$LVS Las Vegas Sands Corp Q3 2023 Earnings Conference Call

Thanks for joining us today. Macau delivered $630 million of EBITDA for the quarter, and we are only eight months into our post-COVID reopening. These are early days. We began in Q1 with $400 million EBITDA. Q2 we did $540 million EBITDA, and Q3 now $630 million EBITDA. We look forward to growth in both the gaming and non-gaming revenue to lift the entire market. Sands China has the largest share of non-rolling table win, rolling table win, and slot and ETG win. We've always believed that the completed Londoner will meet and perhaps exceed the earning power of the Venetian. Our future growth in Macau is tethered to these powerful assets, which have all the variables necessary to drive ROI for years ahead, whether it's rooms, gaming capacity, retail, entertainment, or food and beverage. We have stellar assets. There is speculation about future growth of Macau. The relevant question is: can the market grow to $30 billion, $35 billion, $40 billion GGR and beyond? We are firm believers that it will, and may occur on a much shorter timetable than anyone realizes. This underscores our confidence in returns that will be generated by our capital investment programs in our portfolio. We are staunch believers in the growth of the Macau market in the near and long term. LVS has invested $15 billion in Macau, which is the most important land-based market in the world. A few reference points to consider: third quarter EBITDA represents strong growth when compared to previous quarters. As I mentioned, our retail business in Macau has far exceeded pre-COVID numbers. I expect the gaming portion of our business to follow the same trajectory as Singapore and accelerate in 2024. Let's look at Singapore. Six quarters post-reopening, MBS delivered a $490 million quarter. The power of this building is evident based on the results, despite the disruptive impact of our ongoing $1.75 billion renovation program. Disruption notwithstanding, MBS is hitting on all cylinders from a gaming, lodging, and retail perspective. Slots and ETGs at MBS are approaching a billion dollars annually. Non-rolling tables are exceeding $20 million of drop per day. The ADRs are escalating, and our retail component is delivering far beyond pre-COVID numbers. MBS is a testament that quality assets prevail and validates the thesis that reinvesting in our assets will generate sustaining returns. MBS has it all: an iconic building with superb decor and service levels which attract the most desirable customers in every segment. At the completion of both phases of our refurbishment program, MBS will feature 770 suites. We used to have 200 suites before the refurbishment. There is no denying its future. How far can MBS go? Our expectation starts with $2 billion or more in the future of even annualized EBITDA. Finally, we're bidding for a license in New York. We've secured the Nassau Coliseum and are in the process of gaining the necessary zoning requirements to move forward. We're also receiving strong local support from the local community. The resort will cost in excess of $5 billion, which enables us to develop a five-star resort with unlimited appeal. This is simply an extraordinary opportunity we are very excited about. Our bid is compelling, and we are worth the license. We will be in the ground as quickly as possible. Thanks for joining us again. I'm going to turn the call over to Patrick before we move on to some Q&A.

Well, you know, the beauty of our business model is we've got plenty of capacity to do whatever you want. We'll move to the market. As you saw in the quarter, we moved tables around to accommodate where we saw demand. But again, with the number of rooms and our table capacity, we can grow into any market, any segment that shows strength, and that's what happened here. The truth is, I expect both to move forward in the future and show growth both in base and premium. But our assets are built to be just this, which is versatile, able to accommodate the market. Grant, maybe have some color. That's true of any market. The only difference in this market for me is we have such a huge amount of table supply that we're very nimble.

Hey, Joe, can't help but be somewhat opportunistic as we look at the market. Our stock is trading roughly at COVID levels, and we think our buildings are going to make $5 billion and more, $40-50 billion over the next decade. It's hard not to look at the stock as opportunistic. On the other hand, we also like to be long-term and be consistent, so it's kind of a mixture of both. But it's hard for us to sit here today and look at pricing as if we're closed in Macau, half-open in Singapore, and not think there's opportunity. But we also have a long-term perspective.

We traditionally don't talk about the current quarter. We'll keep that intact here as well. I think you look at the numbers in the market as they print. The strength of Golden Week is pretty evident. The numbers print by the government and other sources, but we never comment inside the quarter.

Yeah, I'll turn to Grant there. There will be some disruption, but we still feel as though the initial results at the Londoner are obviously we're looking at as a future hope. The Londoner prospects. Grant, take it through 2024, both room and casino, and how we see it.

I'll also add to Grant's comment, Stephen. Again, the size and scale of our portfolio gives us flexibility. You have 10,000 other rooms. Money and customers can move too. So I think we minimize the disruption and maximize the opportunity to deploy the rest of our assets to keep our business strong despite that. And Patrick's comment, the Londoner looks like it's going to be a juggernaut. It'll be neck and neck, maybe exceed. Those two assets are going to be hugely important in the future. But getting through 2024, while not easy, I think it's very manageable if the team deploys other assets in the portfolio intelligently.

Well, it's happening, isn't it? I mean, this quarter we just did $490 million. I hate to say, but it's happening. Good question. Do we need China? We always need China, let's be clear about that. We always want more business. Small country. But I think what you're seeing in Singapore is a very diverse bunch of assets all coming together. I think the biggest story is the suite product, which you haven't seen. It's pretty extraordinary when it goes from 200 to 770. It's just a very potent combination of great food and beverage, great service, and enables us to get places we've never thought of before. The real question for me is, I think $2 billion is our goal in the future and beyond. The real question is, when you get more China, when you get more flights, when you open up totally, you know, the funny thing about Singapore is it's been open about six quarters now. If you follow the trajectory of Singapore, we're hoping the same thing after Macau. We're very early stages in Macau. Singapore opened up, it wasn't that powerful the first couple quarters, and you know, it limped along. All of a sudden it caught fire, and now it's starting to really perform. We're surprised how strong it is, and because the place is kind of torn up, you've been there, it's got some real challenges from a physical perspective. So to answer your question, we think we can get there without more. We want more. We'll take all the customers we can get. We think this is a uniform asset. It's one of those places you just want to go to. You'll pay up for it, whether it's your room product or the gaming opportunity. It just is going to keep getting stronger. Do we think it's achievable? Yes. But we prefer to have all airlift coming in and all the potential customers trying to visit. Sure. We just have a huge faith in this product. We don't think $2 billion is the end. It's the beginning. So I do think it's important to look at Macau and give it the benefit of understanding we've gone from a dead stop in January back to, after very difficult times of no one coming, to about 80% of Q3 2019 nine months later. But how much further can it go? I think a lot more. If you look at Singapore, this trajectory is very telling of what's going to happen in Macau. So I think again, another illustration of what's happening in Singapore is on page 25. I think the retail slide is just, you have to look at it. I don't know how many malls you guys spend time in, but $3,000 a foot is a pretty good local mall. The Four Seasons Mall is $8,400 a foot in the luxury segment and $3,700 in the non-luxury. Even Macau, which is not a necessary luxury mall, is doing $1,700 a foot. So the power of the spending right now in retail, the opportunity always seems to happen first, the gaming seems to follow. It happened in Singapore, it's going to happen in Macau. But to your question, we have huge confidence in the future of MBS, and I think our investments will prove in the end what works in these places is supremely strong buildings with great service and great architecture, and that's what you have residing in MBS.

George, I would say in my experience, entertainment is an essential component of any top-tier resort, and you can never underestimate how powerful it is as a statement of the customer longevity commitment. And honestly, for us, it's been a staple. The only regret I have is we can't do more because it's so powerful. Just like retail, it's part of the package. It makes people want to come and visit. It's the reason why we have been so successful at the Venetian with the arena, and it was true in Las Vegas, it was true in Atlantic City, it was true in any place I ever worked. It's always been essential. It would be very powerful in Singapore as well. So to me, it's not even a question. It's a question of how we do more of this stuff because it pays and pays handsomely.

It's a commitment to Phase 1 because the product, as good as it was externally architecturally, it lacked, frankly, it was necessary. No matter what happens in Phase 2, it's the best money we could have spent to make that product successful and stronger. It's going to pay off in dividends in the future. The room product was lacking both from a size perspective but also a finish perspective. Some of the casino space was just not very good. I always felt that MBS, as good as it was architecturally, lacked the pizzazz inside the building. And in our business, great buildings prevail and prevail for decades and just grow and grow. So that money is money very well spent. It's not connected at all. It's meant to make MBS a very powerful $2 billion-plus product we built in Singapore years ago. The speculation was it could never be more than $500-600 million EBITDA. Here we are, we're going to push through $2 billion and beyond. And I think it's a testament to reinvestment and spending money wisely. It doesn't have any association with Phase 2.

You know, you're right to harp on something we speak about quite a bit now. Your question is an excellent one, and we look at it all the time. I was on the phone last night with our team in Macau just discussing it. These are things we don't have an honest answer to tell you exactly why the entire industry seems to be down a point or up two points. It's very impactful. Kind of money we're talking about would be worth probably a couple hundred million dollars a year to us. We go back 2% EBITDA. So it's very impactful. We just don't have a good answer. Is it mix? Maybe. Is it the removal of junket and that type of thing? Maybe. But until we have a really coherent and certain answer, we don't want to give you a response. I'd like to believe the whole industry trades up a point or two. I'd vote for that. I'm sure our competitors would. But we didn't make it happen. We need to perhaps know. It's very simple: the math on the baccarat games doesn't change. The customer bets can change, ties and players can change, flat bets change. So the point is, we don't know the answer ourselves. A lot of people are scratching their heads. Until we have a certain answer we can say with confidence, I want to hope along with you that we trade up to 24 again because it would be a wonderful thing for us. With our volumes, it would be incredibly impactful. We'd be at $700 million probably this quarter of EBITDA. So excellent question. I don't have an excellent answer. We're working through it. Grant, any you add to that?

Before you go, we're really in a new world in Macau, and I think people really don't understand how quickly this thing has reopened. I mean, I know you know it, but the problem is, you know, Vegas opened, regionals opened, Singapore opened quite a while ago. Macau is new to the game. It's only been open for eight months. Eight months. So things are evolving and turning. It's happening quickly. Again, I think it's instructive to look at the trajectory of what happened in Singapore. Go back to eight months after they opened, and watch what's happened in double that time. It's incredibly interesting to see the comparisons. I think this hold percentage thing will evolve, and we don't know. Wouldn't it be wonderful to find that we're back at 24 in Q2? It would be wonderful. But without certainty, we would only give you an answer which we don't have clarity on ourselves. And when we do, we'll be happy to share with the market.