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Studio City(MSC) - 2024 Q4 - Annual Report
MSCStudio City(MSC)2025-03-21 11:31

Financial Position - As of December 31, 2024, the company reported net property and equipment of US2.65billion,representing88.82.65 billion, representing 88.8% of total assets[529] - The company recorded valuation allowances for deferred tax assets of US172.7 million as of December 31, 2024, up from US80.7millionin2023[532]−Noimpairmentoflong−livedassetswasrecognizedduringtheyearsendedDecember31,2024,2023,and2022[531]−Theremainingestimatedusefullivesofpropertyandequipmentareperiodicallyreviewedtoensureaccuratedepreciation[529]−Thecompanybelievesthatcurrentassumptionsusedinfinancialestimatesareappropriate,butchangesinactualexperiencecouldmateriallyaffectfinancialstatements[533]−Futurechangesinestimatesandassumptionsbasedonoperatingresultsormacroeconomicfactorsmayaffecttherecoverabilityoflong−livedassets[530]MarketEnvironment−ThegamingandleisuremarketinMacauisevolving,withincreasedcompetitionexpectedduetomoreintegratedresortsbeingdevelopedintheCotairegion[528]−Greaterregulatoryscrutinyandcompliancecostsareanticipatedduetocomplexanti−moneylaunderinganddataprivacylaws[528]−Thecompanyissubjecttogreaterregulatoryscrutiny,whichmayincreasecompliancecostsandimpactfinancialconditionduetocomplexanti−moneylaunderinganddataprotectionlaws[528]CybersecurityandInternalProcesses−Thecompanyiscontinuallyenhancingitsinternalprocessesandtechnologyinfrastructuretoaddressincreasingcybersecuritythreats[528]−Increasedcybersecuritythreatsnecessitatecontinualenhancementstointernalprocessesandtechnologyinfrastructuretocomplywithevolvingregulations[528]GovernanceandManagement−Theauditandriskcommitteeisresponsibleforoverseeingthefinancialstatements,independentauditors,andriskmanagementpolicies[571]−Thecompensationcommitteeevaluatesandapprovescompensationforthepropertygeneralmanageranddirectors[572]−Theboardofdirectorsconsistsofelevenmembers,includingthreeindependentdirectors[561]−Thecompanydoesnothaveamajorityofindependentdirectors,relyingon"homecountrypractice"forgovernance[562]−Thecompanyhasestablishedanauditandriskcommittee,acompensationcommittee,andanominatingandcorporategovernancecommittee[566]−Thecompanyhasnotsetasideoraccruedanymaterialamountforpensionorretirementbenefitsforitsdirectorsandexecutiveofficers[557]−Thecompany’sdirectorsowefiduciaryduties,includingadutyofloyaltyandadutytoactingoodfaith[563]StaffingandLaborRelations−AsofDecember31,2024,thetotalnumberofdedicatedstaffmembersatStudioCitywas5,848,anincreasefrom5,286in2023and3,571in2022[580]−Thedistributionofstaffbyfunctionincludes1,773inGaming,1,316inHotel,and1,093inFoodandBeverage[580]−Thecompanyhasnotexperiencedsignificantlabordisputes,andnoneofthededicatedstaffaremembersofanylaborunion[580]−Thecompanymaintainsagoodworkingrelationshipwithitsstaff,emphasizingtheimportanceofattractingandretainingqualifiedpersonnel[580]ShareholderInformation−MelcoInternationalholds463,095,592ClassAordinaryshares,representing54.9480.7 million in 2023[532] - No impairment of long-lived assets was recognized during the years ended December 31, 2024, 2023, and 2022[531] - The remaining estimated useful lives of property and equipment are periodically reviewed to ensure accurate depreciation[529] - The company believes that current assumptions used in financial estimates are appropriate, but changes in actual experience could materially affect financial statements[533] - Future changes in estimates and assumptions based on operating results or macroeconomic factors may affect the recoverability of long-lived assets[530] Market Environment - The gaming and leisure market in Macau is evolving, with increased competition expected due to more integrated resorts being developed in the Cotai region[528] - Greater regulatory scrutiny and compliance costs are anticipated due to complex anti-money laundering and data privacy laws[528] - The company is subject to greater regulatory scrutiny, which may increase compliance costs and impact financial condition due to complex anti-money laundering and data protection laws[528] Cybersecurity and Internal Processes - The company is continually enhancing its internal processes and technology infrastructure to address increasing cybersecurity threats[528] - Increased cybersecurity threats necessitate continual enhancements to internal processes and technology infrastructure to comply with evolving regulations[528] Governance and Management - The audit and risk committee is responsible for overseeing the financial statements, independent auditors, and risk management policies[571] - The compensation committee evaluates and approves compensation for the property general manager and directors[572] - The board of directors consists of eleven members, including three independent directors[561] - The company does not have a majority of independent directors, relying on "home country practice" for governance[562] - The company has established an audit and risk committee, a compensation committee, and a nominating and corporate governance committee[566] - The company has not set aside or accrued any material amount for pension or retirement benefits for its directors and executive officers[557] - The company’s directors owe fiduciary duties, including a duty of loyalty and a duty to act in good faith[563] Staffing and Labor Relations - As of December 31, 2024, the total number of dedicated staff members at Studio City was 5,848, an increase from 5,286 in 2023 and 3,571 in 2022[580] - The distribution of staff by function includes 1,773 in Gaming, 1,316 in Hotel, and 1,093 in Food and Beverage[580] - The company has not experienced significant labor disputes, and none of the dedicated staff are members of any labor union[580] - The company maintains a good working relationship with its staff, emphasizing the importance of attracting and retaining qualified personnel[580] Shareholder Information - Melco International holds 463,095,592 Class A ordinary shares, representing 54.94% of the voting power[589] - New Cotai, LLC owns 124,596,560 Class A ordinary shares and 72,511,760 Class B ordinary shares, totaling 23.39% of the voting power[589] - The Silver Point Funds have a beneficial ownership of 114,757,656 Class A ordinary shares, accounting for 13.62% of the voting power[589] - As of December 31, 2024, there were a total of 842,864,460 Class A and Class B ordinary shares outstanding[593] - 368,577,180 Class A ordinary shares were registered in the name of a nominee of Deutsche Bank Trust Company Americas[593] - 60% of the equity interest was directly held by MCO Cotai and 40% by New Cotai prior to the Organizational Transactions[594] - There are no different voting rights among shareholders[594] Financial Performance - In 2024, revenue from casino contracts was reported at 259.8 million, an increase from 155.5millionin2023andarecoveryfromanegative155.5 million in 2023 and a recovery from a negative 56.7 million in 2022[618] - Total gaming taxes and costs deducted from gross gaming revenues were 1.06billionin2024,comparedto1.06 billion in 2024, compared to 756.9 million in 2023 and 227.9millionin2022[618]−TheGamingOperatormanagestheday−to−dayoperationsofStudioCityCasinoandispermittedtodeductcostsforgamingtablesandelectronicgamingmachinesaboveallocatedlimits[621]−InJuly2024,anadditional50electronicgamingmachineswereallocatedforoperationatStudioCityCasino,increasingthetotalto61massgamingtablescurrentlyallocated[623]AgreementsandObligations−TheParticipationAgreementallowsNewCotaitoexchangeitsParticipationInterestforClassAordinaryshares,withadjustmentstoClassBsharesaccordingly[601]−TheCompanyisrequiredtocontributeallnetproceedsfromequitysecuritiessalestoMSCCotai,reflectingaback−to−backarrangementforshareissuances[610]−TheShareholders′AgreementgovernstherelationshipbetweenMCOCotaiandNewCotai,includingboardcompositionandcorporategovernance[615]−TheStudioCityCasinoAgreementissubjecttocustomaryeventsofdefault,allowingforterminationunderspecificconditions[622]−StudioCityCompanyhasatotallong−termcontractualobligationsof227.9 million in 2022[618] - The Gaming Operator manages the day-to-day operations of Studio City Casino and is permitted to deduct costs for gaming tables and electronic gaming machines above allocated limits[621] - In July 2024, an additional 50 electronic gaming machines were allocated for operation at Studio City Casino, increasing the total to 61 mass gaming tables currently allocated[623] Agreements and Obligations - The Participation Agreement allows New Cotai to exchange its Participation Interest for Class A ordinary shares, with adjustments to Class B shares accordingly[601] - The Company is required to contribute all net proceeds from equity securities sales to MSC Cotai, reflecting a back-to-back arrangement for share issuances[610] - The Shareholders' Agreement governs the relationship between MCO Cotai and New Cotai, including board composition and corporate governance[615] - The Studio City Casino Agreement is subject to customary events of default, allowing for termination under specific conditions[622] - Studio City Company has a total long-term contractual obligations of 2,609.2 million, with 363.8milliondueinlessthan1year[515]−ThecompanycompletedaprivateplacementofsharesinMarch2022,raisingnetproceedsof363.8 million due in less than 1 year[515] - The company completed a private placement of shares in March 2022, raising net proceeds of 299.2 million[510] - The company has a corporate rating of "B+" from Standard & Poor's and "B1" from Moody's, both with stable outlooks[519] - As of December 31, 2024, the company has 221.6millionin2025Notesand221.6 million in 2025 Notes and 1,100 million in 2029 Notes due[515] - The company expects to incur capital expenditures in the future to develop existing operations[507] - The company relies on operating cash flow and various financing forms to meet funding needs and repay indebtedness[508] - The company has entered into eight Work Agreements covering various services, including operational and property sharing services[632] - The Master Services Agreement is effective until December 31, 2032, unless terminated or renewed by mutual agreement[628] - The company is subject to restrictions on distributions due to its subsidiaries' debt obligations[520] - The company has entered into licensing agreements for the use of certain trade names, including those related to Marriott International[522]