Las Vegas Sands Corp. (NYSE:LVS) Q1 2023 Earnings Call Transcript April 19, 2023
Las Vegas Sands Corp. beats earnings expectations. Reported EPS is $0.28, expectations were $0.2.
Operator Good day, ladies and gentlemen, and welcome to the Sands’ First Quarter 2023 Earnings Conference Call. At this time, all participants have been placed on a listen-only mode, but we will open the floor for your questions and comments following the presentation.It is now my pleasure to turn the floor over to Mr. Daniel Briggs, Senior Vice President of Investor Relations at Sands. Sir, the floor is yours.Daniel Briggs Thanks, Paul. Thank you all for joining the call today.With me today are Rob Goldstein, our Chairman and Chief Executive Officer; Patrick Dumont, our President and Chief Operating Officer; Dr. Wilfred Wong, President of Sands China; and Grant Chum, EVP of Asia Operations and COO of Sands China.Today’s conference call will contain forward-looking statements.
We will be making those statements under the safe harbor provision of federal securities laws. The company’s actual results may differ materially from the results reflected in those forward-looking statements.In addition, we will discuss non-GAAP measures. Reconciliations to the most comparable GAAP financial measure are included in our press release.We have posted an earnings presentation on our website. We may refer to that presentation during the call.And finally, for the Q&A session, we ask those with interest to please pose one question and one follow-up question, so we might allow everyone with interest the opportunity to participate.This presentation is being recorded.I’ll now turn the call over to Rob.Rob Goldstein Thank you, Dan, and thank you for joining the call.The results speak for themselves.
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There is a powerful recovery underway in Macao in both gaming and the non-gaming segments. The future looks very good for both markets. Our commitment to investing in both Macao and Singapore has never wavered.In Macao, following the relaxation of travel restrictions, increased visitation has driven gaming volumes, retail sales and hotel occupancy during the quarter. In other words, business is back. Sands China is in unique position to capture the opportunities. Our diversified IR model with continuous investment in non-gaming segments MICE, hotel suites, live entertainment, retail, food and beverage, positions us well to deliver strong growth in the years ahead.Our focus is on all segments in the Macao market, including international tourists.
We’re excited to have the opportunity to develop — to deploy more capital to expand our non-gaming offerings in Macao. The $3.8 billion commitment we made as part of the concession tender is just the baseline. We will invest more in this extraordinary market. I look forward to everyone having the opportunity to see, to witness The Londoner and the Four Seasons. The quality of our new products is exceptional.Marina Bay Sands delivered EBITDA of $394 million for the quarter. Mass win was an all-time property record of $549 million. Rolling volumes have nearly equalled the 2019 level. Our $1 billion suite and casino renovation program is progressing. More suite inventory will continue to come online throughout the remainder of the year. We will have 400 suites available by the end of 2023, up from just 150 prior to our renovation.Okay, let’s take some questions, and please ask away.
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Question-and-Answer Session
Operator: Thank you.
Ladies and gentlemen, the floor is now open for questions. [Operator Instructions] And the first question today is coming from Joe Greff from J.P. Morgan. Joe, your line is live.Joe Greff Hey, everybody. Congratulations on these results.Rob Goldstein Thanks, Joe.Joe Greff Rob, Patrick or Dan, whoever wants to take this first one. In Macao, presumably, March was better than February, and February, obviously, was better than January from an EBITDA and an EBITDA margin perspective. I was hoping you can maybe help us understand maybe the margin exit rate coming out of the quarter as we head here into the second quarter. If you’ve reported 31% margins for the quarter, March was something much higher than that. I was hoping you can help us maybe understand the cadence of EBITDA generation by month and maybe the same thing for margins by month, just so we’re, I guess, thinking about it the right way in terms of our projections going forward.Rob Goldstein Joe, I’ll ask Patrick to take it.
But before I do, I’ll just say, I think you have to realize, I think you do realize that Macao is in its infancy as far as a return to a more normal operating environment. It’s not even — I think we’re — it’s still early days there. This first quarter is still not representation of what can happen in Macao or will happen. So, I wouldn’t call it normal operating mode. And as you referenced, the acceleration in revenues is clearly there and that will accelerate margins.Patrick, you want to add some more color.Patrick Dumont Thanks. Rob. Joe, it’s an interesting question. I think we’ve been very focused on margins for many years at SCL. Unfortunately, operating environment during the pandemic made it very hard to see the benefit of some of the work that the team has done over the years to make the business itself more efficient.
I think in the long-run, we’re going to look to see some significant operating leverage and the performance out of Macao, particularly as we reach a higher level of performance in a more normalized environment.I will say that there was a material difference in performance across the quarter. January was obviously impacted because, on January 8, the opening occurred. And then, subsequent to that, February is typically a very slow month post the Lunar New Year. But March was a very exciting time. A lot of things were going full steam ahead. It’s very excited to see the recovery, the increase in tourism. And so, margins did recover to a more normal level.There’s a lot of noise in the quarter because of the start-up. But I think overall, our long-term outlook for margins is quite strong.
I think we’ve done a good job managing costs historically. I think the business itself was set up to be efficient. And I think in the long-run, given the mix of business, we should see a favorable margin operating environment.Grant, I don’t know if you have any comments you’d like to add to that.Grant Chum Sure. Yeah, thanks, Patrick. Yeah, maybe I can just give some color on the March trends. I think, Joe, you’re right, the market experienced strong recovery through the quarter. So, pretty much across all operating metrics, March was better than January and February average. I mean, just as a starting point, in Macao, overall visitations city-wide were up 22% in March versus the first two months of the year.For our portfolio, the gaming volume, non-rolling drop and slot handle were both up 10% in March versus the first two months.
Rolling volumes accelerated a lot more than that during that month, not least because we’re starting to get some traction on the foreign VIPs coming to Macao, to our properties. Hotel occupancy improved. Occupied room nights increased by 8% in the month versus the first two months, as we were able to operate more hotel rooms with the additional manpower that’s coming on board in the second half of the first quarter, and that will significantly increase further into the second quarter.So, overall, yes, I mean, March was a very pleasing month in terms of evolving trends. And as Patrick said, operating margin did recover and did recover more in March, but hopefully this is just the beginning.Joe Greff Great. Thank you for your comments there. You mentioned that 31% of your rooms in Macao were out of service related to labor constraints.
Where does that stand now? And can you talk about labor constraints now? And how are you remedying that?Grant Chum Sure. Rob, shall I take that?Rob Goldstein Yes, please, Grant. Yeah, you’re closest to that. Sure.Grant Chum I mean, hotel room inventory, Joe, availability, the actual availability for the first quarter, yeah, was around 7,700 rooms for SCL portfolio-wide. So effectively, we were accommodating as many rooms as we could, given the manpower constraints during the quarter. As I just referenced, it did improve somewhat in March as the additional hiring of the labor came on board, and the Macao government and the labor bureau have been very supportive in helping us to bring on the labor that we need to operate, especially the hospitality side of the business, the hotel and restaurants.As we go into second quarter, we would expect that, on average, second quarter, we can reach 10,700 rooms in terms of operating capacity.
So that’s roughly 3,000 additional hotel rooms that we will be able to operate in the second quarter, and that, obviously, takes us up to the much close to our physical available inventory. And we will reach the 12,000 probably sometime in the third quarter, in time for the summer peak season, as additional hiring and training completes through the second quarter.Rob Goldstein So, Grant, is it safe to say the labor issues are not event for the entire market by summertime?Grant Chum Yeah, Rob, I think for most of the market, for the second quarter, it’s effectively a non-issue from a hotel operating capacity. Obviously, the size of our inventories is the biggest. We’ll take a little bit time to get up to full capacity, but obviously, there is a big difference already that we can see between operating 10,700 rooms versus 7,700.Rob Goldstein Thanks, Grant.
Good job.Joe Greff Thank you, guys.Rob Goldstein Okay. Thank you.Operator Thank you. The next question will be Carlo Santarelli from Deutsche Bank. Carlo, your line is live.Carlo Santarelli Hey, everybody, thank you. Rob, just as it pertains to MBS, obviously, now Macao has gotten up and running and you’re starting to see things normalize with obviously the comments there on March. Have you guys seen anything change behaviorally? I mean, we see the results. It doesn’t look like anything’s changed. But I was just wondering if there was anything that you’ve seen change in terms of demand around either the high end or the premium mass segments in MBS post kind of resumption of activity in Macao, as it continues to ramp?Rob Goldstein Carlo, one thing I thought I understood and I think I was wrong in that respect was the super high-end premium customer in Asia.
