Las Vegas Sands Corp. — Q2 2022 Form 10-Q
Reporting period: Three and six months ended June 30, 2022. Unaudited results cover continuing operations, principally the company’s Macao and Singapore resorts; Las Vegas results are reported as discontinued operations after the February 23, 2022 sale.
Financial results
| Metric | Q2 2022 | Q2 2021 | Six months 2022 | Six months 2021 |
|---|---|---|---|---|
| Net revenues | $1.045 billion | $1.173 billion | $1.988 billion | $2.369 billion |
| Operating loss | $147 million | $139 million | $449 million | $235 million |
| Continuing-operations net loss | $414 million | $280 million | $892 million | $560 million |
| Net income (loss) attributable to LVS | $(290) million | $(192) million | $2.240 billion | $(470) million |
| Adjusted property EBITDA | $209 million | $244 million | $319 million | $488 million |
| Operating cash flow, continuing operations | Not separately stated | Not separately stated | $(690) million | $(105) million |
| Capital expenditures | Not separately stated | Not separately stated | $335 million | $448 million |
Q2 revenue declined 10.9% year over year; first-half revenue declined 16.1%. Macao revenue fell $480 million in Q2 and $707 million in the first half versus comparable 2021 periods, while Marina Bay Sands revenue increased $352 million and $326 million, respectively. First-half casino revenue declined 21.8%; food and beverage grew 9.4%, while rooms and mall revenue declined 9.0% and 2.3%.
Adjusted property EBITDA is a non-GAAP measure. Its margin on continuing-operations revenue was approximately 20.0% in Q2 2022 versus 20.8% in Q2 2021, and 16.0% for the first half versus 20.6%. The first-half attributable profit principally reflects a $2.861 billion after-tax gain from the Las Vegas disposal; it does not indicate profitable continuing operations.
At June 30, cash and cash equivalents were $6.452 billion, restricted cash was $16 million, total debt was $15.379 billion (including $73 million current maturities), and total equity was $4.215 billion. Cash increased substantially following the Las Vegas sale. Available revolving capacity was approximately $2.963 billion across the U.S., SCL and Singapore facilities; an additional $2.65 billion Singapore delayed-draw facility was conditional on delivery of expansion-project cost and schedule materials. First-half interest expense, net, was $318 million; income tax expense was $112 million despite a pretax loss of $780 million.
Material changes and notable transactions
- The Las Vegas properties and operations were sold for approximately $6.25 billion. LVS received approximately $5.05 billion cash at closing before adjustments and transaction costs, plus a $1.20 billion, six-year seller-financing loan. The company recognized a $3.611 billion pretax disposal gain and $750 million related income tax expense. The loan’s carrying value was $1.20 billion; estimated fair value was $1.10 billion, with no credit-loss allowance recorded.
- Continuing-operations cash used was $690 million in the first half, compared with $105 million used a year earlier, reflecting Macao operating losses and working-capital needs. Cash provided by financing activities included $5.032 billion of transactions with discontinued operations and $700 million of SCL facility borrowings.
- Long-term debt increased from $14.795 billion at year-end 2021 to $15.379 billion at June 30, primarily reflecting SCL revolving-facility draws. Credit-rating downgrades triggered a 0.50 percentage-point increase in SCL senior-note coupons, expected to add $16 million of 2022 interest expense and $36 million annually through 2024.
Outlook, risks and contingencies
- COVID-19 and demand: Macao visitation and gaming activity remained severely depressed amid travel restrictions and outbreaks. The government ordered casinos and other non-essential businesses closed July 11–22, 2022, followed by a limited operating period; timing of a return to normal operations was unknown. Management said the pandemic’s 2022 impact would be material but could not be reasonably estimated. Singapore visitation improved as restrictions eased.
- Macao concession: VML’s subconcession was extended only through December 31, 2022. The company said it expected to extend or obtain a new concession, but gave no assurance. The new gaming law changes concession terms and requirements. VML must provide a 2.31 billion pataca (about $286 million) bank guarantee, and specified gaming areas and equipment are subject to reversion without compensation. Failure to secure a concession could materially harm operations and could trigger noteholder put rights or debt acceleration.
- Liquidity and covenants: Management reported compliance with debt covenants at June 30, 2022, while financial-covenant waivers were in place through December 31, 2022 for LVSC and MBS and January 1, 2023 for SCL. Future compliance depends partly on recovery and restrictions; further waivers may be needed and are not assured. The company had suspended its quarterly dividend program.
- Projects: The Londoner Macao Arena and mall expansion were completed in the first half. The Londoner/Grand Suites project was expected to cost about $2.20 billion, with $2.11 billion spent by June 30. The approximately SGD 4.50 billion MBS expansion’s construction start deadline was extended to April 8, 2023; required lender cost and schedule materials had not been delivered, so related delayed-draw funding was unavailable. A separate approximately $1.0 billion MBS renovation was underway.
- Other contingencies: Potential Las Vegas sale support payments are capped at $125 million for July–December 2022 and $250 million for 2023; none had been made through June 30, and management did not anticipate payments. A Macao court entered judgment for LVS defendants in the AAEC case, but the plaintiff appealed; the claimed damages had been increased substantially, and management could not estimate the probability or range of loss. A securities class action and related derivative action also remained unresolved.
Important facts for investors to verify
- Subsequent developments in Macao casino reopening, travel restrictions, visitation and gaming revenue.
- Outcome and terms of the Macao concession tender, including the employee bank guarantee and possible asset reversion.
- Cash generation, debt balances, facility availability, covenant waivers and any additional waiver requirements.
- Collectability and terms of the $1.20 billion Las Vegas seller loan, and any contingent sale-support payments.
- Timing, financing and remaining costs of the MBS expansion and renovation projects.
- Appeals and potential exposure in the AAEC litigation and developments in the securities and derivative actions.