Las Vegas Sands Corp. — Q3 2021 Form 10-Q
Reporting period: Three and nine months ended September 30, 2021. Amounts are in U.S. dollars; financial results below are for continuing operations unless stated otherwise. Las Vegas operations are classified as discontinued operations and held for sale, so reported continuing-operation comparisons exclude them.
Business context and results
The company operates integrated resorts in Macao and Singapore. COVID-19 travel restrictions and operating limits continued to constrain visitation, particularly in Macao and Singapore, although results improved from the prior-year periods as visitation recovered and some restrictions eased. Las Vegas capacity restrictions were lifted June 1, 2021.
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Net revenue | $857 million | $446 million | $3,226 million | $1,925 million |
| Operating loss | $316 million | $523 million | $551 million | $1,274 million |
| Net loss from continuing operations | $594 million | $664 million | $1,154 million | $1,597 million |
| Net loss attributable to Las Vegas Sands Corp. | $368 million | $565 million | $838 million | $1,386 million |
| Loss per share attributable to Las Vegas Sands Corp. | $0.48 | $0.74 | $1.10 | $1.81 |
| Adjusted property EBITDA, continuing operations (non-GAAP) | $47 million | $(163) million | $535 million | $(239) million |
Revenue increased 92% year over year in Q3 and 68% over nine months, led by Macao. Q3 operating margin was approximately negative 37% (versus negative 117%); nine-month operating margin was approximately negative 17% (versus negative 66%). These are calculated from reported revenue and operating loss. Higher gaming taxes and operating costs accompanied the revenue recovery; Q3 casino expense increased $177 million, including a $143 million increase in gaming taxes.
Discontinued Las Vegas operations generated revenue of $399 million in Q3 and $828 million over nine months, with net income of $99 million and $75 million, respectively. Their adjusted property EBITDA was $132 million and $136 million, respectively.
Cash flow, debt and liquidity
- Cash: $1.644 billion unrestricted cash and cash equivalents, plus $16 million restricted cash, at September 30, 2021. Continuing-operations cash and restricted cash totaled $1.660 billion.
- Debt: $14.535 billion total long-term debt carrying value, including current maturities, compared with $14.004 billion at December 31, 2020. Long-term debt excluding current maturities was $14.462 billion.
- Cash flows, nine months: Continuing operating activities used $345 million; continuing investing activities used $638 million, including $640 million of capital expenditures; continuing financing activities provided $562 million. Cash, cash equivalents and restricted cash decreased $436 million across continuing and discontinued operations.
- Borrowing availability: $1.50 billion under the LVSC revolver, $2.0 billion under the SCL revolver and $436 million under the Singapore revolver. A further SGD 3.69 billion (about $2.71 billion) remained available under the Singapore delayed-draw facility, restricted to Marina Bay Sands expansion capital expenditures.
- Interest: Nine-month net interest expense was $469 million, up from $376 million; weighted-average debt and interest rate were $14.509 billion and 4.4%, versus $13.190 billion and 3.9%.
Material changes and unusual items
- In September, Sands China issued $1.95 billion of senior notes due 2027, 2029 and 2031, with coupons of 2.30%, 2.85% and 3.25%, and used proceeds plus cash to redeem $1.80 billion of 4.60% notes due 2023. The refinancing resulted in a $137 million loss, including a $131 million make-whole premium.
- The company entered definitive agreements to sell its Las Vegas real estate and operations for approximately $6.25 billion enterprise value. The transaction was expected to close in Q1 2022, subject to approvals and other conditions. Consideration includes approximately $4.0 billion cash for real estate, $1.05 billion cash for operating assets and liabilities, and $1.20 billion seller financing.
- After closing, a contingent lease-support agreement could require payments tied to Las Vegas performance through 2023, subject to an annual cap of up to $250 million, prorated depending on closing timing.
- Capital expenditures were $640 million over nine months, including $440 million for The Londoner Macao. The company estimated The Londoner Macao and completed Four Seasons suites development costs at approximately $2.2 billion, with $1.9 billion spent by September 30.
- Quarterly dividends remained suspended. Management reported compliance with debt covenants, but financial covenant waivers extend only through specified dates: December 31, 2022 for LVSC and MBS, and January 1, 2023 for SCL.
Outlook, risks and contingencies
- Management said the pandemic’s effect on 2021 results, cash flows and financial condition would be material but could not be reasonably estimated. Travel restrictions, visitation, operating limits and government policy changes remain key uncertainties; management cited cost and capital-spending controls and available liquidity as mitigants.
- The Macao gaming subconcession expires June 26, 2022. If not renewed or extended, gaming operations could cease and casino premises and gaming equipment could transfer to the government without compensation. The company said it believes renewal or extension will occur, but the process and outcome remain uncertain. Specified gaming-law changes could also trigger note repurchase rights and credit-facility default consequences.
- The Marina Bay Sands expansion is estimated at SGD 4.5 billion. A construction-cost estimate and schedule are due to lenders by March 31, 2022; failure to deliver would prevent further delayed-draw borrowings until delivered.
- In the Macao action brought by Asian American Entertainment, the plaintiff’s amended claim is 96.45 billion patacas (approximately $12.03 billion at the filing’s stated exchange rates). The trial was ongoing; management could not determine the probability of outcome or reasonably possible loss.
- A putative securities class action and a related derivative action were pending. Management likewise could not determine the probability of outcome or reasonably possible loss.
- The Las Vegas sale carries execution, regulatory, transition, seller-financing repayment and contingent-support risks. The filing also notes foreign-exchange and interest-rate exposure, including potential effects on debt and transaction losses.
Most important facts for investors to verify
- Whether Macao and Singapore travel and operating restrictions ease, and whether that produces sustained visitation and cash-flow recovery.
- Progress and terms of Macao’s concession-renewal process before the June 2022 subconcession expiration.
- Completion, timing, proceeds and final conditions of the Las Vegas sale, including the seller note and contingent lease-support exposure.
- Compliance with debt covenants after current waivers expire, and continued access to revolver and expansion-project financing.
- Updated costs, schedule and financing requirements for The Londoner Macao and Marina Bay Sands expansion.
- Developments in the Macao litigation and securities/derivative actions, for which the filing provides no clear estimate of potential loss.