Thank you for holding, and welcome to Galaxy Entertainment Group's management update for the first quarter results of 2024. Joining us today are Mr. Ted Chan, Chief Financial Officer; Mr. Roland To, Senior Director of Strategic Planning; and Mr. Peter Caveny, Assistant Senior Vice President of Investor Relations. At this time, all participants' lines are in listen-only mode. The presentation will be followed by a question-and-answer session, and instructions will be provided at that time. Now, I would like to pass over to Mr. Chan for a presentation. Mr. Chan, please go ahead. Thank you.
Thank you, Operator. Hello, everyone, and thank you for joining us for the update call on GG's Q1 2024 results. Joining me here on today's call is Roland To and Peter Caveny. Copies of our media release, stock exchange announcement, and PowerPoint presentation are available on our website, which also includes our customer disclaimers. During Q1 2024, we made substantial reconfigurations to Galaxy Macau's gaming floor. In the shorter term, this was disruptive for the month of January and the early part of February. The renovation was completed just prior to the Chinese New Year. With the completion of these renovations, we have been seeing a significant improvement in the flow of customer traffic across the entire floor. For Q1 2024, GG reported net revenues of HKD 10.6 billion, up 50% year-on-year and up 2% quarter-on-quarter. Adjusted EBITDA was HKD 2.8 billion, up 49% year-on-year and up 1% quarter-on-quarter.
We played lucky in Q1, which increased our EBITDA by HKD 63 million. Our balances remained healthy and liquid, with a net cash of HKD 25 billion as of Q1 2024. We recently paid the previously announced special dividend of HKD 0.30 per share in April 2024. Our dividends demonstrate our continued confidence in Macau markets, as well as Galaxy's future performance and our commitment to return capital to shareholders. In Q1, the group's mass revenue was 105% of 2019's levels, compared to 67% and 107% in Q1 and Q4 2023, respectively. In Q1, Galaxy Macau's mass business performed well, achieving 126% of 2019's level, whereas StarWorld was approximately 73%. We continue to refine and upgrade our resources to make them even more appealing. We are particularly focused on driving higher-value customers to our properties and converting more of our non-gaming customers to gaming.
Across our properties, we're in the process of implementing smart tables, which will drive further efficiency across the gaming floor. In addition, we are upgrading our slot machine products, including high-limit slots area in Galaxy Macau. We were also pleased to announce the addition of our 10th hotel brand, Capella Hotels & Resorts, to Galaxy's portfolio of hotels. We're actively fitting out the property and anticipate opening mid-next year, offering approximately 100 ultra-luxury sky villas and suites. We're poised to elevate the luxury hospitality standard in Macau. We firmly hold the belief that we should compete on quality and service, not on price. We believe that addition and upgrades to our resources, expansion of our sales team, and the introduction of smart table technology will allow us to grow and recapture our market share.
At StarWorld, we continue to evaluate a range of major upgrades that include the main gaming floor, the lobby experience, and increasing the F&B options. We are committed to a year-long transformation of the property to capture the unique opportunity on the Macau Peninsula side. We continue to work hard on managing our core structure. Our current staff number is approximately 21,000, equivalent to 95% of the count from 2019, even after the full opening of Phase III. Staff costs represent around 75% of our OpEx. Our unwavering confidence in the future prospects for Macau is reinforced by our significant investments in the business. During Q1, we invested approximately HKD 1.4 billion into Phase III and Phase IV development, taking our accumulated investment today to HKD 30.7 billion in the project. Phase IV development is progressing and is earmarked for completion by 2027.
We will continue to adjust the development timeline in accordance with the market demand. We believe that the many additional facilities that we have added and will continue to add in the future set a strong foundation for our sustainable growth in the long run. The central government continues to support Macau. This is evidenced by the recent expansion of the existing IVS to include an additional 10 cities. This brings the total number of Chinese cities under IVS to 59, with a combined population of near half a billion. Furthermore, the government has introduced a range of new visa measures for mainlanders, allowing them more easily access to Macau, including exhibitions and multiple entry visas. The recent expansion of IVS and introductions of the new visas were supported by the visit of Director Xia Baolong to Macau.
This gives us great confidence in the medium- to long-term outlook for Macau. Last, to support the government's goal of expanding international visitors to Macau, we have opened our first overseas office in Tokyo, and we are in the process of opening an office in Bangkok. That concludes my prepared remarks. Operator, we're ready for the Q&A session.
Thank you. We're going to now begin our question-and-answer session. If you have a question for today's speakers, please Press Star 1 on your telephone keypad, and you will enter the queue. After you're announced, please ask your question. If you find that your question has already been answered, it is your turn to speak. Please Press Star 2 to cancel the question. So once again, please Press Star 1 on your telephone keypad to ask a question. Now, the first question comes from DS Kim from JP Morgan. Please go ahead.
Hi Ted. Hi Peter. Hi everyone. Good evening, and thanks for taking my questions. I guess first quarter wasn't amazing for us, but it's already behind us. I don't want to caught up with that. But let me ask if that's okay, a couple of questions on our latest trend, second quarter to date, and beyond. First of all, can you share with us how much market share we have had in April and March, if possible, and any comments on May-to-date performances? I just want to compare first quarter market share and how was the exit rate in first quarter, and then how we trend this quarter to date. That was my first question. And second question would be regarding the promotional activities in the market, particularly for so-called super premium mass players.
I have heard on the ground that there may have been some changes in market dynamics very recently, and I'm wondering if you could share some details, if you saw anything changing on the ground, not necessarily for Galaxy, but for overall market or some of the peers. Perhaps we and everyone in the market are agreeing to do a little more reasonable promotion activities and whatnot. Any changes anecdotally, if you could share, would be really appreciated.
No problem, DS. Why don't I just combine your two questions into one answer? So let's really look at the—I think the market is actually very concerned about the promotional activities in Macau and how they're impacting each other. And Q1's past, what about Q2, right? Let me craft it into the following. First of all, I think we acknowledge competition is actually quite intense in Q1, and it's actually expanded to Q2. And you heard that recently there will be maybe some stabilization. I can acknowledge that as well, that there is some stabilization in terms of that competition. But let me look at it this way. In terms of competition, I think the six gaming operators already align according to their respective characteristics. So every gaming operator has different characteristics. So let's focus on Galaxy for a moment.
We basically aligned our whole structures post-Chinese New Year in order for us to increase our sales force and also to yield our database better. And number two, we have to improve our entertainment offerings, especially the arena program, to be more relevant to our customers. Especially, we can see some amazing results in the past weekend, even after the Golden Week. If we look at the reinvestment of Galaxy, I can't comment on the others, but if I look at the reinvestment rate in the last six months, basically, we are rating our reinvestment rate on our rate customer in a range of roughly about 150 basis points different. So this range already allows us the feasibilities for us to offer different patrons according to different offerings. So no matter how competitive market, we try our very best to cope with different level of ADT customer on that.
So with all the efforts post-Chinese New Year, with all the efforts that we've done, I think we see some results. And I'm quite happy to see that the market share is actually for Galaxy's stabilized, especially in April. If I compare with all the segments, mass, slot, VIP market share, all the data points are showing me that our market share is above the last three months or six months average in April. And also, the momentum continued in May, especially during Golden Week and after Golden Week. So I think that's the direction that we're heading in, and I'm quite happy that what we've been doing post-Chinese New Year is actually bearing some fruit.
Thank you so much, Sir. That's very encouraging and similar to what we hear on the ground. Galaxy has been regaining market share. I think the direction has been set, and kudos to that. But if I may follow up, when you say the reinvestment rate within the range of 150 basis points I missed that part a little bit. Did you mean that our reinvestment rate has moved up about 150 basis points versus six months ago, or within different tiers, the gap between a top tier and bottom tier is only about 150 basis points?
So what I'm referring to is actually, if we look at this last six months, including April, our reinvestment on the rate customers ranged within 150 basis points, which means the range is that we believe the range is big enough for us to build on the flexibility to reinvest on different type of customers. So if we see sometimes the competition is particularly high on a particular area, we can actually use this flexibility to do so. So I guess, as I said, every company has a different characteristic. We use more reinvestment on the programs, on the service, on the database yielding, while the other company might have different amenities for them to reinvest to the customer. So there's no perfect apple-to-apple comparison.
But I think they have been doing what we can to leverage our non-gaming facilities as well as our database management to do a better job for us. And after the Chinese New Year, we put some efforts, and it looks like we're on the right directions.
Thank you. Final question, if you don't mind, is just as a housekeeping, could you comment a bit about CapEx budget for this and next year, if possible, broken down across different types, i.e., maintenance versus concession-related commitment versus Phase 3 and 4 growth CapEx, if you could share with us that degree? Then thank you again for taking my questions.
No problem. For the quarter one, the total CapEx for the company is, let's say, $1.5 billion in Q1. We haven't spent too much on the concession-related CapEx at the moment because it's a year one, and it's also subject to changes after we submit the plan to the government. So you can assume that most of the CapEx in Q1 is related to the business and also Facebook.
Thank you. If you don't mind, could you give us a little bit of color on the CapEx budget for the year, like full year 2024?
Full year 2024 on the CapEx will be around $5 billion. That excludes those related to the concession-related, and that's also still subject to some final changes. As you will all know, on the 10-year basis, the CapEx versus OpEx related to concession for Galaxy is actually 30-70 ratio. 30% CapEx and 70% OpEx. Every year, I think the government is flexible enough for us to change according to the plan.
That's really helpful. Thank you again.
All right. Thank you.
Our next question comes from George Choi from Citi. Please go ahead.
Hi guys. Thank you very much for taking my questions. First of all, would you please remind us your timeline for the introduction of smart tables? And secondly, we understand that you guys have recently introduced a new side bet called Small 6/Big 6, and you have rolled it out to all of your baccarat tables. I'm just wondering, theoretically, how much is the incremental theoretical house advantage from this new side bet versus normal Lucky 6? And based on the data that you have gathered so far, has this become a popular side bet amongst your players?
Okay, George. Thank you for the questions. Smart tables, we are launching the smart table in the second half of the year, so basically sometimes around July. The plan is actually to complete the whole implementations within the year. So basically, Q4, we will have all the smart table implemented in all our properties, including StarWorld and Galaxy Macau. I think smart table implementation is one thing. Installation of the furniture is one thing, but also more importantly, it's actually on the back end, the database management. So we are doing the same time. So we hope that by the end of the year, we have the full set of smart tables, including the back end setup, being ready for the operations. SIBET, I think, is a hot topic. We are very pleased.
The government's actually supportive in terms of the additional new games, new side bet that we put in place. Very, very successful. Very, very nice. I think the customer we thought that it would take some time for customers to get used to it, but very quickly, I'm amazed by how smart our guests are, and they like the game very much. So there's no way to really give you a number that is too early. But I must say, the side bet percentage of the bets is increasing almost every day. So we're very happy. That definitely will be improving our hold percentage. In May, our hold percentage is actually a little bit on the high side of our range.
We cannot make a conclusion whether this is purely because of the side bet or perhaps our reconfiguration of the casino floor really having a great result of the improvement in terms of efficiency. So it's a combination of things, efficiency of the operation and also the side bet improving our hold percentage in May.
Thank you very much, Anthony. Very good callout. Thank you.
The next question comes from Jihwan Choi from Citi. Please go ahead.
Hi. Thanks. A couple of questions. First is, as you mentioned in your announcement here, the market growth has been driven more by the premium segments. Just curious about what's your latest thinking about the base mass segment. Is it just not the recovery is just not going to be as exciting as the premium segment because of the economic downturn that China has gone through, or is it still more of a timing issue? Second is, could you talk a little bit more about the trajectory for whether it's GGR market share, EBITDA market share improvement that you expect, just knowing that you're trying to balance the investment and investment in your marketing growth program?
At what point do you say we need to step up, or is it the trajectory is going to be very sort of year-end weighted in terms of improvement given the timing of roll-out of the smart tables? Thanks.
All right. So base mass. Interestingly, when we analyze the rate to customer on the premium mass and also the base mass, the characteristic is actually quite similar. And one thing is more about the frequency of travel is actually still below the premium mass. So I guess with many reasons that you guys may understand. But with the current central government's very encouraging policy to ease the visa relaxation policies, I think that definitely will help both premium mass and base mass. And also with the expanded IVS, definitely will help. Even though I said that the premium mass actually led the improvement and the recovery of the business, mass is also increasing and improving every day, but it's lower than premium mass. But with the new policy emitted by the central government, that definitely will help us in terms of the performance. Sorry, I missed the second question.
GGR share. Yeah, the GGR share. I think I just mentioned earlier that after the effort that we did in post-Chinese New Year and with the emphasis on the yielding of the database with our increased sales holds and also some improvement on our entertainment offering, especially the arena offering, from April, when we look at our market share is about Q1 when we compare to Q1 from April. And if we also look at the past three months or six months average, our April's market share is also above all these metrics. And more encouragingly, the momentum actually continued in May, Golden Week. And after Golden Week, it continued with the momentum. So it looks like we're on the right direction.
Thanks. But just to follow up, I mean, should we expect just more incremental improvement until we get the Smart Tables all rolled out at the end of the year, or you actually already have seen pretty big improvement? Thanks.
We see some improvements already. So with smart table, I think you see more accuracy in reinvestment to the right customer, which means you can improve your reinvestment range within your different ADT level of the customers. But without smart table, we can still have a lot to do, and that's what I just mentioned. And I think that in April or, let's say, quarter today, it looks like there's some meaningful improvement happening. So I hope that the trend continues. And coupled with some initiative going forward in Q3 and Q4 with smart table be ready, we should further improve.
Got it. Thank you.
Thanks.
The next question comes from Simon Cheung from Goldman Sachs. Please go ahead.
Hi, Peck. Thanks for the presentation. I just got a couple of questions. Again, related to the competition, I think that's well documented and well understood that the market is highly competitive. I just wanted to get a bit more sense. We know the high end of the segment is very competitive, but obviously, there are a lot of concern that such a competition intensity will spill over to maybe mid to even low end of the segment. Do you see any sign of that? I hear that you mentioned that things have stabilized a bit. Perhaps just back to DS questions, what is the reinvestment rate differences between high end and low end and compared to before Chinese New Year, before you implement all the changes? That's the first one.
And then the second one, you mentioned that arena are doing a good job and that we have two IVS cities open since early March. I'm just trying to understand a bit how, if possible, can you help to quantify any impact in terms of, I guess, foot traffic? Just wanted to get a better sense how your property would be able to capture these perhaps incremental or accelerating recovery on the low end or mid end mass market segment. And then the very last questions, in relation to capital return, we have received a lot of questions whether Galaxy would consider increased dividend. I guess that's also taking into consideration of Bangkok being a potential investment in the future. Just like to hear your thought on those two fronts. Thank you.
Thanks, Simon. I guess the question is more about the competition landscape and how do we see that being impacted and how do we address this. I guess if we look at the reinvestment rate between the high end premium mass and base mass, for sure, the reinvestment percentage on the premium mass, high premium mass is actually lower than the low end or base mass, literally because the room rate is actually already determined more than half or 50% of the total reinvestment on the base mass. So if you look at it that way, if we strip out room, that's a different story.
So I guess if we look at that way, in our portfolio, we still see quite lucrative high end premium mass segment in terms of the profitabilities in there, whereby the lower end one, the room is already determined the high percentage of the reinvestment rate there. So as I said, every game company has a different characteristic. Some of them are more on borrowing your work, explaining the competition to them, base mass. To me, it's more like a surface level elevations on the game floor. So some of them choose to do more F&B offering on the casino floor for the base mass. But I think this really depends on what kind of characteristic of your floor.
I think for Galaxy, it's more about integrated experience, and we have amazing entertainment retail so that we can have more programs combining and working together to generate enough visitation on the casino floor. So it's quite different. There's no one equation to force a sense on that particular area. So I guess if we look at the reinvestment rate, yes, premium mass is actually lower than the base mass purely because of the room rate issues. Whether the competitors are going to the base mass as well, I think we all know that is happening all the time, just not now, but in the last few quarters already. And I think every competitor are using different characteristics in their properties, and we are using entertainment and retail. So that's one. In terms of the capital deployment, yes, we are looking at it very carefully on every quarter.
In terms of Phase 4, we still require roughly about HKD 20 billion to build. And we're looking very seriously on the overseas developments throughout. As you just point out, Thailand, if Thailand's happening, that would be very interesting. In the Land of Smile, they have all the ingredients for success in terms of hospitalities. So what I understand is actually the Minister of Finance already leading their relevant agencies to revise a study on the feasibility study by the parliament. I hope that this year, when the legislation when the parliament reopen in summertime and when they are able to pass the law within the year, then hopefully, the bidding process could start. But it's too early to comment on how Thailand looks like. We don't know where's the location, how big the size is. But I think we are very interested in Thailand.
If we have more information, definitely, we will be seriously consider that. That would be part of the consideration in terms of our capital deployment.
Can I just quickly one quick follow-up, just back to the competition. Obviously, the market fixated or focused a lot on the GGR market share. And we hear that you've done a lot to drive better market share in April or even May. I guess the fair share market share that everyone's been talking about, I remember you alluded earlier that that would be what, closer to 20%. I don't know whether it's still relevant. And if so, then would you be able to perhaps share with us the timelines of that kind of whether it's achievable by end of the year next year? That would be very helpful. Thank you.
I'd love to do it right now. I mean, the market share is actually a relevant relativity term. So I just mentioned to you that our April and May number, we are about the three month and 6-month average of the past three months or past six months average, which means it's moving on north, not on the south side. And that is quite positive. And also, I mentioned that the reinvestment rate on the last six months range was within 150 basis points, which means we are not only increasing our market share by just increasing the reinvestment but also flexibility within that 150 basis points in terms of reinvestment allocations. So one encouraging outcome in Q1 was that our OpEx level is already stabilized also. Last year, we increased our workforce to cope with the opening. At the same time, expansion on Phase 3.
Every quarter, we have an increase in terms of OpEx. In Q1, we're already stabilized, and we continue to see the stabilizations going forward in the next few quarters across the year. That will be giving you an idea that when we are in the territorial recovery in the revenues, that will be having a positive EBITDA flow through going forward, unlike the change in the last few quarters.
Understood. Thanks a lot. Thank you.
Thank you, Simon.
Thank you. There are currently no more questions in the queue.
Thank you, operator. Before we close, I'd like to make a summary on the outlook. I would like to say that we, Galaxy, here remain very confident on the outlook on Macau in general and also specific for our company with the following reasons. Number one, the strength of the ongoing recovery in visitor numbers and associated revenue. This is further supported by the expansion of the IVS scheme and the easing visa policies. For us, in Q1, we meaningfully expanded our sales and hosting team. Our market share has now stabilized in Q2. The sign of further improvement was seen in May. During Golden Week, Galaxy's worldwide mass drop and slot handle were around 120% of 2019's level. We're very encouraged that the momentum continues post the holiday week.
We also successfully completed a reconfiguration of Galaxy Macau's main gaming floor, and we have seen a significant improvement in the flow of customer traffic across the entire floor. Going forward, it will improve our hold percentages accordingly. We're also in the process of rolling out the new and updated slot product, and we will launch our smart tables in Q3, as I said earlier. And we will complete the entire portfolio by Q4 with our smart tables. Raffles, Galaxy Macau, and Horizon Clubs has proven to be very successful. And we'll continue to ramp up GICC and Galaxy Arena with more relevant shows and events. And at Galaxy, we have always believed in competing on quality of products and services but not on price.
So our newly announced partner, Capella Galaxy, will further lift the level of luxury in Macau and further position Galaxy at the top end of the market. And beyond that, we continue with the development Phase IV, which will again increase our hotel room count and diverse product offering, including all of these non-gaming products, in order for us to align with the increasing demand from the premium mass segment. So with that, it concludes today's call. And thank you all for your time today, and we will see you in the next earnings call. Thank you.
This is the end of Galaxy Entertainment Group's conference call. Thank you for joining us today.