Las Vegas Sands Corp. Fourth Quarter 2023 Earnings Call Transcript(NYSE: LVS), January 24, 2024
Las Vegas Sands Corp. ne is among the top 30 most popular stocks among hedging budget at the end of the third quarter (see the main points here).
Operator: Good day, ladies and gentlemen, and welcome to the Sands Fourth Quarter 2023 Earnings Conference Call. At this time, all participants have been placed on a listen-only mode, and we will open the floor for your questions and comments following the presentation. It is now my pleasure to turn the floor over to Mr. Daniel Briggs, Senior Vice President of Investor Relations at Sands. Sir, the floor is yours.
Daniel Briggs: Thank you. Rob Goldstein, our President and CEO, joins the call today; Patrick Dumont, our President and Chief Operating Officer; Dr. Wilford Wong, Executive Vice President, Sands China; and Grant Chum, CEO and President of Sands China and Executive Vice President of Asia Operations. Today’s telephone convention will include forward-looking statements. We will make such representations in accordance with the port provisions of the federal securities laws. The Company’s actual effects could possibly differ materially from those reflected in such forward-looking statements. In addition, we will talk about non-GAAP measures. Reconciliations to comparable maximum GAAP monetary measures are included in our press release. We have published a presentation of the effects on our website.
We will refer to this presentation as a call. Finally, for the Q&A session, we ask other interested persons to conduct a consultation and a follow-up consultation, so that we can allow all interested parties the opportunity to participate. This presentation is lately being recorded. Now I’ll hand it over to Rob.
Rob Goldstein: Thank you, Dan, and thank you for being with us today. Macau generated EBITDA of $654 million for the quarter. That figure would have been $40 million higher if we had stuck to our plans in the RV segment. one year since the end of COVID in Macau. We started the first quarter with $400 million in EBITDA. In the second quarter, we earned $540 million. In the third quarter, we earned $630 million. Growth helps keep it happening. We expect continued expansion in gaming and non-gaming revenue, which will accrue in our market. SCL continues to maintain the highest percentage of non-rolling table wins, rolling table wins, and ETG slot wins. More importantly, we have up to the highest percentage of EBITDA in the Macau market. We believe that London, once completed, will need, and perhaps even exceed, the country’s revenue-generating capacity.
Our long-term expansion in Macau is tied to those strong assets, which will drive expansion in the coming years, whether it’s venues, gaming capacity, retail, entertainment, food, beverages, we have exceptional assets. These assets will get even better as we move forward. There is speculation about Macau’s long-term expansion. Can the Macau market reach $30 billion, $35 billion or even $40 billion and more?That will be the case. This underscores our confidence in the returns we have generated from our portfolio’s equity investment programs. We strongly support the expansion of the Macao market in the short and long term. LBS has invested $15 billion in Macau to date. Macau is the world’s largest territory-based market.
A few reference points to consider, fourth quarter EBITDA, assuming expected hold on rolling play represents considerable growth when compared to the previous quarters. Our retail business in Macao has already far exceeded pre-COVID numbers. I continue to expect the gaming force on our business to follow the same path as Singapore and accelerate in 2024. Let’s pivot to the MBS and Singapore. Seven quarters into our reopening, MBS delivered a $544 million a quarter. This is the largest EBITDA for one quarter in the history of the building. The power of this building is evident based on the results despite the disruptive impact of our ongoing $1.75 billion renovation. Disruption notwithstanding MBS is hitting on all cylinders with gaming, lodging and retail perspective.
Placements in ETG’s MBS are coming in at an annual rate of $1 billion. Non-rolling tables represent a decrease of more than $20 million compared to the day. The RDAs are expanding and the retail sector remains consistently well above pre-COVID-19 levels. MBS validates asset quality and reinvesting in our assets will generate sustainable returns. MBS has it all, our iconic construction with very good décor and service levels, attracting the most sought after consumers across all segments. At the end of the two-stage renovation program, MBS will have 770 suites, up from less than two hundred previously. Its long term cannot be denied. How far can MBS go. Our long-term expectations start with $2 billion or more in EBITDA consistent with the year. As you know, we are bidding for a license in New York.
We have a lot of local support. The cost of construction will be around $6 billion, which will allow us to expand a true five-star hotel with [indistinguishable]. It’s a great opportunity. We are very excited about this prospect. Our offer is compelling. If we get permission, we will be buried as soon as possible. Thank you for being here today. I go on to hand it to Patrick before moving on to the Q&A.
Patrick Dumont: Thank you, Rob. We wanted to highlight some adjustments to the documents that we usually provide for the quarter. Following discussions and reviews with the SEC, we will no longer provide normalized adjusted real estate EBITDA in our press releases, SEC. Presentations and supplemental earnings presentations. These adjustments are being made to our documents for this quarter and in our upcoming reports. We believe that research of our monetary and operating effects over the course of a quarter will continue to derive advantages from an understanding of the expected continuation effect in our continuing volume segments on our reported effects. We will continue to deliver the expected effect in our rolling volume segments for our earnings presentations.
See pages 6 and 7 of our effects presentation for a review of the new presentation format. For this quarter, ended December 31, 2023, we generated $654 million of adjusted EBITDA from real estate in Macau, a very strong operating result. It is vital to note that we maintained 2. 16% in our lamination segment in Macau. EBITDA would have been $40 million higher in Macau if we had maintained our business as planned in our rolling segment. At Marina Bay Sands, for the fourth quarter of 2023, we generated adjusted real estate EBITDA of $544 million, a solid result. We maintained 4. 57% in our rolling vehicle segment in Singapore. EBITDA would have been a decrease of $71 million in MBS if we had kept our RV segment as planned. It’s also vital to take a look at our margin. structure, as we maintained as planned in our lamination line segments in Macau and Singapore.
At MACaao, our margins for the fourth quarter of 2023 would have been 35. 9%, an improvement of one hundred base emissions compared to the third quarter of 2023, had we maintained our rolling volume segment as expected. At MBS, if we had maintained our rolling volume segment as expected, our margin in the fourth quarter of 2023 would have been 48. 8%, a cumulative of 170 foundation issuances sequentially. It is vital to note that in Macau and Marina Bay Sands in Singapore, we are generating an expansion of profits. , EBITDA expansion and, the expected maintenance of the rolling volume segments, an increase in margin. We are very focused on the quality of our offerings and on new investments to generate high-value views in our homes through the resulting earnings expansion and margin expansion over time.
Looking ahead, we are excited about our progress in our markets, and we are focused on growth for the long term. Let’s move to the Q&A portion of our call. Thanks.
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Operator: Thank you. Ladies and gentlemen, the field is now open for inquiries. [Operator’s Instructions] And your first query comes from JPMorgan’s Joe Greff. Joe, your line is active. Please go ahead.
Joe Greff: Hey guys. Thank you for accepting my question.
Rob Goldstein: Hi, Joe.
Joe Greff: Obviously, the premium mass had significant sequential growth and exceeded the base mass. I was just hoping — can you talk about the progression of base mass recovery throughout the fourth quarter? And then clearly, what we’re seeing out of information for the Macao market as a whole, in January month-to-date is nice overall mass growth pickup. And as you said before, Rob, the growth keeps coming. I was hoping if you can talk about sort of the relative performance of base mass in January and if we’re seeing this hopefully anticipated pickup in that mass segment?
Rob Goldstein: Thanks, Joe. As you know, we don’t comment on the current quarter. The numbers speak for themselves so the market appreciation in Macao in January thus far has been published, a very encouraging doesn’t it, a continuation of December. As for our performance in Q4, I’ll turn to Grant to talk about the acceleration of base and premium mass. Grant?
Grant Chum: Yes, Rob. Thank you. Yes, Joe, the segment differential growth in the fourth quarter, we had 13% growth in premium mass and 8% growth sequentially on base mass. So I think base mass was progressing nicely through the quarter. It’s just that premium mass had a great performance that exceeded that. If you look at the visitation trends during the fourth quarter, Macao actually recovered to almost 90% of 2019 levels on visitations. So I think the base mass is continuously progressing and building up. Transportation infrastructure has been improving. I think the demand to come, I think the desire to take advantage of the non-gaming events that have been coming on stream across our properties, but across the whole industry, have been very effective. So I think you should expect that growth pattern to continue.
Rob Goldstein: Grant can also say: Grant, why do I ask if it’s fair to say that transportation and Visa, the total lubricant that materializes the Macau market, is improving a year after COVID?The preference is there, but so is the ability for day-to-day life. Is it fair to say?
Grant Chum: Sí. La ability to get there has improved, but the appeal of the destination is even more apparent. You can see that domestic flights to major continental airports in the Greater Bay Area have necessarily recovered. And if you take a look at our ferry statistics, the passengers we carried in the fourth quarter are back to 93% of their pre-COVID levels, but only 52% of our sailing capacity. So it’s evident that other people are excited to come, even though transportation capacity is still recovering. And it’s also transparent, it’s very rewarding overseas, overseas visits rebounded dramatically in the fourth quarter, especially those from Southeast Asia, and it’s been wonderful to watch from Macau. This is despite direct flights from foreign countries to Macau, which haven’t recovered even, I think, by 60% in the fourth quarter compared to pre-COVID. But attendance is now back to 80, 90% of what it was before, even though air connectivity is catching up.
Joe Greff: Great. And then my follow-up. . .
Patrick Dumont: Hey, Joe, it’s a — Joe, before the follow-up, one thing important to note also, it’s been a while since we talked about this. But we actually have capacity to absorb base mass business as it continues to come into the market. So when you think about the property portfolio that we have, the investment that we’ve made in terms of amenities, the tourism attraction for the base mass customer, the ability to service that customer in terms of food and beverage, shopping, entertainment, but also the fact that we have the capacity as that market continues to grow, we’ll be the beneficiary of that. And it’s important to note, because the market is not at capacity yet. So as more visitors come in this base mass segment, we’ll have the ability to absorb it. Sorry, what’s your next question?
Joe Greff: My next question is for you, Patrick. Obviously, it’s fantastic to see a billion dollars in buyback activity in the last quarter. Do you consider this to be a sustainable level, unless there is massive volatility at the inventory value level?
Patrick Dumont: I think there was some activity during the quarter, and to be honest, I think we looked at inventory value levels as an opportunity. When we think about our long term, we go back to capital, as we said. Before, we expected our buyback percentage to have a higher weight there. So I think fundamentally in the long-term cost of percentage buybacks, the compound advantage, the equity drop benefit, triggers that denominator. In terms of quantity, I think we’ll measure ourselves over time. If we take a look at our balance sheet, the loose cash flow that we’re generating, we’ll look to be competitive where we can. And I think we’re going to launch a program where we’re looking to earn percentages consistently over time. But I think I don’t know if we’re necessarily going to buy the same amount that we buy in this quarter, in each and every quarter.