Release Date: August 15, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Galaxy Entertainment Group Ltd (GXYEF, Financial) reported a net revenue of $10.9 billion for Q2 2024, up 26% year on year and 3% quarter on quarter.
- Adjusted EBITDA for Q2 2024 was $3.2 billion, up 28% year on year and 12% quarter on quarter.
- The company announced an interim dividend of $0.5 per share, reflecting strong confidence in the Macau market and future performance.
- Galaxy Macau's mass business performed exceptionally well, achieving 137% of 2019 levels.
- The company is progressing smoothly with Phase 4 development, focusing on non-gaming, entertainment, and family facilities, with completion expected in 2027.
Negative Points
- The company experienced a slight decrease in adjusted EBITDA by $20 million due to unfavorable luck in Q2.
- Staff costs represent around 75% of the company's operating expenses, indicating high labor costs.
- Total CapEx for Q2 was HKD1.1 billion, with significant investments in Phase 3 and 4 developments, which could strain financial resources.
- The market competition remains intense, particularly in the premium mass segment, which could impact margins.
- The company is still in the early stages of implementing smart table technology, with full coverage expected by year-end, indicating ongoing operational adjustments.
Q & A Highlights
Highlights from Galaxy Entertainment Group Ltd (GXYEF) Q2 2024 Earnings Call
Q: How should we think about dividend policy going forward? Will the 50% payout be a baseline expectation?
A: (Ying Tat Chan, CFO) We are excited to announce a dividend, but this is not a set regular dividend. We will review on a half-yearly basis according to the situation. We generated more than $11 billion in EBITDA over the last 12 months and have good free cash flow. We are confident in maintaining this level going forward, but it is not an absolute guideline.
Q: Can you share details on market share performance and expectations for the future?
A: (Ying Tat Chan, CFO) We are happy with our market share performance, which has been improving. Initiatives like expanding our sales host team and targeting premium mass customers have borne fruit. Despite a slow start in July, momentum picked up later in the month and continued into August. Our visitation numbers in Q3 have grown roughly 30% compared to Q2.
Q: What are the trends in reinvestment rates and how should we view them going forward?
A: (Ying Tat Chan, CFO) Our reinvestment rates have been within a 150 basis points range over the last two quarters. We are disciplined in managing this, and while competition remains intense, it has stabilized. We focus on EBITDA and margin, not just top-line growth.
Q: What are the automation and efficiency gains, and what should we expect in terms of OpEx in the second half?
A: (Ying Tat Chan, CFO) We have seen significant efficiency gains from our initiatives, particularly in Galaxy Arena. Our headcount has stabilized, and staff costs represent around 75% of OpEx. We managed to reduce total OpEx by 2% in Q2 and expect similar levels going forward.
Q: What is Galaxy's interest level in Thailand and expectations for any bidding process?
A: (Ying Tat Chan, CFO) Thailand has great potential as a tourist destination. We are actively monitoring the situation and hope for more clarity on the procedures. We remain very interested and will evaluate opportunities as they arise.
Q: What is the impact of the criminalization of illegal money exchange on your operations?
A: (Ying Tat Chan, CFO) The bill to criminalize illegal money exchange is expected to pass soon. However, legitimate channels like UnionPay cards and carrying renminbi are sufficient for our mid-premium mass customers. Our Q3-to-date numbers show a high increase in table drop, indicating that legitimate channels are working well.
Q: Why prefer dividends over share buybacks for capital return?
A: (Ying Tat Chan, CFO) We have historically had a dividend payout of around 30-33%. We decided to increase it to 50% this time. We will evaluate opportunities for returning capital to shareholders on an ongoing basis.
Q: Can you share CapEx figures for Q2 and expectations for the year?
A: (Ying Tat Chan, CFO) In Q2, we spent HKD1.1 billion on CapEx. For the whole year, we expect to spend around HKD6 billion.
Q: What are the key initiatives driving your market share gains?
A: (Ying Tat Chan, CFO) Key initiatives include reconfiguring Galaxy Macau's casino floor, expanding our sales host team, and introducing new side games. These have contributed to our market share gains. Our entertainment events, particularly at Galaxy Arena, have also increased visitation.
Q: What are your thoughts on the future of StarWorld?
A: (Ying Tat Chan, CFO) StarWorld is progressing well in its transformation to a mass-centric property. We have seen the highest table drop since the border reopened and record high slot revenue. We remain highly confident in StarWorld's future.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
