Las Vegas Sands Corp. — Q2 2020 Form 10-Q
Reporting period: Three and six months ended June 30, 2020. Unaudited consolidated results cover the company’s Macao, Singapore and Las Vegas operations. The COVID-19 pandemic and related travel restrictions, closures and capacity limits severely disrupted all three markets.
Financial results and liquidity
| Metric | Q2 2020 | Q2 2019 | Six months 2020 | Six months 2019 |
|---|---|---|---|---|
| Net revenue | $98 million | $3.334 billion | $1.880 billion | $6.980 billion |
| Operating income (loss) | $(922) million | $894 million | $(867) million | $1.865 billion |
| Net income (loss) | $(985) million | $1.108 billion | $(1.036) billion | $1.852 billion |
| Net income (loss) attributable to LVS | $(820) million | $954 million | $(821) million | $1.536 billion |
| Adjusted property EBITDA | $(547) million | $1.266 billion | $(110) million | $2.718 billion |
- Q2 revenue declined 97.1%; six-month revenue declined 73.1%. Casino revenue was only $10 million in Q2, down 99.6% year over year.
- At June 30, cash and cash equivalents were $3.016 billion, with $16 million restricted. Total debt was $13.838 billion, including $71 million of current maturities; long-term debt was $13.767 billion.
- Available revolving credit capacity was approximately $3.945 billion across U.S., SCL and Singapore facilities. An additional SGD 3.75 billion (approximately $2.69 billion) delayed-draw facility was restricted to MBS expansion capital expenditures.
- Six-month operating cash flow was a use of $1.022 billion; capital expenditures were $702 million. Cash, cash equivalents and restricted cash fell by $1.210 billion to $3.032 billion.
- Interest expense, net, was $118 million in Q2 and $249 million for six months. The six-month weighted-average interest rate was 3.9%, versus 4.6% in 2019.
Changes versus prior comparable periods
- Properties faced shutdowns and sharply reduced visitation: Macao gaming was suspended in February and resumed later that month under safeguards; Singapore operations were suspended beginning April 7; and Las Vegas operations closed March 18 and reopened June 4 with restrictions.
- Q2 adjusted property EBITDA was negative in Macao ($(312) million), Marina Bay Sands ($(113) million) and Las Vegas ($(122) million). For the first half, Macao was $(245) million, Marina Bay Sands was $169 million and Las Vegas was $(34) million.
- Six-month 2019 results included a $556 million gain on the sale of Sands Bethlehem and $1.160 billion of sale proceeds. The sale closed in May 2019, so comparisons also reflect a smaller portfolio in 2020.
- Mall revenue was reduced by rent concessions of $170 million in the first half, including $111 million in Q2. Six-month capital expenditures rose to $702 million from $453 million, primarily reflecting Macao construction and development.
Outlook, management commentary and risks
- Management said the pandemic’s impact on 2020 results, cash flows and financial condition would be material, but could not be reasonably estimated. No quantified earnings or revenue guidance was provided.
- Management cited cash, available credit and cost and capital-spending reductions as supporting ongoing operations and major construction projects. The filing says management believed the company was in compliance with debt covenants at June 30.
- SCL lenders waived specified leverage and interest-coverage tests through July 1, 2021; MBS received covenant relief through December 31, 2021. The U.S. facilities were not described as receiving equivalent waivers; management reported U.S. leverage of 1.4x against a 4.0x maximum.
- SCL issued $1.5 billion of senior notes in June 2020: $800 million of 3.800% notes due 2026 and $700 million of 4.375% notes due 2030, for incremental liquidity and general corporate purposes.
- The company paid a $0.79 per-share quarterly dividend in March, then suspended its quarterly dividend program in April. SCL also did not pay a final 2019 dividend.
- Londoner Macao work continued, with phased completion expected during 2020–2021; total Macao development costs were estimated at approximately $2.2 billion. The MBS expansion was estimated at SGD 4.5 billion, with the construction estimate and schedule deadline extended to June 30, 2021.
- Key uncertainties include renewed closures, travel restrictions, weak tourism and MICE demand, fixed property costs, construction or supply-chain disruption, credit collections, foreign-exchange movements and access to financing.
- In the AAEC Macao litigation, the plaintiff’s requested claim was increased to 96.45 billion patacas (approximately $12.08 billion). Trial was rescheduled to June 16, 2021; management said it could not determine the probability of outcome or any reasonably possible loss and intended to defend the matter vigorously.
Most important facts for investors to verify
- Whether travel restrictions, visitation, property capacity limits and operating conditions improved after the filing date, and whether operations remained open.
- Cash burn, unrestricted cash availability by subsidiary, borrowing capacity and any further debt or covenant amendments.
- Progress and remaining cost and funding requirements for Londoner Macao and the MBS expansion.
- Whether mall rent concessions, credit-loss provisions and customer receivable collections changed materially.
- Developments in the AAEC litigation and any updated assessment of potential exposure.