Las Vegas Sands Corp. — Q2 2023 Form 10-Q
Reporting period: Three and six months ended June 30, 2023. Unaudited results cover the company’s Macao and Singapore integrated resorts; the former Las Vegas operations are presented as discontinued operations. Unless noted, amounts are in U.S. dollars.
Financial performance
| Metric | Q2 2023 | Q2 2022 | Six months 2023 | Six months 2022 |
|---|---|---|---|---|
| Net revenue | $2.542B | $1.045B | $4.662B | $1.988B |
| Operating income (loss) | $537M | ($147M) | $915M | ($449M) |
| Net income (loss) from continuing operations | $368M | ($414M) | $513M | ($892M) |
| Net income (loss) attributable to LVS | $312M | ($290M) | $459M | $2.240B |
| Diluted EPS attributable to LVS | $0.41 | ($0.38) | $0.60 | $2.93 |
| Adjusted property EBITDA (non-GAAP) | $973M | $209M | $1.765B | $319M |
Q2 operating margin was approximately 21% of revenue, versus a loss in the prior-year quarter. The six-month 2022 attributable earnings and EPS included $2.904B of income from discontinued operations, principally the Las Vegas property sale; continuing-operations earnings are more comparable.
- Revenue recovery: Q2 revenue rose 143% year over year, with Macao operations contributing $1.25B of the increase and Marina Bay Sands contributing $245M. Casino revenue increased 163%; rooms 205%; food and beverage 127%; mall 16%; and convention, retail and other 146%.
- Operating drivers: Management attributed improvement to the easing of Macao travel restrictions in late 2022/early 2023 and Singapore’s reopening. Macao adjusted property EBITDA was $541M in Q2 versus a $110M loss; Marina Bay Sands generated $432M, up from $319M.
- Costs and interest: Q2 operating expenses rose 68% to $2.005B, mainly with higher gaming taxes and activity-related costs. Q2 net interest expense was $210M versus $162M; the weighted-average debt interest rate increased to 5.4% from 4.3%. Higher rates also lifted interest income to $76M from $14M.
- Cash flow: Six-month operating cash flow from continuing operations was $1.382B, versus a $690M outflow in 2022. Investing cash outflow was $601M, including $362M of capital expenditures and the Nassau Coliseum acquisition. Financing cash outflow was $1.307B, chiefly reflecting $1.287B of debt repayments, including $1.198B on the Sands China revolving facility. Cash, cash equivalents and restricted cash declined $544M to $5.892B.
- Balance sheet at June 30: Cash and cash equivalents were $5.768B; total assets $22.270B; total liabilities $18.111B; and equity $4.159B. Long-term debt, including current maturities, was $14.920B, down from $15.978B at year-end 2022. Cash less reported debt was approximately $9.2B of net debt, before considering restricted cash.
Changes, liquidity and capital allocation
- Unrestricted cash was $5.77B. Available capacity under revolving facilities was $1.50B at the parent, $1.74B at Sands China and $435M in Singapore. An additional $2.72B Singapore delayed-draw term facility was not available until the MBS expansion cost estimate and schedule are delivered to lenders.
- Management said it believed liquidity was sufficient to support operations, planned projects and commitments. It reported compliance with debt covenants at June 30. The U.S. and Singapore leverage ratios were 3.7x and 2.2x, respectively, against stated maximums of 4.0x and 4.5x. Sands China’s financial-covenant waiver was extended through January 1, 2024, effective July 31, 2023, with revised future leverage limits.
- In May, Sands China lenders extended commitments to July 2025. The company repaid $1.20B on the Sands China revolving facility during the first half. The parent’s dividend and minimum-liquidity restrictions were extended through December 31, 2023 under its facility amendment.
- In July 2023, the board reinstated a quarterly dividend of $0.20 per share, estimated at approximately $153M, payable August 16 to holders of record August 8. This was declared after quarter-end.
Outlook, projects and risks
- The filing provides no numerical revenue or earnings guidance. Management said visitation and operations had improved, but noted that future pandemic-related effects and the pace of travel recovery remain uncertain. Macao mainland-China visitation and gaming revenue remained below 2019 levels in the latest reported comparisons.
- The MBS expansion includes a hotel tower, rooftop attraction, convention facilities and a roughly 15,000-seat arena. Its stated minimum project cost is SGD 4.50B (about $3.32B at period-end exchange rates), but management expects total cost to materially exceed the original estimate due to inflation and higher labor and material costs. Construction commencement and completion dates were extended to April 2024 and April 2028. Approximately $1.07B had been incurred by June 30.
- The company was also undertaking an approximately $1.0B Marina Bay Sands renovation, expected to finish by year-end 2023, and acquired Nassau Coliseum for $241M to pursue a New York integrated resort. A New York casino license is not assured. Under the Macao concession, the company must invest at least 30.24B patacas (about $3.75B) by December 2032, of which it expects 27.80B patacas in non-gaming projects.
- Other key exposures include interest-rate and foreign-exchange movements, gaming-receivable collection, dependence on Macao and Singapore, regulatory and travel restrictions, competition, construction costs and execution, and debt refinancing and covenant compliance. Management estimated a 100-basis-point rate change could alter annual interest cost by about $46M.
- Material litigation includes the AAEC Macao matter: the company received a favorable trial-court judgment in 2022, but an appeal remains pending. Plaintiff’s amended claim is 96.45B patacas; management said it could not determine the probability of outcome or reasonably possible loss. A securities class action and related derivative action also remain pending; management likewise could not estimate probability or loss. Management intends to defend these matters.
Most important facts to verify
- Whether Macao and Singapore visitation, gaming volumes and win rates sustain the sharp year-over-year recovery; results remain sensitive to gaming outcomes and travel conditions.
- Actual cost, financing and schedule for the MBS expansion and renovation, including the conditions for drawing the delayed-term facility.
- Ongoing compliance with debt covenants, liquidity requirements and restrictions on dividends, especially as Sands China’s waiver and amended leverage thresholds change.
- Whether the requested Macao gaming-profit tax exemption is granted for the 2023–2032 concession period.
- Developments in the New York casino-license process and in the AAEC and securities-related litigation.