LAS VEGAS SANDS CORP quarterly report, Q3 FY2023

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Las Vegas Sands Corp. — Q3 2023 Form 10-Q

Reporting period: Three and nine months ended September 30, 2023. Las Vegas Sands operates integrated resorts in Macao and Singapore. Results rebounded as pandemic-era travel restrictions eased; the Las Vegas properties are reported as discontinued operations for the 2022 comparison.

Financial performance

  • Third quarter: Net revenue was $2.795 billion, up 178% from $1.005 billion. Operating income was $688 million, versus an operating loss of $177 million; operating margin was approximately 24.6%, versus negative 17.6%. Net income from continuing operations was $449 million, versus a $380 million loss. Net income attributable to LVS was $380 million, or $0.50 per diluted share, versus a $239 million loss, or $0.31 per diluted share.
  • First nine months: Net revenue was $7.457 billion, up 149% from $2.993 billion. Operating income was $1.603 billion, versus a $626 million loss; operating margin was approximately 21.5%, versus negative 20.9%. Continuing-operations net income was $962 million, versus a $1.272 billion loss. LVS-attributable net income was $839 million, versus $2.001 billion in 2022; the prior-year result included $2.861 billion of after-tax gain on the Las Vegas property sale.
  • Operating performance: Q3 consolidated adjusted property EBITDA, a non-GAAP measure, was $1.122 billion versus $191 million; nine-month EBITDA was $2.887 billion versus $510 million. Macao generated $631 million of Q3 EBITDA, compared with a $152 million loss, and Marina Bay Sands generated $491 million, up from $343 million. EBITDA excludes significant costs and cash uses and is not a substitute for GAAP earnings or operating cash flow.
  • Cash flow and investment: Nine-month operating cash flow was $2.221 billion, versus cash used of $840 million. Investing used $925 million, including $692 million of capital expenditures and $221 million paid for the Nassau Coliseum. Financing used $2.010 billion, including $1.803 billion of debt repayments and $153 million of dividends. Cash, cash equivalents and restricted cash ended at $5.698 billion; unrestricted cash was $5.574 billion.
  • Debt and liquidity: Debt carrying value was $14.394 billion at September 30, down from $15.978 billion at year-end 2022. Interest expense, net of capitalized amounts, was $200 million for Q3 and $628 million for nine months; the nine-month weighted-average interest rate rose to 5.4% from 4.4%. The company reported $4.17 billion available across revolving facilities, plus a separate $2.70 billion Singapore delayed-draw facility that cannot be drawn until expansion-project cost estimates and schedules are delivered to lenders. Management said it was covenant-compliant.
  • Balance sheet: Total assets were $22.124 billion and total equity was $4.452 billion at September 30. Current assets were $6.172 billion and current liabilities were $4.102 billion.

Material changes and drivers

  • Macao’s recovery drove much of the improvement: Q3 revenue there was $1.789 billion versus $258 million a year earlier. Marina Bay Sands revenue increased to $1.015 billion from $756 million. For the first nine months, revenue rose at both Macao operations and Marina Bay Sands as visitation and gaming volumes improved.
  • Q3 casino revenue increased 215% to $2.008 billion. Rooms revenue rose 178% to $342 million, supported by stronger occupancy and room rates; mall revenue rose 69% to $201 million, partly reflecting fewer pandemic-related tenant rent concessions and higher overage rents.
  • Operating costs rose with business levels. Nine-month casino expense increased 128%, with gaming taxes accounting for much of the increase. Interest expense also increased as benchmark rates rose, despite significant debt repayments during 2023.
  • S&P upgraded the company and Sands China to BBB- in July 2023, reducing coupons on outstanding Sands China senior notes by 0.25 percentage point per year from the first interest payment date after the upgrade.

Outlook, projects and risks

  • Management said travel and tourism disruptions had subsided, but the future impact remained uncertain. It believes cash, operating cash flow and available facilities can support operations and major projects. The filing gives no specific earnings or revenue guidance.
  • The Marina Bay Sands expansion is scheduled to begin construction by April 8, 2024, with completion by April 8, 2028. The 2019 minimum project-cost reference was SGD 4.50 billion (about $3.29 billion), but management expects the total cost to materially exceed that amount because of inflation and higher labor and material costs. Approximately $1.08 billion had been incurred by September 30. Separate MBS renovations were estimated at approximately $1.0 billion for Towers 1 and 2 and $750 million for Tower 3 and other changes.
  • Phase II of the Londoner Macao, including hotel-room renovations and new attractions, dining, retail and entertainment, has an estimated cost of $1.0 billion. Under the Macao concession, the company must invest at least 30.24 billion patacas (about $3.75 billion) in approved projects by December 2032.
  • The Nassau Coliseum acquisition cost $241 million and is intended to support a proposed New York integrated resort; obtaining a casino license is not assured. The associated land lease has a 99-year term.
  • Capital returns resumed with a $0.20-per-share quarterly dividend paid in August; another $0.20 dividend was declared for payment in November. In October, the board increased the remaining share-repurchase authorization to $2.0 billion and extended it to November 2025. No shares were repurchased during the first nine months; the company said it intended to resume repurchases in Q4.
  • Tax treatment in Macao is uncertain: requested gaming-profit tax exemption and a new shareholder dividend tax agreement for the new concession period were not assured. Other risks include travel and tourism recovery, regulation and concession/licensing requirements, interest and foreign-exchange exposure, gaming-receivable collection, project cost and execution, and dependence on Macao and Singapore operations.
  • Material litigation includes an appealed Macao claim by AAEC, amended to approximately $11.96 billion; the company said it could not determine the probability of loss or a reasonably possible loss range. A U.S. securities class action has remaining allegations concerning 2019–2020 statements; defense motions were pending, and the company likewise could not estimate the outcome or loss range.

Most important facts for investors to verify

  • Whether Macao and Singapore visitation, gaming volumes and property-level margins continue to recover, and how results compare with pre-pandemic levels.
  • Actual cost, financing, construction start and completion timing for the MBS expansion and renovations, and progress toward Macao concession investment commitments.
  • Debt maturities, interest-rate exposure, covenant requirements and availability of revolving or delayed-draw borrowing capacity.
  • Whether Macao tax exemptions and dividend-tax arrangements are granted, and the outcome and potential exposure of the AAEC and U.S. securities litigation.
  • Whether the company executes planned dividends and share repurchases while funding development projects and meeting debt obligations.