Las Vegas Sands Q2 2024 Earnings Call Transcript

Quartr
Provided by Quartr
July 24, 2024

There are 15 speakers on the call.

Operator

Good day, ladies and gentlemen, and welcome to the Sand Second Quarter 2024 Earnings Call. At this time, all participants have been placed on a listen only mode. 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.

Operator

Sir, the floor is yours.

Speaker 1

Thank you, Matthew. Joining the

Speaker 2

call today are Rob Goldstein, Patrick Dumont, Doctor. Wilfred Wong and Grant Chunt. Today's conference call will contain forward looking statements. We'll be making those statements under the Safe Harbor provision of federal securities laws. The company's actual results may differ materially from the results reflected in those forward looking statements.

Speaker 2

In addition, we will discuss non GAAP measures. Reconciliations to the most comparable GAAP measures are included in our press release. We've also posted an earnings presentation on our website. We will refer to that presentation during the call. Finally, for the Q and A, we ask those with interest to please post one question and one follow-up, so we might allow everyone within the opportunity to participate.

Speaker 2

The presentation is being recorded. I'll now turn the call over to Rob.

Speaker 3

Thanks, Dean, and thanks for joining us today. Macao market continues to grow. Total gaming revenues for the market grew 24% in the Q2 of 2024 when compared to the Q2 of 2023. In addition, mass gaming revenue grew 29% compared to 1 year ago. We remain confident in the future growth in Macao market.

Speaker 3

I believe Macao market gross gaming revenue will exceed $30,000,000,000 next year and continue to grow year after year. Our business strategy is predicated on investing in high quality assets and also have scale. Macau is and always has been a deeply competitive market. Our strategic approach has enabled us to compete very effectively. We have designed our capital investment programs to ensure that we will continue to be the market leader in the years ahead.

Speaker 3

Our approach allows us to grow fast in the long term and large share EBITDA and generate industry leading returns on invested capital. Turning to our results in Macao, we delivered solid EBITDA for the quarter despite material disruption at the moment. SEL continues to lead the market in gaining and non gaining revenue and in market share of EBITDA. We will continue we will capture high value, high margin tourism over the long term. We have unique competitive position in terms of scale, quality and diversity of product offerings.

Speaker 3

Upon completion of the 2nd phase of the run dinner, our Kota arena, our product management more pronounced than ever. Another strong quarter in Singapore despite ongoing disruption in construction. The financial results in RIA based stands reflect the positive impact of our capital investment program and the growth of high value tourism. The growing appeal of Singapore as a destination is enhanced by robust entertainment and lifestyle event calendar. As we complete the balance of our investment programs, there will be considerable runway for growth.

Speaker 3

Thanks for joining our call. I'll turn it over to Patrick now, and then we'll go to Q and A. Patrick?

Speaker 4

Thanks, Rob. Macao EBITDA was 561,000,000 dollars If we had held as expected in our rolling program, our EBITDA would have been higher by $4,000,000 When adjusted for lower than expected hold in the rolling segment, our EBITDA margin for the Macau portfolio properties would have been 32.1% or down 80 basis points when compared to the Q2 of 2023. Context here is important. Our margins at Londoner were directly impacted by the disruption of the Londoner Grand Renovation. We closed the casino at 1500 Keats out during the quarter.

Speaker 4

Margin at The Venetian was 38.2% and we expect margin improvement as The Venetian Cotai Arena comes back online later this year and as visitation to the market and growth in unrated play in the market both increase in the future. Margin at the Plaza and Four Seasons was 40%. We are now deep into our Londoner Grande renovation program. We plan the completion of the 1st tower by year end 2024 and of the 2nd tower by May of 2025. The Londoner Grand Casino has been closed since May and is scheduled to reopen in December.

Speaker 4

As these products come online between the end of twenty twenty four and the first half twenty twenty five, our competitive position will be stronger than ever. We expect meaningful EBITDA growth and margin expansion in the in market leading product and growth in high value tourism. And we in market leading product and growth in high value tourism. Had we held as expected at our Roll in Place segment, EBITDA would have been $64,000,000 lower. Had we held as expected in our rolling play segment, MBS margin would have been 48% or 2 20 basis points higher than the Q2 of 2023.

Speaker 4

While we have substantially completed the original $1,000,000,000 refurbishment program at MBS, we are still in the initial stages of realizing the benefits of these new products. Tower Gaming at Marina Bay Sands will be offered for the first time at the property in the Q3 of 2024. The next phase of our capital investment program at Marina Bay Sands is scheduled to be completed during the Q2 of 2025. This will further support growth in 2025 beyond. Turning to our program to return capital to shareholders.

Speaker 4

We repurchased $400,000,000 of LVS stock during the quarter. We also paid our reoccurring quarterly dividend. We look forward to continuing to utilize the company's capital return program to increase returns to shareholders in the future. Thanks again for joining the call today. Now let's take some questions.

Operator

Thank you. Ladies and gentlemen, the floor is now open for questions. Your first question is coming from Joe Greff from JPMorgan. Your line is live.

Speaker 2

Good afternoon, guys. I'd like to start off on Singapore, if we could. I was hoping, can you give us a sense

Speaker 5

of maybe how

Speaker 2

players and visitors geographically, how they're performing? I guess more specifically, are you seeing any kind of slowdown from Mainland Chinese visitation or Mainland Chinese spend into MBS? And was there any more material trend change towards the end of the versus maybe what you've seen over the last couple of quarters as that's been sort of a growing segment?

Speaker 3

Jay, as you know in the past calls, we have a diverse customer base in Singapore, we got more of the region. And certainly China is part of that, but we're all over the place, Vietnam, Japan, Korea, Indonesia, Malaysia. So I don't think we saw much different than the past year except we obviously the seasonality is in play in Q2. But our business, Singapore, the only I would say where it's impacted it is we keep self inflicting wounds by finishing our building. And it's nearly end, finally after it feels like a long time.

Speaker 3

But despite seasonality, despite the difficulties of construction, Tower 3, Tower Gaming, we continue to move forward towards $500 plus 1,000,000 quarters and diversity of visit tours is very clear to me, really where they're coming from. They're coming from everywhere. We have not seen a slowdown in China. We just simply see the same business in the last couple of quarters, which is solid, but it's also solid from all of the regions. So Singapore is moving forward.

Speaker 3

I think you'll see a real important transition probably at the early part of Q2 when the building is really full bore complete and tower games intact, all the suites are in tact. We're really playing the game with one hand behind our back right now and still delivering $2,000,000,000 plus run rate. So, we feel very good about our prospect and saying we're probably the most not probably, it is the most the largest earning EBITDA building in this year gaming. So and it continues to get stronger. We think it's a we said before, we think that our goal is $2,500,000,000 out of Singapore and I think you'll see it happen in the coming years.

Speaker 2

Great. And then people have not really asked me a question about Macau, I think Macau is self sufficient or speaks for itself. But Rob, Patrick, maybe you can give us an update on any development opportunities, specifically Thailand? And I'm not sure there's much to add to what's going on in New York.

Speaker 4

So first off, I think the great news is we're very ready to develop new grounded developments in new jurisdictions. We're very excited about it. Rob, the team, I spent a lot of time looking at opportunities for our company to expand and grow new jurisdictions. As you know, we're spending a lot of time in New York. We're spending a lot of time in Texas.

Speaker 4

We've been looking at Thailand. I think Thailand is a very interesting opportunity. The market there is very strong for different types of tourism. I think depending on the way it's set up and the opportunity that's there in terms of structure, it could be very interesting for us. We love the market as a place to source customers.

Speaker 4

We think the tourism quality there is quite high. If you go and visit, you'll have a great experience there and we'd love to be part of it. So if Thailand becomes available, we'd be very interested. But I think it's early days yet. I think we've been spending time there along with the rest of our industry looking to see if we could be helpful to that process.

Speaker 4

And we're waiting and seeing what happens.

Speaker 2

Thank you, guys.

Speaker 3

Thank you, Joe. Thank you.

Operator

Your next question is coming from Stephen Grambling from Morgan Stanley. Your line is live.

Speaker 6

Hey, thanks. I appreciate the comments on the Londoner Grand renovation impacting margins in Macau. But can you get back to 2019 levels in the current environment as that comes through and ramps up? Or do we need to see some change either in growth in the market or the competitive and promotional environment to get back there?

Speaker 4

So a couple of things, and I think this is really important to note. Macau market has always been super competitive. From day 1, it's been a very competitive market. And we've been very effective in the way that we compete because we have an investment driven model. So if you go back pre pandemic, if you go back in 2010, it was a very competitive market.

Speaker 4

And in fact, I remember when the premium mass segment didn't exist. And when it started, people Rob can reference this as well, some other people in the room can as well. When there was no premium mass segment, it was really rolling volume and mass play. And the market has always evolved over time. But the one thing that's been consistent is that our company has driven success through investment and through leading in non gaming amenities.

Speaker 4

And to be fair, innovating on the gaming side as well. And so when you look at our performance, if you go to Page 14 in the slide deck, you can kind of see what happened in the quarter. So the Venetian Macau did $262,000,000 of EBITDA in the quarter at a 38.2% margin and it's missing about half its volume of unrated play. So just with the arena out, which is also a very valuable amenity to drive premium mass performance, look at the strength of the performance of The Venetian. Same thing is true in the Plaza.

Speaker 4

Look at what the Four Seasons did, 40% margin, dollars 100,000,000 of EBITDA. So when we look at the Londoner, we basically took out an equivalent property like Melco or an equivalent property to Wynn Palace. We took that capacity out of the market for ourselves to renovate it. So for us to put up $550,000,000 in the quarter, in my mind, this is a great result because we know that we have a limiter in place. We're missing one of a significant portion of what is ultimately going to be one of the best properties in Macau, if not the best property.

Speaker 4

And if you look at the success of the Londoner right now, if you look at the win per unit per day on the table side, the Londoner is the 2nd best in our system. So in Macau, so when you think about that, the model has been proven, the investment has been validated. Now we're going to open up the better half hopefully by the end of the year in Nature Park. Suddenly the limiters are going to come off. So in my mind, this is a very positive investment for us and we'll get to the margins.

Speaker 4

We're already doing it at other properties. It's just a function of renovation because we're carrying all the costs now associated with the shuttered casino and 1500 rooms. So the Londoner impact is really one half of it's working. You see the performance, you see the slot win, you see the slot performance win per unit, you see the table win performance, you look at the hotel performance and the non gaming amenity performance. And then you look at the side that shut and you realize that's the better side, but we're carrying all the cost.

Speaker 4

The potential of the future is really there. We feel very strong about the potential for the margins to reach where we need to go. And just remember pre pandemic, we were 35%, 36% EBITDA margin on a whole normalized basis business in aggregate. So we'd like to believe we're in a good spot. We're competing effectively.

Speaker 4

We have great assets. We're investing for the future. And when we're done, we're going to have the newest and best products in the market. So we feel very strongly about the path that we're on. It's just going to take a little bit

Speaker 7

of time to get there.

Speaker 3

The only structural change, Steve, we need is get open. Again, the market is doing $30 plus 1,000,000,000 next year. We're going to have the 2 most important assets in the market speaking to each other. I mean, that's key to we're going to have London Earth and Venetian Avenue, 7,400 keys between them. The full power of the Cote Tigrina, all the amenities between those 2.

Speaker 3

But I think those buildings will be very, very intertwined and give us by far $2,000,000,000 plus assets. Speaking to other Parisian and Four Seasons and Sands keep doing what they're doing, we will be at $3,000,000,000 plus and Singapore will get $2,000,000,000 plus I believe that sometime near future, we will have the highest EBITDA creationist company's history without Las Vegas. So I'm pretty confident that London will perform and outperform the expectations. But also the enhanced innovation because the back and forth of those two buildings, they're very similar, huge retail, huge suite capacity, entertainment retail, F and B. They just they're much bigger and better than anything else in that market for making money.

Speaker 3

And I think when those come online next year, yet these results today to another $150,000,000 out of London, all of a sudden you're looking at $3 plus 1,000,000,000 of annualized EBITDA. That's how we view the market. Margins being what they are, making EBITDA still the most important thing and we will get there. We will get there.

Speaker 6

So maybe as a quick follow-up, on capital allocation, you noted being consistent with capital return. And it sounds like you're confident in a ramp from here in Macau and really growing in MBS, yet the stock is near the lows during the pandemic. So what's the tolerance to be maybe not as consistent and actually being more aggressive with capital allocation or even rethinking about the leverage profile at least in the near term?

Speaker 4

So I think first off, we have said this before, we see meaningful value in both equities. Where the stock is trading doesn't make any sense to us, both on a historical basis and how we view the value of our company and how we look to invest and grow. So we're going to continue to repurchase stock. And you saw we did the last couple of quarters. We feel fairly strongly about the value of our business and we're going to continue to do it.

Speaker 4

Look, I think for us, we're very focused on being shareholder friendly. We were a very shareholder friendly company in the past. We're a shareholder friendly company today. We're going to continue to do that. That's our goal.

Speaker 4

And I think that the nice thing is that as we complete the London, our 2 things are going to happen. We're going to have less CapEx and more free cash flow and to be fair, a more productive asset base. And so hopefully, we'll have the opportunity to use that capital to return it to shareholders. So we're going to look to do that and continue what we've been doing. But we agree with you.

Speaker 4

We think where the stock is today is not reflective of our long term value.

Speaker 3

And also if we do invest in new opportunities, that's not near future. New York, Texas, Thailand, the years ahead, you can find us. So lots of room to invest money if we please.

Speaker 1

Thank you.

Speaker 4

Thanks, David.

Operator

Thank you. Your next question is coming from Robin Farley from UBS. Your line is live.

Speaker 8

Great, thanks. Two questions. One is, can you kind of share some thoughts on, there's a lot of concern about tariff impact on the Chinese economy next year. And just is there any way to help us think about that broadly, how you're thinking about you have a lot of CapEx going being up and running in the market next year, which should certainly position you well, but just sort of thinking about broader impact there? Thanks.

Speaker 3

When you say tariff impacts on the Chinese so the U. S, the new President, whoever he or she may be, I see. I don't think we want to talk about it for 2 reasons, when we don't know what's really going to happen nor do we know the impact. Obviously, the Chinese economy speaks for itself. It's been a struggle this year.

Speaker 3

And I think it hopefully just gets better, we see more improvement. And both this the big thing in our business is the 2,000,000 plus visit tours we're lacking quarter on quarter, that really hurt us and that's just today. And I don't think we should comment on politics or what's happened with the customers we don't know. But obviously, our biggest miss for our company, which is both for scale and quality, we lose 8,000,000 annualized visitors, it puts us and everybody else. So we'll leave it there, going into the political realm of who's going to do what to who and why.

Speaker 8

Okay, fair enough. Thanks. And then I had a question. You already commented on your interest in continuing share repurchase. Looking at the rate that you did this quarter, you'd be mostly through your remaining authorization at the end of this quarter.

Speaker 8

Is that when we think about like your appetite for continuing beyond that, is that if you could just sort of comment on that? Thanks.

Speaker 4

Yes. I think if you look at our prior practice, you can see that we've always been focused on return of capital, both through share repurchases and dividends, and that our Board has been very supportive of trying to create shareholder value through return of capital. So, as our current authorization gets used up, we'll go back to the Board and we'll have a discussion about how we want to allocate capital. But the Board has been very supportive of trying to enhance shareholder returns over time.

Speaker 3

Okay.

Speaker 8

Thank you.

Speaker 3

Thanks, Robin. Thanks, Robin.

Operator

Thank you. Your next question is coming from Carlo Santarelli from Deutsche Bank. Your line is live.

Speaker 9

Hey, everyone. Good evening or good afternoon. Rob, if you could, I mean, I know this is probably a difficult question, but if you think about And

Speaker 3

those are the 2 That's a long term problem.

Speaker 9

I hear you.

Speaker 3

I hear you. So my question was

Speaker 9

maybe it's not as difficult as I preempted it to be. But when you guys think about the rooms that are out of service at Londoner and those customers and recapture in your existing portfolio, whether you're able to recapture them in Venetian, Parisian or elsewhere, What do you think is actually the delta in what you're missing from those rooms being offline, I. E, how much of that shortfall that's being generated there relative to historical periods is actually elsewhere in the portfolio versus how much do you think is just exiting the system and maybe showing out the competitors?

Speaker 3

Right. Before I get this question, Mr. Chum, we woke up during this call in the middle of the night in Cow, I wanted to also reference the fact that the disruption in the size of the carrying labor, when you've been in these buildings, the 4 1 buildings, where the construction impacts both Londoner 1 and 2, I want to be clear that the disruption isn't just limited to our current Londoner 1, which is a beautiful building also feels the same. Grant, would you answer the question about the rooms and the belt and how you see that?

Speaker 7

Yes. Thanks, Rob. I think, first of all, yes, the performance definitely was impacted by the Phase II renovation on the Sheraton side. But actually despite that, you referenced the fact that we obviously worked hard to shift the patronage to other properties in the portfolio. And the team was actually incredibly successful at that.

Speaker 7

We actually reached the record high in any quarter on non rolling drop as well as record high in any quarter on slot handle. So in terms of gaming volumes, I think we've managed to sustain the volumes overall. However, within the mix, I think what you do lose is some of that base mass, which is where Pacifica Casino was primarily positioned. And also, what you also can see in those numbers is the impact of the loss of the rooms impacting the cash hotel revenues, because obviously when you have fewer rooms, we are yielding accordingly. And when you lose that cash revenues from the hotel side, because you have reduced inventory and we need to shift the customers to other properties on the casino side, that clearly impacts not just EBITDA, but it's a high flow through segment business segments.

Speaker 7

So it obviously impacts the percentage margin as well.

Speaker 9

Great. Thank you. That's helpful. And if I could just one quick follow-up. Sorry, go ahead, Rob.

Speaker 3

Yes. Guys, do you have a dollar amount on the cash wound sales lost in the quarter?

Speaker 7

I'm sorry, Rob.

Speaker 3

I was asking if you can give us a number for the dollar amount we lost in cash room sales for the closure of Lending.

Speaker 7

If you look at the actual reduction in cash revenue for versus Q1, then you're probably looking at the range of around $15,000,000 $20,000,000 impact. Although you can't simply add that back because you've also got to consider that's a net impact of shifting more rooms into some customer segments and then having fewer rooms to sell. So it's a net impact that's probably not as high as that, but if you're looking at pure cash revenues, then that's the range of impact.

Speaker 3

Carlos, sorry, your second question was what?

Speaker 9

Yes. The second question was just more of a technical question. And I get it, a lot could go both ways. But this is the Q4 in a row where hold in Singapore has and the VIP side has been very strong. And I think when you look at the last four quarters, close to $30,000,000,000 of volume at an almost 4.4% win percentage.

Speaker 9

It feels a little bit more structural. And I know in your add back math, you guys are obviously dinging yourselves for a much lower hold. Structural, is there any thought of perhaps changing what that metric is as the normalized hold for that property going forward?

Speaker 3

It's a great question and one we still have time on. And I think what you should realize I think you do realize is the world is changing in baccarat for 2 reasons. Smart tables gives us a better way of quantifying what the whole percentage should be. But also we've put games on the floor, I'll call it prop bets or side bets that change the whole percentage in baccarat. And your comment is spot on.

Speaker 3

We're debating how high we can take it. The team there feels it's understated. And you're right, we keep digging ourselves quarter after quarter. And perhaps in the near future, we'll address that because clearly something is happening here. But again, the smart cable opportunity, which we're deep into now, coupled with the game changes.

Speaker 3

The baccarat has been a pretty steep, pretty predictable game for many years, a player, a banker and then tie pair. It's changing dramatically. We were there a few months ago. It was shocking to see how much money they bet on the prop bets. It's no different than the Super Bowl, when you don't just bet the winning team, you bet every 3,000 side bets, which drives the per way up.

Speaker 3

We believe that's in play in Singapore. We're not ready today, but we're coming close to decision this year perhaps to address that very issue because you're right, the team would argue something in play. It's not simply better fortunes, there's better mathematics that's being made and then going to assess those mathematics through smart table, etcetera. Patrick, you want to add to that?

Speaker 4

Yeah, sure. It's the right question to ask. We've been following this for a while. Some of it depends on what Rob said or it depends on what Rob said, which is the additional wagers that are available on the game mix that we have on the floor at the time. But it's also you have to understand propensity.

Speaker 4

And so you have to observe empirically what people are going to do before you can make that decision. So you'd argue that our theoretical is higher than this. But we're going to continue to look at it and we'll make adjustments as necessary when we think the statistics warranted. But you're right, it is a very significant adjustment and one that we're going to continue to look at. But our game mix has changed, the availability of first Rob calls and prop bets, but really high vol bets are on the floor now in a very different way than they had been previously, both pre pandemic and even a year ago.

Speaker 4

And the patron uptake is very high. And so that is adjusting the way that mix on the floor is being exhibited through gaming win. And so we're going to continue to take a look at it and we'll make adjustments when we feel that it's appropriate. But it's a very good question to ask. There's more there.

Speaker 3

Thank you, everybody.

Speaker 2

Thank you.

Speaker 3

Thanks, Carlo. Thanks, Karl. As always.

Operator

Thank you. Your next question is coming from Shaun Kelley from Bank of America. Your line is live.

Speaker 5

Hi, good afternoon, everyone. For Grant or the team, just wanted to ask, can we get a little more color on just what you think is happening in sort of underlying visitation to the market? I think you captured it well on your Slide 19. But we saw or noted a bigger sequential deceleration than we typically see in the second quarter. And my question for you is 2 fold.

Speaker 5

Just one, what's driving that? Is it macro? Is it something you're seeing or hearing out there? And I guess just as importantly, is it continuing at all into Q3? Or what's your expectation for this to this pattern to possibly continue?

Speaker 5

Thanks.

Speaker 3

Wilfred, you want to take that one?

Speaker 7

Yes. Thanks, Sean. Yes. I think you're right. The visitation recovery rate has actually reduced.

Speaker 7

So that's actually taking account seasonality when you compare the visitation recovery versus Q2 of 2019, we're about 79%. But we were as high as 90%, 85% to 90% in the past 6 months, in the past two quarters. So clearly, there has been, I think, more than just a seasonal slowdown. And that's particularly prominent in the visitation outside of Guangdong. So that does impact, I think Rob referenced it earlier, it does impact, I think, the base mass business, especially the unready play.

Speaker 7

We don't know exactly why, but I think that is a clear feature of this quarter and it does feed into, as we said, the Basement segment.

Speaker 5

Thanks, Grant. And then just as a follow-up, I think you also talked about I mean, obviously, I think you mentioned a number of times that the market is always competitive, always promotional. Could you just talk about your own promotional allowance or cadence this quarter? Was it a little higher? Did you need to reinvest a little bit more?

Speaker 5

I think on our math, that was possibly the case. Or is it all just mix? Just kind of how did you see it play out and kind of what do you how much are you reacting to versus how much are you kind of letting go on market share just because it's not your game?

Speaker 4

Hey, one thing. I just want to say one thing and then I'll turn it over to Grant. So just note that the visitation is very important. And you referenced Slide 19 and the fact that there's 2,000,000 visitors missing that were here pre pandemic. We are geared for scale and that scale is very high margin for us because of the volumes.

Speaker 4

And so our mix looks different and our margins look different and our reinvestment looks different because of the shift of business between non rated and rated play. That's a very important thing when you look at our results and you consider what we're doing today. The mix of business has changed for us pre pandemic, post pandemic. So that's one thing. The other thing is I would also like to highlight that if you look at the margins of our overall operations, they're consistent with prior performance.

Speaker 4

And when that unrated play returns and the volumes return of premium mass play, their margins should improve. So yes, we look at reinvestment rates, but we also look at the total business. We like to understand how much money we're actually making on net. So when you look at the business overall, our margin performance and our competitive positioning is actually quite good given where things are. But But I'll turn it over to Grant for some additional detail.

Speaker 7

Yes. Thanks, Patrick. Yes, I think it's a mixture. Firstly, the business mix point that Patrick referenced. And secondly, because we were closing Pacifica Casino and getting ready for that, yes, there is, for a period of time, a high level of reinvestment as we prepare for that shift, which as I talked about earlier, we did so very successfully, especially into the Parisian, but also the other properties.

Speaker 7

So those are the main factors affecting the reinvestment and the overall margin mix. But I think even though there are fluctuations quarter to quarter, day to day even in terms of tactical, I think we're very clear on our strategy, which is that we will compete on the quality and the scale of our asset base. And of course, at this point in time, we're hampered because we have a number of our key assets out. But when those assets come back online, really from Q4 this year into 2025, we absolutely intend to be competing on that basis because at that point, we not only have, I think, scale we always had, but the sheer quality of product that we'll have at that point at scale, I think that will be the fundamental difference from what we had before and we intend to make full use of that in terms of competing for the market.

Speaker 5

Thank you, everyone.

Speaker 3

Thanks, Sean.

Operator

Your next question is coming from Chad Beynon from Macquarie. Your line is live.

Speaker 10

On Singapore, which has been consistently strong for several quarters, it appears that there's still some quarterly volatility. I think last quarter we talked about some big events in the Q1 that drove non gaming and obviously VIP play. As we think about the back half of the year, can you help us kind of square what seasonality should look like and if there are any big events that are booked on the calendar in Singapore that could drive additional non gaming or VIP business? Thanks.

Speaker 4

So a couple of things. So typically 2Q is our trough quarter in the year. And so you saw that in Singapore this quarter. As a practical matter, we were also out keys because of the renovation in Tower 3. So across the back half of the year and into Q1 of next year, all of that stuff is going to come back.

Speaker 4

So the limiters are going to come off. And so if you look at the tower gaming that we're adding, you look at the additional salons that are coming back online, some of the renovated gaming areas that are coming back, we're finally going to hit full stride in that building. So even though we put up this quarter and last quarter, which are, I think the 2 highest of all time, we have more room to go. We're not operating with full capacity. And so right now, when we look at Singapore, we see strength in the market.

Speaker 4

We've geared ourselves to focus on high value tourism, which is coming into Singapore at a very high level. We are the premier place to visit from an amenity standpoint, entertainment, food and beverage, and we're benefiting from it. And our hospitality is now second to none, which we spent a lot of years working on and we're finally there. So we're going to start to see this asset continue to grow and outpace. In terms of the calendar up and coming, I can't point to anything other than Formula 1 that would be fitting the category you just laid out.

Speaker 4

Formula 1 happens every year. It's a great event. It's something that's good for Singapore. Our patrons really enjoy it and we look forward to success. But in terms of calendar, unless Grant has something in mind, I can't think of anything other than that right now that's worth mentioning.

Speaker 7

Yes, that's the main one. Yes.

Speaker 10

Okay, great.

Speaker 2

Thanks. And then

Speaker 3

you have to reconcile this market is so powerful and getting better by the day.

Speaker 7

And the

Speaker 3

past release is Q2 is always the weakest growth seasonality, but still what's happening in Singapore is almost unheard of in our industry. I mean, everything is coming to get converging that thing and we're doing these numbers again with capacity constrained. When that goes away, the market will continue to thrive, whether it's F1 or Taylor Swift or whoever's coming next. Those events are very additive, but that place as a market just becomes more and more desirable by the day you see by the visitation and their quality of visitation. So the entertainment will come, but I think our ability will speak for itself.

Speaker 10

Okay. Appreciate it. And then I'm going to ask you to put on your economist hat again, not looking out to future years, but this year, obviously, the RR cut could bring some more money back into consumers' pockets in China. Just wondering in prior cycles, how long that usually takes for it to trickle down? Obviously, we've seen a nice little improvement in some of the July foot traffic.

Speaker 10

I don't think it would happen that fast. But is this something if it's kind of working in terms of some stimulus, you could start to see it in the 3rd or Q4 here, just in terms of spend per play trends? Just wondering if you could kind of opine on what we've seen in prior cycles. Thanks.

Speaker 4

So this is a fascinating question. One thing I'll tell you, this was the highest volumes we ever had in premium mass and slots in a quarter. So clearly like something positive is happening. I think if you said that the economy was frothy and doing incredibly well, that we'd be doing better, I think that might be a fair statement. You could say that.

Speaker 4

But in terms of timing or specific economic actions, there are so many different things that could happen that may influence it. We have no idea. This isn't anything that we can comment on or have a view on other than that we're hopeful that there will be further economic growth and further beneficial economic activity around the Greater Bay Area. And hopefully, we'll be the beneficiaries of that. But in terms of specific comments around timing or things of that nature, that's something we can really do.

Speaker 10

Thanks, Patrick. Appreciate it.

Speaker 1

Thanks, Chad.

Operator

Thank you. Your next question is coming from Brandt Montour from Barclays. Your line is live.

Speaker 11

I just wanted to follow-up maybe with Grant or anyone on Sean's question about visitation. And maybe just thinking about what's going on there. I know that we don't have a crystal ball for the future, but in the 2Q, do you think macro was the biggest factor? Is there still infrastructure friction there with flights to non Guangdong particularly? Or is there something else that you think is at play as well?

Speaker 7

Yes. Thanks, Brad, for the question. Yes, I don't have specific reasons why we have a slowdown in the recovery rate for non Guangdong. I think what you can say is there is a segment bifurcation here where the premium segments are still doing incredibly well. And you can see, I think it's on Slide 18 on Dan's pack.

Speaker 7

Actually, this is the highest spend per visitor arrival since the COVID recovery began of any quarter. So clearly, at the premium end, the strength of spending is very high. But at the same time, the I think the lower price points in terms of, say, the slot performance is also incredibly strong. So those two factors drove record high volumes in our non rolling drop and soft handle. But in the middle, especially the base mass tables, especially unrated, that is highly correlated to the strength of visitation.

Speaker 7

And it just wasn't as strong this quarter, even if you adjust for seasonality. So I think we can explain how the segments have performed, but we don't know exactly why the visitation base isn't recovering as fast in the middle in terms of that base mass visitation.

Speaker 11

Great. Thanks for that, Grant. And then on the disruption, the renovation projects, if we were to try and gauge the level of disruption from these projects in the Q3 versus the Q2, I know you lose the casino floor for a whole quarter versus a half a quarter. Can you maybe give us some finer points on what else is going to be offline in the Q3 versus the Q2, room count, etcetera?

Speaker 4

Yes. It's good. Yes, go ahead, Grant. Go ahead, please.

Speaker 7

Yes, the disruption will actually increase from a room perspective. So we're operating around 2,500 keys at Sheraton in the 2nd quarter on average over the quarter. And we expect to be down to about 1300 on average across the Q3. Obviously, a higher number of keys in the first half of the quarter and finishing up with fewer keys. And as you said, we will have a full quarter of Pacifica Casino closure versus 60%, 65% of the quarter in the second quarter.

Speaker 7

So yes, the disruption impact will actually increase during the Q3.

Speaker 11

Perfect. Thanks, everyone.

Operator

Thank you. Your next question is coming from David Katz from Jefferies. Your line is live.

Speaker 12

Afternoon, everyone. Thanks for taking my question. I wanted to go back to the repurchases and just take a little bigger picture look, right? Just thinking about the factors, obviously the stock and where it is, is one of them. But when we look at your capabilities, there are some maturities out there.

Speaker 12

In the future, there's obviously the issue of the float at the current run rate that shrinks the float and that's a consideration that some companies think about. If you could just sort of walk us through how you're thinking about those other issues in view of all of them, that would be helpful, please.

Speaker 4

So all very good questions, all things we talk about all the time, consider with the Board and we think about frequently. I think the key thing for us is, we always look to invest for growth. So when you think about capital allocation, our primary conversation is how do we grow this business? We had a question earlier about new jurisdictions. We're looking at them.

Speaker 4

If you look at our Las Vegas sale, the fundamental driver of that was our ability to reallocate capital to faster growing markets and new growth opportunities. And I think our investments in Macau and Singapore will prove out and that will ultimately allow us to grow those businesses, create additional cash flow, which ultimately will be used for either new growth or shareholder return. And so when you look at our balance sheet, we think being investment grade is incredibly important. We think it provides us with a strategic advantage. It reduces our cost of debt capital, which impacts our overall cost of capital and makes the financing of new projects more efficient and creates better returns for equity.

Speaker 4

And also to be fair, we think when we go to new jurisdictions, it puts us in a more competitive position because we have the financial capability to execute the projects we're proposing. And so all of these things are very helpful for us as we look through our business. When it comes to capital return, I think the idea of shrinking the share count is something we've talked about previously, where we think there's a benefit to doing so. We think there is a positive gearing towards share repurchases. We've been very aggressive over the last couple of quarters.

Speaker 4

We like to continue to shrink the share count over time. And to be fair, we're also a dividend payer. We think that's helpful to shareholder returns. As an S and P 500 member, we think it's good to have a dividend as well. So I think we have the free cash flow to continue the return of capital.

Speaker 4

We're very happy about that given our investment opportunities. We have the balance sheet strength to be able to develop new jurisdictions. And so I think you're going to see a balance between growth and our ability to return capital over time. I think the nice thing is when we're done with the Londoner and we're done with some of the other with these major renovation projects in Singapore, given the growth that we're seeing, we'll have the ability hopefully to return more capital and we'll have the ability to increase our program and benefit shareholders. So you'll see us do that over time as our business continues to operate and grow.

Speaker 4

And so I think the idea of shrinking the share count, I think we're in a good position to do it. I think we have a lot of liquidity out there in the market. We have very strong ability to execute. So I think we're in good shape in terms of our program and the way that we approach it.

Speaker 12

Thank you. Appreciate it.

Speaker 7

Thanks, David.

Operator

Thank you. Your next question is coming from Dan Politzer from Wells Fargo. Your line is live.

Speaker 1

Hey, good morning, everyone or good afternoon, everyone. Thanks for taking my questions. The first one on Singapore. The ADR was very impressive, transitioning overall pretty good despite a subdued visitation. Can you talk about are you starting to see the benefits of the existing CapEx that you've put into the ground so far?

Speaker 1

And should we think about any disruption as it relates to Tower 3 that leading up to the completion next year?

Speaker 3

Thank you. Yes, obviously, the mining put into the building thus far has done very well. You can see results of we're getting to $2,000,000,000 plus run rate. We're still under construction. There's more to go.

Speaker 3

We have Tower 3 is disrupted because we don't have the product from a room, tower gaming isn't there. I mean, we're doing very well there. But again, at Refinitiv, we have one hand tied behind our back and trying to get through it. So the road ahead in CINGAL looks very positive to us. We think 500,000,000 dollars 550,000,000 $600,000,000 a quarter is in reach in the near future.

Speaker 3

And as we referenced earlier, once the entire building is complete 25, I think you'll see better members than ever on Singapore. It's a very rosy picture in Singapore. And yes, the CapEx in Toy Fair is paying off very well and we think it's going to continue to get even stronger in time. And as for ADR, while it's relevant, our cash sales are not the drivers. The drivers is our casino business, especially our non rolling casino drop and the table side, rock rupture.

Speaker 3

But it's a very positive picture. The disruption is real for the balance of the year into Q1 and Q2. But once that burns off and via Tower Gaming Open and the full complement of suites, I think you're going to see Singapore just continue to be stronger and stronger.

Speaker 1

Got it. Thanks. And then, as far

Speaker 4

as it relates to the Macao property portfolio, obviously there's a

Speaker 1

lot of CapEx going into Londoner. As it relates to the other properties there, is there anything that we should be thinking about as you start to wrap up Londoner later this year? Or should we expect 2025 to be pretty much disruption free there?

Speaker 3

Yes, good point. With London will wrap up again in 'twenty five. We should note that we are going to under the earliest misunderstanding perhaps in one call about what happens in the niche. We are going to rehab some of the rooms in the niche because we always do. But it's typical.

Speaker 3

You won't see it in the numbers of the building or be hidden from the public view by doing the 4 by 4 traditional way you approach these things in our industry. So we will undergo a renovation of the room product at Venetia next year at the closure of London renovation. Four Seasons pretty much is done. And then we'll sit and see what we want to do with even those things at Parisian and perhaps in sand, but nothing beyond that I should think about for the time being.

Speaker 1

Got it. Thanks so much.

Speaker 3

Sure. Thanks, Dan.

Operator

Thank you. Your next question is coming from Steve Wieczynski from Stifel. Your line is live.

Speaker 13

Yes. Hey, guys. Good afternoon. So, Grant, you've been asked a question on visitation twice now.

Speaker 4

I'm actually going to try

Speaker 13

to ask it a third time. So if we look at Slide 20, it shows that the group visitation was I think we've done about 1,300,000 visitors in May June so far. So I want to ask more about kind of what's going on with the group side and just trying to figure out maybe has it do you think Macau has essentially gotten maybe too expensive and is pricing certain groups out of the market? And I hope that kind of makes sense.

Speaker 7

Yes. Thanks for the question. I think the 2 groups is a broader supply chain issue and the change in consumer habits, not just applicable to the Macau market, but to all the key markets that were significant to group markets prior to COVID. I think the other aspect that I should have mentioned and perhaps I could get Wilfred to give his perspective as well is actually during this period, we also have a series of significant announcements on policies that would boost visitation over time, even though in this current quarter, the impact may not be prominent, ranging from individual visitor scheme expansion to other types of visa relaxation. So I think we need to bear that in mind that things are actually moving extremely positively on the policy side to support future growth in visitation.

Speaker 7

Wilfred, maybe you want to add to that?

Speaker 14

Sure. I think the government, both at the Macau level and at the national level, is monitoring the situation. And that's why you see the recent announcement that there's an additional 10 cities that people that qualify for IVS. And if you look at Macau, traditionally, about 55%, 60% of the visitors use the IVS scheme. And this time, they added 10 cities, which has close to 60,000,000 population.

Speaker 14

So you're increasing that catchment area. And I think the other measures such as a faster and nationwide application for business visa will also benefit Macau. So it will take time for these policies to be promulgated, fully promulgated and known in these cities. So we're expecting some positive impact in the months to come.

Speaker 13

Okay, great. Thanks guys. That's all for me. Appreciate

Operator

it. 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. We thank you for your participation.

Powered by Quartr
Earnings Conference Call
Las Vegas Sands Q2 2024
00:00 / 00:00