Galaxy Entertainment Group Announces Selected Unaudited Q3 2018 Financial Data

- Q3 Group Adjusted EBITDA of $3.9 Billion, Up 10% YoY

- 11^th Consecutive Quarter of YoY EBITDA Growth

- Paying Previously Announced Special Dividend of $0.50 Per Share on 26 October 2018

HONG KONG, Oct. 25, 2018 /PRNewswire/ -- Galaxy Entertainment Group ("GEG", "Company" or the "Group") (HKEx stock code: 27) today reported selected unaudited financial data for the three months period ended 30 September 2018. (All amounts are expressed in HKD unless otherwise stated)

Q3 2018 RESULTS HIGHLIGHTS

GEG: Delivered Solid Performance, Driven by Mass, VIP & Operational Execution, Despite Playing Unlucky

• Q3 Group Net Revenue* of $13.0 billion, up 6% year-on-year and down 7% quarter-on-quarter
• Q3 Group Adjusted EBITDA of $3.9 billion, up 10% year-on-year and down 10% quarter-on-quarter
• Played unlucky in Q3 which decreased Adjusted EBITDA by approximately $332 million, Normalized Q3 Adjusted EBITDA of $4.2 billion, up 16% year-on-year and down 6% quarter-on-quarter
• LTM Adjusted EBITDA of $16.7 billion, up 29% year-on-year and up 2% quarter-on-quarter

Galaxy Macau™: Continued Solid Performance, Despite Playing Unlucky

• Q3 Net Revenue* of $9.3 billion, up 7% year-on-year and down 6% quarter-on-quarter
• Q3 Adjusted EBITDA of $3.0 billion, up 9% year-on-year and down 8% quarter-on-quarter
• Played unlucky in Q3 which decreased Adjusted EBITDA by approximately $323 million, Normalized Q3 Adjusted EBITDA of $3.3 billion, up 14% year-on-year and down 2% quarter-on-quarter
• Hotel occupancy for Q3 across the five hotels was virtually 100%

StarWorld Macau: Continued Solid Performance Driven by Mass

• Q3 Net Revenue* of $2.9 billion, up 7% year-on-year and down 5% quarter-on-quarter
• Q3 Adjusted EBITDA of $927 million, up 16% year-on-year and down 6% quarter-on-quarter
• Played unlucky in Q3 which decreased Adjusted EBITDA by approximately $5 million, Normalized Q3 Adjusted EBITDA of $932 million, up 24% year-on-year and down 6% quarter-on-quarter
• Hotel occupancy for Q3 was virtually 100%

Broadway Macau™: A Unique Family Friendly Resort, Strongly Supported By Macau SMEs

• Q3 Net Revenue* of $145 million, up 38% year-on-year and up 11% quarter-on-quarter
• Q3 Adjusted EBITDA of $9 million, versus $(4) million in prior year and $2 million in Q2 2018
• Played unlucky in Q3 which decreased Adjusted EBITDA by approximately $4 million, Normalized Q3 Adjusted EBITDA of $13 million, versus $(4) million in prior year and $4 million in Q2 2018
• Hotel occupancy for Q3 was 96%

Balance Sheet: Healthy Balance Sheet

• Cash and liquid investments were $43.3 billion and net cash of $34.7 billion as at 30 September 2018
• Debt of $8.6 billion as at 30 September 2018, primarily reflects ongoing treasury yield management initiative
• Paying the previously announced special dividend of $0.50 per share on 26 October 2018

Development Update: Continuing to Pursue Development Opportunities

• Cotai Phases 3 & 4 -- Continue to move forward with Phases 3 & 4, with a strong focus on non-gaming, primarily targeting MICE, entertainment, family facilities and also including gaming
• Hengqin -- Plans moving forward to develop a low-density integrated resort to complement our high-energy entertainment resorts in Macau
• International -- Continuously exploring opportunities in overseas markets, including Japan

Dr. Lui Che Woo, Chairman of GEG said:

"I am pleased to report that GEG delivered solid results for the three months period ended 30 September 2018. Before going into details of our results I would like to make a few comments concerning super typhoon Mangkhut which impacted Macau last month.

On 16 September 2018 Macau experienced super typhoon Mangkhut which was reportedly as strong as Hato in August last year. Macau saw significantly less damages and injuries during this No. 10 typhoon Mangkhut, thanks to the precautionary measures taken by the Macau SAR Government and the community, including team members of GEG.

Firstly I would like to thank the Macau SAR Government for their leadership during this challenging event. I would also acknowledge the significant efforts of the civil protection teams, the broader community, our staff and fellow Concessionaires. Significant advanced warning was given which allowed for timely preparation. The Concessionaires, including GEG, worked closely with the Government both pre and post typhoon and helped the community recover from the event. In all, with strong leadership, active community involvement and careful preparation, Macau was substantially less impacted by typhoon Mangkhut when compared to previous typhoons.

Despite increased competition, with new property openings both in Macau and regionally, GEG delivered solid results with Q3 Adjusted EBITDA growing 10% year-on-year to $3.9 billion. It should be noted that during the quarter gaming operations played unlucky which reduced EBITDA by approximately $0.3 billion. Additionally Macau experienced adverse impacts from both the World Cup in July and typhoon Mangkhut in September. We continue to drive every segment of our business with a particular focus on yielding our resorts. GEG's renowned 'World Class, Asian Heart' service combined with our differentiated resorts offerings have resulted in our portfolio of hotels reporting virtually full occupancy.

GEG remains financially healthy with a solid balance sheet. Our balance sheet combined with substantial cash flow from operations allows us to return capital to shareholders through special dividends and to fund our development pipeline and international expansion plans. These include Cotai Phases 3 & 4, Hengqin and Japan. On 26 October 2018 we will pay the previously announced special dividend of $0.50 per share.

The continued growth in the rapidly emerging and underpenetrated middle-class in Mainland China and their demand for leisure and travel gives us confidence in the longer term outlook for Macau. However, I do acknowledge that the current international trade tensions, rising interest rates and a slowing economy may impact consumer sentiment in the short term. We are committed to support the Macau SAR Government's vision to develop Macau into a World Centre of Tourism and Leisure.   

I am very proud of our team members and I would like to take this opportunity to express my sincere gratitude to our executive team and all team members for their commitment and efforts in delivering these results, especially during typhoon Mangkhut."           

Macau Market Overview

Macau's Gross Gaming Revenue ("GGR") for Q3 2018 was $71.7 billion, up 10% year-on-year and flat quarter-on-quarter. This is the 9^th reported consecutive quarter of YoY growth. These results were achieved despite the negative impact of super typhoon Mangkhut.

During the period, visitor arrivals to Macau were 9.0 million, up 9% year-on-year, in which visitors from Mainland China grew at a faster rate of 13%. Overnight visitors grew 7% year-on-year, with the average length of stay rising by 0.1 day year-on-year to 2.27 days.       

Group Financial Results

Q3 2018                    

During Q3 2018, the Group's net revenue increased 6% year-on-year and decreased 7% quarter-on-quarter to $13.0 billion. Adjusted EBITDA increased 10% year-on-year and decreased 10% quarter-on-quarter to $3.9 billion. Galaxy Macau™'s Adjusted EBITDA increased 9% year-on-year and decreased 8% quarter-on-quarter to $3.0 billion. StarWorld Macau's Adjusted EBITDA increased 16% year-on-year and decreased 6% quarter-on-quarter to $927 million. Broadway Macau™'s Adjusted EBITDA was $9 million versus $(4) million in Q3 2017 and $2 million in Q2 2018.

Latest twelve months Group Adjusted EBITDA was up 29% year-on-year and up 2% quarter-on-quarter to $16.7 billion.

During Q3 2018, GEG played unlucky in its gaming operations which decreased Adjusted EBITDA by approximately $332 million. Normalized Q3 2018 Adjusted EBITDA grew 16% year-on-year and decreased 6% quarter-on-quarter to $4.2 billion.

The Group's total GGR on a management basis[1] in Q3 2018 was $15.8 billion, up 6% year-on-year and down 8% quarter-on-quarter. Total mass table GGR was $6.6 billion, up 8% year-on-year and down 3% quarter-on-quarter. Total VIP GGR was $8.6 billion, up 5% year-on-year and down 12% quarter-on-quarter. Total electronic GGR was $0.6 billion, up 10% year-on-year and up 8% quarter-on-quarter.

Balance Sheet and Special Dividend

The Group's balance sheet remains liquid and healthy. As of 30 September 2018, cash and liquid investments were $43.3 billion and net cash was $34.7 billion. Total debt was $8.6 billion at 30 September 2018, same as at 30 June 2018. Our debt primarily reflects a treasury management exercise where interest income on cash holdings exceeds corresponding borrowing costs. Our healthy balance sheet combined with solid cash flow from operations allows us to return capital to shareholders via special dividends and to fund our development pipeline and international expansion ambitions. On 26 October 2018 the Group will pay the previously announced special dividend of $0.50 per share.

Galaxy Macau™

In Q3 2018, Galaxy Macau™'s net revenue was $9.3 billion, up 7% year-on-year and down 6% quarter-on-quarter. Adjusted EBITDA was $3.0 billion, up 9% year-on-year and down 8% quarter-on-quarter. Adjusted EBITDA margin under HKFRS was 32% (Q3 2017: 31%).

Galaxy Macau™ played unlucky in its gaming operations which decreased its Adjusted EBITDA by approximately $323 million in Q3 2018. Normalized Q3 Adjusted EBITDA was $3.3 billion, up 14% year-on-year and down 2% quarter-on-quarter. The combined five hotels registered occupancy was virtually 100% in Q3 2018.

StarWorld Macau

StarWorld Macau's net revenue was $2.9 billion, up 7% year-on-year and down 5% quarter-on-quarter in Q3 2018. Adjusted EBITDA was $927 million, up 16% year-on-year and down 6% quarter-on-quarter. Adjusted EBITDA margin under HKFRS increased to 32% (Q3 2017: 29%).

StarWorld Macau played unlucky in its gaming operations which decreased its Adjusted EBITDA by approximately $5 million in Q3 2018. Normalized Q3 Adjusted EBITDA was $932 million, up 24% year-on-year and down 6% quarter-on-quarter. Hotel occupancy was virtually 100% in Q3 2018.

Broadway Macau™

Broadway Macau™ is a unique family friendly, street entertainment and food resort supported by Macau SMEs, it does not have a VIP gaming component. Broadway Macau™'s net revenue for Q3 2018 was $145 million, up 38% year-on-year and up 11% quarter-on-quarter. Adjusted EBITDA was $9 million, versus $(4) million in prior year and $2 million in Q2 2018.

Broadway Macau™ played unlucky in its gaming operations which decreased its Adjusted EBITDA by approximately $4 million in Q3 2018. Normalized Q3 Adjusted EBITDA was $13 million, versus $(4) million in prior year and $4 million in Q2 2018. Hotel occupancy was 96% in Q3 2018.

City Clubs

City Clubs contributed $28 million of Adjusted EBITDA to the Group's earnings for Q3 2018, down 3% year-on-year and was flat quarter-on-quarter.

Construction Materials Division

The Construction Materials Division contributed Adjusted EBITDA of $197 million in Q3 2018, up 5% year-on-year and down 37% quarter-on-quarter.

Development Update

Cotai -- The Next Chapter

GEG is uniquely positioned for long term growth. We continue to move forward with Phases 3 & 4, which will include approximately 4,500 hotel rooms, including family and premium high end rooms, 400,000 square feet of MICE space, a 500,000 square feet 16,000-seat multi-purpose arena, F&B, retail and casinos, among others. We look forward to formally announcing our development plans in the future.

Hengqin

We continue to make progress with our concept plan for our Hengqin project. Hengqin will allow GEG to develop a low density leisure destination resort that will complement our high energy resorts in Macau.

International

On 20 July 2018 the Japanese Diet passed the Integrated Resort ("IR") Bill. We are very pleased with the recent passing of the IR Bill in Japan. We view Japan as a great long term growth opportunity that will complement our Macau operations and our other international expansion ambitions. GEG, together with Monte-Carlo SBM from the Principality of Monaco and our Japanese partners, look forward to bringing our brand of World Class IRs to Japan. 

Selected Major Awards in Q3 2018