Ladies and gentlemen, thank you for standing by, and welcome to the Las Vegas Sands first quarter 2020 earnings call. I would now like to hand the conference over to Mr. Daniel Briggs. Thank you. Please go ahead.
Thank you very much. Joining me on the call today are Sheldon Adelson, our Chairman and Chief Executive Officer, Rob Goldstein, our President and Chief Operating Officer, and Patrick Dumont, our Executive Vice President and Chief Financial Officer. 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 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. We may refer to those slides during the Q&A portion of the call.
Finally, for those who would like to participate in the Q&A session, we ask that you please respect our request to 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 turn the call over to Mr. Adelson.
Thank you, Dan. Good afternoon, everyone. Thank you for joining us today. I hope all of you, your friends, and families are in good health during these challenging times. The COVID-19 pandemic is unlike anything I have ever seen in my business career. While this pandemic brings many challenges, it also presents each of us with an opportunity to make a difference and to provide assistance to all those who have been impacted. Our company is fortunate to have the financial strength to enable us to focus our efforts on the safety and security of our team members and customers and on making a difference to those in need in each of our host communities of Macau, Singapore, and Las Vegas.
We don't know how long this pandemic will last, but we are confident that travel and tourism spending in each of our markets and around the world will eventually recover. As surely as day follows night, people will travel again, shop again, come together again to enjoy entertainment and social interaction, to exchange ideas, and to conduct business. Focusing on the support for our team members and communities today will position us to recover more quickly as the impact of the pandemic eventually subsides. It is also the right thing to do. Excuse me. Our optimism about an eventual recovery, coupled with our financial strength, enables us to continue the execution of our previously announced capital investment programs in both Macau and Singapore.
We believe these investments will strengthen our leadership position in each of these markets and will provide a larger platform for future growth as travel and tourism spending eventually recover. In Macau, we are making great progress in our $2.2 billion capital investment program for The Londoner Macao and The Grand Suites at Four Seasons. In addition to these large projects with which you are already familiar, we're moving full speed ahead with a number of other investments, which we think will increase both the attractiveness and the diversification of our integrated resort portfolio. Now is not the time to pause or slow down investment in Macau. We see the opportunity and possess both the financial strength and the strategic commitment to make additional investments.
With our effort to accelerate investment in Macau, we intend to play our part in supporting the local economy in the short term and ensure we are in a leading position to capture the eventual recovery in tourism spending. I remain steadfast in my belief that Macau has the opportunity to become one of the greatest business and leisure tourism destinations in the world and the MICE capital of Asia. As I've said on many occasions, we welcome the opportunity to invest billions of dollars in additional investment and contribute to Macau's diversification and evolution into Asia's leading leisure and business tourism destination. Turning to our investment in the expansion of Marina Bay Sands, Singapore, we remain excited to be a part of Singapore's continued growth as a leading business and leisure tourism destination.
We continue to make progress on the MBS expansion and will provide additional updates in the future. We will also continue to reinvest in Marina Bay Sands to enhance the customer experience in advance of the expansion. Finally, turning to Las Vegas. The eventual recovery could take more time here than in Asia. We're confident that Las Vegas' best days are ahead of it, that Las Vegas will remain the greatest leisure and business tourism destination in the United States. Let me now spend a moment on capital allocation. Maintaining a strong balance sheet makes great business sense while we weather the storm caused by this pandemic. A balance sheet strength will enable us to invest in promising future growth opportunities and will position the company to deliver industry-leading growth in the years ahead.
While we have suspended our dividend program, we remain confident that the recovery in travel and tourism spending and the strength of our business model will enable us to deliver both growth and the return of capital to shareholders in the future. I assure you, I have not said, "Yay dividends, and yay buybacks," for the last time. I'm looking forward to saying them again, and hopefully very soon. Thank you for joining us on the call today, and now we'll take questions.
Your first question comes from the line of Joe Greff with J.P Morgan. You may now ask your question.
Good afternoon, everybody.
Hi, Joe.
I hope all of you and your families are well and healthy. My first question relates to, I guess, the things that we would call in the Macau travel impediments or restrictions, IVs, airlift, ferry, the quarantine imposition by Guangdong. I know this is a tough question, but do you have a sense of when those things start to get relaxed? Maybe more importantly than timing on those four buckets, but more on how those things will eventually roll out.
This is Sheldon. I can only quote some of the rumors that we've heard. We have nothing positive, nothing definite. The rumors we've heard that it's going to start in sometime the middle or end of May.
Joe, I'll just elaborate a bit. I think, to Sheldon's point, we follow the same sources you do. Perhaps ours are a little better. We do believe there'll be some opening May, perhaps, or June. We're hopeful. As you know, it won't be a flick of the switch, and it's all different timing to which provinces. We're hoping for first, the IVS is reinstated. That's pivotal. Then the 14-day quarantine for reentry into China is equally important, as you know. I think the IVS and the 14-day quarantine, the first place we'll see some bright lights would be in Guangdong, and then provinces will follow throughout the summer. It won't be one flick of the switch and all provinces open equally. I think, though, as you know, Guangdong is pivotal. Once that's open, it opens the door for others to follow. It will be a gradual process.
The one thing we're grateful for is that the majority of our income is derived from Asia, which as you know, has been to these situations, be it SARS or be it swine flu in the past. They're more conversant with the problems. We think the recovery there is going to be back to gambling, back to visitation will come rather quickly. It will come in gradual phases throughout the summer. It'll be Guangdong and then other provinces to follow. Airlift may be still muted for a while in terms of how much, but I think trains will be running. We feel pretty confident we'll be back to a much better place this summer and then a much better place in the fall.
We have seen evidence of pent-up demand like crazy from our customers who are asking when, and we talk to them pretty regularly. Feel pretty good about the return of Macau first, far beyond what we're going to see in the U.S.
Excellent. Great. Then just another question related to Macau, and maybe this is a question for Patrick or Dan on the call. Thank you for including in the slide deck the monthly OpEx for Macau, $110 million. How much of that $110 million relates to the premium and base mass segments? In other words, when those segments come back, you're looking at incremental margins much higher than, say, the 35%-36% that the margins are overall. In other words, what would those margins be that 35+% be without those fixed charges that you're currently sustaining without much revenue growth or much revenues?
Hey, Joe. It's Patrick. Thanks for the question. I think if you look back at our margin over the last couple of years, as the premium mass and mass business grew, those margin areas are probably appropriate for a recovery under normal run rate conditions. If you think about our expenses broken into categories, our largest expense is really gaming tax, which is variable, followed by our payroll, which is not, and then a whole host of other things related to property operations, fixed property costs, and things related to just general consumables. Some of those things are variables, but it'd be very hard to characterize and say a particular market segment would result when it started back in call it higher margins because of this trough.
I think the way to think about it is, we've been very focused on managing towards margins over the last couple of years anyway. The team there and through our work together, we've been very focused on increasing our cash flow as we grew revenue in higher margin segments. I don't think you should look at a rebound through a particular segment and say that will expand margins. What you can do is take a look at this and say, our business already had plenty of leverage in it. We have plenty of liquidity to manage through this very difficult time. When things do rebound, we'll continue to be focused on margins as we were before and look to control the cost that we can control.
I think to look at it on a segment basis would be difficult because in reality, we have to open the properties. We're going to have strength in every segment. I'd like to believe that when things recover, we're going to continue to see that strength that we saw in 2019 and 2018, the years before. We had a great trajectory heading into 2020, I'd like to believe that we'll continue to maintain the very strong operating leverage that we had on a run rate basis when things recover.
Great. Thank you so much, guys.
Thanks, Joe.
Your next question comes from the line of Felicia Hendrix with Barclays. You may now ask your question.
Hi. Thank you so much. Great to hear you all. Sheldon, definitely wanted to thank you and the company for all you've done to get important PPE to the healthcare workers out there. Patrick.
I'm sorry.
Sorry?
I didn't hear what you said.
I was thanking you for all that you and the company have done to get the important PPE to healthcare workers.
Oh, great. Thank you.
Yeah. Thank you.
We're still doing it. We have set four more 747 trips to go to China to pick up more of the masks and PPE. Listen, something we do like that potentially saves lives, and it's nothing for us, particularly the cost of fuel is nothing. We could fly over there and come back at a very low cost.
That's great. Patrick, just to stay on the topic of the OpEx and the monthly cash burn. One of the things that we've kind of struggled with as we've tried to model in a gradual recovery is kind of how to flex that cash burn. Obviously you're not going to go from $110 back to your full run rate, right? It's going to ramp up. Is the right way to think about it is just kind of, and I know a lot of it's variable, the way we're thinking about it is to just kind of pro rata, run it, rate it in terms of how you're ramping up. Is that the right way to think about it?
More importantly, I'm wondering, as you've kind of worked to really mitigate costs, as you've been in almost like shutdown mode, are there things that are going to kind of stick, or are there going to be cost mitigation efforts that you've made now that are going to benefit you in the future?
Kind of a 2-part question there. Appreciate the detail. I think the way to think about margin recovery is that when you look at sort of call it our uncontrollable operating expenses, call it across 2019, that represent a little bit more than 60% of our total expense structure. When you think about that and you think about sort of our controllable operating expenses, that was kind of in the 38% context. What you'll see is that those uncontrollable expenses, which are mostly gaming tax, which actually was about 60% of that. Of that a little more than 60, it's about 60% of that is gaming tax. That's really going to drive the way the margins look, because we will start getting operating leverage. If you think about that other 38% that's controllable, some of that's variable.
Our payroll, although you'd say that it was something that is under control, we've taken the doctrine that we want to keep our team together. That's something that we're very focused on. When you think of our two largest expenses as the gaming tax and as the payroll, you can kind of walk into what that margin might look like during this call it transition period of ramp up. Will we run, call it the 33% EBITDA margins we were running before right out of the gate? Unless there's an immediate snapback recovery, that might be a little challenged. When you look at the expenses that we have controlled and you look at the marketing expenses and the way that we look at the other parts of the business, we've been able to control costs in a very disciplined way.
The business has experienced other troughs before, and we've always managed expenses to ensure liquidity and to ensure the proper recovery when it comes around. Are there some margin opportunities? Sure. It depends on what segment comes back and when. As you know that the junket segment is obviously much lower margin and less contribution providing than the mass and premium mass segment. If we get huge volumes of mass business, our margins are going to look tremendous right out of the gate. A lot of it depends on what segment of the business you call the recovery on first. Given that expense structure, given your view that you may have on recovery of the business, you can kind of formulate a transitional margin process for the business.
Okay, that's really helpful. Thank you. Patrick, this is probably also for you as well. Obviously you guys have been doing a lot of stress testing on the company, led you to the dividend decision. Just wondering how deeply have the stress tests cut into the liquidity cushion, and would you be willing to take on more debt? If so, where would you see that maxing out? What milestones would you have to reach to reinstate the dividend?
I'll leave the last part of the question for the chairman, since that's really something that falls to him. I think the key thing for us here is that, as we've mentioned before on prior earnings calls, is we're very focused on looking at the liquidity of the company, very focused on looking at the long-term objectives of the chairman. Our highest and best use of capital is reinvestment in high-growth projects. If you look at our track record on return on invested capital and the projects that our chairman has led, it's tremendous. Our goal is to preserve that liquidity and also to continue to invest in our key markets to drive that high ROIC.
If you look at the Chairman's notes and the strategies he's laid out, we are continuing to invest in these markets to ensure that we get the high returns going forward when the market does recover. That being said, we look at a variety of different scenarios. We have a lot of different downside cases, a lot of different liquidity scenarios, a lot of different CapEx scenarios, so that we ensure we can analyze things to a satisfactory way so the board feels comfortable making a decision with the Chairman. That's what we've done here. If you look at page eight in the deck, you can see that we've laid out the cash and available liquidity.
You can see that right now, under the current conditions as we've presented them, we can go more than 18 months and invest in completing the projects in Macau and continue along with Marina Bay Sands' new developments. That's very encouraging for us. We feel very strong about our balance sheet position. Our board feels very confident in our ability to weather the storm. That being said, if for some reason we felt like we needed access to the capital markets, we spent a lot of time working to ensure that we had access to the most deep and most liquid market in the world, which is the high-grade bond market. As an investment-grade company, the investment-grade bond market opened very quickly after the impacts of coronavirus hit the capital markets, and issuers do have access. We feel very comfortable at our ability.
We feel great about the high-grade market. At some point, if the board makes a determination with management that it makes sense to raise additional liquidity, we'll have the ability to do so. We're very confident about that. At this time, we're very comfortable with our liquidity on hand. We've shown the analysis on page eight. We're looking forward to a strong recovery so we can benefit from the huge CapEx developments that we've been undertaking during this time. One last question. I think the second part of that was that you directed something that would probably best be answered by the Chairman, which is kind of view on dividends and when the dividends may come back and what that looks like. If that's okay, Sheldon, I'll turn the call back to you.
Thank you, Patrick. We will reinstate the dividend after discussing it with our board of directors when things get back to where we were. It's very simple. I don't think it's a long time away. Macau is a big percentage of both GGR, gross gaming income, and our EBITDA, and I think that is liable to come back first, then probably Singapore and Vegas in that order, perhaps. If what Rob says is true, that people are dying and anxious to get back. No, we don't want them to die. Get back to Macau to enjoy themselves, then it should come back sooner rather than later. Listen, I'm the largest shareholder, my family and I. We want the dividend reinstated more than you do.
If you could see the amount of money that we're not getting, we'd certainly like to have that in our savings account. We'll reinstate the dividend as soon as we get back to earning some money.
Okay. Thank you very much.
You're welcome. Thank you.
Your next question comes from the line of Thomas Allen with Morgan Stanley. You may now ask your question.
Thank you. I think we're all trying to figure out what the business is going to look like in the future when things come back. Macau reopened at the end of February, and there were a couple of weeks there before the travel restrictions went to place in Guangdong and got stricter in Macau. Can you just qualitatively talk to us about what business was like then and how social distancing measures impacted your business? On a similar vein, can you just talk about how Singapore was performing? I know you put the monthly numbers on slide seven, but just qualitatively, how social distancing measures were impacting Singapore during the time period before it closed. Thank you.
Thomas, hi, it's Rob. I think in Singapore, social distancing did have an impact because we're limited there in terms of size of the operation. I think it will have an impact on Singapore in the future. Question is, how long those social distancing imperatives stay in place. We just don't know. It will have an impact, a negative, in terms of Singapore. In Macau, I think we're in a much different position because the scale and size of operations enable us. We have so much square footage there and so many more slots and tables that I think we can do much better business in Macau than Singapore vis-à-vis social distancing.
I think that the areas you talked about, the time periods obviously were impacted not just by social distancing, but demand slowed because it was more difficult to get there, and there's more concerns about access. It was a confusing time in both markets in terms of visas, getting in, getting out, quarantine. I don't think it's an adequate snapshot when the rebound comes. I think once in Macau, we open the doors back up and the 14-day quarantine and the IVS team is back in place, I think we'll be able to do
Quite well, the social distance will have a minimal impact in Macao. Again, the size and scale of our operations there, the numerous table slots and square footage. I think in Singapore, we're going to have a lot of demand. I spoke to the team this morning, and they were laughing about the amount of people calling to complain about the fact we're closed and they want to come gamble. I do believe we'll see a lot of demand in Singapore. I am concerned that may have a negative impact. I cannot tell you, obviously, what that'll be, but I think we'll have more demand come this summer, especially come fall, and Singapore could be adversely impacted by social distancing. It remains to be seen.
Thanks, Rob. Just as my follow-up, when you announced a dividend cut, in the prepared comments it said, Mr. Adelson, I think you wrote, "I see many strategic opportunities for a company precisely because of our financial strength." Can we just get some more detail on this comment? I think some people are interpreting it to imply that you'd be interested in M&A. Is that the right perception? I think Patrick talked about high growth opportunities earlier. I just want to clarify those comments.
I'd like to reaffirm what you're thinking. It does mean that we're interested in M&A. One of the reasons why we got the best balance sheet in the industry and our market cap, up until this virus came, was equal to the combined market cap of all our competitors in the U.S. combined. I'm not going to give up on developing integrated resorts. I'm going to add on to our strategic thinking, strategic priorities that we can acquire, because most of the other companies, one, don't have the balance sheet that we do, and they don't have the potential market that we do. We can go in and acquire one or more operations that, of course, the price has to be right. I'm now taking on the strategy of both acquiring and building and developing.
If I could just quickly follow up on that, any changes to your views on what markets you'd like to be in?
Not really, we've always said that Asia is the best place for us because, number one, in this virus shutdown, the Asians have been through this for a long time, for several times. They're used to it. When it opens up again, they're just going to come back and continue, maybe at a higher pace to make up for the lost time that they've experienced. Asia has got the population is the most inclined to play, to gamble than other populations. It looks like if we can find something good in Asia, we'd certainly like to do that.
Thank you.
Either to acquire or to build.
Your next question comes from the line of Steven Wieczynski with Stifel. You may now ask your question.
Yeah, hey guys, good afternoon. Rob, maybe you can help us think about the Vegas market a little bit at this point. Obviously with what's going on, you probably have seen a drastic slowdown in convention traffic. I wanted to understand what you're seeing in terms of the folks that did have convention meetings on the book. Are they willing to rebook at a later date, or are they holding off at this point?
Good question. We see a different path in Vegas when you're in Asia. Again, Sheldon referenced the, not the comfort, but the exposure Asia's had to the viruses and these kinds of things. As you know, when you fly into Asia, temperature testing and masks are kind of the way it works over there anyway. I think that the U.S. has never experienced on our shores this kind of thing. As it relates to the group market, I'm surprised. I just talked to George this morning, who runs our building here, George Markantonis. He's seeing strong demand in August from multiple groups, and he feels the demand is there. The question's going to be airlift into Las Vegas. I don't know how airlift will look the next 90 days.
I don't know the economic impact in terms of how Americans will spend money or think about being here. Group business appears to be out there for August and into the fall. They're not canceling the 21. They're rebooking into late summer and fall. I think demand's there. I've spoken to some of our competitors. The same thinking applies there. I don't think Vegas has a problem with getting groups back into place if we have the proper social distancing, the proper etiquette in place to protect people. I think that's going to look like Asia, which is a lot of social distancing, a lot of controls to make sure it's as safe as we can make it, cleanliness, et cetera. Apparently, George thinks the demand is there, and I've heard that from multiple companies in town.
I thought they'd push back into 2021, but they haven't. It's August, September, October, November, pretty strong demand.
I can tell you coming from that business myself. This is Sheldon. A lot of the companies, both private and association-wise, are relying upon their shows to expand their own businesses and to do what it is they usually do with a show: research, recruitment, et cetera. They don't want to give up on that. It's not, we can only have it at this time, and if we don't have it at this time, we're not going to ever have it again. That's not the case at all. They'll have it and make up for the loss of time as soon as they possibly can.
Okay, got you. Patrick, you gave a lot of color around the dividend, the dividend cut, and maybe this is for you or Sheldon. It seems like your liquidity position is very strong, your balance sheet's very strong. Was there ever the thought of keeping some small dividend in place just to maybe keep a little bit of a different investor base included in your stock for the time being, or was it always just kind of 100% cut or keep it?
Well, this is Sheldon. We haven't eliminated the dividend. We just suspended it. Yes, we could come down to a cut rather than a total suspension. We'll see what happens, how fast we open places, and what kind of income we're going to experience. Listen, we're all in the same boat. As I said, I own the largest amount of stock, my family and I, of anybody. I want to see that dividend recover and to maintain it as long as possible.
Okay, great. Thanks, guys. Appreciate it.
You're welcome.
Your next question comes from the line of Shaun Kelley with Bank of America. You may now ask your question.
Hi, good afternoon, and want to echo the sentiments that I hope everybody's safe and healthy. Just wanted to follow up on maybe the Singapore recovery, because this market is relatively unique to Las Vegas Sands. Appreciate all the extra color and disclosure you gave there. Can you maybe, Rob, give us a little bit more color on just sort of the current customer mix there and how you expect maybe that to trend as Asia kind of reopens maybe between your VIP customers and a little bit of the mass market there? Where is it coming from, and how do you think the source markets are going to react just in that market?
Currently, as you know, the customer mix there is zero since we're closed till June 1. The team is pretty confident that we'll get open in June. It doesn't appear much concern that it extended beyond this. If you saw the journal this morning, the majority of the problem has been isolated. I think Paul and Andrew and all the guys there told me this morning they feel pretty confident we open in June. Local market was thriving, and they think will thrive. In fact, they were chuckling about the amount of people calling to complain that they couldn't gamble. We feel pretty confident the local market will bounce back immediately and be pretty strong, actually, because it's an activity people enjoy being part of in Singapore, and we're very confident that rebounds really quickly on June 2.
The foreign local market, meaning Indonesia, Malaysia, I'm not too strong on because I think that those countries are facing challenges. I'm not sure the borders will even be open to those people. I feel less aggressive in terms of the rebound of our local market that's foreign, meaning, again, the countries nearby. Indonesia, Malaysia, a bit of a struggle right now. I think we'll be slow to see that return. I think we'll be quick to see a return to China if we get open, the borders open, and the Chinese are able to come. I think that will recover rather quickly. I think Singapore becomes positive right away in June and then ramps up throughout the summer. It will miss some key elements of local foreign markets surrounding in the neighborhood.
I don't think Malaysia or Indonesia will be simple to get back to Singapore for the summer. I do think China and local play will be strong. I know local play will be strong because it drove our business prior to closing, and we hear anecdotally that people are really frustrated and want to go back to gambling in the casinos. Also, as you mentioned, Shaun, you know you've been to Asia enough that the idea of wearing a mask or social distancing or thermometer checks will not be difficult for the customers in local Singaporeans nor Chinese visitors. They'll accept it. They'll deal with it. As you know, the high-end baccarat business anyways, people in a room is two or three in a large room, so no problem there.
The only thing I'm concerned about is if we get into a mass business there again quickly is where we may lose some. The spread can be difficult vis-à-vis the main gaming floor because there will be social distancing on the slot machines, et cetera. Once again, like a lot of markets, we have a lot of very high-end play, both slot, ETG, and table, I think we accommodate. We may be at risk when it relates to masses of people coming in and the slot machines not having enough capacity and same with tables mass. No risk on the high end, previous mass risk on the mass. Again, I think Singapore is going to be like Macau, quick to recover. Unlike the U.S., which I think is more drastic and slower. Their ability to acclimate to this environment has been proven in the past.
They've lived through SARS, they've lived through swine flu. They've lived through a lot of things, they always going to come back, and they come back much quicker than we anticipate. We feel bullish with the caveat that our foreign business around us, our neighborhood foreign business might be pushed back until the fall and not be there. We feel strongly our high-end Chinese business will recover rather quickly. We know it will, because the demand is there.
Great. Really appreciate all the detail on that, Rob. Then, sort of the other way to split out the trajectory of recovery in Macau, I think you talked a little bit about the restrictions there and the difficult read in March. Did you see for what we were able to see in March? Was it really that VIP was the only thing, or was the primary market that was available at that time, just given the broader travel restrictions? Is that the way to read the data that we have thus far? Is that a little bit of what you saw in that market, just so we can characterize it for investors?
Yeah. I wish I can give you a better color, but we just saw such a turndown there that the business just turned down. People, I read these things that the high end will come back first or the premium mass will come back or the mass. I don't think we saw evidence of that in those two weeks. I think it was so confusing and the restrictions, et cetera. I just don't think there's good evidence what's going to happen in the future. What I do believe is that China's going back to work, they're going back to travel, and when the IVS and the 14-day quarantine are taken away, I think all segments come back and come back rather healthy. I think by late summer, early fall, we're going to see some nice profitability out of our Asia properties.
By late fall, by Thanksgiving or October, I think you'll see a very strong return to a better time over there. We feel just extremely confident that Asia gets better quicker. You're seeing already in China with the travel restrictions being eased. What I don't know is the province-by-province access into Macau, how that will happen. It will happen, and I think there's been a strong claim made by the Macau government to get started. They're hoping to see the restrictions eased. I just don't think the two weeks, three weeks could be really a strong indicator of how it's going to come back. I think it comes back across all segments. I'm not a believer it's just going to be the high end. I believe it's going to be plenty of mass people as well.
Thanks, Rob. The optimism is definitely refreshing, so appreciate it.
Thank you. We're optimistic. The world will recover.
Your next question comes from the line of Stephen Grambling with Goldman Sachs. You may now ask your question.
Hi, good afternoon. I'll echo the well wishes to all of you and your families, and also Felicia's on the personal protective equipment, as my wife was actually one of those healthcare workers needing it. Thank you. My first question is a follow-up on the comments around M&A. Can you elaborate on the guidelines that may dictate whether you would pursue individual assets versus whole companies, how willing regulators may or may not be to these types of transactions, and where you generally would expect the biggest synergy potential?
Sheldon, you want to take that, or you want us to take it here in the office?
Take it, Dave.
Okay. It's Patrick, and thanks for the question. I think one thing that you should sort of look at in terms of the lens we might examine M&A through is just on our long-term views on returns. The chairman has been very strict about the way we deploy capital in order to ensure that we get the right returns to justify things. That's always been true in developments, and it will certainly be true through any M&A transaction. I think the way we're thinking about it is, and from the discussions that we've had, just around trying to be opportunistic to look and see high-quality assets where they're in key markets where it may be cheaper to buy than to build. You may find something that is attractive and fits into our overall strategy in the long run.
I think we're going to be very returns-focused. Clearly, our industry is heavily regulated, and we're going to have to ensure proper compliance as we always do, and we're going to have to look very carefully at those opportunities in that context. I think, it's not as if this is something that will happen immediately. This is going to evolve over time, and we're going to have an opportunity to take a very hard and disciplined look and see if any of those opportunities are attractive to the chairman of the board. I think that's kind of how we'll think about it.
Thanks. Maybe a follow-up on Shaun's question around Marina Bay Sands. You talked to the revenue trajectory, but can you just remind us of the puts and takes that might impact that property's margins relative to others as we think about the re-ramp, since it looks like you had very solid margins this quarter, and it looks like even the OpEx per day in the zero revenue is better than peers. Thanks.
I think overall, Marina Bay Sands, the margins in that property are really tremendous. I think a lot of that has to do with the original strategy that goes back to the chairman's view that creating a very high quality, with integrated resort with multi amenities to the highest level would produce high margins. You see the results. Since the history of the opening of the property, that strategy has been spot on. It's really delivered. It's been a tremendous asset and has driven tourism and has really contributed to the market of Singapore. I think it's been great. I think to Rob's comments earlier, we know that there's a lot of pent-up demand, and I think the opportunity here for us is to look at it for the long run. I think we're very focused on deploying capital there.
We have a bunch of projects to help and enhance and improve the offering at Marina Bay Sands that we think will be margin enhancing and cash flow enhancing. I think we're very focused on the development in tower 2. The chairman's vision there is great, and we're very excited to get that arena open. We think that'll add to the tourism offering of Singapore. We already have some market test about that, because we obviously have the arena in Macau that we operate, and it's a great tourism asset, and it works very well with the mass business and premium mass business. We see a corollary there in Singapore where we can drive significant visitation from the surrounding catchment area out of that arena.
I think if you look at Singapore over the next couple of years, we're going to see what we hope is very high-value returns on the new deployed capital in a market that continues to maintain very high margin structure. While we don't know exactly the pace of recovery that we'll see today, we do know that in the long run, and as Rob said, when things recover because the demand, we're going to be poised to take advantage of it and continue to deliver very high margins and strong cash flow. That's how we think about it.
Thanks so much for all the color and perspective. Best of luck.
Your next question comes from the line of Carlo Santarelli with Deutsche Bank. You may now ask your question.
Hey, thank you. Thanks everyone for the comments. I think this one's probably best for you, as you think about the near to medium term and maybe make the assumption that specifically in Macau, I would imagine the two sub-segments of your gaming business will ramp at different speeds. Do you guys adjust strategically at all to maybe pivot the business a little bit more towards a VIP customer that might be more pronounced early on or do you not see it that way?
We got a little problem hearing. We couldn't catch all that, but you're saying that you think VIP is going to ramp much quicker than mass?
I'm asking if that is your opinion, and then if you cater your business at all differently. I just want to get your perspective on that.
No. We're not going to think that way. We believe the pent-up demand is real in all segments. If anything, I think it'd be a mistake to think that way. We believe this is going to open up to a lot of business come this summer and the fall. The social distance we have to work through. I think Asians and Chinese, as they open that market up, open that country up, as those quarantine barriers come down and the IVS comes up, I do think we're going to see a return to all segments. We're pretty confident that Macao will start making some money this summer and a lot of money come fall. Again, I'll be redundant here, but the Asians, we've never seen this kind of a virus on our shores here in the U.S. We're taken aback and shell-shocked by it.
Asia has seen it numerous times. They understand it. They've dealt with it. You realize Hong Kong has opened operating. It never closed in terms of retail and restaurants. They're walking around with gloves and masks and sanitizer and temperature checks. Everything's open in Hong Kong in terms of the restaurants, retail, and I think their statistics are pretty excellent relative to the rest of the world. They can deal with it. Macau will deal with it. I think it'd be a mistake to try to handicap which segment comes back first. I think they all come back. We're pretty anxious to see that happen in the next 60 days, with the first phase, then hopefully by late summer, it really kicks in all the way.
Our job is to provide a safe environment for our employees and for our customers so they keep coming and there's no reinfection. Again, unlike the U.S., which I think people are concerned, here in Nevada, we're having a hard time getting open again because the people are so scared of any idea. Hong Kong right now, you can go out for dinner, you can go shopping. They've come to terms with it much more comfortably than we have. I think it's a mistake to try to figure out which segment resurrects quickest. I think they all come back pretty quickly.
Great. Thank you. That's helpful. Just one follow-up as it pertains to Marina Bay Sands. It looks like just timing of CapEx has shifted a little bit from where it was. Could you guys just provide an outline for maybe the key milestones of that project and how you foresee the construction process?
Sorry. Page 11 has our CapEx expectations in the slide presentation.
Yep.
You're referring to the expansion, so the new tower for Marina Bay Sands.
Yeah, just in terms of the timeline of construction and whatnot.
I think what we've laid out here is pretty consistent with our thinking today. I think we're really not going to start any heavy expenditures until the back half of 2021. Then we'll follow as quick an execution schedule as we can follow. It's funny, the chairman always says to us, "I built The Venetian in less than two years. You guys should do the same." We're going to do the best that we can do to be as aggressive as we can be, because really, we want to add these assets to the tourism portfolio of Singapore as quickly as possible. I think if you look in Macau, and you look at the trajectory of our latest project, which was really from the ground up, The Parisian, you can see the distribution there in some of our prior presentations about how CapEx progressed.
Some of that is influenced by labor availability. In Singapore, we'd like to believe that in this particular market, we'll have the ability to pursue the schedule that we've laid out there, where the majority is coming across 2022, clean up in 2023, and then we'll see what happens. Maybe there'll be some in 2024. As of right now, we're not sure. I think our goal is to try to get this thing open as quickly as possible once we get the proper approvals from the government of Singapore, obviously with their support. Just to highlight, we do have a delayed draw of financing for that project. That project is financed in advance, and it's the same bank group that we've been with for years that also holds the credit facility there in Singapore. We're continuing to make progress. We're working on a timeline there.
We're trying to work as quickly as we can given the current environment. We'll continue to keep you updated in upcoming quarters, but we'd like to pursue the schedule as aggressively as we can.
Before this, we also will be open, when we do open up this summer, our Four Seasons is fully open, operational, 290 keys. By the end of the year, we'll have The Londoner done as far as the outside, not the facade. We're moving quickly. We have 3,000 workers on site right now to finish those projects.
Great. Thank you very much.
Your next question comes from the line of Harry Curtis with Instinet. You may now ask your question.
Good afternoon, everyone. First question is with respect to building margins back in Macao. Going back to the old adage, never let a crisis go by without learning from it. As you look at some of your larger expenses, ex labor. For example, marketing, food, and beverage. Are there opportunities here to tweak the way that you operate to bring your margins back faster so that you'll be running actually more efficiently, even with fewer guests, for example?
Harry, I guess my confidence may be misguided, but I believe business in Macao is going to be strong enough. We won't have to worry about cutting some restaurant workers. I just don't think there's enough margin in cutting costs if the revenues are there, and I think the revenues will be there. I just feel like we're overplaying this in terms of how Asia thinks and how Asia rebounds. I think that's an appropriate commentary and question vis-à-vis Las Vegas. I think it's a very fair question. In Macao and Singapore, I think we have great pent-up demand. We hear it, we feel it, and we think that unless we're misguided in that thinking, it'd be a mistake to pull back on F&B, pull back on a lot of things we do there, because, again, you can't overcome the enormous top line.
These are top-line businesses over there in Asia, and I think they need those kind of goods and services to be successful. I don't see it. Maybe Patrick sees it, but I just don't see enough. If business comes back to levels we believe this year in Asia, I think it'd be mistaken to try to shave a few points of cost and drive margin because the revenue should be there, in my estimation.
Just one additional thing to think about. Before the start of this disruption, beginning in the first quarter of this year, this was a very well-functioning, very well-oiled machine that ran high margins, was incredibly efficient, and continually looked to make itself more efficient each quarter. I think we won't look at this purely from the transition standpoint. We're going to look at this from the way we always look at it, which is, to Rob's point, we've got to grow revenue, and we believe that it will happen. We're going to continue to manage the business in a very cost-efficient manner, ensuring that we generate as much cash flow and keep our margins strong.
I think it's difficult from where we sit today to tell you all the things that we'll do going forward because we've looked very carefully at our business each quarter, and we've taken cost out of it appropriately. I think we'll just continue to do that and try to run as efficient a business as possible.
Fair enough. Let me move on to a broader topic that looks out 5 years-10 years and is tied to Sheldon's comments about additional spending in Macao. There's a new chief executive. Some investors are questioning the relationship that the concessionaires might have going forward with the new chief executive. It seems to me his most recent comments have actually been somewhat encouraging that the concessionaires have been positive for Vegas. My question-- Vegas, Macao rather. My question is, as you think about the future, and spending in Macao, what partnerships might develop with the government or other companies or in the hospitality industry or in completely different industries that would position Las Vegas Sands to get a high return on incremental investment?
First, I'll repeat Sheldon's comments at the top of the call. We'd love to invest in Macau. We're keen to invest in Macau. I don't know you saw the chief executive calling us out for participating in the quarantine with our hotel rooms and commending our actions there, but we're pleased to see recognition on that. I think we've always been consistent, and Sheldon has been consistent. We want to invest as much as we can in Macau, as often as we can in Macau, and we're anxious for that day to come, Harry. The minute we get the go ahead, I think Sheldon Adelson and our board would be predisposed to write very large checks very quickly. We've always been believers. We believe the market has so much potential growth there. There's so much opportunity.
The future of Macao is very bright and very diversified. We're very anxious to be part of that. I think Sheldon's always been unequivocal in his willingness to invest in the future of Macao. Sheldon, do you want to echo those sentiments?
Yeah, I'll echo those.
Echo them.
Ditto.
Ditto.
Listen, Macao will be the best, if not one of the best. It'll be the best gaming and leisure destination anywhere in the world. There's no reason why it shouldn't grow. While Rob was talking, I was thinking about potentially if it could only grow as big as Vegas does. The population that it serves is much greater than what Vegas serves, and it could grow into that, but it'll take a long time to grow into that. We've got 150,000 rooms. There's only about 35,000 rooms-40,000 rooms in Macao, it'll take quite a while for it to grow well beyond that.
Okay. Thanks very much, everyone.
It certainly has the growth potential.
Thanks, Harry. Appreciate it.
Thanks, everyone.
Thank you.
Your last question comes from the line of David Katz with Jefferies. You may now ask your question.
Hi. Evening, everyone, and thanks for taking my question. I wanted to just go back to the reopening and try and envision, Rob, you touched on this on the mass side, what operationally it could look like. From people taking the ferry, border crossings, et cetera. Are we envisioning gloves, masks, and temperature? I suppose I would ask the same question about Las Vegas, and given, as you point out aptly, we may not be as used to it here.
Yeah.
What that potentially could look like, because we saw some release from the Nevada Gaming Commission this afternoon.
Right. Dave, I turn to Hong Kong as a guideline. I think the Asian people will adapt. Well, yes, the answer is there'll be temperature checks, there'll be masks, there'll be gloves. We're going to do everything we can do to ensure our employees and our customers an environment they can have fun in and visit us and all that, but they're not going to be at risk, as best we can prevent that. The rooms will be clean beyond clean. The wiping down of surfaces, the social distancing. They're doing it in Hong Kong. I think last time I looked, Hong Kong had less than a dozen deaths. Again, retail is open. You go into Hong Kong, the restaurants, you sit a certain five, 10 feet apart. You get a temp check coming in.
You wear gloves, you wear a mask, and it's a different world, but the Asians adapt. There's all kinds of sanitizer. They're doing it as we speak in Hong Kong today. I envision a similar environment here in Las Vegas and in Macau. The difference is going to be the ability to acclimate is much higher in Asia because for years, I've been going to airports, be it Tokyo or Hong Kong, Macau, and you do a temperature check, and people are wearing masks. It's not that foreign that they're thinking. I don't think the Asian people have a problem at all. In fact, I think they're going to welcome it and be anxious to get back to having fun in casinos. I believe that from the bottom of my heart, the recovery in Asia is going to happen rather quickly. I'm not as comfortable in Vegas.
One of the reasons I'm concerned is because it is foreign to our thinking. I've been wearing a mask now for a while, and it's different. It is different. I think it will be a little bit difficult here. I also worry about the airlift and how the airlines will be able to fly into Las Vegas because the airlift's an important part of our success. Although it's going to take some time and some comfort to get people acclimated, I think it's going to happen. I don't think there's any problem at all what's going to happen in Macau. The minute they open the doors in Macau, we're ready. We have the gloves, the masks, the sanitizer, the temperature checks. I think your best example is what's happening in Hong Kong as we speak. It's pretty amazing. You can go shopping.
You can go eating, you can do a lot of things there. Life there is not usual, but it's ongoing, and that's what I hope we can do in Las Vegas as well and adapt to the new environment. Until the day comes with a vaccine or a cure, I believe that's going to happen. Having lived through so many of these things, from the stock market crash, the 1980s to 2001 to 2008, 2009 to SARS. People always say, "Oh, that's going to change everything. It's going to be all different. It'll never be the same." I don't agree. I think this thing will get fixed at some point. There'll be some remedy, be it a vaccine or be it some way of getting the medical people. There's too many smart people out looking.
I think the world will return, but Asia will return quicker, and it will rebound much faster than here, and there'll be no aversion to wearing a mask and gloves and social distancing. In fact, they'll welcome it as long as they can come back to Macau and Singapore.
Dinner out [crosstalk].
Rob, you're not that old that you remember all those past times.
What's that?
You're not that old that you remember all those incidents in the past.
I was much younger, but I remember them.
Dinner out sounds great. Be well, everyone.
Thanks, David
Thanks for taking my question.
Be well, be safe.
Yep.
Thank you, presenters, and thank you, ladies and gentlemen, for joining Las Vegas Sands' first quarter 2020 earnings call. That concludes today's conference. You may now disconnect, and have a great day.