Welcome to the Las Vegas Sands Corporation Second Quarter 2014 Earnings Conference Call. I will now turn the call over to Mr. Daniel Briggs, Senior Vice President of Investor Relations.
Thank you, Mike. Before I turn the call over to Mr. Adelson, please let me remind you that today's conference call will contain forward looking statements that we are making under the Safe Harbor provisions of federal securities laws. The company's actual results could differ materially from the anticipated results in those forward looking statements. Please see today's release under the captioned forward looking statements for a discussion of risks that may affect our results.
In addition, we may discuss adjusted net income and hold normalized adjusted net income, adjusted EPS and hold normalized adjusted diluted EPS and adjusted property EBITDA and hold normalized adjusted property EBITDA, all of which are non GAAP measures. A definition and a reconciliation of each of those measures to the most comparable GAAP financial measures are included in the press release. Please note that this presentation is being recorded. We also want to inform you that we have posted supplementary earnings slides on our Investor Relations website for your use. We may refer to those slides during the Q and A portion of the call.
With that, let me please introduce our Chairman, Sheldon Adelson.
Thank you, Dan. Good afternoon, everyone, and thank you for joining us today. We are pleased with our financial results, which reflect continued execution of our principal strategic objectives. We delivered strong growth in revenue, cash flow, net income and earnings per share again this quarter, with our adjusted diluted earnings per share increasing 31% from the prior year's quarter to reach a 2nd quarter record of 0.85 dollars per share. We initiated a bonus program in Macao this quarter that impacted our EBITDA by approximately $29,000,000 and our adjusted earnings per diluted share by $0.03 That means and I want to make this clear, our EBITDA would have been $29,000,000 higher, which is $1,340,000,000 had we not initiated the bonus program.
We also meaningfully increased the return of capital to shareholders. And our $0.85 earnings per share would have been $0.88 Let me take you through some of the highlights of our results in Macau for the quarter. I suspect there are a number of common questions that you want to answer Q and A. So I'll take this opportunity to give you my perspective on the issues and drivers that impacted the quarter. The car adjusted property EBITDA grew by 22% to US801 $1,000,000 in quarter 2.
Had we not made the adjustment I mentioned previously, our Macao EBITDA would have been $830,000,000 and the growth would have been 27%. 27%. During the quarter, we again outpaced the market in terms of gaming revenue growth. Our gross gaming revenue was up 12% versus some market that was up 5%. Two points to note here.
Firstly, our mass stable and slot revenues continue to grow ahead of the market. Secondly, during the period when VIP is experiencing the slowdown, our business mix is clearly more defensive than the overall market as we have a much higher proportion of our gross gaming revenue and mass market revenue. For the Q2, our gaming revenue mix was 44 percent non VIP, whereas the Macau market, the overall Macau market was 60% VIP and 40% non VIP. The VIP segment represents just 17% of our departmental profit in Macau. Now let me give you some commentary in each segment.
With respect to VIP Gaming, the factors behind the slowdown have been well documented. 1, tighter liquidity conditions in both the Chinese economy and the junket system 2, the slowdown in the Chinese real estate market and 3, a general backdrop of uncertainty and caution in the economy. The latter has affected not just VIP gaming, but also other sectors of luxury spending. The press has extensively reported a crackdown of corruption in the PRC, not in Macau. As in the past, as I have experienced, that type of crackdown creates uncertainty and that uncertainty temporarily slows the VIP market in Macao.
Let me emphasize it's temporary and it's cyclical. I've seen that happen several times in the past in the last 10 years. Clearly, the World Cup had a negative impact on overall GGR in June, in particular in the VIP segment. June VIP revenues are down by 20% versus May this year. I had somebody check this out and what we found was that the same thing happened in 2010, the previous broke up.
The decline then was 24%, whereas in 2011 and 2013, the average decline month on month was only 11%. So there was a 24% drop during the World Cup 4 years ago. And whereas the traditional metajune drop for intervening years was only 11%. We aim to get our fair share of the VIP market, which albeit low margin is still a US30 $1,000,000,000 a year market. And we continue to invest in our premium direct segment, where we deal directly with VIP customers, which experienced a lower level of rolling volume decline in quarter 2 than our junket volumes.
At the same time, we will continue to reallocate resources between VIP and mass in order to optimize our profits. You will notice that compared to a year ago, we have reduced VIP table capacity by 28% and increased mass table capacity by 14%. As a result, our win per unit in VIP segment is actually up 32% year over year, while our mass win per unit is up 17%. With respect to mass table games, the market growth obviously continued to be very healthy with 33% growth. Suffice to say that even with the World Cup effect, the mass table revenue per day in June for all of Macau was only 1% lower than last October, the best month of 2013.
That is also the best that was also the best month in Macau's history up until the end of 2013. This is really worth noting. In terms of our own performance, we were impacted by low hold in the premium ad segment. We estimate that factor will contribute about a US32 million dollars negative impact on our revenue for the quarter. If we adjusted for this mass hold as well as the 14 month bonus, our Macao EBITDA would have been 8 $50,000,000 not the $801,000,000 that it is that we reported.
So it's a further adjustment that would bring it up $49,000,000 more to $850,000,000 Clearly, we have experienced very strong growth in premium mass. And as the segment becomes a greater proportion of our non rolling table win, the volatility at whole percentage naturally becomes more of a factor, especially over a 3 month period. Now I'll quick comment on business mix within nonrolling. As most of you will appreciate, we have a dominant position in the core market core mass segment. Given the sheer scale and breadth of our gaming and non gaming capacity in product.
Q2 was typically a bit slower in terms of the base mass business and the non gaming segments. As the second half progresses with the summer holiday months and then the seasonally strong October December months, the full extent of our competitive advantage in the mass market becomes much will become much more pronounced. I highlighted in the Q1 call our strategy of fully utilizing our room inventory for our high value mass gaming customers. We continue to execute very successfully in this strategy. Our database continues to grow rapidly.
Our revenue per room might remain stable despite a rapid increase in room usage and we continue to build customer loyalty. This is clearly evident in the continued success of the mass business since Sansco Dicentrum. I now want to make a few comments on margin. Sands China enjoys industry leading operating margins. This quarter we achieved 34% margin, up almost 200 basis points against the prior year.
There are many factors contributing to our superior profitability versus the competition. Business mix, operating efficiency and the ability of our properties to attract an outsized share of Macau Visitation. For example, in 2013, with just under 30,000,000 visitors to Macau, we had 63,000,000 visitations to our properties. That is outpacing the market. For every person that came in to Macau, we had 2 visitations in our combined properties.
We built the property a portfolio of properties that position us as the destination of choice for virtually every type of visitor coming to Macau. With that being said, there are a number of factors affecting the margin for the quarter. Firstly, there is the accrual for the 14 month bonus for our employees, which totaled $29,000,000 in the quarter. Secondly, there was the impact from low non rolling holding premium mass. And thirdly, the business mix was somewhat less favorable to margin.
Rob can elaborate on these drivers in more detail during the Q and A, but let me emphasize one point. We are committed to judiciously reinvesting in our business in Macau. This includes upgrading our physical product and nurturing and retaining our employees. We also have every intention of continuing to promote local talent to Macau. In business, there is strategy and there are tactics.
The core of our success today derives from having the right strategy from the outset. Today, everyone likes to talk about Macau's diversification from pure gaming, whereas we are actually delivering on all aspects of diversification. I want to point out that our competitors called their properties integrated resorts, but not one has the MICE facilities that we have, which is the most important characteristic of an IR. We are the creator of the integrated resource. We are the creator of the integrated resource.
And therefore, we are the very first and only true presenter of the convention based integrated resort business model. Let me highlight 3 truly unique differentiators. 1st, the scale of our hotel room inventory covering every price point in every customer segment. 2nd, our retail mall portfolio, which with completion of the Parisian will encompass 4 distinctly positioned, but complementary retail shopping experiences all under one roof. You won't have to walk outside and experience the weather to connect to all of our properties when they're completed.
It. The utilization of our pedestrian connection, raised pedestrian connection over the Cotai Strip has increased from year to year and I watch it every day about 60 percent and the end result of the retail mall on both sides of the pedestrian walkover. By the way, it's air conditioned and with moving sidewalks and has significantly increased to the point where the Four Seasons Mall is the highest grossing mall of sales per Let me highlight 3 unique differentiators. First, the scale of our hotel room inventory covering every price point in every customer segment. 2nd, our retail mall portfolio, which with completion of the Brazilian will encompass 4 distinctly positioned, with complementary retail shopping experiences all under one roof.
3rd, our unique and ambitious events and entertainment strategy, fully utilizing our advantages and having multiple performance venues including the Cotai Arena. We are the only property in all of Cotai that has an arena. Again, like so much of what we do, we have been pioneers in entertainment and we now have a track record of bringing world class events to Macau. I don't believe any of these unique competitive advantages can be matched by a competition even after the completion of the next wave of their developments. Let me end my opening remarks on Macau by looking back and looking forward.
I have eyes on both sides of my head. I was in Macau in May to join the celebrations of the 10th anniversary of the opening of Sands Macau. That year we opened. 2004, the mass table and slot revenues in the entire Macau market were less than US1.5 billion dollars In 2,007, the year we opened Indonesian mass market revenues were US3.4 billion dollars In 2012, the year we opened Sands Cotai Central, mass revenues were US11.7 billion dollars The run rate for the past 12 months has reached US17.5 billion dollars While there have been and will continue to be cyclical bumps along this path of secular growth, I have every confidence in our ability to continue to grow. I have more than confidence.
I'm absolutely certain we will continue to grow. We have a still underpenetrated market. We have improving transport infrastructure and we, Las Vegas Sands and Sands China have a uniquely differentiated portfolio of properties and product offerings in Macau. When I created my vision for the Cotai Strip, I was wrongly criticized and believed. Today, the market now knows that the food for Macao is the Cotai strip.
So that completes my opening remarks on Macao operations. Now I'm turning to Marina Bay Sands in Singapore. We generated US418 million dollars of EBITDA at Marina Bay Sands during the quarter. Despite a 27% decline in rolling volumes, our EBITDA is up 18% year on year and our whole normalized EBITDA is only marginally down. I think this demonstrates the quality and resilience of the cash flow generation at Marina Bay Sands.
As I'm sure many of you are aware, the sharp swings in rolling volumes from quarter to quarter are attributable in part to ultrahighend patrons. This segment contributes significantly to volumes, old volatility and accounts receivable, but not nearly as much to profits and margin. We are maintaining the strong base of highly profitable loan customers and we continue to make significant progress in our receivables, accompanied by a very prudent user ratio. At the same time, we continue to invest in our foreign premium mass growth initiatives. Of course, the value of Marina Bay Sands to our shareholders is much more than its operating results and financial success.
Impressive as these may be, Marina Bay Sands serves as the most important reference site for emerging jurisdictions anywhere in the world that are considering large scale integrated resort developments, particularly convention based. On that note, let's move on to our potential development opportunities in new jurisdictions. In Japan, we are pleased to see the progress that has been made in the last few months. The diet recently began discussion of proposed IR legislation. We are pursuing the potential for IR development in Japan with great enthusiasm and believe our convention based integrated resort development model will bring meaningful benefits to Japan in terms of business and leisure tourism, employment and economic growth.
We have also been spending time on the ground in Korea, whereas in Japan, we believe integrated resort developments can deliver significant economic benefits for the local economy. In both Japan and Korea, we are willing substantial capital investment to developing large scale iconic innovative solutions. Remember, we are the pioneers in the industry and we took risks when others hesitated. Our track record speaks for itself. Our development capabilities, our operating know how in every business segment of the integrated resort and our financial strength are unmatched.
We believe we are exceptionally well positioned to compete for these development opportunities. Finally, let's address the return of capital to shareholders. The confidence we have in the strength of our business and the reliability and predictability of our cash flows have allowed us to progressively increase the return of capital to shareholders. Ours is a uniquely privileged business model. We can continue to return significant amounts of capital to shareholders through dividends and share buybacks, while retaining more than sufficient financial payoff to pursue both organic growth and new development opportunities.
I'm sure you've heard my motto, Yay Dividends. Over the last 10 quarters through June 30, 2014, we have returned US8.3 billion dollars to our shareholders through dividends and stock repurchases, including over US6.7 billion dollars to Las Vegas Sands shareholders and in Hong Kong dollars the equivalent of over US1.5 billion dollars to the non LVS shareholders of Sands China. Also we increased the annual dividend by 42.9% this year. In addition to raising the LBS recurring dividend, we increased the Sands China Limited interim dividend for 2014 by 30% to HK2.87 dollars per share. SEL also paid a a increasing the dividends at LBS and SCL in the years ahead as our business and cash flows continue to grow.
I'll repeat, yay dividends. In addition to dividend growth, we returned US320 $1,000,000 of capital to LVS shareholders this quarter through our stock repurchase program leaving approximately US300 $1,000,000 remaining under our return capital to shareholders and to enhance long term shareholder returns. In conclusion, we are continuing to successfully execute our business plan and I am more confident than ever about our future success. It's my job together with our outstanding management team to ensure we stay disciplined and continue to execute the strategies that will both extend our industry leadership in current and new markets and generate strong growth and outstanding returns for our shareholders years ahead. With that, let me thank you and let me turn the call over to the operator to begin
The first question is from Joe Greff with JPMorgan.
Good afternoon, guys. Sheldon, you touched on the reasons for the VIP performance in the Q2 for the market as a whole. And you mentioned liquidity and credit tightening. Can you talk about what you're seeing on the VIP side? No, it's not nearly as important as the math side,
but what you're seeing on
the VIP side with respect to either credit extended to players on the direct side or to the junkets?
I'll turn that over to Rob, who will comment on that.
Hi, Joe. The softness in the junkets segment has been well documented. The explanations have been explored by a lot of people. Our Macao business as you know is not dependent on that. As Kjell referenced, it's about 17 percent of our EBITDA makeup.
We'll keep monitoring the progress of this segment and we'll use our 1500 tables, our 9,000 rooms to make the best of our profitability. But again, our core driver is the mass business. It's hard to sit here with the complete all the answers what's happened in the VIP segment. And there's so many diverse explanations out there. I'm not sure if we can add a whole lot of value.
I just believe in the end, it's back end consumer demand is soft and soft industry wide. And I think it's foolish for us to guess when that demand will return. I think that's as much I want to say about that segment.
I'd like to add that that applies to Macau and not to Singapore. Yes. I think that the uncertainty created in the market by the crackdown in the PRC always It's cyclical by the way and that always creates uncertainty and people that's reflected by fewer people coming to Macau. So even though none of it applies to Macau, but it doesn't affect people coming to Singapore And we've seen an increase in Chinese customers, high rollers coming to the VIP market coming to Las Vegas.
And so with respect to the VIP customer in Macau, are you seeing extended timetables to repay credit? Are you altering reserves or reserving more as a percentage of the credit that's outstanding? I guess that was more of that's the heart of my question.
Yes, Joe. We are definitely monitoring credit extension. Actually we're pulling back on some of the credit. But that I don't think is the issue in Macao for us. It's just back end demand.
We're very comfortable with our reserves. We think we're in the right place vis a vis our junket partners. We're not that concerned about credit from a risk perspective. I just continue to believe that the absolutes are no one's completely clear on what is the all the reasons for the pullback. And when that pullback reverses, we'll be able to take advantage of it.
Until that time, we'll monitor it closely.
Great. And then I'll just have to talk about my follow-up.
It's like you said Joe, it's not a major part of our business. Yes. Not the major part and it's decreasing as a percentage of our total GGR.
Great. Shelly, you spent it's my follow-up. You spent a decent amount of time talking about capital return and what you've done historically. Maybe since we're getting a lot of emails and questions on this, maybe you can revisit with us how you're thinking over a period of time about increasing the dividend and what the dividend growth policy is from here? That's all for me.
Thanks.
We had a Board meeting yesterday and I discussed with the Board that I wanted them to think about the dividend policy and about stock repurchase and that we would bring it up. We have enough money for stock repurchase to go through on our regular program to go through this current quarter. And I expect that we will have some dividend news and stock repurchase news on the next earnings call for the 3rd quarter.
Great. Thank you.
You're welcome.
The next question is from Shaun Kelley with Bank of America.
Great. Good afternoon, guys. Sheldon or Rob, in the prepared remarks, you also mentioned some of the reasons for where you guys performed on your Macau EBITDA margins. I think the third thing that you cited was a less favorable business mix. And I was wondering if you could actually elaborate on that a little bit just because I think we would have expected with mass being with VIP being down and mass being up that business mix would have been in your favor a little bit.
So what did you mean by that comment? And anything you could call out there would be helpful.
I'll take that. Let's begin with the Q2 seasonality issue. We had a stellar Q1. The industry did as well. We weren't expecting to have material growth seasonality wise.
So that didn't happen. Sheldon referenced the World Cup. I think that goes without saying that it had an impact. We can't quantify to the dollar amount, but clearly it impacted our mass business, especially in the June period. The mix changed unfavorably.
So a higher share of our business came out of premium mass, which is a little bit lower margin, a few points lower. So the mix was definitely unfavorable in terms of the premium mass performed fine. We took some reading in terms of the whole percentage, a few points low, probably cost us $30 plus 1,000,000 of revenue, higher risk business as you know. Our strength, the LVS advantage resides in all those rooms and all those gaming positions and it really blossoms and performs very, very well when the market blossoms, when the market is softer, but we don't get that pure mass customer with the highest margins. And frankly, we don't get to fill up all of our table positions and all of our sleeping rooms.
So I think what happened is an aberration, total confidence this summer reversal will happen very we believe the summer has been stellar for us. We have a lot of confidence in the ability to fill those rooms, fill those gaming positions, especially weekends with more mass customers. We don't want to see a fall off of our premium mass. We're spending a lot of dollars to drive that premium mass business and be competitive. And again, that's our advantage.
But the truth is with the when the market is not as strong as it was in the Q1, we suffer a bit. Those weekend rooms are not as filled up and the table positions are not as filled up. So I think the mix absolutely played against it this quarter. I still Sheldon referenced the October period. We realize the demand in this market and
the expectations are so huge that a
few months later was a expectations how the expectation climbed immeasurably. But again, when you add in the $32,000,000 of hold related revenue mix or $30,000,000 the 14th month issue, the World Cup issue and the seasonality, I think it starts explaining some of the disappointment we have in terms of the mix and some of the margin and what happened. And I fully believe it's aberrational, fully believe this summer will be very, very gratifying us and for shareholders.
And then Rob, maybe not to beat the dead horse on this, but may it kind of is the second part of this. So your overall mass table share then kind of dipped down sequentially, right? And you've opened up but you've dedicated more tables to this segment. So the question is, was that expected? And do you expect that to then I guess sequentially bounce back as some of these factors probably will out?
We have said Sean on previous calls, we're agnostic about the use of tables. We have 1500 gaming position tables rather. We have 9,000 plus sleeping rooms. We have 4,800 slot ETG positions. It's a massive advantage in this market.
And as the summer months kick in, we will continue to deploy those assets based on market demand and market interest them. Obviously, the junket segment is not where we're focusing right in terms of growth, the market we'll have to wait and see when that returns. Our focus remains our driver of our core EBITDA remains mass, be it mass tables, mass slots, ETGs, premium mass. That's our focus. That's our core ability to grow this market.
Do we believe I couldn't be more of a raging bull on Macao heading near weekend. It is still the greatest game market in the world. I guess, we opened up one thing I can't help but think about 10 years ago, we opened up Sands Macao to his questions about could Macao Ecore surpass Las Vegas in terms of gaining revenues. I think we all know how that turned out. Cotai will continue to drive Macao beyond Hong Kong and Guangdong into the provinces of China.
The infrastructural improvements coupled with propensity gamble makes Macao the most important market in the world and a very, very safe bet to grow and grow. And finally, the penetration in Mainland China is still sub-two percent. So do we think Macao is going to boom? We sure do. We think $100,000,000,000 of GGR is reasonable to expect.
This last month has been a disappointment, but it's a month in a very, very long race. And I think when you see the summer quarter, you'll feel a lot better about our performance.
I think it's very clear. Thanks, John.
Thanks, John. Appreciate it.
I want to emphasize that 1 month or a quarter doesn't make a trend. And nothing is going to change in Macau. Nothing is going to change in the propensity of Asian people to come to Macau and play. It has not changed in 1000 of years and it isn't good. There is no catalyst to make a change now.
The next question is from John Oh with CLSA.
Hi, good afternoon guys. Can we talk a little bit about your mass business, especially in the premium mass? Are you seeing customer behavior or the demographics at the very high end of premium mass to be similar to the VIP segment? And if
this is the case, do
you think this segment could be at risk of slowing down like what we're seeing in VIP today?
John, it's Rob. I have to say I don't believe that's the case at all. It's a different customer. There might be some overlap. There certainly is some overlap.
But the great majority of mass customers and even premium mass are not coming out of the junket segment. I think it's a very different audience. And again, although we are flattish sequentially, our year on year performance 34% plus indicates while the junkets have come down quite a bit year on year, unfortunately, the mass business has boomed 34%. I don't know many businesses that grow 34% year on year and yet are worried about future growth. I think it's clear the growth is there.
This Q2, this what Sheldon referenced, World Cup, etcetera, I think those are valid variables that impacted our mass business and the business in the industry. But I think it's very myopic to think that that's going to be an issue for the future. And no, I don't believe as the junket business is in decline and I believe it will resurrect, the mask business continues to do very well and I don't believe there's risk of that deterioration. No, I really don't believe that at all.
John, I think it's not as close a customer as you think it is, because the VIP customer is used to going in the rolling program and the premium mass players are they're not all from VIP coming downwards. They're playing in the non rolling segment and it's just a different it's a different kind of person. The player is not just coming from the VIP coming down to say US100000 dollars and under. They're coming up from US1000 dollars to US2000 dollars and above that. So that's what the premium mass is.
We've got a US5000 daily theoretical win from a premium mass customer. That's not a settling down of quote VIP customers. And again, one is rolling, one is not rolling.
Okay. Thank you. And if I can follow-up with a question on hotel rooms, could you talk to us on how would you think about your comping strategy in Macau? Do you think there's an opportunity to do things a lot more differently now versus from what you've done before maybe get more aggressive with comping rooms to take market share and ask? That's it from Tom.
No, it's very simple. The our biggest let's be clear, our biggest asset beyond gaining capacity is sleeping room capacity. And for those of you who watch this industry as I have for 35 years, the ability to put someone in a room above that casino is the number one driver where that person gambles. We have that ridiculous advantage of having 9,000 keys in our portfolio and growing shortly. So I think the answer you know that that's a huge advantage.
Our approach has been simple. We've proven over and over again that as we give away complementary rooms, the return is breathtaking. And as long as we continue as the team in Macau can continue to deliver those kind of numbers, we are earning $2,000,000 $3,000 $4,000 per occupied room. That's a huge advantage to us. So think about it as that premium mass customer comes in further and further away with a larger budget, has to sleep someplace, can't go back and forth in a day or 2, will be the place of choice in my opinion for not just this year, but for years to come in Cotai.
And that relationship between where you sleep and where you gamble is unequivocal. It's a huge important that decision years ago to build those rooms puts us in the pole position today. We'll continue to deploy that resource as long as we get a $2,000 $3,000 $4,000 per night return on that complementary room. So to me, while others are running out capacity, that becomes a wild advantage of this company as this market swings back to huge growth in which it will.
So Rob, do you think you have sorry, Rob, if I can follow-up, do you think you have the right room comp ratio today? And what do you think is the right mix?
No. We want to be more comps, John. We want to keep driving. We want to get to $5,000,000,000 $6,000,000 $7,000,000,000 $8,000,000,000 of mass table win. And the way to get there is keep giving away rooms to the right customer base.
So no, we don't have the right we're going to be more complementary towards the right customer mix. There's no place like it in the world. It's not like that in Las Vegas or any place in the U. S. Or any place anywhere where you can comp a room to a customer and get a $2,000 $3,000 yield that night in the casino.
So no, the mix is keep comping as long as you maintain that margin and maintain that profitability, we'll be aggressively pursuing that customer. That is the strategy along with our mass customer who margins are even 10, 12 points higher. We're in a very, very privileged place. This has been a disappointing month in June, but look forward to the future because it will return to growth year on year, 33%, 34%, 35%. Those numbers, there's no place in the world like it, no place like it.
And we're in the right place with the right strategy at the right time.
Awesome. I like the sound of it. Thank you.
Thanks, John.
The next question is from Carlo Santarelli with Deutsche Bank.
Hey, everyone. Good afternoon. Carlo. I just had a question. It's kind of a 2 pronged question on the premium segment.
Rob, you mentioned and Sheldon mentioned in the prepared remarks as well about the margin drag, slight margin drag on that premium mass segment and when that's a higher portion of the mix. I was hoping you guys could clarify clarify that and maybe in the same breath, if you could talk a little bit about why we're seeing mass hold percentages come down. And my understanding and please correct me if I'm wrong, but the premium mass customer would be a customer who's more prone to buy at the window. And I know you guys do a little bit of different accounting. But does that premium mass mix because of the way that you guys calculate it have a negative effect as that premium mass customer becomes a bigger overall customer as a percentage of the total?
No, not at all. So I think it remains just the opposite. Here's the way we look at the market. I mean, we're lucky that still the majority of our mask business is non incented business that comes without a complementary room, without promo chips, without gifts, etcetera. So I think the point is that customer when the what we were trying to reference was the mix change when it swings to the premium mass customer who's more highly incented because of the marketplace.
So we're getting high 30s, let's say, 36%, 37%, 38% due to promo chips, complementary rooms, complementary meals and the ilk. We all know these things in the gaming world are part of that better premium mass customer. We're very happy to take 38 percent of 1,000,000,000 of dollars. However, when you marry that to our what's made our business so spectacular in the Q1 and in 2013 was we are when capacity is constrained, we are the guys who get the great lion's share of the mass mass customer. Sheldon referenced $60 plus 1,000,000 visitations.
Who is that guy? Who is that person? They are a high frequent that comes in and has a 1,000,000,000 to gamble at our places, our ETGs because of capacity. They can't go to many of the stores because the rates are too high on the gaming minimums. So we're in a very, very fortunate place.
I don't think it's to the whole percentage issue, I don't think it's a question of it changing. It's not changing. It's simply more volatile in the the more you let go bet larger sums of money. Some of these folks are betting huge amounts of money on table. That volatility will translate into whole percentage different.
The same thing in Las Vegas where we hold 25% of the baccarat and 10 points south of that on the mass mass. It's no different. The geography hasn't changed the mathematics on the tables. So our volatility this quarter how we held a few points higher and got more mass mass, we'd have a $900,000,000 quarter, which we're going to see again in the future. We're not concerned about volatility.
It's part of the game. We're not concerned about margins. We'll take 38% or so on the premium mass. But again, our stellar advantage comes from that mass, mass customer. Other people do not have the capacity to service.
That's helpful, Rob. And then if I just could one follow-up on Singapore. And it appears again every time we see a big roll quarter it seems like hold is suppressed and every time we see a big hold it looks like roll is suppressed. Are you guys still pretty confident that there's not a relation between that just from a pure gamblers perspective who would happen to play more if they happen to be winning, so we would expect that inverse correlation
lower the roll, because people the players lose earlier on in their presence, in their visit. And if they lose later, that means there's more roll. So we have a lower percentage of hold. I mean, that's a that's a that's a that's a that's a that's a that's a that's a that's a that's a that's a that's a that's a that's a that's a that's That's the lot of averages.
I think we should address also in addition to Sheldon's comment the idea that we can stimulate very honestly, I'll be blown with you how we look at Singapore. It's the role is disappointing, but it's not disappointing relative to what we're doing in Singapore. We made a very conscious decision. Management in Singapore and the team here in Las Vegas, there is an incenting situation going over there, which we will not be part of. It's over incenting in some segments.
And frankly, we're not going to play that business. We're also being more judicious in credit extension, because we see some of the concerns we have with our policies are very strict about how we give credit, how we collect credit. So we are somewhat, I wouldn't say disadvantaged, but much more compliant, if you will. And again, what we've learned is that sometimes driving roll to $14,000,000,000 to 15 $1,000,000,000 isn't a lot advantageous if you're giving away huge commissions and huge amounts of credit extension. So we have made a conscious decision to take customers that we feel we can collect from, we can extend a get a nice fat margin from, a fair margin.
And this is a highly concentrated segment. If we took we can grow our rolling business anytime we want. It means giving away a lot more credit, a lot of things we think are not a good long term decision. We're very pleased that we end up with a $50,000,000,000 annualized roll that's acceptable to us. And the whole percentage, I mean, we said it all last year, we were suffering with inadequate hold.
We told you we'd come back. It's just mathematics. The chips don't know who's playing. And frankly, the people who won last year are losing this year. It's a very simple mathematical equation.
So we've had a very strong hold and we're gratified by it. But at the end of the day, the math always prevails and we're always told to be at 285 and beyond. There's nothing structurally wrong. What's more pleasing to us is our growth in our mass business over there, our non going spot ETG business is accelerating. We're 4.7 a day, 63 point margins.
So if we can get Singapore to be a 1.5%, 1.6%, 1.7% store, we'll accept that.
Carlos, this is Sheldon. What I want to say is that if we had 0 rolling, $1 in rolling and $1,000,000,000 in profit on a quarter, I think I'd take the profit, I'd take the EBITDA rather than the rolling. I'm shocked. I can't put the rolling in the bank. I can only put the EBITDA in the bank.
Understood.
We
came back Carla, we came back to Sheldon and Mike. We're very clear from our last meeting over there and said, look, we're going to sacrifice some roll, but we're going to get you a better margin and long term better business and that's what we're doing in Singapore. We're very gratified. We'd like to roll $15,000,000,000 hold 5%, but we're going to take what we can get. And so this quarter, we're very accepting of a very fat quarter.
Thanks, everyone.
You're welcome. Thanks,
Carlo. The next question is from Felicia Hendrix with Barclays.
Hi, thanks and good afternoon. Sheldon, on the buyback, given the magnitude of the buybacks in the first quarter and then what you repurchased in April, the $175,000,000 I would have thought that the buyback level would have been higher in the quarter, especially given where the stock was. So I'm just wondering, was there anything legal, structural or anything in the quarter that prohibited you from buying more shares?
Nothing. It's just the way it went.
Okay. So, and then you said nothing
There was no other consideration whatsoever.
Okay. And then obviously you said that you think you'll get the further authorization which a lot of folks have been asking us about. So that's a positive there. And then Rob, on you recently opened the new premium mass area at Stansco Place Central Dragon's Palace. Just wondering, could you give us an update on the ramp of that area?
And when do you expect it to be running at a full run rate?
It opened up as you know and successfully. It's not running at the level we want to run at, but the ramp is continuing. I think you'll see it this fall. We always believe it would take about 3 months to get there. Very confident of its performance.
A slower start than we anticipated, very candidly opened up in the long time in terms of the seasonality, opened up into the World Cup, opened up a lot of things. But remain we'll be there this weekend and have a look at it. The team there is highly confident of its growth. And although we had a disappointing quarter from my perspective in terms of growth in general and Sanskot Dicential. Those rooms sitting above it will start to get very, very busy this summer and so will the Dragon Palace.
Completely confident of its performance.
Okay, great. Helpful. Thank you.
Thank you.
The next question is from Robin Sarliu with UBS Securities.
Great. Thanks. On the mass market side of things in Macau, I know you've talked about Can
you speak up a little bit, please?
Sure. On the mass market side of things in Macau, I know you've talked about hold and mix and the World Cup, but you haven't talked that much about the competitive environment. Can you talk about what other operators are doing in the mass market, particularly as VIP has declined and kind of changed the competitive environment and maybe others focusing more on mass? Hopefully, you
could hear that okay. I'll give you my macro overlook. They can't focus more on mass because they don't have enough tables. They don't have a fraction a small fraction of the number of tables that we do and the mass requires a lot of tables. So there isn't anybody who's got the number of tables we have or anything close to it.
You could say that SJM has a lot of tables, but they've got 20 sub licensed casinos and a whole bunch of maybe 50 or so VIP rooms. If they still have them, I'm not sure. But how can they do this? It's not as though they have the number of hotel rooms. They have the number of they have the must see properties and they have the number of tables, number of hotel rooms, number of tables they just don't have.
So it's not as though our competitor say, oh, SEL is doing very well with the mass market. Let's compete with them. We'll go into the mass market. It's like Sheldon Adelson at 5.7 say, hey, basketball is a great game. I'd like to get into it.
Okay, great. My follow-up question is on Singapore. And let me just preface it with, I totally understand about hold affecting your volumes. So that's not the question. I think
it's my basketball, but I don't have the way. And it's our competitors may have the will, but they don't have the way.
Okay. So just shifting to Singapore for my follow-up question. I understand how hold affects your volume. So that's not the question. The question is, you mentioned that you felt that Singapore is not seeing the same slowdown in VIP that you're seeing in Macau.
So first, I guess, how do you know that what do you see that makes you feel comfortable that that's the case that it was just a hold issue in the quarter?
If it's uncertainty that the Chinese people are concerned about, they want to lie low till things recycle. I think they would lie it's clear they would lie low and where the Chinese government could see them if they were looking for them. And that the Chinese government can't go to see they're not in Singapore. It's not Chinese soil. And so they can go to Australia, they can go to Singapore, they can go to Philippines, they come to Vegas, but they're most popular places.
Since we offer more to the high rollers like much higher gaming bets, we offer credit of large amounts to big players. We get that in Singapore and we're starting to get some of that here in Vegas.
Rob, I'll go back for a second to Macau. I just want to your comment was just your question interesting what Sheldon talked about. First of all, we're dealing with some of the most focused, intelligent, seasoned operators in the world. Our competition there is very, very, very good to do. And we work very competitively, but we have a huge respect for what they do every day.
However, to Sheldon's point, they're disadvantaged physically in terms of capacity. And again, the market gets fat this summer and this fall that will be something they can't overcome despite their intellect. The second piece is I've not seen margin erosion at all in the as the junket business becomes more challenging. I have not seen erosion at all in the margins in the premium mass. The aggressive behavior of the market has been there the last couple of years, be it Melco, Wynn, MGM, Galaxy in terms of those margins.
I've not seen erosion at all. In fact, if anything, I think it's being maintained. But that focus will get intense in the premium mass and we expect it. On the Singapore issue, I would just make a comment that we're not seeing necessarily a slowdown much as we're seeing a we're thinking differently about how to incent and how to give credit to the foreign customer coming into Singapore. I'm not sure it's market driven much as our own initiatives that may have impacted our decline in the rolling segment this last quarter.
Okay, that's great. Thanks. And just last question is on the Parisian. It's still is there any change at all, any
Robin, this is Mike. Construction at the moment has stopped pending the receipt of certain approvals from the power government that we hope to obtain shortly. We're positioning ourselves right now to be able to resume full activity once those necessary approvals are received. And we have no plans to change the anticipated opening at the end of 2015 at this point.
Thank you.
Thanks, Robin.
The next question is from Thomas Allen with Morgan Stanley.
Hi, guys. As we think out to the rest of the year, there are a couple of things happening both to the market and for you. You have the smoking ban going into going in October. Can you talk about how you expect that will impact the market and how you expect to deal with it? And then also just on same regions and 4 seasons, haven't heard any update there.
So can you just talk about how those will look coming along and how do you think those could benefit you? Thank you.
I'm sorry. I got distracted by some. The smoking, well, we're building smoking rooms that we're going to drop down in the middle of the mass gaming floor. And the rules are still being clarified as to how much of the gaming floor is VIP and what is the VIP, what's the definition of VIP. It appears as though premium mass if it's in a separate room and it's enclosed, it will be considered VIP.
So that's where we stand out. We have a much greater premium mass business than our competitors. So with the combination, all VIP rooms are going to be allowed to be smoking. And as a matter of fact, the ramping up of the Dragon Palace is that was the subject of a question a few questions ago. We're waiting for the okay to smoke in there.
And we have an open entrance to that property and we put a strong sense of urgency on the design and construction of an enclosure to make it a fully enclosed room, essentially fully enclosed. So I don't know. I haven't smoked since I was a teenager and that's at least 10, 12 years ago. And so I don't know about how people are smoking, I could tell you that the press is saying that they don't expect and you guys you analysts know this better than I do. People are not expecting more than a 2% or 3% impact on the smoking issue.
I don't know if that's true or not. I hope that that's all it is. I thought that we might be able to go with e cigarettes, but I understand e cigarettes have been outlawed in Macau. So they can't use e cigarettes in Macau. Listen, many years ago when the no smoking ban first came in, I used to be a frequent visitor to the Peninsula Hotel in Los Angeles.
And I love the smoking the cigar bar because I was at a cigar smoker. And I said to myself, it'll kill the cigar again. They might have to close it down and turn it into a coffee shop or something. The next time I went there, there were as many people as there were not smoking at all than they used to be with people with big fat cigars and small thin cigars. So I don't know people have a tendency to roll with the punches and they evolve with the rules with the governmental rules on the smoking issue.
And listen, it's good that they don't smoke. So but we don't know. Your guess is as good as ours. Well, at least as good as mine. There could be other people in my company who after all we have 50,000 employees.
Could be a lot of people that think differently than I do and they may agree with you. But I'd be honest enough to say I'm not that smart and I don't know. But I'm not giving up being smart on other things. I'm not sorry I'm doing that.
I think there was a second part of that question regarding San
Regis. Hello?
Sorry, I'm on a trade. So the second part of the question was, can you give us an update on the same Regis in the 4th season? And then my yes, that's exactly that's good. Thanks.
Not the apartments next summer. That schedule is right on at the moment. There are no delays at the present time. Openings are always subject to government approvals, but if we maintain that construction schedule at this point, you should begin to open that building in next summer's period. Four Seasons, we've completed 40 of the apartments and we're now waiting inspections in terms of being able to put those apartments on the market as a part of hotel situations that licensing process is with the government as we speak.
And one last thing on the smoking, I'd add the capital committee of SCL as well as LVS approved yesterday of about $33,000,000 of expenditure to put the no smoking facilities in, which is supposed to be due by October 6. On the smoking facility. The smoking facility is in by October 6. And that construction will begin as we speak. So we should be ready.
Some of the hotels have the older hotels have significant disadvantages in doing that. We are in pretty good shape for that. We better speak fast or it will happen faster. Okay. I hope that answers your question, Tom.
Thank you.
The next question is from Stephen Kent with Goldman Sachs.
Hi, good afternoon. A couple of questions. One, Singapore, you're now running and have been running at very, very high occupancies for a while. You talked in the past about building something there or trying to build something. Could you give us an update on that?
And then second, just on the real estate side, at different points, you've talked about selling the malls and getting some asset value out of Macau. Can you just talk about if there are any limitations on your ability to do that and how we should think about it?
We have to although they did say in the past that it will be okay for us to have a strata title on the malls and that there was no objection to that. We still are growing at a very healthy rate. And as I said in my prepared remarks that the mall at the Four Seasons, the shops at the Four Seasons is the highest sales per square foot of any mall in the world, dollars 7,000 a square foot, U. S. Dollars a square foot for the first level.
And the second level, I think the average for the entire mall, 1st, 2nd, 3rd or mezzanine level is $5,500 per square foot. And the next highest to the best of my knowledge that I've been told is the Bell Harbor shops in Bell Harbor, Florida, part of Miami at $3,500 a portion. So we're very proud of that and it continues to grow significantly. I don't know why we should I don't we don't need the money. And I've got to wait until we finish the Parisian and if we are able to build the Tropical Garden Mall across from the Parisian and next to the 2nd Sheridan Tower on the border of Lot 6 and Lot 7.
I don't know. We can either sell the existing retail properties. We have made Macau the 2nd shopping
Sheldon, is there a restriction on I'm sorry to interrupt you. Sheldon, is there a a restriction on your ability to sell them or is it just you're waiting for value?
Say again?
I said is there a restriction on your ability to sell or is it that you're simply waiting for greater value because I've heard both sides?
Well, it's not just waiting for good no, there is no restriction in Macau. There is a restriction in Macau.
We can sell them all.
We could sell them all.
Okay.
If we don't sell condominium title, we could sell the cash flow from the models, just like we sell stock in the company. There's no restrictions. And
Okay. And then building a hotel in Singapore?
You're interrupting me. It happens all the time to every husband in the world.
Steve, you had something else to follow-up?
No, my question it was in the original question, which was, are you building a hotel in Singapore? The idea at different points of building something in Singapore.
Right. We'd love to build another extension of our hotel. We're running at 99.4% occupancy. And it's probably the most occupied, the greatest income per any hotel in the world and with 2,563 Keys. But they're not there is some land adjacent to it, but we haven't gotten the approval from the Singapore government yet.
We are in very, very dire need of Maruho Gildram. So we've got the demand and we could sell it out handily.
Okay, great. Thank you.
Thanks, Steve. This will be the last question as we have reached the end of the allotted time for Q and A. The last question is from Harry Curtis with Nomura.
Good afternoon. Two quick questions. Hi, Sheldon. Hi, Sheldon. Can you give us an update on your CFO search and what
are the features that you're looking for
in the individual you want to put in that chair?
We have the capability of the CFO in house and we're extremely pleased with it. We have both corporate finance and accounting. And it's simply just allocating the title, which we haven't gotten to because we're happy with the functions.
Okay. So you're not going to bring anyone in from externally then? There is no
need to bring somebody in externally.
Okay. And then the second goes back to the VIP piece of it and recognizing it's not an enormous part of your business. But to the extent that Beijing has increased the scrutiny on VIP players or VIP players just are feeling it indirectly. Do you have any sense of what's behind that and how long it might last?
This has happened several times in the last several years. I remember at least 3, 4 other times. And it doesn't last more than a few months, 3 or 4 months. When the press starts to reduce their print about the crackdown on corruption in the PRC then it seems to go away. That seems to create a sense of uncertainty.
And I looked into this at length. And the Chinese people say that if once the government starts inquiring about things, it creates a sense of uncertainty. As much as the Chinese government doesn't want social instability, they the population of the country doesn't want uncertainty. They don't know what's going to happen. So it doesn't necessarily mean that people are targeting them or targeting their category.
It just means there's some uncertainty and they don't like uncertainty.
But as a quick follow-up, doesn't this new administration strike you as being a bit more hawkish on the issue than prior ones?
I don't know. I try as hard as I can to get involved foreign government's political affairs and what their choices are all about. It's not my business and I don't want to be involved in it.
Okay. Thanks a lot. Appreciate it.
Thank you, Harry.
That was our final question. And this concludes the Las Vegas Sands Corporation's Q2 2014 earnings conference call. You may now disconnect.