Las Vegas Sands Corp. — Q1 2020 Form 10-Q
Reporting period: Three months ended March 31, 2020. Unaudited results reflect the onset of the COVID-19 pandemic. Unless otherwise noted, figures are in U.S. dollars.
Business context and reporting period
Las Vegas Sands operates integrated resorts in Macao, Singapore and Las Vegas. Macao casinos were suspended for 15 days in February (22 days at Sands Cotai Central); the Las Vegas properties closed beginning March 18. Marina Bay Sands remained open through quarter-end but visitation fell; Singapore ordered its closure beginning April 7. The prior-year comparison includes Sands Bethlehem, sold in May 2019.
Financial results and liquidity
| Metric | Q1 2020 | Q1 2019 |
|---|---|---|
| Net revenue | $1.782 billion | $3.646 billion |
| Operating income | $55 million | $971 million |
| Net income (loss), consolidated | $(51) million | $744 million |
| Net income (loss) attributable to LVS | $(1) million | $582 million |
| Adjusted property EBITDA (non-GAAP) | $437 million | $1.452 billion |
| Net cash from (used in) operations | $(370) million | $820 million |
| Capital expenditures | $320 million | $240 million |
Revenue fell 51.1%; operating income fell 94.3%. Operating margin was approximately 3.1%, compared with 26.6% a year earlier. Adjusted property EBITDA margin was approximately 24.5%, versus 39.8%. Casino revenue declined 55.8%; rooms 40.4%; food and beverage 40.1%; mall 35.6%; and convention, retail and other 33.6%. Operating expenses declined 35.4%, less than the revenue decline.
At March 31, cash and cash equivalents were $2.602 billion, plus $16 million restricted cash. Total debt was $12.322 billion, including current maturities; long-term debt net of current maturities was $12.253 billion. The company reported $1.50 billion available under the LVSC revolver, $2.02 billion under the Sands China revolver and $416 million under the Singapore revolving facility. A further SGD 3.75 billion (about $2.63 billion) was available under a Singapore delayed-draw term facility exclusively for MBS expansion capital expenditures.
Material changes versus the prior comparable period
- Macao revenue decreased by approximately $1.52 billion and Marina Bay Sands revenue by $155 million, principally due to pandemic-related travel disruption and closures. Las Vegas revenue was also affected by reduced visitation and the March closure.
- Consolidated adjusted property EBITDA declined 69.9% to $437 million. Macao EBITDA was $67 million versus $858 million; Marina Bay Sands was $282 million versus $423 million; Las Vegas was $88 million versus $138 million.
- Operating cash flow swung from $820 million generated to $370 million used. Cash, cash equivalents and restricted cash declined $1.624 billion during the quarter, ending at $2.618 billion.
- Interest expense, net, decreased to $131 million from $141 million; weighted-average debt was $12.483 billion and the weighted-average interest rate was 4.2% versus 4.6%.
- Other income was $37 million versus other expense of $21 million, primarily reflecting foreign-currency transaction gains. Income tax expense was $25 million despite a $26 million pretax loss, reflecting the geographic mix of earnings and taxes.
- Q1 dividends included $603 million declared on LVS common stock and $308 million paid to noncontrolling interests. In April, LVS suspended its quarterly dividend and Sands China announced it would not pay a 2019 final dividend.
Outlook, management commentary, risks and unusual items
- Management said the pandemic’s effect on 2020 results, cash flows and financial condition would be material, but could not be reasonably estimated. Reopening timing, travel restrictions, customer demand and the pace of recovery remained uncertain; the filing gives no quantified earnings or revenue guidance.
- Management cited a strong balance sheet and liquidity, and said it believed the company could support continuing operations and major projects. It had initiated cost and capital-spending reductions to limit nonessential cash outflows. Future cash generation, fixed operating costs and access to financing remain important risks.
- Sands China lenders waived specified leverage and interest-coverage covenant tests for periods from January 1, 2020 through July 1, 2021, subject to stated terms. Management said the company was in compliance with debt covenants at quarter-end; U.S. and Singapore leverage ratios were 1.2x and 2.1x, respectively.
- Capital projects continued: the Londoner Macao and Grand Suites at Four Seasons were part of approximately $2.2 billion of Macao development projects; MBS expansion was estimated at SGD 4.5 billion. Timing and ultimate costs could change, and pandemic disruption could affect construction.
- Macao mall tenants received $59 million in rent concessions in the quarter. The company also provided up to 2,000 hotel rooms for quarantine use at Sands Cotai Central.
- A Macao lawsuit seeks 96.45 billion patacas (about $12.08 billion) in claimed lost profits. The matter is at a preliminary stage; management said it could not determine the probability of outcome or reasonably possible loss and intends to defend it vigorously.
- Key risks include extended closures or travel limits, prolonged weakness in tourism and discretionary spending, construction and supply-chain disruption, debt covenant and refinancing risks, foreign-exchange exposure, gaming regulation and collection of gaming receivables.
Important facts for investors to verify
- Subsequent reopening dates, operating restrictions, visitation trends and the duration of the pandemic’s effect on each market.
- Cash burn, actual availability and conditions of credit facilities, and whether covenant waivers or further lender relief are needed.
- Timing, remaining commitments and potential cost changes for Macao and Singapore development projects.
- Whether mall concessions, credit-loss provisions and gaming-receivable collections worsen as economic conditions evolve.
- Updates on the AAEC litigation, dividend policy and Sands China distributions.