Las Vegas Sands Corp. — Q3 2020 Form 10-Q
Reporting period: Three and nine months ended September 30, 2020. Amounts are in U.S. dollars; financial statement amounts are in millions unless noted. The filing attributes the severe operating deterioration primarily to COVID-19, travel restrictions, temporary closures and capacity limits across Macao, Singapore and Las Vegas.
Financial performance and liquidity
| Metric | Q3 2020 | Q3 2019 | Nine months 2020 | Nine months 2019 |
|---|---|---|---|---|
| Net revenue | $586 | $3,250 | $2,466 | $10,230 |
| Operating income (loss) | $(610) | $899 | $(1,477) | $2,764 |
| Net income (loss) | $(731) | $669 | $(1,767) | $2,521 |
| Net income (loss) attributable to LVS | $(565) | $533 | $(1,386) | $2,069 |
| Adjusted property EBITDA (non-GAAP) | $(203) | $1,283 | $(313) | $4,001 |
| Net cash from (used in) operations | Not reported for quarter | $(1,316) | $1,796 |
Q3 revenue fell 82.0% year over year; nine-month revenue fell 75.9%. Nine-month casino revenue declined 79.2%, rooms 72.8%, food and beverage 68.7%, mall 54.5%, and convention, retail and other 64.2%. Q3 operating expenses declined 49.1%, but remained high relative to revenue; the operating loss reflects the sharp decline in business and substantial fixed costs. Nine-month interest expense, net, was $386 million versus $421 million; the weighted-average interest rate was 3.9% versus 4.6%.
Balance sheet at September 30, 2020: Cash and cash equivalents were $2.381 billion, restricted cash $17 million, total assets $20.982 billion, and total equity $3.840 billion. Current liabilities were $2.255 billion. Long-term debt was $13.840 billion plus $72 million of current maturities, compared with total debt carrying value of $12.492 billion at December 31, 2019. Retained earnings fell to $1.112 billion from $3.101 billion.
Cash and funding: Cash, cash equivalents and restricted cash declined $1.844 billion in the first nine months. Capital expenditures were $1.078 billion, including $857 million in Macao. The company reported $3.95 billion of available capacity across revolving facilities and SGD 3.69 billion (about $2.69 billion) available under the Singapore delayed-draw term facility, restricted to the MBS expansion project. The Singapore facility is not general-purpose liquidity. Management said liquidity was sufficient to support operations and ongoing major projects.
Material changes and significant developments
- All properties had reopened by the reporting date but were operating at reduced levels, with travel restrictions, health protocols and capacity limits still in force. Macao’s mainland visitation was down 92.4% year over year in August; Singapore visitation was down 99.5%; Las Vegas visitation was down 57%.
- In June, Sands China issued $1.5 billion of senior unsecured notes, due 2026 and 2030. The debt proceeds were intended for incremental liquidity and general corporate purposes. Total debt carrying value increased about $1.42 billion from year-end 2019.
- Debt covenant relief was extended: LVSC’s leverage covenant was suspended through December 2021, SCL’s relevant waiver period through January 1, 2022, and MBS’s leverage and interest-coverage covenant relief through December 2021. LVSC’s amendment also requires at least $350 million of monthly liquidity during its relevant period and limits dividends unless pro forma liquidity exceeds $1 billion. Management reported covenant compliance at September 30.
- The regular LVS quarterly dividend was suspended in April after a $0.79-per-share payment in March. SCL also did not pay a final 2019 dividend. The company recorded $911 million of dividends and noncontrolling-interest payments in the first nine months.
- The company recorded $248 million of mall rent concessions during the first nine months, including $78 million in Q3. Credit-loss provision rose to $60 million for the nine-month period from $15 million, reflecting aging premium-player receivables and constraints on marker redemption.
- Adjusted property EBITDA was negative in Macao and Las Vegas for the nine-month period; Marina Bay Sands remained positive at $239 million, down from $1.204 billion.
Outlook, risks and contingencies
Management gave no numerical earnings or revenue guidance and said the pandemic’s duration, the timing of easing travel restrictions, the pace of visitation recovery and the resulting financial impact could not be reasonably estimated. Management expects COVID-19 disruption to remain material and notes further closures or restrictions could occur. Cost and nonessential capital-spending reductions were implemented, while management continued to expect to support operations and complete major projects.
The Londoner Macao conversion and related Macao projects were expected to cost approximately $2.2 billion, with phased delivery in 2020 and 2021. The MBS expansion was estimated at approximately SGD 4.5 billion (about $3.3 billion at the stated exchange rate); construction cost and schedule submissions were deferred to June 2021. Project costs and completion dates may change.
Key risks include prolonged travel restrictions or weak discretionary spending, fixed operating costs, construction and supply constraints, debt service and refinancing access, covenant and distribution restrictions, gaming-receivable collections, regulatory and licensing requirements, and foreign-exchange and interest-rate exposure. The company reported an outstanding Macao lawsuit by Asian American Entertainment seeking 96.45 billion patacas (about $12.08 billion); the matter was at a preliminary stage and management could not estimate the probability of outcome or reasonably possible loss. The company intends to defend the case.
Important facts for investors to verify
- Whether travel rules and operating restrictions in Macao, Singapore and Las Vegas eased, and whether visitation, gaming volumes and hotel occupancy recovered after September 30.
- Cash burn, unrestricted cash location and accessibility, available borrowing capacity and the conditions on the Singapore delayed-draw facility.
- Debt balances, maturities, covenant waivers and distribution restrictions, including the impact of further operating losses on liquidity and financing access.
- Progress, remaining spending and timing for The Londoner Macao and MBS expansion, including any revisions to project estimates.
- Credit-loss allowances and collections from gaming customers, the continuation of mall concessions, and the status and potential exposure of the AAEC litigation.