Business Context and Reporting Period
This Form 8-K, filed on September 8, 2021, by Las Vegas Sands Corp. (LVS), discloses financial highlights and liquidity information for its majority-owned subsidiary, Sands China Ltd. (SCL). The report focuses on the impact of the COVID-19 pandemic on SCL's operations in Macao, specifically covering the months of July and August 2021.
Key Financial Metrics
Revenue and Profitability
- Net Revenues: SCL reported US$265 million in July 2021 and US$148 million in August 2021, compared to US$43 million and US$53 million in the same periods in 2020.
- Operating Loss: Operating losses narrowed to US$25 million in July 2021 and US$83 million in August 2021, down from US$141 million and US$148 million in 2020.
- Net Loss: Net losses were US$63 million in July 2021 and US$125 million in August 2021, compared to US$165 million and US$175 million in 2020.
- Adjusted Property EBITDA: SCL achieved adjusted property EBITDA of US$44 million in July 2021 and a loss of US$14 million in August 2021, improving from losses of US$79 million and US$83 million in the prior year.
Liquidity and Debt
- Total Liquidity: As of August 31, 2021, SCL held US$2.56 billion in total liquidity.
- Cash Position: Included US$556 million in cash and cash equivalents (excluding restricted cash).
- Borrowing Capacity: Included US$2.0 billion in available borrowing capacity under the 2018 SCL Revolving Facility.
- Dividends: The board did not recommend a final dividend for the year ended December 31, 2020, or an interim dividend for the six months ended June 30, 2021.
Material Changes vs. Prior Period
Compared to the same periods in 2020, SCL experienced significant year-over-year improvements driven by increased visitation from mainland China. Gross gaming revenue from mainland China increased by 528.1% in July 2021 and 234.0% in August 2021. However, these figures remain significantly below pre-pandemic levels; July 2021 revenue was down 65.5% and August 2021 revenue was down 81.7% compared to 2019. Net losses decreased substantially year-over-year, and the company moved from a significant adjusted property EBITDA loss in July 2020 to a positive figure in July 2021.
Outlook, Risks, and Management Commentary
Management believes SCL has sufficient liquidity to support continuing operations and complete major construction projects despite the pandemic. However, the company faces significant risks related to unpredictable border restrictions in Macao. Tighter restrictions implemented in late July and most of August 2021, including nucleic acid testing requirements for travelers from Guangdong, limited visitation. While demand from visiting customers remains robust, the company expects the adverse impact of the pandemic to continue until it is contained. SCL has implemented cost and capital expenditure reduction programs to minimize cash outflow.
Investor Verification Checklist
- Verify the sustainability of the 528% year-over-year revenue growth in July 2021 given the subsequent tightening of border restrictions in August.
- Confirm the availability of the US$2.0 billion revolving credit facility and any covenants that may be triggered by continued losses.
- Monitor the Macao government's response to new COVID-19 cases, as this directly dictates border access and visitation volumes.
- Review the reconciliation of non-GAAP measures to understand the specific adjustments made to arrive at Adjusted Property EBITDA.
- Assess the timeline for the completion of major construction projects mentioned as a use of liquidity.