Las Vegas Sands Corp. — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023. Financial statements are unaudited. The company operates integrated resorts in Macao and Singapore; its former Las Vegas properties are reported as discontinued operations.
Financial performance and position
| Metric | Q1 2023 | Q1 2022 |
|---|---|---|
| Net revenue | $2.120 billion | $943 million |
| Operating income (loss) | $378 million | $(302) million |
| Income (loss) from continuing operations | $145 million | $(478) million |
| Net income attributable to LVS | $147 million; $0.19 per diluted share | $2.530 billion; $3.31 per diluted share |
| Adjusted property EBITDA | $792 million | $110 million |
| Cash from continuing operating activities | $441 million | $(500) million |
| Capital expenditures | $166 million | $137 million |
- Revenue increased 124.8%, led by Macao and Marina Bay Sands as travel restrictions eased. Casino revenue rose 145.8%; rooms rose 155.8%. Adjusted property EBITDA is a non-GAAP measure and should not be treated as operating cash flow.
- Operating margin was approximately 17.8% of revenue, versus an operating loss in the prior-year quarter. Interest expense, net, increased to $218 million from $156 million; the weighted-average interest rate rose to 5.4% from 4.2%.
- At March 31, 2023, cash and cash equivalents were $6.532 billion, total debt was $15.989 billion, and current debt maturities were $2.018 billion. Restricted cash was $124 million. The company reported $2.481 billion of available capacity across its U.S., SCL and Singapore revolving facilities; a further $2.78 billion Singapore delayed-draw facility was not available until required project estimates and schedules are delivered to lenders.
- Total assets were $22.715 billion and total equity was $3.829 billion. The new Macao concession resulted in recognition of a $495 million intangible asset and related financial liability, with the asset amortized over ten years.
Material changes versus the prior comparable period
- Revenue and property-level earnings rebounded sharply following the relaxation of COVID-19 and travel restrictions. Macao adjusted property EBITDA improved to $398 million from a loss of $11 million; Marina Bay Sands increased to $394 million from $121 million.
- Q1 2022 net income included $2.861 billion of after-tax gain on the sale of the Las Vegas properties. Accordingly, the year-over-year decline in total net income is not representative of continuing operating performance.
- Cash from continuing operations improved by $941 million year over year, primarily reflecting the recovery in operating results. Q1 2022 financing cash flow included proceeds from the Las Vegas sale; Q1 2023 did not.
Outlook, management commentary, risks and contingencies
- Management said visitation and operations had improved, but the future effects of travel, tourism and broader economic conditions remain uncertain. No specific consolidated earnings or revenue guidance was provided.
- The Marina Bay Sands expansion has a stated minimum project cost of SGD 4.50 billion (approximately $3.39 billion at quarter-end exchange rates), but the company expects the ultimate cost to materially exceed the original estimate because of inflation and higher labor and material costs. Approximately $1.05 billion had been incurred by March 31, 2023. A supplemental agreement moved construction commencement to April 8, 2024 and completion to April 8, 2028. A separate approximately $1 billion renovation is expected to be completed by the end of 2023.
- Under the Macao concession, the company is required to invest at least 30.24 billion patacas (approximately $3.74 billion) by December 2032, including an expected 27.80 billion patacas in non-gaming projects. The 2023 proposed project list was submitted for government approval.
- The SCL revolving facility matures July 31, 2023. Management believed it would extend the facility before maturity; failure to extend or refinance could require alternative funding and reduce liquidity. SCL’s financial covenant waivers run through July 31, 2023. Management reported compliance with debt covenants at quarter-end.
- The company requested renewal of Macao’s gaming-profit corporate tax exemption for the new concession period; approval is not assured. Its Q1 2023 effective tax rate was 25.6%, compared with 0.4% in Q1 2022.
- Material risks include dependence on Macao and Singapore, travel and tourism recovery, gaming regulation and concession requirements, leverage and refinancing, interest and foreign-exchange exposure, labor and construction costs, gaming receivable collection, and litigation. A Macao claim by Asian American Entertainment seeks substantially increased damages; the company won at trial, but the plaintiff’s appeal remains pending. Management said it could not determine the probability of outcome or reasonably possible loss. Securities and derivative actions also remain unresolved.
- The quarterly dividend program remains suspended. Management stated it believes available cash, operating cash flow and borrowing capacity are sufficient for liquidity, debt obligations, capital spending and committed projects, subject to the facility conditions described above.
Important facts for investors to verify
- Progress on the SCL revolving facility extension before its July 31, 2023 maturity, and any changes to covenant waivers or borrowing availability.
- Actual cost, schedule, lender documentation and funding needs for the Marina Bay Sands expansion and renovation.
- Recovery trends in Macao and Singapore, including visitation, gaming volumes and win-rate volatility; Q1 gaming results can be affected by chance and short-period hold percentages.
- Whether Macao grants the requested gaming-profit tax exemption and approves the proposed concession-related investments.
- Developments in the Macao damages appeal and other litigation, for which potential loss is not clearly quantifiable in the filing.