Las Vegas Sands Corp. — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022. Figures are in U.S. dollars; financial statement amounts are generally in millions unless stated otherwise. The Las Vegas operations were sold on February 23, 2022 and are reported as discontinued operations; continuing results primarily reflect Macao and Singapore.
Financial performance and liquidity
| Metric | Q1 2022 | Q1 2021 |
|---|---|---|
| Continuing net revenue | $943 million | $1.196 billion |
| Operating loss from continuing operations | $302 million | $96 million |
| Net loss from continuing operations | $478 million | $280 million |
| Adjusted property EBITDA, non-GAAP | $110 million | $244 million |
| Cash used in continuing operating activities | $500 million | $188 million |
| Continuing capital expenditures | $137 million | $291 million |
- Revenue declined 21.2%; casino revenue fell 27.5% to $627 million. Management attributed the decline mainly to lower Macao visitation and tighter regional travel restrictions. Singapore revenue also decreased.
- Operating margin was approximately negative 32% versus negative 8% a year earlier; adjusted property EBITDA margin was approximately 11.7% versus 20.4%. EBITDA is a non-GAAP measure and is not a substitute for operating income or cash flow.
- Reported net income attributable to Las Vegas Sands was $2.530 billion, or $3.31 per diluted share, versus a $278 million loss, or $0.36 loss per share, in Q1 2021. The 2022 result includes the Las Vegas sale gain; continuing operations remained loss-making.
- The Las Vegas sale generated approximately $5.05 billion in cash proceeds before transaction costs and working-capital adjustments, and a $3.61 billion pretax gain. The company recorded $2.861 billion as the after-tax gain on disposal in discontinued operations. It also received a $1.20 billion six-year seller-financed loan, reported as a loan receivable; no credit-loss allowance was recorded.
- At March 31, cash and cash equivalents were $6.430 billion, with $16 million of restricted cash. Total debt was approximately $14.977 billion, including current maturities. Continuing cash declined by $500 million from operations and $146 million from investing activities; sale-related proceeds drove the increase in reported cash.
- Available borrowing capacity under revolving facilities was approximately $3.48 billion: $1.50 billion at LVSC, $1.54 billion at SCL and $438 million in Singapore. A further $2.73 billion Singapore delayed-draw facility was not available until specified expansion-project cost and schedule documents were delivered to lenders.
- Interest expense, net, was $156 million; weighted-average debt was $14.953 billion at a 4.2% average interest rate. The S&P downgrade to BB+ raised SCL note coupons by 0.25 percentage points, with management estimating additional interest expense of $9 million in 2022 and $18 million annually thereafter through 2024.
Material changes and business developments
- Continuing adjusted property EBITDA fell 54.9% year over year. Macao properties collectively recorded negative $11 million, versus positive $100 million; Marina Bay Sands generated $121 million, down from $144 million.
- Casino revenue declines reflected reduced gaming volumes and, at some properties, lower win or hold percentages. Macao visitation and gaming activity remained well below pre-pandemic levels; the filing cites Macao government data showing Q1 visitation down 76.9% and gross gaming revenue down 76.7% versus Q1 2019.
- Development expense increased to $60 million from $9 million, primarily reflecting evaluation and pursuit of opportunities, including in Florida and Texas, and digital gaming efforts. Corporate expense rose to $59 million from $49 million.
- The Londoner Macao project was expected to reach approximately $2.20 billion in total cost, with $2.06 billion spent by quarter-end; remaining amenities were expected to be completed before year-end 2022. Singapore extended the deadline to commence the MBS Expansion Project to April 8, 2023; the construction budget and schedule remained under review.
- The company suspended its quarterly dividend program in April 2020; SCL also had not resumed dividends after its February 2020 interim payment.
Outlook, risks and contingencies
- COVID-19 and travel: Management said the pandemic’s 2022 impact would be material but could not be reasonably estimated. Macao operations faced travel limits, health safeguards and reduced operating levels; Macao–Hong Kong ferry service remained suspended. Singapore’s Vaccination Travel Framework began April 1, 2022, but future policy changes remained possible.
- Macao gaming rights: VML’s subconcession was due to expire June 26, 2022. Macao proposed extending existing contracts through December 31, 2022 while it amended gaming law and conducted a tender. VML requested an extension, subject to government approval and contract amendment. Failure to extend or obtain a new concession could halt gaming, transfer casino premises and equipment to the government without compensation, and potentially trigger debt repurchase or acceleration provisions.
- Debt covenants: Management reported compliance at March 31, 2022. Certain financial covenant requirements were waived through December 31, 2022 for LVSC and MBS, and January 1, 2023 for SCL. Future compliance may depend on operating recovery and additional waivers; no assurance was given that waivers would be granted.
- Sale support obligations: Under a contingent lease support agreement, payments to the Las Vegas buyer could be required through 2023 if operating results fall below agreed targets. Annual caps are $213 million for the post-closing 2022 period and $250 million for 2023. No payments had been made through March 31; management said it did not anticipate making them.
- Legal matters: On April 28, 2022, after quarter-end, the Macao court entered judgment for the defendants in the AAEC litigation, which had included a substantially increased claimed amount; the court also found the plaintiff litigated certain aspects in bad faith. The Daniels securities case was dismissed in March, but plaintiffs filed a second amended complaint in April; management could not estimate the outcome or possible loss. Other litigation disclosures are in the filing.
- Other notable items: In April, the company paid SGD 72 million (approximately $53 million) toward renewal of Marina Bay Sands’ gaming license, now expiring in April 2025. The filing also identifies foreign-exchange, interest-rate, gaming-receivable and seller-loan collectability risks.
Most important facts for investors to verify
- Progress and final terms of VML’s Macao extension and new concession process, including any changes to gaming law.
- Whether visitation and property-level earnings recover, especially in Macao, and the resulting effect on operating cash flow and covenant compliance after waivers expire.
- Cash remaining after sale-related taxes, transaction adjustments and any contingent lease support payments; the filing estimated approximately $4.36 billion in net sale proceeds after preliminary adjustments and taxes.
- Delivery of the MBS Expansion Project budget and schedule to lenders, availability of delayed-draw financing, and project cost and timing updates.
- Collection and credit quality of the $1.20 billion seller-financed loan, and any developments in the pending Daniels litigation or other material legal matters.