C.H. Robinson Worldwide Q4 2023 Earnings Call Transcript

Quartr
Provided by Quartr
January 24, 2024

There are 16 speakers on the call.

Operator

Good day, ladies and gentlemen, and welcome to the Sands' 4th 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 Sandd. Sir, the floor is yours.

Speaker 1

Thank you. Joining the call today are Rob Goldstein, our Chairman and CEO Patrick Dumond, our President and Chief Operating Officer Doctor. Wilfred Huang, Executive Vice Chairman of Sands China And Grant Chum, CEO and President of Sands China and EVP of EASA Operations. Today's conference call will contain forward looking statements. We'll be making those statements under the Safe Harbor provision of federal securities laws.

Speaker 1

The company's actual results may differ materially from the results reflected in those forward looking statements. In addition, We will discuss non GAAP measures. Reconciliations to the most comparable GAAP financial measure are included in our press release. We have posted an earnings presentation on our website. We will refer to that presentation during the call.

Speaker 1

Finally, for the Q and A session, we ask those of interest to please post one question and one follow-up. So It might allow everyone with interest the opportunity to participate. This presentation is being recorded. I'll now turn the call over to Rob.

Speaker 2

Thanks, Dan, and thanks for joining us today. Macau delivered $654,000,000 of EBITDA for the quarter. The number would have been $40,000,000 higher if we had held as expected in the rolling segment. It's only been 1 year since the end of COVID in Macao. We began in Q1 with $400,000,000 of EBITDA.

Speaker 2

In Q2, we did $540,000,000 Q3, we did $630,000,000 The growth just keeps coming. We look forward to continued growth in both gaming and non gaming revenue, which will lift the entire market. SEL continues to own the largest share of ongoing table win, Rolling tape win and slot ETG win. Most importantly, we have the largest share of EBITDA in the cow market by a wide margin. We believe the completed London will meet and perhaps even exceed the earning power of the Venetian.

Speaker 2

Our future growth in Macau is tethered To these powerful assets, which will drive growth in the years ahead, whether it's rooms, gaming capacity, retail, entertainment, food and beverage, we have stellar assets. Those assets will even get better as we complete the ongoing $1,200,000,000 Londoner reinvestment program. There has been ongoing speculation about the future growth of Macau. Can the Macau market grow to $30,000,000,000 $35,000,000,000 even $40,000,000,000 and beyond? We believe that it will.

Speaker 2

This underscores our confidence in the returns that we generate by capital investment programs in our portfolio. We are staunch believers in the growth of Macau market in near and long term. LVS has invested $15,000,000,000 in Macau to date. Macao is the most important land based market in the world. A few reference points to consider.

Speaker 2

4th quarter EBITDA, assuming expected hold on rolling play represents Our retail business in Macau has already far exceeded pre COVID numbers. I continue to expect the gaining force in our business to follow the same path as Singapore and accelerate in 2024. Let's pivot to MBS in Singapore. 7 quarters into our reopening, MBS delivered a $544,000,000 quarter. This is the largest EBITDA For one quarter of the history of the building, the power of this building is evident based on results despite the disruptive impact of our ongoing 1.7 $5,000,000,000 renovation.

Speaker 2

Disruption notwithstanding MBS is hitting on all cylinders with gaming, lodging and retail perspective. Slots and ETGs at MBS are approaching $1,000,000,000 annual run rate, non rolling tables are exceeding $20,000,000 of the drop per day, ADRs are escalating and the retail component is delivering far beyond pre COVID numbers. MDS validates that quality assets prevail Reinvesting in our assets will generate sustained returns. MBS has it all, an iconic building with superb decor And service levels which attract the most desirable customers in every segment. At the completion of both phases of the renovation program, MBS will feature 7 70 suites.

Speaker 2

We previously had less than 200 suites. There is no denying its future. How far can MBS go? Our future expectations start with $2,000,000,000 and beyond in EBITDA per year. As you know, we're bidding for a license in New York.

Speaker 2

We're receiving Strong local support. The cost of the building will be in the $6,000,000,000 range, which enables us to develop a true 5 star resort with unlimited appeal. This is a massive opportunity. We are very enthused about the prospect. Our bid is compelling.

Speaker 2

If we receive the license, we'd be in the ground as quickly as possible. Thank you for joining us today. I'll turn the call over to Patrick before we move on to Q and A.

Speaker 3

Thanks, Rob. We wanted to highlight some changes in materials that we typically provide for the quarter. After discussions and review with the SEC, we will no longer be presenting hold normalized adjusted property EBITDA in our press releases, SEC filings and supplemental earnings materials. These changes are being made to our materials for this quarter and for reporting going forward. We believe that the analysis of our financial and operating results in any quarter will continue to benefit from an understanding of the impact of expected hold In our rolling volume segments for our reported results, we will continue to provide the impact of expected hold in our rolling volume segments for our earnings materials.

Speaker 3

Please see Pages 67 in our earnings presentation for an overview of the new presentation format. For this quarter, the quarter ended December 31, 2023, we generated $654,000,000 of adjusted property EBITDA in Macau, a very strong operating result. It is important to note that we held 2.16% in our rolling segment in Macau. EBITDA would have been higher by $40,000,000 in Macau Had we held as expected in our rolling segment. At Marina Bay Sands for the Q4 of 2023, We generated $544,000,000 in adjusted property EBITDA, another strong result.

Speaker 3

We held 4.57% in our rolling segment in Singapore. EBITDA would have been lower by $71,000,000 in MBS had we held as expected in our rolling segment. It is also important to address our margin structure Had we held as expected in our rolling line segments in Macau and Singapore. In Macau, our margins in the Q4 of 2023 would have been 35.9%, an improvement of 100 basis points as compared to the Q3 of 2023 If our hold was as expected in our rolling volume segment. At MBS, had we held as expected in our rolling volume segment, Our Q4 of 2023 margin would have been 48.8%, an increase of 170 basis points sequentially.

Speaker 3

It's important to note that both in Macau and in Marina Bay Sands in Singapore, we are generating revenue growth, EBITDA growth And when considering expected hold for rolling volume segments, margin expansion. We are very focused on the quality of our offerings on further investment to drive high value visitation to our properties on the resulting revenue growth and our 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 and A portion of our call. Thanks.

Operator

Thank you. Ladies and gentlemen, the floor is now open for questions. And your first question today is coming from Joe Greff from JPMorgan. Joe, your line is live. Please go ahead.

Speaker 4

Good afternoon, guys. Thanks for taking my question. Good job. Obviously, the Premium S 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 Q4 and then clearly what we're seeing out of information for the Macau market as a whole in January month to date It's nice overall mass growth pickup.

Speaker 4

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 NAS in January and if we're seeing this hopefully anticipated pickup in that

Speaker 2

Thanks, Jill. As you know, we don't comment on the current quarter. The numbers speak for themselves though. The Market appreciation, Cal, in January thus far has been published and very encouraging, doesn't it, a continuation of December. As for our performance in Q4, I'll turn it to Grant to talk about the acceleration of base in premium mass.

Speaker 2

Grant?

Speaker 5

Yes, Rob. Thank you. Yes, Joe, the segment differential growth in the 4th quarter, we had 13% growth in premium mass An 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.

Speaker 5

If you look at the visitation trends During the Q4, Macau actually recovered to almost 90% of 2019 levels on visitations. So I think the base mass is continuously progressing and building up. The 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.

Speaker 2

Grant, as I said also Grant, I just want to ask you, is it fair to say transportation and visas, the whole Lubricant that supplies the market into Macau is getting better year after COVID. It seems to me as if the ability to get there, the desire is there, but also the ability that is improving daily. That fair to say?

Speaker 5

Yes. The ability to get there has been improving, but the desirability of the destination is even Clearer, you can see that the domestic flight to Mainland Key Greater Bay Area airports has all but fully recovered. And if you look at our ferry statistics, passengers that we carried In the Q4, we covered to 93% of pre COVID, but on only 52% of our sailing capacity. So clearly people are enthusiastic about coming even though the transportation capacity It's still recovering. And that's also clear, very gratifyingly the overseas, the foreign visitation recovered Dramatically in Q4, especially from Southeast Asia, and that's great to see from Macau.

Speaker 5

And that's despite the direct flights From foreign countries into Macau, haven't recovered, even by, I think, 60% in the 4th quarter versus Pre COVID, but the visitation now is getting back up to 80%, 90% of what it was before, despite the flight connectivity Still catching up.

Speaker 1

Great. And then my follow-up

Speaker 3

Hey, 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. It's important to note because the market is not at capacity yet. So as more visitors come in, in this base mass segment, we'll have the ability to absorb it. Sorry, what's your next question?

Speaker 4

Thanks. My next question is for you, Patrick. Obviously, it's nice to see $500,000,000 of buyback activity this past quarter. Do you view that as a sustainable level unless there's some huge volatility in the share price level?

Speaker 3

You. I think there was some activity during the quarter. And to be fair, I think we looked at the share price levels as an opportunity. When we think about our future capital return, as we said before, we kind of expect our share repurchase will be more heavily weighted into events. And so I think we fundamentally believe in the long term value of share repurchases, the benefit of the compounding, the benefit of the share shrink, shrinking that denominator.

Speaker 3

In terms of amount, I think we're going to be measured across time. If you sort of look at our balance sheet, you look at the free cash flow we generate, We're going to look to be aggressive when we can. And I think we're going to run a program where we look to acquire shares consistently over time. But I think it I don't know that we'll necessarily buy the same amount that we bought in this quarter going forward every quarter.

Speaker 4

Okay. And then one final thing, congratulations Grant on your promotion.

Speaker 5

That's all for me. Thanks. Thank you, Joe. Thank you very much.

Operator

Thank you. Your next question is coming from Stephen Grambling from Morgan Stanley. Stephen, your line is live. Please go ahead. Steven, your line is live.

Operator

Please you may

Speaker 3

go ahead with your question now.

Speaker 6

Hey there. Sorry, can you hear me?

Speaker 1

Yes.

Speaker 6

Yes. Sorry about that. So, you may have touched on this a little bit, but As we think about the renovations coming up for the remainder of SansCo Thai CentralThe Londoner, can you just maybe help contextualize How that will compare to the first renovation both in terms of disruption and then contribution?

Speaker 2

Yes. I think I'll turn it over to Grant for that comment. Grant Londiner?

Speaker 5

Sure. Thanks, Rob. Thanks for the question, Steve. I mean, I think We can say in terms of the time line, we've already commenced the renovation of the Sheraton Hotel, and that will continue through the whole of 2024, and we'll hopefully complete sometime in the Q1 of 2025. And yes, there could be some impact from construction disruption, especially as we go into the second half of the year.

Speaker 5

And that a little bit depends on when the works are approved to commence On the Sheraton side of the casino floor, and also as well as the number of keys That will be out at any given time at the Sheraton. That said, I think we'll be managing this whole process, just as we did in the first phase when we converted the Holiday Inn into the Londoner starting in 2019. So we'll be well used To yielding the rest of the portfolio, as you know, the yields we're getting At the Sheraton side of the building, is lower than the rest of the portfolio. So we will be trying to you. Not miss any opportunity to yield the rest of the portfolio whilst the works are going on.

Speaker 5

And this is something that we've been doing throughout these existing building renovations. Right now, the schedule is Still a little bit fluid, just pending some statutory approvals. But at this point, our expectation is The first half will be relatively normal and then expect to see some disruption into the second half. But then by 2025, we're going to be in a dramatically elevated and different position In terms of the entire Londoner, you asked about the Phase 1 and Phase 2 contribution. Well, we have done The bulk of the work in the public areas and externals facade in the Phase 1 and the retail mall And one of the 2 casino floors, but we only touched 1,000 keys Out of the 6,000 that we have, so the main difference is that Phase 2 is going to address The majority of the hotel inventory in terms of renovation and of course, the other Main game and flow that we have on the Sheraton side.

Speaker 2

Hi, Stephen, just to follow on Brand's comments. I understand the market's concern about London disruption. It's a valid point. However, two thoughts for you. One is that, I think if the market continues to accelerate like we're seeing in the early January market numbers, Perhaps we can overcome that by using other assets in the portfolio.

Speaker 2

But secondly, to BrandsComp, I think when you see the eventual transformation of Lunder, it will be a juggernaut on par with the Venetian beyond. So it gives us 2 assets we think can probably make $3,000,000,000 by themselves. And while there's disruption in 'twenty four, 'twenty five and beyond gives us something that's unique in that market. The number 1 and 2 Assets are number 1 and 1 assets in that market for years to come. So there may be some disruption, but maybe market force can overcome that.

Speaker 2

But I think the end result is well worth the pain.

Speaker 6

That's all super helpful. Maybe an unrelated follow-up on Singapore. Looking at least at the visitation data, it Seems like it was mixed at best, but yet you're still seeing that market grow sequentially from an EBITDA standpoint revenue. I guess what are you seeing from China customers coming back to the market? Any initial reason how we should be thinking about that building into next year?

Speaker 7

I'm happy

Speaker 2

to give

Speaker 3

you Go ahead, Rob.

Speaker 2

No, go ahead, Madhu. I'll follow yours. Go ahead.

Speaker 3

Yes. So I think the key thing about Singapore is it's really about quality of tourism. So we've been very focused on investment. If you heard us over the last couple of calls on what our investment thesis is, That the higher quality assets we have, the higher quality tourism will attract and that's really on full display here. So it's not about quantity, it's not about the full recovery, it's the fact that we're getting Very high value tourists.

Speaker 3

If you look at Singapore as a market, it's incredibly attractive, right? It has a growing high net worth Population, there's a lot of family offices moving there. There's a lot of business activity there. There's political stability. There's strong tourism infrastructure.

Speaker 3

It's got a strategic location. All of those things are benefiting the Singaporean market overall and helping drive the business that we're in. And so for us, there's been a ramp from China, that's true, but there's still a lot more to go. It's still, let's call it 50% on visitor arrivals. You may have heard that at some point, they're going to go visa free this year.

Speaker 3

We're hopeful that that actually occurs, There's no way to know exactly how beneficial that will be, but it can't hurt. But I think the key thing is just a very attractive market, but it really the results you see in this quarter In a building that was really under construction, didn't have its full suite complement and didn't really have a lot of the amenities that we'll have in Halfway through 2024 and 2025, I think really speaks to the capability of the market and where this building can go. You heard Rob in his remarks about our view of The trajectory of this business, we're very bullish on it. But I think it's really just about high value tourism. I wouldn't look at the absolute number of visitor arrivals

Speaker 2

I think Patrick's comments are spot on, Steve. We have limited we have capacity constrained building in MDS. Unfortunately, we only have so many rooms and suites, which we had 10 times as much, but we don't. So the mass market tourism isn't as important to us as the right tourists in the market. We look at this asset as a $2,000,000,000 asset today annualized EBITDA, but we believe it can grow 10% to 20% over the next 3 or 4 years.

Speaker 2

And then hopefully, we can finalize our plans with the government. Once the government blesses another building, we believe that That could open later this year and make us a $3,000,000,000 projected EBITDA by end of decade in Singapore. So we see ourselves now at 2 Going to 222,324 and eventually stepping up to $3,000,000,000 We see huge growth in this asset. It's just beginning. We got obviously hampered by COVID, but to watch it grow like it's growing, our only disappointment in Singapore is we just don't have more space Because it's a very desirable market and that building probably the most valuable in hotel building ever built in the world And we'll just accelerate in the next 3, 4, 5 years until hopefully we can tell you at finality we have a deal in Phase 2.

Speaker 6

Makes sense. It's all helpful. Thanks so much. Best of luck.

Speaker 2

Thank you.

Operator

Thanks, Stephen. Thank you. Your next question is coming from Carlo Santarelli from Deutsche Bank. Carlo, your line is live. Please go ahead.

Speaker 8

Thank you. Hey, guys. Rob, you touched on it a little bit just there, but I was wondering, obviously, there's A ton of moving parts with COVID and everything else, but $1,000,000,000 in Phase 1 at Marina Bay Sands, returns on that product look to be very favorable, dollars 750,000,000 over 2024 and into 2025. I was wondering how you think about returns there. And then to your point there at the end of your last comments, when do you expect to kind of have An update around the timing and perhaps the spend on the larger scale project there.

Speaker 2

I'll just reiterate how much we believe in Singapore as a market. My comments about $3,000,000,000 we actually believe that's very attainable When we opened this new building late in the decade, as for the update, Patchy has been right in the middle of that. So Patchy, please take it away in terms of Phase 2 Singapore.

Speaker 3

Yes, I think it's an interesting comment. I think the key thing for us is that we are an investment driven story, Right. So the more we invest in high quality assets, the better service levels we have, the more we're going to have pricing, the more we're going to differentiate our product, The more we're going to have high value tourists and the more our EBITDA margins will grow. And so you're seeing that happen real time in Singapore. And so for us, I think we'll finish the 3rd tower by Chinese New Year next year.

Speaker 3

That $750,000,000 will go in. We'll saw some amenities that have to be done across parts of 25, but by the mid part of 25, we're basically going to have what is an effect of brand new building. It's going to be fully renovated and you'll get to see the full power of the suite product on the rolling side. You get to see the power of the premium mass and all the amenities that we have, The shopping, the entertainment, all the things that we're adding in terms of our premium mass lifestyle program that you can't get anyplace else, these are all very positive things and the quality of these amenities ACE customers want to be repeat visitors. And so for us, these investments will drive very high returns.

Speaker 3

That's the reason why we're willing to do that. That's the reason why the Board was supportive. You. You can see the trajectory of EBITDA now, we're not even done. So we think Tower 3 will be very accretive in terms of investment.

Speaker 3

You heard the numbers Rob just mentioned we're very confident in those numbers. We feel very strongly, but that's where we should be going. And then in terms of the next building IR2, We've been in very close discussions with the government over many months. There's a lot of moving parts here, a lot of things we have to satisfy. This is a project of national significance.

Speaker 3

We want to make sure that everyone is comfortable with it And that we get all the proper approvals and we're hoping in the next quarter or 2 that we'll get everything done. We've been making good progress. We've been visiting Singapore And we feel very confident where we are and hopefully we'll be able to get all the green lights we need and we'll be able to get going soon.

Speaker 8

That's all I need. Thank you guys. Helpful.

Speaker 2

Thank you. I appreciate your help.

Operator

Thank you. Your next question is coming from Shaun Kelley from Bank of America. Sean, your line is live. Please go ahead.

Speaker 9

Hi, good afternoon, everyone. Wanted to offer my congrats to Grant on the promotion as well. And maybe speaking of promotions, Grant or whoever, if you could comment a little bit just on the promotional environment.

Speaker 10

I mean, I think this is

Speaker 9

a big question or theme that came out of the quarter last quarter, and just sort of what you're seeing particularly the upper end of the premium mass segment right now. And in general, are premium mass market margins consistent with your pre COVID expected ranges or are they still a little bit below that? And what would it take for them to recover? Thanks.

Speaker 5

Thank you, Sean, for the question. I think if you look at the competitive landscape, Of course, it is very intense at the premium mass segment. But if you look at also And our margin structure, I think the way we've driven our business is no different from before, which is To really drive and elevate the product and to drive the content and the events that we put on Across a whole range of sectors to attract visitors and patrons. And I do think that back to Patrick's opening comment, if you look at that margin Progression underlying margin grew another 100 basis points. We actually saw A good improvement in our mass margin sequentially.

Speaker 5

So we are dealing with the competitive market as any competitor does. It is intense, but we believe strongly That in the end product wins, and Londoner and Grand Suites at Four Seasons are true Living, evolving testaments of that argument that good product wins. And there are going to be fluctuations in the competitive intensity in particular segments at different points in time, but to have a sustainable competitive advantage and Sustainable profitable growth, product and service and the content we put into the resort calendar are still going to trump everything else. And you can see that through what we've done at the Londoner, it's already at a run rate of close to $800,000,000 as it was exiting the year. And you can see that the way this is going, we will end up with a margin structure As we already are in Q4, at back to the same level as we were in 2019.

Speaker 5

And then as The revenues continue to grow. You should logically expect that margin to continue to improve and therefore exceed Where we were in 2019.

Speaker 2

Sean, can I just follow-up on Grant's comments? My experience has always been the same. Regardless of the market, great buildings and great experiences always prevail. We have those in Macau. If you look at our EBITDA in Q3, I believe our EBITDA exceeded our next 2 competitors combined, which is quite a statement to the power of our buildings.

Speaker 2

There'll be promotional issues occasionally here and there. In the end, we have a structural advantage, which can't be undermined. We have more capacity for lodging, food and beverage, retail And gaming capacity, anybody even found by a bunch and that will enable us to prevail both on margin and EBITDA basis. And so yes, there'll be occasionally a promotional issue here and there, but it really shouldn't concern you as far as our business. Our margins remain intact Our dominance remain intact in all segments in Macau.

Speaker 9

Thank you both for that. And then maybe just as my as a quick follow-up. You. Last quarter, it was mentioned, Grant, I think in one of your comments or one of your responses, a little bit about a bit of an uneven recovery we were seeing coming out Some of the source markets from broader Mainland China as some of the air travel is reopening. Wondering if we're continuing to see that uneven recovery or Any other broader signs of the kind of where the macro situation sits in China?

Speaker 9

Because so far, and again, it seems to be continuing through January, Seems like Macau is relatively unaffected there, but I wanted sort of an update on that trajectory if you could give one.

Speaker 5

Sure, Sean. I think if you look at Q4, it did even out quite a bit. I think if you look at Dan's Visitation from non Guangdong versus Guangdong slides.

Speaker 3

Page 20. We

Speaker 5

are catching it. Yes. Thanks, Dan. We're catching up significantly on the recovery rate in non Guangdong. That said, it is still uneven in the sense that if you look at the breakdown by province, some of the wealthier provinces Have recovered way beyond pre COVID levels of visitations, particularly in the Yangtze River Delta versus even Guangdong, the recovery rate is actually much higher.

Speaker 5

But overall, I think you can see And evening out in terms of the recovery rate in Guangdong versus non Guangdong. And then also, I think The Q4, the overseas, the foreign country visitation also started to accelerate and even out as well against the nearby region source markets. So I think you are seeing, I think, a progressive improvement across all these source markets. Yes, I don't know maybe Wilfred, I don't know if you have anything to add on the China side in terms of the economy.

Speaker 11

Yes. Sean, China is still recovering from the tough COVID period. And but what is evident is the company's quarterly performance has actually been trending well. We have seen, as Grant alluded to, healthy growth in the number of visitors, Especially from the non Guangdong region. Now one observation is that when long haul travels of Chinese travelers Has not fully recovered, Macau is emerging as a top tourist destination for short haul travelers from the Chinese mainland.

Speaker 5

Thank you, everyone.

Speaker 2

Thank you. Appreciate it.

Operator

Thank you. Your next question is coming from Chad Beynon from Macquarie. Chad, your line is live. Please go ahead.

Speaker 12

Afternoon. Thanks for taking my question. I wanted to ask one just about the retail portfolio. We've been hearing and seeing a little bit of pressure Just kind of in the luxury retail space, particularly in Asia, based on the numbers that you put out and I guess the turnover rent that you collected, You're not seeing that, but how are you thinking about the recovery in retail? Are you getting the right customers in there now?

Speaker 12

And do you think this could continue to improve as visitation and overall spend improves in 2025 or 2024? Thank you.

Speaker 2

If you look at your deck on, I think it's Page 2829, it gives you

Speaker 1

a pretty

Speaker 2

good look at our retail portfolio in Asia. And Be blunt about it, how you could be on half of these numbers, almost $3,000 a foot in a 600,000 foot mall at MBS. Venetian almost 2,000 foot with 800,000 feet and of course $9,200 a foot, the 4 seats luxury and Amir 4300 foot on the non luxury. So the answer is we are seeing our retail portfolio that's approaching $700,000,000 of contribution And growing. Of course, there's discussions out there, the least moderate I'll be making about the slowdown globally.

Speaker 2

But it looks to me that I spoke to David, Donay, our retail expert. It feels like we continue to see opportunity to remerchandise and get better and better at the retail segment. We still believe that retail is a long way to go. Our buildings are a little different than other retail and that we attract a higher value customer both in Macau and Singapore, As you referenced, the lack of supply in Singapore. So I think that mall just keeps appreciating and we keep remerchandising it to be more effective Every day more luxurious and more upscale.

Speaker 2

In Macau, we've got work cut out for us in some of our buildings, not there yet in the Parisian, there's some work to be done, but

Speaker 7

I don't know how you

Speaker 2

can argue with these kind of results, dollars 677,000,000 of contribution, And it just keeps accelerating. It compares very favorably with 2019. So we feel very bullish about our retail prospects. And again, it takes work. Dave is still faster constantly remerchandizes, rethinks and reassesses the portfolio.

Speaker 2

He's got a lot of work to do. But the numbers I think are stellar and I think will continue to be stellar for years to come.

Speaker 12

Thanks, Rob. Makes sense. And then just in terms of the hold, understanding that it's kind of random here in terms of luck or Unlucky, has there been any difference in terms of gameplay or you talk about kind of the recovery from the Chinese consumer, And I'm speaking of Singapore, but hold has been high now for 3 quarters. So is there anything that could kind of lead to maybe an Elevated hold in that market in the near term or should we expect kind of The reversion to the mean that we've seen in prior quarters years. Thanks.

Speaker 2

I think it's safe to say this business always runs on mathematics, the mathematics prevail.

Speaker 13

And I wouldn't take

Speaker 2

3 quarters as an ongoing trend for I wouldn't take 3 quarters as an ongoing trend forever. There'll be a dark day in Singapore, we'll miss by $70,000,000 because We take the highest volume players in the world and people bet lots of money and some days it goes with you and some days it doesn't. This quarter, obviously, in Singapore went with us. But I would caution you, I don't think that the betters are changing. In fact, if anything, there's more of them, More affluent coming out of Asia and we're fortunate enough to have the capacity to handle all of it.

Speaker 2

But I don't think you can point to A change in betting patterns in either jurisdiction that would elevate or hurt the whole percentage. It will be We'll revert the mean always and Macau will come back next quarter probably and do $70,000,000 higher and Singapore may have a bad quarter. Grant, you may comment on that. That's how I see it.

Speaker 5

That's exactly right, Rob. And people have relative short memories, but in the Q4 of 2022, there's like $100,000,000 plus adjustment on the downward impact From low hold at Marina Bay Sands, so I think 1 or 2, 3, 4, even 5 quarters It's actually a relatively short period of time and sample size, for you not to get potentially very random results that deviate from the expected normal hold. But I think it's fair to say, yes, the mathematics Always prevail and given the scale of our business over time, over 1 year, 2 years, we should stay very much. It is within the expected range. As you saw in Macau as well, we had the 1st 3 quarters Holding significantly above the expected mean hold and then 4th quarter reversed.

Speaker 5

And For the whole year, we end up at about 3.3%, which is exactly where we expected to be.

Speaker 2

Yes, just for fun going back maybe 8, 10 years ago, we had a horrific number of quarters in a row due to a few Players, I think, was Indonesia or Malaysia. We lost obscene amounts of money quarter after quarter to them. And some people on our Board were concerned and they wanted to be sure. And We talked, we looked at everything and we're very comfortable and there was a belief there for a while that these people were magical and could be beaten. And they lost back their entire winnings and then some.

Speaker 2

It always goes that way. I don't think you can ever get too emotional about this quarter is very interesting to see the Macau miss And the Singapore overachieving, but in the end, the game stay consistent. Pairs and ties versus straight bets do matter, but the Asian gambler is special He or she shows up consistently and they are great customers. I wouldn't let the success of few quarters change your views on The mathematics of Bakwad, we don't. So thank you.

Speaker 2

That's

Speaker 5

great. Thank you.

Speaker 6

Thanks, Chad.

Operator

Thank you. Your next question is coming from Robin Farley from UBS. Robin, your line is live. Please go ahead.

Speaker 14

Great. Thank you. Two questions, if I could squeeze it in. One is just any comments On Chinese New Year, upcoming, anything with trends approaching that? And then totally unrelated, Just your latest expectations for timing of a decision in New York.

Speaker 14

Thanks.

Speaker 2

I'll take New York first, Robin. The Governor, Governor Hochul, I think it was this week commented on making seeing something happen this year. I hope that's true. We're as you know, we've been working in New York for quite a long time. And we think we have a very compelling bid, But we don't have any great insight if that will happen or not.

Speaker 2

We sure hope the governor is correct. And either way, win or lose, we get a decision calendar year 2024. That's our hope. But I think it'd be silly to tell you any insight beyond the Governor's comments. I think we just we worked very hard in this project.

Speaker 2

We believe we have a really Good chance of getting one, but I don't give you I couldn't give you any guidance beyond that. Grand Chinese New Year's, do you think you'll be going to be there for that? Will that be Will the Year of the Dragon bring anybody to

Speaker 13

the building? I hope so.

Speaker 5

Well, the well, Robin, I mean, we can't really comment on the current quarter and obviously booking windows are short here. But I think you can See, from the December holidays, these peak holiday periods, even though the end of December It's not a big China holiday. It is in Hong Kong and some other parts of the region. But the ramp up in demand during those peak periods was tremendous. So Hopefully, that will be replicated through into this Chinese New Year as well.

Speaker 5

So there is a lot of optimism

Speaker 2

Robert, I do think this summer was really Great tell of what might happen in Chinese December numbers that closed were just terrific. And again, you see the market numbers for January. So we're very hopeful that the year Dragon It's a huge year for us and for the market.

Speaker 14

Great. Thank you. And, Grant, congratulations on the new role. Thanks.

Speaker 5

Thank you, Robin.

Operator

Thank you. Your next question is coming from Ran Muntour from Barclays.

Speaker 7

Good evening, everybody. Thanks for taking my question. So in Singapore on the Phase 2, I was wondering if you Maybe remind us the total room count exiting the year and then specifically with regards to disruption cadence, you. What is the quarter to quarter and overall year look like in terms of how that will flow through the P and L?

Speaker 2

Bob, do you want to grab that?

Speaker 3

Yes, sure. So I think when we finished the year, we were around 2,200 keys available Next year, because of the construction in T3, Tower 3, we're going to get down to the mid-1600s in Q3, which is probably going to be our peak of disruption. But those rooms are our smallest right now and really have our lowest yield. So hopefully the impact will be minimal. We'll be able to yield because of the compression higher value customers.

Speaker 3

The performance in Marina Bay Sands has been quite good and you think we'll be able to yield up in the renovated portion of the building. Sorry, what was the rest of your question?

Speaker 7

And then sorry, so then the ending key count when all is said and done with suites and normal rooms?

Speaker 3

It's mid-1800s.

Speaker 7

Mid-1800s, perfect. Okay. And then as a quick follow-up, just A broader question. We haven't really talked about non gaming spending. I was just curious if you could give us update on your efforts On that front and maybe how your outlook has evolved for the return profile as we sort of go into 2024 on non gaming spend?

Speaker 2

When you say non gaming, can you be more specific? Are you talking retail, food and beverage, hotel?

Speaker 7

Of course. Sorry about that. Yes, with regards to the concession agreements.

Speaker 2

I see. Okay. I'm going to grand handle that, but I would say we are a little bit different than the rest of our competitors In terms of we've been spending money aggressively in Macau forever for 20 years on entertainment and other things. We believe in it. It's a huge value add.

Speaker 2

I'll let Grant take the question specifically. But I think, again, it's important to note we are a different animal than other people in terms of this concession. We welcome it. We've been doing it before the concession mandate. I think it's been very beneficial to our company.

Speaker 2

Grant?

Speaker 5

Yes. Thanks for the question. Yes, I think in 2023, we went very Intensely on investing across all of the non gaming categories that we committed to in the concession. As Rob said, many of these categories are categories that we have been investing in And involved in for a very long time. So I think whether you look across entertainment, we had Almost 80 shows that we put on during 2023 with some amazing record runs Attendance, obviously, firstly with the Jackie, churn concert in Kota Arena and then towards the end of the year, Hins, a singer in Hong Kong and had a great 14 show run at the Londoner.

Speaker 5

So it's probably set a new standard and precedent for mini residences In Macau and then across other categories in mice, in art and culture, In themed attractions, in gastronomy, across the board, we've been investing heavily. I should also give a chance to Wilfred to speak to some of those events and projects that we've been heavily Investing in as well, but suffice to say, versus our original forecast for what we would invest In the 1st year of the 10 years, we greatly exceeded that during 2023, And we're looking to do so again in 2024. Wilfred, I don't know if something you want to add to the non gaming concession and investments we're making.

Speaker 11

Yes. We have in the past years been investing heavily in the areas that Grant just described. And by a long way off, we are the leader in the MICE market. So we are still seeing a very strong presence of MICE activities In our properties, for non gaming, apart from the shows, we've been helping To promote Macau as a destination, not just for gaming. Therefore, we have a lot of art exhibitions, Cultural shows that really put us apart from the other competitors.

Speaker 7

Great. Very helpful. Thanks all.

Speaker 2

Thank you.

Operator

Thank you. Your next question is coming from David Katz From Jefferies. David, your line is live. Please go ahead.

Speaker 13

Hi, good evening, everyone. Thanks for taking my questions. I'll ask If I could follow-up on the share repurchases, Patrick, not asking about how much or when, Just thinking about how the family stake takes a long term view and where you'd like how we might think about that evolving over time. And then second, since we last spoke on an earnings call, there's been an awful lot of Activity and focus in Texas and if you could share some of your views and thesis around What the family's activities and how they might relate to the company and shareholders, that would be helpful as well. Thanks.

Speaker 3

Sure. So I think first off, I think we see value in both equities. So we're very long term bullish. You. From a company standpoint, we're going to continue to be aggressive, as you said before, focusing on investment for growth.

Speaker 3

You see the success of our capital allocation programs, both in Macau as Grant just described and in Singapore in driving growth in high value tourism in diversifying our amenities and by creating margin and revenue expansion. So we're very focused on investment for growth. That being said, we generate a lot of free cash flow and we anticipate to generate free cash flow in the future that we'll be able to use to return capital to shareholders. So I think the company will look to be aggressive and measured over time as we return capital through share repurchases to shareholders. I think we've always had a dividend, aside from the pandemic.

Speaker 3

I think we like having a dividend. We think it's helpful for shareholder returns. We think it's an important component of our overall shareholder value strategy. But that being said, we're going to be overweight to share repurchases. In terms of Texas, I think the most important thing is that Las Vegas Sands is actively Trying to facilitate the development of integrated resorts in the state of Texas and through the legalization of gaming.

Speaker 3

And so we're very excited about it. We think it's an unbelievable market. Over time, we hope that it happens. I can't tell you when it's going to be, But we're very focused on it as a company, and we'd like the opportunity to develop some very unique tourism assets, specifically in Dallas. You.

Speaker 3

We think that's a great market. We've been very focused on it and we think the opportunity there would be a great one. In terms of the families' activities in Texas, I think We like the state. We're very obviously happy with our investment there. We're very excited about it.

Speaker 3

And we'll look to be a part of the business community there. But in terms of OVS, We're very focused on bringing integrated resource or designated resource to the state of Texas and the development opportunity that we exist there.

Speaker 13

Thank you.

Operator

Thank you. Your next question is coming from Dan Politzer from Wells Fargo. Dan, your line is live. Please go ahead.

Speaker 15

Hey, good afternoon, everyone. Thanks for taking my questions. I wanted to follow-up on Sands China and as it relates to capital allocation. Your net leverage there, I think, is around 3 times at this point. It should be much lower than that As you kind of make your way through 2024, how do you think about the subsidiary there resuming dividend payments up to the parent?

Speaker 15

And then obviously, your stake went up a little bit through quarter through those that repurchase. So maybe does that incentivize some of those dividends coming up sooner than later? Thanks.

Speaker 3

Hey, if it's okay, I'll take that one. I think the key thing here is I just mentioned in the prior question and as Grant mentioned, as Wilfred mentioned, We're very committed to investing in the long term in Macau. And so our primary focus is going to be deploying capital there for growth. That being said, we are generating Meaningful free cash flow there as we did in this last quarter. And I think what you'll look to see over time is that some of the leverage that we put on the balance sheet During the pandemic, we'll defuse.

Speaker 3

So we have a maturity coming up in 2025. We'll look to defuse some of that in front of the refinancing. And our goal is really to bring leverage down in terms of quantum, but then also our leverage is going to come in naturally as our EBITDA expands over time, which is our expectation. So I think once that occurs, we're going to start looking to begin the dividend again at the SandShine level. That's something that's going to be determined by the Board there.

Speaker 3

But I think overall, it's something that we'd like to see. And I think the goal is to begin that dividend In the years ahead, it was a very strong dividend payer in prior years pre pandemic and we'd like to become an investment grade name there, Keep that investment grade rating, invest for the future in terms of scale and scope to grow our business there and then return excess capital through dividends To shareholders there. That's the plan.

Speaker 15

Got it. Thanks. And then just for my follow-up, as we think about Macau, we've talked a bit about The margins and the improvement, more or less has been about 100 basis points quarter over quarter. As you think about kind of the trajectory from here and I know you're on to get back to those 2019 levels. How should we think about maybe the pacing of improvement?

Speaker 15

And do you think that operating expense structure is really in place at this point. You should benefit from scale here on out.

Speaker 3

I have one quick comment, then I'd like to turn it to Grant. We've mentioned this a few times in the past couple of quarters. I think the story of our margin expansion in Macau is going to be based on revenue growth. As the market continues to recover, As tourism continues to recover as more high value tourists come online, they see the types of high quality offerings we have, they experience the amenities and Entertainment that Grant referenced earlier, we're going to continue to grow and expand our customer base. And that will lead to pricing, that will lead to expansion, that will lead to revenue growth.

Speaker 3

So from that standpoint, I think our long term margin view is expansion because of the investment and because of what we just described. But I'll turn it over to Grant to see if he has Some additional comments.

Speaker 5

Yes, Patrick, I think you covered it well. I think it's dependent on Revenue growth as the market continues to grow and we'll be more than a full participant in that market growth. The margins will have a positive trajectory. I think we obviously have a more efficient and more productive cost structure today than we did in 2018 2019. So we will we are benefiting from that as revenues grow And you get the operating leverage on the fixed costs.

Speaker 5

We will continue to do so. And I think it is very much about how revenues grow from here. And as revenues grow, our margins will have further upside.

Speaker 15

Got it. Thanks and congratulations on the promotion Grant.

Speaker 5

Thank you very much.

Operator

Thank you. Your next question is coming from George Choi from Citi. George, your line is live. Please go ahead.

Speaker 10

Thanks for taking my questions. My questions were answered earlier, but do you have a housekeeping question? Would you please remind us how the total rent mechanism works at the Macau properties? Should we be And normal uptick in the quarter, that is when you guys receive the tariff rent. Thank you very much.

Speaker 10

I'll jump back to the queue.

Speaker 2

I'm sorry, George. I think we missed that. Could you repeat yourself? It was unclear. There was some Difficult with static, yes.

Speaker 2

Can you try it again, George?

Speaker 10

Apologies. I just Wonder how the turnover rent mechanism works in the Macau properties. Is it a 4th quarter event? Is that when you received your turnover rate?

Speaker 2

Yes. Grant, do you want to handle the 4th quarter turnover in retail?

Speaker 5

George, there are leases that are on monthly turnover rents and there are leases that are on annual turnover rents. So historically, what happens is for those annual turnover rent leases, as we get The Q3, the end of Q3 and Q4, we will obviously be recognizing more Of those turnover rents as we hit the annual sales targets. So historically, you should expect seasonally the second half of the retail rental revenues We'll be higher than the first half.

Speaker 10

Okay, understood. That's all I have. Thank you very much.

Speaker 2

Before we finalize the call, I just want to reach out and recognize the great contributions of Wilfred Wong, who is now Executive Vice Chair. Wilfred has been with us about 8 years and made a great contribution. Wilfred, congratulations on the Elevation Executive Vice Chair. Grant Shum, well deserved. We hired Grant many years ago.

Speaker 2

The big concern was, was he old enough to win the casino at that time? Over the years, we've aged and sufficiently, so you're not going to casino and graduates to Grant. Both of you guys have built a terrific team over there. We're very proud and grateful for your efforts and look forward to many more years working together. Thank you for your time today and interest in our company.

Speaker 2

We bid you astute.

Operator

Thank you, ladies and gentlemen. This does conclude today's conference call. You may disconnect your phone lines at this time and have a wonderful day. Thank you for your participation.

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Earnings Conference Call
C.H. Robinson Worldwide Q4 2023
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