Las Vegas Sands Q4 2023 Earnings Call Transcript

Presentation

[Operator]

Good day, ladies and gentlemen, and welcome to the Sands' Fourth Quarter 2023 Earnings Conference Call. At this time, all participants have been placed on a listen-only mode, and we will open the floor for your questions and comments following the presentation.

It is now my pleasure to turn the floor over to Mr. Daniel Briggs, Senior Vice President of Investor Relations at Sands. Sir, the floor is yours.

[Daniel Briggs, Senior Vice President, Investor Relations at Las Vegas Sands]

Thank you. Joining the call today are Rob Goldstein, our Chairman and CEO; Patrick Dumont, our President and Chief Operating Officer; Dr. Wilfred Wong, Executive Vice Chairman of Sands China; and Grant Chum, CEO and President of Sands China and EVP of Asia 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. The Company's actual results may differ materially from the results reflected in those forward-looking statements.

In addition, we'll discuss non-GAAP measures. Reconciliations to the most comparable GAAP financial measures are included in our press release. We have posted an earnings presentation on our website. We will refer to that presentation during the call.

Finally, for the Q&A session, we ask those with interest to please pose one question and one follow-up, so we might allow everyone with interest the opportunity to participate. This presentation is being recorded.

I'll now turn the call over to Rob.

[Robert G. Goldstein, Chairman and Chief Executive Officer at Las Vegas Sands]

Thanks, Dan, and thanks for joining us today. Macao delivered $654 million of EBITDA for the quarter. The number would have been $40 million higher if we had held as expected in the rolling segment. It's only been one year since the end of COVID in Macao. We began in Q1 with $400 million of EBITDA. In Q2, we did $540 million. Q3, we did $630 million, the growth just keeps coming. We look forward to continued growth in both gaming and non-gaming revenue, which will lift the entire market. SCL continues to own the largest share of non-rolling table win, rolling table win and slot ETG win. Most importantly, we have the largest share of EBITDA in Macao market by a wide margin. We believe the completed Londoner will need and perhaps even exceed the earning power of The Venetian. Our future growth in Macao 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 $1.2 billion Londoner reinvestment program.

There is an ongoing speculation of the future growth of Macao. Can Macao market grow to $30 billion, $35 billion, even $40 billion and beyond? We believe that it will. This underscores our confidence in the returns that we generated by capital investment programs in our portfolio. We are staunch believers in the growth of Macao market in near- and long-term. LVS has invested $15 billion in Macao to date. Macao is the most important land-based market in the world. A few reference points to consider, fourth quarter EBITDA, assuming expected hold on rolling play represents considerable growth when compared to the previous quarters. Our retail business in Macao has already far exceeded pre-COVID numbers. I continue to expect the gaming force on our business to follow the same path as Singapore and accelerate in 2024.

Let's pivot to the MBS in Singapore. Seven quarters into our reopening, MBS delivered a $544 million a quarter. This is the largest EBITDA for one quarter in the history of the building. The power of this building is evident based on the results despite the disruptive impact of our ongoing $1.75 billion renovation. Disruption notwithstanding MBS is hitting on all cylinders with gaming, lodging and retail perspective. Slots in ETG's MBS are approaching a $1 billion annual run rate. Non-rolling tables are exceeding $20 million of drop per day. ADRs are escalating and the retail component is delivering far beyond pre-COVID numbers.

MBS validates that quality assets prevail and reinvesting in our assets will generate sustained returns. MBS has it all, our 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 770 suites, we previously had less than 200 suites. There is no denying its future. How far can MBS go? Our future expectations start at $2 billion and beyond in EBITDA per year.

As you know, we're bidding for a license in New York. We're receiving strong local support. The cost of the building will be in the $6 billion range, which enables us to develop a true five star resort with unlimited people. This is a massive opportunity. We are very enthused about the prospect. Our bid is compelling. 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&A.

[Patrick Dumont, President and Chief Operating Officer at Las Vegas Sands]

Thanks, Rob. We wanted to highlight some changes in the 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 our 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. Please see Pages 6 and 7 in our earnings presentation for an overview of the new presentation format.

For this quarter, the quarter ended December 31, 2023, we generated $654 million of adjusted property EBITDA in Macao, a very strong operating result. It is important to note that we held 2.16% in our rolling segment in Macao. EBITDA would have been higher by $40 million in Macao had we held as expected in our rolling segment. At Marina Bay Sands for the fourth quarter of 2023, we generated $544 million in adjusted property EBITDA, another strong result. We held 4.57% in our rolling segment in Singapore. EBITDA would have been lower by $71 million in MBS had we held as expected in our rolling segment.

It is also important to address our margin structure as we held as expected in our rolling volume segments in Macao and Singapore. In Macao, our margins for the fourth quarter of 2023 would have been 35.9%, an improvement of 100 basis points as compared to the third quarter 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 fourth quarter of 2023 margin would have been 48.8%, an increase of 170 basis points sequentially. It's important to note that both in Macao and 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&A portion of our call. Thanks.

Questions and Answers

[Operator]

Thank you. Ladies and gentlemen, the floor is now open for questions. [Operator Instructions] And your first question today is coming from Joe Greff from J.P. Morgan. Joe, your line is live. Please go ahead.

[Joseph Greff, Analyst at J.P. Morgan]

Good afternoon, guys. Thanks for taking my question.

[Robert G. Goldstein, Chairman and Chief Executive Officer at Las Vegas Sands]

Hi, Joe.

[Joseph Greff, Analyst at J.P. Morgan]

Obviously, the premium mass had significant sequential growth and exceeded the base mass. I was just hoping -- can you talk about the progression of base mass recovery throughout the fourth quarter? And then clearly, what we're seeing out of information for the Macao market as a whole, in January month-to-date is nice overall mass growth pickup. And as you said before, Rob, the growth keeps coming. I was hoping if you can talk about sort of the relative performance of base mass in January and if we're seeing this hopefully anticipated pickup in that mass segment?

[Robert G. Goldstein, Chairman and Chief Executive Officer at Las Vegas Sands]

Thanks, Joe. As you know, we don't comment on the current quarter. The numbers speak for themselves. The market appreciation in Macao 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 to Grant to talk about the acceleration of base and premium mass. Grant?

[Grant Chum, Chief Executive Officer and President, Sands China Ltd. and Executive Vice President, Asia Operation at Las Vegas Sands]

Yes, Rob. Thank you. Yes, Joe, the segment differential growth in the fourth quarter, we had 13% growth in premium mass and 8% growth sequentially on base mass. So I think base mass was progressing nicely through the quarter. It's just that premium mass had a great performance that exceeded that. If you look at the visitation trends during the fourth quarter, Macao actually recovered to almost 90% of 2019 levels on visitations. So I think the base mass is continuously progressing and building up. Transportation infrastructure has been improving. I think the demand to come. I think the desire to take advantage of the non-gaming events that have been coming on stream across our properties, but across the whole industry, have been very effective. So I think you should expect that growth pattern to continue.

[Robert G. Goldstein, Chairman and Chief Executive Officer at Las Vegas Sands]

And Grant is it fair to say also -- Grant, why I ask is it fair to say transportation and visas, the whole lubricant that supplies the market into Macao is getting better year after COVID. It seems to me as if the ability to get the desire is there, but also the ability that this improving daily. Is that fair to say?

[Grant Chum, Chief Executive Officer and President, Sands China Ltd. and Executive Vice President, Asia Operation at Las Vegas Sands]

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 fourth quarter recovered to 93% of pre-COVID, but only 52% of our sailing capacity. So clearly, people are enthusiastic about coming even though the transportation capacity is still recovering. And that's also clear, very gratifyingly the overseas, the foreign visitation recovered dramatically in fourth quarter, especially from Southeast Asia, and that's great to see from Macao. And that's despite the direct flights from foreign countries into Macao, haven't recovered even by, I think, 60% in the fourth 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.

[Joseph Greff, Analyst at J.P. Morgan]

Great. And then my follow-up [Speech Overlap]

[Robert G. Goldstein, Chairman and Chief Executive Officer at Las Vegas Sands]

Hey, Joe, it's a -- 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. And 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?

[Joseph Greff, Analyst at J.P. Morgan]

My next question is for you, Patrick. Obviously, it's nice to see $0.5 billion 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?

[Patrick Dumont, President and Chief Operating Officer at Las Vegas Sands]

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 that [Phonetic]. 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 tweaking that denominator.

In terms of amount, I think we'll 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 -- I don't know that we'll necessarily buy the same amount that we bought in this quarter going forward every quarter.

[Joseph Greff, Analyst at J.P. Morgan]

Okay. And then one final thing, congratulations, Grant, on your promotion. That's all for me. Thanks.

[Grant Chum, Chief Executive Officer and President, Sands China Ltd. and Executive Vice President, Asia Operation at Las Vegas Sands]

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.

Stephen, your line is live. Please -- you may go ahead with your question now.

[Stephen Grambling, Analyst at Morgan Stanley]

Hey, there. Sorry, can you hear me?

[Patrick Dumont, President and Chief Operating Officer at Las Vegas Sands]

Yes.

[Robert G. Goldstein, Chairman and Chief Executive Officer at Las Vegas Sands]

Yes.

[Stephen Grambling, Analyst at Morgan Stanley]

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 Sands Cotai Central/The Londoner. Can you just maybe help contextualize how that will compare to the first renovation, both in terms of disruption and then contribution?

[Robert G. Goldstein, Chairman and Chief Executive Officer at Las Vegas Sands]

Yeah. I think we'll turn over to Grant for that comment. Grant, Londoner?

[Grant Chum, Chief Executive Officer and President, Sands China Ltd. and Executive Vice President, Asia Operation at Las Vegas Sands]

Sure. Thanks, Rob. Thanks for the question, Steve. I mean, I think we can say in terms of the time line, we have 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 first quarter of 2025. And yes, there could be some impact from construction disruption, especially as we go into the second half of the year. 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 our 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 not miss any opportunity to yield the rest of the portfolio whilst the works are going on. 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 relative 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 external facade in the Phase 1 and the retail mall and one of the two 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 gaming floor that we have on the Sheraton side.

[Robert G. Goldstein, Chairman and Chief Executive Officer at Las Vegas Sands]

Stephen, just to follow on Grant's comments, I understand the market is concerned about Londoner 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 January market numbers, perhaps we can overcome that by using other assets in the portfolio. But secondly, to Grant's comment, I think when you see the eventual transformation of Londoner, it will be a juggernaut on par with The Venetian or beyond. So it gives us two assets we think can probably make $3 billion by themselves. And while there's disruption '24, '25 and beyond gives us something that's unique in that market. The number one and two assets are number one in one assets in that market for years to come. So, there may be some disruption but maybe market force can overcome that, but I think the end result is well worth the pain.

[Stephen Grambling, Analyst at Morgan Stanley]

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 read and how we should be thinking about that building into next year?

[Patrick Dumont, President and Chief Operating Officer at Las Vegas Sands]

I think I'm happy to give -- go ahead, Rob. Go ahead, Rob.

[Robert G. Goldstein, Chairman and Chief Executive Officer at Las Vegas Sands]

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

[Patrick Dumont, President and Chief Operating Officer at Las Vegas Sands]

Yeah. 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.

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, 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 has 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. We're hopeful that that actually occurs, which -- there's no way to know exactly how that official that it will be, but it can't hurt.

But I think the key thing is, it's 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 '24 and '25. 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 and use it as a determining factor for where the business can go.

[Robert G. Goldstein, Chairman and Chief Executive Officer at Las Vegas Sands]

I think Patrick's comments are spot on, Steve. We have limited -- we have capacity constrained building in MBS. Unfortunately, we only have so many rooms, which we got 10 times as much, but we don't. So the mass market tourism is as important to us as the right tourists in the market. We look at this asset as a $2 billion asset today annualized EBITDA, but we believe it can grow 10% to 20% over the next three to four years. 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 billion projected EBITDA by end of decade in Singapore. So we see ourselves now at $2 billion, going to $2.2, billion, $2.3 billion, $2.4 billion and eventually stepping up to $3 billion. We see huge growth in this asset. It's just beginning.

We got obviously hampered by COVID, but to watch it growing is 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 will just accelerate in the next three, four, five years until hopefully, we can tell you a finality, we have a deal in Phase 2.

[Stephen Grambling, Analyst at Morgan Stanley]

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

[Robert G. Goldstein, Chairman and Chief Executive Officer at Las Vegas Sands]

Thank you.

[Patrick Dumont, President and Chief Operating Officer at Las Vegas Sands]

Thanks, Stephen.

[Operator]

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

[Carlo Santarelli, Analyst at Deutsche Bank Aktiengesellschaft]

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 billion in Phase 1 at Marina Bay Sands. Returns on that product look to be very favorable, $750 million 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 projects there?

[Robert G. Goldstein, Chairman and Chief Executive Officer at Las Vegas Sands]

I'll just reiterate how much we believe in Singapore as a market, my comment is about $3 billion. We actually believe it's very retainable when we opened this new building late in the decade.

As for the update, Patrick's been right in the middle of that. So Patrick please take it away in terms of Phase 2 Singapore.

[Patrick Dumont, President and Chief Operating Officer at Las Vegas Sands]

Yeah. 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 and margins will grow. And so, you're seeing that happen real-time in Singapore. And so, for us, I think we'll finish the third tower by Chinese New Year next year, that $750 million will go in. We'll saw some amenities that have to be done across parts of '25. By the mid part of '25, we're basically going to have what is, in effect, a 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 any place else. These are all very positive things and the quality of these amenities base customers want to be repeat visitors.

And so, for us, these investments will drive very high returns. That's the reason why we're willing to do and that reason why the Board was supportive. 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. 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, IR 2, 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. 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 two 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 going soon.

[Carlo Santarelli, Analyst at Deutsche Bank Aktiengesellschaft]

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

[Robert G. Goldstein, Chairman and Chief Executive Officer at Las Vegas Sands]

Thank you, Carlo. I appreciate it.

[Operator]

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

[Shaun Kelley, Analyst at BofA Securities]

Hi. Good afternoon, everyone. I 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? I mean, I think this is a big question or theme that came out of the quarter last quarter and just sort of what you're seeing, particularly at 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.

[Robert G. Goldstein, Chairman and Chief Executive Officer at Las Vegas Sands]

Grant?

[Patrick Dumont, President and Chief Operating Officer at Las Vegas Sands]

Shaun, that was good by the way. Thank you.

[Grant Chum, Chief Executive Officer and President, Sands China Ltd. and Executive Vice President, Asia Operation at Las Vegas Sands]

Thank you, Shaun, 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 at 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. 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 Londoner is already at a run rate of close to $800 million 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 back to the same level as we were in 2019. 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.

[Robert G. Goldstein, Chairman and Chief Executive Officer at Las Vegas Sands]

And Shaun, 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 Macao. If you look at our EBITDA in Q3, I believe our EBITDA exceeded our next two competitors combined, which is quite a statement to the power of our buildings. There will be promotional issues occasionally here and there. So in the end, we have a structural advantage, which can't be undermined. We have more capacity for lodging, food and beverage, retail, entertainment and gaming capacity [Indecipherable] by a bunch, and that will enable us to avail both a margin and EBITDA basis. And so, yes, there will be occasionally a promotional issue here and there, but it really shouldn't concern as far as our business. Our margins remain intact, and our dominance remain intact in all segments in Macao.

[Shaun Kelley, Analyst at BofA Securities]

Thank you, Rob, for that. And then maybe just as my -- as a quick follow-up, 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 of 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 just any other broader signs of the kind of where the macro situation sits in China? Because so far, and again, seems to be continuing through January. Seems like Macao is relatively unaffected there, but I wanted sort of an update on that trajectory, if you could give one?

[Grant Chum, Chief Executive Officer and President, Sands China Ltd. and Executive Vice President, Asia Operation at Las Vegas Sands]

Sure, Shaun. I think if you look at fourth quarter, it did even have quite a bit. I think if you look at Sands visitation from non-Guangdong versus Guangdong slides...

[Daniel Briggs, Senior Vice President, Investor Relations at Las Vegas Sands]

Page 20.

[Grant Chum, Chief Executive Officer and President, Sands China Ltd. and Executive Vice President, Asia Operation at Las Vegas Sands]

...we are catching up. Yeah. 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. But overall, I think you can see an evening out in terms of the recovery rate in Guangdong versus non-Guangdong. And then also, I think the fourth quarter, 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 the source markets. 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?

[Wilfred Wong, Executive Vice Chairman, Sands China Ltd. at Las Vegas Sands]

Yeah. Shaun, 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, Macao is emerging as a top tourist destination for short-haul travelers from the Chinese mainland.

[Shaun Kelley, Analyst at BofA Securities]

Thank you, everyone.

[Robert G. Goldstein, Chairman and Chief Executive Officer at Las Vegas Sands]

Thank you. I appreciate it.

[Operator]

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

[Chad Beynon, Analyst at Macquarie Group]

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? And do you think this could continue to improve as visitation and overall spend improves in '25 or '24? Thank you.

[Robert G. Goldstein, Chairman and Chief Executive Officer at Las Vegas Sands]

If you look at your deck on, I think it's Pages 28, 29, it gives you a pretty good look at our retail portfolio in Asia and be blunt about it, it could be -- what happened to these numbers, almost $3,000 a foot in a 600,000-foot mall at MBS. Venetian almost $2,000 a foot with 800,000 feet, of course, $9,200 a foot at the Four Seasons luxury and a mere $4,200 a foot on the non-luxury. So the answer is, we are seeing our retail portfolio that's approaching $700 million of contribution and growing. Of course, there's discussions out, [Indecipherable] a slowdown globally. But it looks to me that I spoke to David, because they are retail experts, and it feels like we continue to see opportunity to remerchandize 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 Macao and Singapore, as you reference the lack of supply in Singapore. So I think that mall just keeps appreciating and we keep remerchandizing it to be more effective every day, more luxurious, more upscale.

In Macao, 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 I don't know how you could argue with these kind of results, $677 million 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. David Sylvester constantly remerchandizes, rethinks and reassesses the portfolio. He's got a lot of work to do. But the numbers, I think, are stellar and I think we'll continue to be stellar for years to come.

[Chad Beynon, Analyst at Macquarie Group]

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 game play 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 three 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 and years? Thanks.

[Robert G. Goldstein, Chairman and Chief Executive Officer at Las Vegas Sands]

I think it's safe to say this business always runs on mathematics. The mathematics prevail, and I wouldn't take three quarters as an ongoing trend forever. There will be a dark day in Singapore will miss by $70 million, because we take the highest volume players in the world, people who bet lots of money. And some days, it goes with you and someday 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 affluence coming out of Asia, and we're fortunate enough to have the capacity to handle all of it. 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 revert the mean always. And Macao will come back next quarter probably and do $70 million higher and Singapore may have a bad quarter.

Grant, do you have any comment on that? That's how I see it.

[Grant Chum, Chief Executive Officer and President, Sands China Ltd. and Executive Vice President, Asia Operation at Las Vegas Sands]

That's exactly right, Rob. And people have relatively short memories. But in the fourth quarter of 2022, there is like $100 million plus adjustment on the downward impact from low hold at Marina Bay Sands. So I think one or two, three, four, even five quarters is 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, yeah, the mathematics always prevail. And given the scale of our business, over time over one year, two years, we should stay very much in the expected range.

As you saw in Macao as well, we had the first three quarters holding significantly above the expected mean hold and then fourth quarter reversed. And for the whole year, we end up at about 3.3%, which is exactly where we expect it to be.

[Robert G. Goldstein, Chairman and Chief Executive Officer at Las Vegas Sands]

And Chad, going back -- yeah, just for fun going back, I don't know, maybe eight, 10 years ago, we had a horrific number of quarters in a row due to a few players, I think, was Indonesia or Malaysia and we lost obscene amounts of money quarter after quarter to them. And some people on our Board were concerned as they want to be sure. And we talk -- we looked at everything, and we're very comfortable. And there is a belief there for about -- for a while that these people were magical and could be beaten and they lost back their entire winnings and then some. It always goes that way. I don't think you can ever get too emotional about, this quarter, it's very interesting to see the Macao miss and the Singapore overachieving. But in the end, the games stay consistent, pairs and ties versus straight bets do matter. But the Asian gambler is special. And he or she shows up consistently and they're great customers. I wouldn't let the success of a few quarters change your views on the mathematics of backlog. We don't. So thank you.

[Chad Beynon, Analyst at Macquarie Group]

Great. Thank you.

[Grant Chum, Chief Executive Officer and President, Sands China Ltd. and Executive Vice President, Asia Operation at Las Vegas Sands]

Thanks, Chad.

[Operator]

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

[Robin Farley, Analyst at UBS Group]

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? Thanks.

[Robert G. Goldstein, Chairman and Chief Executive Officer at Las Vegas Sands]

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, our -- 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. We sure hope the Governor is correct. And either way, win or lose, we get decision in calendar year '24. That's our hope. But I think it'd be silly to tell you if any insight beyond the Governor's comments. I think we just -- we worked very hard on this project. 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.

Grant, Chinese New Year. Do you think you'll be there for that? Will that be -- will the Year of the Dragon bring anybody the building? I hope so.

[Grant Chum, Chief Executive Officer and President, Sands China Ltd. and Executive Vice President, Asia Operation at Las Vegas Sands]

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 in these peak holiday periods, even though the end of December is 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. So there is a lot of optimism and expectations that this will be a strong one, yes.

[Robert G. Goldstein, Chairman and Chief Executive Officer at Las Vegas Sands]

Robin, I do think December was -- Robin, I think December was really great tell 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 of Dragon is a huge year for us into the market.

[Robin Farley, Analyst at UBS Group]

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

[Grant Chum, Chief Executive Officer and President, Sands China Ltd. and Executive Vice President, Asia Operation at Las Vegas Sands]

Thank you, Robin.

[Operator]

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

[Brandt Montour, Analyst at Barclays]

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

[Robert G. Goldstein, Chairman and Chief Executive Officer at Las Vegas Sands]

Patrick, do you want to grab that?

[Patrick Dumont, President and Chief Operating Officer at Las Vegas Sands]

Yeah, 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 1,600s in Q3, it's probably going to be our peak of disruption. But those rooms are smallest right now and really have our lowest yield. So hopefully, the impact will be minimal, and we'll be able to yield because of the compression to higher-value customers. 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?

[Brandt Montour, Analyst at Barclays]

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

[Patrick Dumont, President and Chief Operating Officer at Las Vegas Sands]

It's mid-1,800s.

[Brandt Montour, Analyst at Barclays]

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?

[Robert G. Goldstein, Chairman and Chief Executive Officer at Las Vegas Sands]

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

[Brandt Montour, Analyst at Barclays]

Of course, sorry about that. Yeah, with regards to the concession agreements.

[Robert G. Goldstein, Chairman and Chief Executive Officer at Las Vegas Sands]

Oh, I see. Okay. I'm going to let Grant 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 Macao forever for 20 years on entertainment and other things. We believe it's a huge value add. 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. Grant?

[Grant Chum, Chief Executive Officer and President, Sands China Ltd. and Executive Vice President, Asia Operation at Las Vegas Sands]

Yeah. Thanks for the question. Yeah, 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 Jacky Cheung concert in Cotai Arena, and then towards the end of the year, Hins Cheung, a singer in Hong Kong and had a great 14 show run at The Londoner. So it's probably set a new standard and precedent for many residencies in Macao.

And then across other categories in MICE, in art and culture, in themed attractions and 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 first 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?

[Wilfred Wong, Executive Vice Chairman, Sands China Ltd. at Las Vegas Sands]

Yeah. 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 Macao 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.

[Brandt Montour, Analyst at Barclays]

Great. Very helpful. Thanks, all.

[Robert G. Goldstein, Chairman and Chief Executive Officer at Las Vegas Sands]

Thank you.

[Operator]

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

[David Katz, Analyst at Jefferies Financial Group]

Hi. Hey, everyone. Thanks for taking my questions. I'll ask to the both in one shot. If I could follow up on the share repurchases, Patrick, not asking about how much or when, but just thinking about how the family stake takes a long-term view on where you'd like to be or how we might think about that evolving over time?

And then second, since we last spoke on an earnings call, there has 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.

[Patrick Dumont, President and Chief Operating Officer at Las Vegas Sands]

Sure. So, I think first off, I think we see value in both equities. So we're very long-term bullish. From a Company standpoint, we're going to continue to be aggressive, as you said before, focusing on investment for growth. You see the success of our capital allocation programs, both in Macao 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 is not from the pandemic. 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 liberalization of gaming. 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 like the opportunity to develop some very unique tourism assets, specifically in Dallas. 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 family's activities in Texas, I think we like the state. We're very obviously happy with our investment there. We're very excited about it. And we'll look to be part of the business community there. But in terms of LVS, we're very focused on bringing Integrated Resorts or designated [Phonetic] resorts, the State of Texas and the development opportunity that would exist there.

[David Katz, Analyst at Jefferies Financial Group]

Thank you.

[Operator]

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

[Daniel Politzer, Analyst at Wells Fargo Securities]

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

[Patrick Dumont, President and Chief Operating Officer at Las Vegas Sands]

Hey, if it's okay, I'll take that one. I think the key thing here, as 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 Macao. 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. 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 will decease. So we have a maturity coming up in '25. We'll look to decease 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 stands 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 Sands China level. That's something that's going to be determined by the Board there. 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 in the future in terms of scale and scope to grow our business there and then return excess capital through dividends to shareholders there. So that's the plan.

[Daniel Politzer, Analyst at Wells Fargo Securities]

Got it. Thanks. And then just for my follow-up, as you think about Macao, we've talked a bit about the margins and the improvement, more or less, it's been about 100 basis points quarter-over-quarter. As you think about kind of the trajectory from here, and I know you're on pace to get back to those 2019 levels. How should we think about maybe the pacing of improvement? And do you think that operating expense structure is really in place at this point, you should benefit from scale here on out?

[Patrick Dumont, President and Chief Operating Officer at Las Vegas Sands]

I have one quick comment and 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 Macao 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 the 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. 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.

[Grant Chum, Chief Executive Officer and President, Sands China Ltd. and Executive Vice President, Asia Operation at Las Vegas Sands]

Yeah, Patrick, I think you covered it well. I think it's dependent on revenue growth as the market continues to grow, and we will 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 and 2019. So, we will -- we are benefiting from that as revenues grow and you get the operating leverage on the fixed costs. 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.

[Daniel Politzer, Analyst at Wells Fargo Securities]

Got it. Thanks, and congratulations on the promotion, Grant.

[Grant Chum, Chief Executive Officer and President, Sands China Ltd. and Executive Vice President, Asia Operation at Las Vegas Sands]

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.

[George Choi, Analyst at Smith Barney Citigroup]

Thanks for taking my questions. My questions were answered earlier, but do have a housekeeping question. Would you please remind us how the turnover rent mechanism works at the Macao properties? Should we expect a normal uptick in the quarter, that is when you guys receive the total rent? Thank you very much. I will jump back to the queue.

[Robert G. Goldstein, Chairman and Chief Executive Officer at Las Vegas Sands]

I'm sorry, George, I think we missed that. Could you repeat yourself? It was unclear. There was some difficult [Speech Overlap] static, yes. Can you try again, George, about Macao?

[George Choi, Analyst at Smith Barney Citigroup]

Apologies. So, I just wonder how the turnover rent mechanism works in the Macao properties? Is it a fourth quarter event? Is that when you receive your turnover rent?

[Robert G. Goldstein, Chairman and Chief Executive Officer at Las Vegas Sands]

Grant, do you want to handle the fourth quarter turnover retail?

[Grant Chum, Chief Executive Officer and President, Sands China Ltd. and Executive Vice President, Asia Operation at Las Vegas Sands]

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 into the third quarter, the end of the third quarter and the fourth quarter, 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 will be higher than the first half.

[George Choi, Analyst at Smith Barney Citigroup]

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

[Robert G. Goldstein, Chairman and Chief Executive Officer at Las Vegas Sands]

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 eight years and made a great contribution. And Wilfred, congratulations on the elevation of Executive Vice Chair. Grant Chum, well deserved. We hired Grant many years ago, the big concern was, was he old enough to win the casino at that time? And over the years, he's aged insufficiently, so he did not win the casino. Congratulations to you 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. We bid you adieu.

[Operator]

[Operator Closing Remarks]

Participants

Corporate Executives

• Daniel Briggs, Senior Vice President, Investor Relations
• Robert G. Goldstein, Chairman and Chief Executive Officer
• Patrick Dumont, President and Chief Operating Officer
• Grant Chum, Chief Executive Officer and President, Sands China Ltd. and Executive Vice President, Asia Operation
• Wilfred Wong, Executive Vice Chairman, Sands China Ltd.

Analysts

• Joseph Greff, J.P. Morgan
• Stephen Grambling, Morgan Stanley
• Carlo Santarelli, Deutsche Bank Aktiengesellschaft
• Shaun Kelley, BofA Securities
• Chad Beynon, Macquarie Group
• Robin Farley, UBS Group AG
• Brandt Montour, Barclays PLC
• David Katz, Jefferies Financial Group Inc.
• Daniel Politzer, Wells Fargo Securities
• George Choi, Smith Barney Citigroup