assets of US$8.7 million.

Payments for the acquisition of property and equipment for the nine months ended September 30, 2023 and 2022 were mainly associated with our development projects as well as enhancement to our integrated resort offerings.

Financing Activities

Net cash used in financing activities amounted to US$101.9 million for the third quarter of 2023, which primarily represented the repayments of the outstanding revolving credit facility under the 2020 Credit Facilities of US$100.2 million and other payments of US$1.6 million.

Net cash provided by financing activities amounted to US$398.4 million for the third quarter of 2022, which primarily represented the proceeds from the drawdown of the revolving credit facility under the 2020 Credit Facilities of US$400.0 million.

Net cash used in financing activities amounted to US$654.5 million for the nine months ended September 30, 2023, which primarily represented the repayments of the outstanding revolving credit facility under the 2020 Credit Facilities of US$1.90 billion, partially offset by the proceeds from the drawdown of the revolving credit facility under the 2020 Credit Facilities of US$1.25 billion.

Net cash provided by financing activities amounted to US$819.0 million for the nine months ended September 30, 2022, which primarily represented the proceeds from the drawdown of the revolving credit facility under the 2020 Credit Facilities of US$820.0 million.

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Indebtedness

The following table presents a summary of our gross indebtedness as of September 30, 2023:

On September 29, 2023, MCO Nominee One repaid the outstanding loan principal of HK$785.0 million (equivalent to US$100.2 million) under the 2020 Credit Facilities, together with accrued interest.

On October 31, 2023, MCO Nominee One repaid the outstanding loan principal of HK$785.0 million (equivalent to US$100.4 million) under the 2020 Credit Facilities, together with accrued interest.

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Melco Resorts Finance Limited

Index To Unaudited Condensed Consolidated Financial Statements

For the Three and Nine Months Ended September 30, 2023

F-1

Melco Resorts Finance Limited

Condensed Consolidated Balance Sheets

(In thousands, except share and per share data)

F-2

Melco Resorts Finance Limited

Condensed Consolidated Balance Sheets - continued

(In thousands, except share and per share data)

On December 30, 2022, in accordance with the obligations under the letters of undertakings dated June 23, 2022, Melco Resorts Macau and certain subsidiaries of Melco, which hold the land lease rights for the properties on which the Altira Casino, City of Dreams Casino and Studio City Casino are located, executed a public deed pursuant to which the gaming and gaming support areas comprising the Altira Casino, City of Dreams Casino and Studio City Casino with an area of 17,128.8 square meters, 31,227.3 square meters and 28,784.3 square meters, respectively, and related gaming equipment and utensils (collectively as referred to the "Reversion Assets"), reverted to the Macau government, without compensation and free and clear from any charges or encumbrances, at the expiration of the previous subconcession in accordance with the Macau gaming law. The Reversion Assets that reverted to the Macau government at the expiration of the previous subconcession are owned by the Macau government. Under the terms of the Macau gaming law and the Concession, effective as of January 1, 2023, the Reversion Assets have been transferred by the Macau government to Melco Resorts Macau for use in its operations during the Concession for a fee of MOP0.75 (equivalent to $0.09) per square meter of the casino for years 1 to 3 of the Concession, subject to a consumer price index increase in years 2 and 3 of the Concession and such fee will increase to MOP2.5 (equivalent to $0.3) per square meter of the casino for years 4 to 10 of the Concession, subject to a consumer price index increase in years 5 to 10 of the Concession (the "Fee"). As Melco Resorts Macau continues to be operated at and with the Reversion Assets in the same manner as under the previous subconcession, obtains substantially all of the economic benefits and bears all of the risks arising from the operation of these assets, as well as assuming it will be successful in the awarding of a new concession upon expiry of the Concession, the Company continues to recognize these Reversion Assets as property and equipment over their remaining estimated useful lives.

On January 1, 2023, the Company recognized an intangible asset and financial liability of MOP1,934,035 (equivalent to $239,588), representing the right to use and operate the Reversion Assets, the right to conduct games of fortunes and chance in Macau and the unconditional obligation to make payments under the Concession. This intangible asset comprises the contractually obligated annual payments of fixed premium and variable premiums, as well as the Fee without considering the consumer price index under the Concession. The contractually obligated annual variable premium payments associated with the intangible asset were determined using the total number of gaming tables and the total number of electronic gaming machines that Melco Resorts Macau is currently approved to operate by the Macau government. In the accompanying condensed consolidated balance sheet, the noncurrent portion of the financial liability is included in "Other long-term liabilities" and the current portion is included in "Accrued expenses and other current liabilities". The intangible asset is being amortized on a straight-line basis over the period of the Concession, being 10 years.

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Melco Resorts Finance Limited

Condensed Consolidated Statements of Operations (Unaudited)

(In thousands)

F-4

Melco Resorts Finance Limited

Condensed Consolidated Statements of Cash Flows (Unaudited)

(In thousands)

F-5