At this time, I would like to welcome everyone to the Las Vegas Sands Second Quarter 2021 Earnings Call. All lines are visible to prevent any background noise. I will now turn the call over to Mr. Daniel Briggs.
Thank you, operator. Joining me on
the call today are Rob Goldstein, our Chairman and Chief Executive Officer and Patrick Dumont, our President and Chief Operating Officer. Also joining us on the call today Our Doctor. Wilfred Wong, President of Sands China and Grant Shuck, Chief Operating Officer of Sands China. Before I turn the call over to Rob,
Please let
me remind you that today's conference call will contain forward looking statements that we are making under the Safe Harbor provision of federal securities laws. The company's actual results could differ materially from the anticipated results in those forward looking statements. In addition, we may discuss non GAAP measures. A definition and a reconciliation of each of these measures to the most comparable GAAP financial measures is included in the press release. Please note that we have posted supplementary earnings slides on our Investor Relations website, and you may refer to those slides during the Q and A portion of the call.
Finally, those who would like to participate in the question and answer session, we ask that you please respect our request So limit yourself to one question and one follow-up question, so we might allow everyone with interest the opportunity to participate. Please note that this presentation is being recorded. With that, Let me please turn the call over to Rob.
Thank you, Dan, and good afternoon and a very good early morning to our colleagues in Asia. Just a brief comment and we'll go right to Q and A. Our results continue to reflect the pandemic's impact. We did generate positive EBITDA up $244,000,000 per quarter, about the same as the Q1. Sequential improvement, but pandemic related travel restrictions continue to impact our performance.
We remain confident in the eventual recovery in both Macao and Singapore, We cannot define the timing of the recovery that's underway and will continue in 2021. Singapore remains in the $500,000,000 to $600,000,000 range annually, although the quarter was impacted by heightened pandemic related restrictions for a portion of the quarter. We will also be subject to closures in both There is definitely no visibility as to when air traffic will return in Singapore. Unlike Macao, it is difficult to project additional EBITDA from MBS visible. Our considerable investments in Macao continue to take shape as the market recovers 4 seasons and longer represent growth We do have great optimism about our ability to form to pre pandemic levels for implementation attorneys.
Our company is divided into 3 areas, the aging good. Macao and Singapore. While we believe Macao will accelerate in the second half of this year and lead the recovery, Singapore will follow-up on resumption of air travel. We are confident we will turn to a $5,000,000,000 plus EBITDA from Asia in the future. The sale of Las Vegas assets creates liquidity and Best optionality to explore large land based destination resorts, United States and Asia.
And finally, in the early innings of building out our digital presence, We are exploring multiple opportunities at present and we are eager to have this effort become a tail to our
Your first question is from Robin Farley from UBS. Your line is open.
Great. Thanks for taking the question. I wanted to follow-up on your announcement about your online strategy and kind of pursuing B2B investments. And just if you could help us think about kind of how the brand that you have would help in the B2B effort or how just in terms of what That does for Sands as well in a reciprocal way. And then also is that going to be the full extent or are you still looking also at at B2C options in the online market.
Thanks.
Patrick, you want to take that?
Sure. Happy to. Thanks, Robin. So a few points. I think our brand is very strong.
I think we have decades of established brands and high quality operations and great relationship with customers. Think that's very powerful to your point. One thing we're thinking about is we're really investing for the future. We take a very long term approach. We're still evaluating A lot of different opportunities.
I think B2B presents a very significant opportunity for us. Davis has a great history and we're really looking forward to him getting started and happy that he joined us. I think we'll provide updates as we make progress. It's still very early stages, but we're looking forward to being able to deploy capital over many years I really look at this from the long term and create a lot of long term shareholder value. And I think in the future, you'll see us looking at other things and other opportunities.
As Rob said on other calls, we're going to be very patient. We're going to be prudent and we're going to look for opportunities when we see ways to create real value in the long term. So I don't think this is the last thing you'll see from us, but I think it's really just the beginning and we're looking forward to Obviously, we've seen this evolve over time. So as we make progress, we'll definitely provide more updates.
Okay. And I don't know if it was just as a follow-up, just thinking about to B2B, many of the B2B providers out there kind of working with those that would technically be competitors in land based and so I guess how would you think about framing that, how they would see Sand's presence in the online business as somebody that they would partner with versus the competitor.
And meet. It's a very fair point. And I think interestingly, our company has seen a lot of changes in the last 12 months. And I think one of the things that we thought about when we considered this is that we really are just like the markets in which we operate going forward are going to be Singapore and Macau. And so from that standpoint, it's really a limited universe of people who are our true competitive set, particularly in some of the larger geographies where B2B services model could really be productive.
So I think from our standpoint, we are a little We believe we are from the sense that in a lot of the markets that we might look to target, we don't have any land based operations and don't have any B2C operations where we could find customers from a B2B business model standpoint. So we feel pretty good about it.
Okay, great. Thank you very much.
Your next question is from Joe Greff from JPMorgan. Your line is open.
Good afternoon, guys. Nice to hear
your voices. I kind of said it mostly good. Just in terms of Macau's reliance on travel and mobility enhancing measures And timing there, so I'm not going to waste my time on that. But I think the last call Wilfred gave a decent amount of detail and I would say a This amount of optimism in terms of your license potentially as markets getting extended busy. Sometime middle of this year and that timeframe is sort of past towards about now.
I was hoping you could just give us an update on your conversations or your thinking
Yes. Thank you. Yes, I think the situation has not changed. Obviously, the extension, it's a very complicated issue. It's something that The Macao government and the Chinese government will have to look at very carefully.
They also have Their own preoccupation at this stage. For example, the Macau government, Apart from still working very hard on making sure that Macau remain a safe city in all the Cautionary measures against COVID. They are now preparing for the next legislative Council election, which is due on the 12th September. So the government is operating at a pace where they They want to launch the public consultation for the concession renewal towards the second half of this year, Now I don't think the government is in a rush to review the license because they want to do things right. And as We all know there are many legal issues they have to attend to, such as the concession and Issue and this they can only go to the legislative council when the new council is in place.
And so at this stage, we are really focusing on Doing our best aligning our interest with the government, such as focusing on investment and reinvestment maintaining a stable workforce, which is very important during this pandemic. And I think Things will pan itself out eventually because as we move closer to the expiry of The concession, naturally, the extension of the concession is an option which the government will have to look at. But at this stage, there is nothing official and we have no preview information.
I guess, off Joe on Roper's comments, we remain very comfortable with our about approaching development, we've gone above and beyond. Sheldon was the guy behind the Cotai development. We invested 15 plus US dollars And we can hear from all the government's advice and direction. So we remain very confident and very patient waiting for the government
Appreciate the thoughts. Thank you, guys. Your
next question is from Carlo Santarelli from Deutsche Bank. Your line is open.
Hey guys. Good afternoon. Good morning. Rob, could you talk a little bit about The project at MBS, obviously, 2025 is the deadline or sorry, is the expected opening. As you kind of have these modest setbacks and acknowledging that you guys kind of pushed it earlier given COVID back in 2020, does 2025 still seem kind of realistic as a target and what are kind of the goalposts for some of the construction work along the way?
I'm going to give a pass be separate one, I'll say this before Patrick jumps in. We remain very committed to Singapore to expanding our presence, our footprint. Obviously, COVID has a monkey wrench, a big monkey wrench is this whole thing, but this is an extraordinary market. We're delighted to invest in Singapore. We've done very well there.
And the addition is going to happen. I think the timeframe really depends on the ability to go back to work in the construction area And getting things back in line, I think you've lost 'twenty one, we're not having 'twenty two. So again, we're committed And I'll ask Patrick to provide more color as he dealt with the government directly.
Thanks, Rob. I think the key thing is what Rob just said, which is there's a certain amount of uncertainty around the timing and availability of when we can actually get things done. A lot of the early parts of this project required us to work with certain government agencies. Fill the obligations and their desires as well as part of this project. It's a very tight site.
It's 8 acres. There's a lot of But as a practical matter, the nature of a construction project of this complexity and size would always be challenging in a normal environment. So I think we're just trying to be and make sure that we understand all the different parameters around labor and our construction timelines before we say that this is schedule that is not achievable is achievable. I think a lot of it depends on The environment and how things go in terms of concession excuse me, COVID recovery over the next Over the next couple of months, we'll have a much better view at that time. But right now, I think we're just we're cautiously optimistic.
We're going to continue working with the government and hopefully have an opportunity I think it's going sooner rather than later.
Great. Thanks, Navi and Patrick. If I could
just one quick one. Has there been any thought, obviously, Now given the sale of the Venetian Las Vegas and
the proceeds that are on the comp for that to potentially revisiting The bidding process in Japan?
Not at this time, Karl. We've had an inquiry for a lot of parties there. We've tried very hard and put a lot of money and a lot of human capital work that over the last 10, 15 years and We left with a feeling that there's just so much uncertainty for us. We can always revisit something based on a change in circumstance. But at this point, we remain in the sidelines.
Understood. Thanks guys. Thank you.
Your next question is from Stephen Grambling from Goldman Sachs. Your line is open.
Hey, thanks. Could you just talk a little bit about some of the different expansion opportunities land based resorts in the U. S. Or even other broader markets that we haven't touched base on so far and how you prioritize and evaluate those different markets?
In the U. S, you know of our efforts in New York, which we shut down because New York did not resolve that issue. So that's Not available at this time. Texas, we remain very committed to pursuing. I think it's a couple of years away, but I think there's a real chance down the road and back in is doing something down there.
There's some recent news about our Florida. We put in the order in Florida. We can get to the opportunity. We're going There's a path there in 2022. It was successful in gathering signatures to have a vote in the fall of 2022 for a land based opportunity.
In the U. S, that's why at this point we're looking at. We've obviously discussed Japan Carla previously. Our best opportunities are to reinvest in McAllen Singapore because those types have proven huge successes. And I think we're as fortunate as we are To have made $5,000,000,000 plus we can grow that to who knows what, but there's a lot of running room in both Singapore and Macau.
Frankly, they remain Our biggest focus because they're so extraordinary and hard to duplicate anywhere in the world. And I think that's our focus right now is getting MBS Phase 2 up and hopefully waiting for the call and we can invest more in Macao. The lender will be completed later this year in 2022, 4 seasons. We'd love to deploy more capital in Asia. I think the floor opportunity is interesting.
We'll see if we have the if we can get there. But it's hard to find things extraordinary as the 2 places we operate today.
Your next question is from Shaun Kelley from Bank of America. Your line is open.
Hi, good afternoon, everyone. Maybe a question For either Grant or Wellford, but I was wondering, I think we have a pretty good sight line on the core, on the premium mass market and how that's performing and how The spending behavior is going, but I was wondering if there's any color or insights you guys have gleaned just from what you're seeing on more of the base mass or the lower end mass market. I'm sure the sample set is small. Just kind of curious on how the customer is behaving when they are in the market and what you've seen in some of your properties, if you could provide anything there?
Yes. Thanks, Sean. Good morning. I think the trends have been pretty consistent in the last six You see, I think, very strong consumption propensity, great strength in For those who have returned to Macau for leisure trips, and I think that applies across Different segments. But obviously, clearly, the premium mass, the segment has returned in greater volume, greater number of patrons.
But you go further down to mid level in the base mass, the spending power is definitely prominent. However, you can see from the visitations, they are still around, let's low 20 percent of where we were before the pandemic. So the base mass is clearly The drastic reduction in the number of people visiting, but the people who are coming are actually Staying longer and in most cases, more. And I think what was encouraging sequentially, although June was somewhat of a temporary hiccup. What was encouraging was we saw the greatest amount of sequential growth The bigger bounce back was actually in the base mass.
So we hope to see some of those Encouraging trends continue into the summer holidays and beyond.
Great. And maybe to change gears for a quick follow-up on the online topic, if I could. For Patrick or Rob, just kind of want to get your quick sense on maybe the build versus buy equation, right? So obviously, some of these technologies and things are out there, but they could be good. Quite expensive.
Just how do you kind of weigh maybe some of the options set around acquisitions and sizing relative to possibly things that could be done maybe more organically.
Patrick?
So it's a very interesting question. It's something that we've been looking at for a while and we continue to look at. And it's an interesting comment about valuations. Think there's been a lot of optimism in the market, call it, the last 6 to 12 months and valuations have definitely moved around a lot in the last few weeks. I think the key thing for us is we're really building for the long term.
And so when we look at things, we're really going to take a long term view of value. And if we do acquire something, it's going to be for The reason that it fits into a much larger broader strategy and something where we see long term value creation by owning it. I also think We're not necessarily looking to take big bites right away. I think this is something we're going to look to develop it over time in a prudent manner and sort of build more and then maybe buy where it makes sense. I don't think you'll see us go out and make a splash by using Las Vegas sale proceeds in any large transformational acquisition unless there's some really compelling reason why we have to do it.
But that's not our focus. Our focus is to build the product, get the culture right, get the opportunity right and then make acquisitions as I sit in with the overall strategy.
Thank you very much.
Your next question is from Thomas Allen from Morgan
Patrick, just a follow-up to that question. The specular you're not going to Transformational deals, like how are you thinking about the size of the deals? Like are you thinking of being kind of an incubator for startups? Are you thinking like 100 of millions, low billions, how are you thinking about the sizes?
It's a pretty broad range. I'll tell you that Our goal is really I don't know that we provide a lot of value at the angel stage. We might be able to help some people, but I'm not really sure that where we provide sort of the most value. I think from our standpoint, if we can get kind of earlier stage and mid stage, But again, fitting into a larger strategy, that's where we'll look to be really effective. I think things that are much larger that would be transformational in the $1,000,000,000 range, have to have a really good reason to do it.
And I think we'd want to be operating for a while to understand why that would make sense for us. Right? I don't think we're going to buy our way into business. I think we're going to develop our way into a business and look to see how acquisitions help enhance that approach.
Helpful color. That makes sense. And then just On Macau and Singapore, respecting that the majority of your business and the majority of your future is really around the mass market, VIP came in really light, right, only $600,000,000 of rolling chip volumes in Singapore stood out. Can you talk about what's going on there and your expectations?
I think you're saying you're looking to see you said, right? Thomas?
I think Singapore was down quarter over quarter too, Rob. So like I mean Singapore was what really stood out, but just talk about VIP in general,
I don't have your expectations there.
Yes. Well, VIP, as you know, it's right now to close markets, just locals only. So you're trading mostly on Excluding people who are living in Singapore, and that may be more resilient during the pandemic. You might get And that's your push from some of the folks who moved to Singapore to weigh out the pandemic is part of the reason. But don't think you can look at our numbers at this point and really make a whole lot of inference as the future because it's so without having a little bit of slot business there, it's so outsized And yes, it's surprising us how well it's doing because that never was the case, that kind of performance, yet people, they can't leave.
They're stuck in Singapore. The same way people can't leave their stock consumer report right now on the high end. So I think it's hard to make inferences working in the future. It's probably a trend. It's just It's an anomaly.
I think that's going to be the case in TOCUS and resolves in this air traffic in Singapore. You'll see these trends both good and bad confusing. And I think in the case of it's very difficult to look at Singapore's numbers, come up with A clear direction where it goes. And the slot performance can use all of us initially. And now you realize a lot of people who travel outside Singapore are saying they gamble.
The same volume growth is showing up on the high end on the Chinese nationals that we're resizing for during the pandemic. So I'm not sure you can make a whole lot of Long term trends based on what we're seeing today and so forth.
There's one other comment that might be helpful, which is the way we're sort of thinking about it is that The investment and the product really matter. And so if you look at what we've done during the pandemic, we spent a lot of time and deployed a lot of capital in sort of enhancing the offerings that we have. So when there is a recovery, we have better capacity and more competitive product. It is a product driven industry. And so from our standpoint, the way we think about long term is the level of investment that we put in during the pandemic, so we can position ourselves in a more strong way when the recovery happens.
So I wouldn't look at the rolling volumes now and think you should look at the fact that we've been able to deploy capital, create higher quality products, create higher quality experience for our customers. And that way, we're stronger positioned on the other side. And that's how we're really approaching it.
All helpful. Thank you.
Your next question is from Steve Wilksinski from Stifel. Your line is open.
Hey guys, good afternoon. So probably going back to Wilford with this question, but I guess for Americans and investors that we talk to, it's tough for us to understand where China is with with respect to their vaccination progress. And case counts continue to look pretty promising, but China is still having issues. But is it China is still having issues with lack of availability with the vaccine or is it the vaccine that's being used hasn't been effective or is it just something else. I'm just trying to get more color around that if all that makes sense.
Noelle, thank you for the question. Actually, China is not lacking in vaccines. Actually, they export quite a lot of vaccines. But The truth is, if you look at the statistics, China today has already administered 1,500,000,000 doses of vaccine. Now that really means that over 50%, 60% of the population has been vaccinated.
And if you assume everyone has 2 doses, if that represents 53%. And they're still vaccinating at over 10,000,000 doses a day. So What it means is every 25 days, they can increase that vaccination rate by 10%. Now that is also, to some extent, true for Hong Kong and Macau. Hong Kong already administered 5,000,000 doses, and its vaccination rate is already over 40%.
Karl administered 460,000 doses that's also over 40% of the population. So are quite confident that if China continues in that rate and with the increase of vaccination rate By about 10% per 25 days, when you come to winter, there are almost the whole population like 90%, 80% would be vaccinated. Now I think once we reach that level, that travel bubble within China, including Hong Kong and Macau, is really possible. Now what you have seen in the news is that because China adopts a nontolerance policy towards COVID. So whenever there's some outbreak In certain areas in the country, it's widely reported and they immediately go back to lock And that's why I think the best scenario in the short term is a travel bubble between China, Hong Kong and Macau, because they're so concerned about the importation
Your last question is from David Katz from Jefferies. Your line is open.
Hi, afternoon. Thanks for taking my question. You covered a lot of ground. What I wanted to ask was just kind of a broader question here, taking in everything about the U. S.
And what you've said in Asia. If we were to think about what LVS looks like in say 3 to 5 years out or 2 to 5 years out, What's that picture look like? What's the vision for that? What are the and obviously, that can be as Qualitative and high level as you're thinking about it, but I'd love to just hear your perspectives on that.
Distinct. From a pretty simple market perspective, we first and foremost see a return to $5,000,000 $6,000,000 EBITDA good. In our Macao and Singapore markets, we see a renewed investment in both Macao and Singapore to grow that from $5,000,000,000 to $6,000,000,000 and beyond. We certainly see a 1 or 2 land based facilities in the United States, maybe Florida, Texas. And lastly, we had a strong digital presence.
And reflecting our balance sheet, we have the ability to do all these things. I think we're convinced in Asia that the most important thing in this company, The timing is uncertain of the return to a more normal environment in Asia, but the outcome is not uncertain. It's going to happen. Think it will reflect what's happened here in Las Vegas, which is people flock these casinos, will make more money than pre COVID, and our business will boom again. And I We're not clear about that.
We don't answer about timing, but not the outcome. I also think we're unclear we want to invest heavily In both those places because that's our best path, the $6,000,000,000 $7,000,000,000 $8,000,000,000 EBITDA. We've made very clear our belief in both Texas, Florida and perhaps Other large scale jurisdictions in the U. S. Will be we have the balance sheet and optionality to pursue those.
And as Patrick outlined, we are very involved in digital It's pretty slow to get there, but I think 3 to 5 years from now, you'll see a real positive outcome. And That's where we think we end up. We feel pretty confident. We've been derailed last 18 months by this horrific virus, this pandemic. But I think it's clear we're heading.
To me, it's very obvious that we have been patient and stayed the course. And I think we're doing that. We have ample liquidity than Anything won't do anywhere and in large scale. So that will be my thought for 5 years now. Patrick, your sentiments.
I couldn't agree with you more. And I think the great thing about it is we have a lot of opportunity in front of us, right? I can't tell you which one of these options. Hopefully, all of them become available, but quality. And the great thing is that we've just invested $2,200,000,000 in Macao.
We feel very strongly about the market and the potential to invest more post concession renewal. We feel very strongly about the expansion in Singapore and our long term commitment to Singapore is a very unique tourism And the high quality of earnings potential that we'll get from Singapore. And then looking to the U. S, these are just great locations. And looking at the digital opportunity, we feel very strongly about returns and the potential growth that's in this area.
So from a company standpoint, 5 years from now, we could be looking like a very different company in terms of our scale. And to Rob's point earlier, I think our balance sheet and the capability that the liquidity from the sale Las Vegas presents allows us to pursue all of these opportunities. So we're very bullish about it.
If I may just follow it up quickly, and I appreciate all of that. With respect to the digital strategy, is the notion that it would be Integrated with the company as it is today and branded as such or is it more of a Sort of a separate enterprise or potentially either still at this point? Thank you.
Rob, if you're okay, I'll grab that one.
Yes, please do.
So I think the key thing to note is We have a very skilled team and a great platform. We have a very strong corporate culture. We have just the ability to execute on a variety of different things. And I think we have the capital to have patience and invest for the long term. And so I think this is going to be a business that will require separate people, separate infrastructure and be distinct.
That being said, it will benefit from being part of our larger organization. So much like Singapore and Macau are part of a global team, they have things that are specific them that they have to deal with and so will this business, but it will benefit from being part of a large organization.
Thank you very much.