Daniel J. Briggs - Las Vegas Sands Corp. Sheldon G. Adelson - Las Vegas Sands Corp. Robert G. Goldstein - Las Vegas Sands Corp..

Shaun C. Kelley - Bank of America Merrill Lynch Thomas G. Allen - Morgan Stanley & Co. LLC Stephen Grambling - Goldman Sachs & Co. LLC Joseph R. Greff - JPMorgan Securities LLC Anil J. Daswani - Citigroup Global Markets Asia Ltd..

Good afternoon. My name is Vincent and I'll be your conference operator today. At this time, I'd like to welcome everyone to the Las Vegas Sands Second Quarter 2018 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. I'll now turn the call over to Mr. Daniel Briggs..

Thanks, Vincent. 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. 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&A portion of the call.

Finally, for those who would like to participate in the Q&A session, we ask that you please limit yourself to one question and one follow-up so we might allow everyone with interest to participate. Please note that this presentation is being recorded. With that, let me please introduce our Chairman, Sheldon Adelson..

yay dividends and yay buybacks. Our recurring dividend program remains the cornerstone of our program to return capital to shareholders. Last October, the Las Vegas Sands Board of Directors approved an increase in our recurring dividend for the 2018 calendar year to $3.00 per share for the year or $0.75 per quarter.

After establishing our recurring dividend program in 2012, this marks the sixth consecutive year that we've increased our recurring dividend to shareholders.

We remain deeply committed to our recurring dividend programs at both Las Vegas Sands and Sands China, and we look forward to increasing those recurring dividends in the future as our cash flows grow. At the same time, we will remain optimistic in returning excess capital via our share repurchase program.

We repurchased $ 100 million of stock during the quarter. We look forward to continuing to utilize the stock buy-back program, to return excess capital to shareholders, and to enhance long-term shareholder returns in the future.

Our industry-leading cash flows, geographic diversity and balance sheet strength, enable us to continue our recurring dividend and stock repurchase programs, while retaining ample financial flexibility to reinvest in our existing properties and pursue the most promising new development opportunities.

In conclusion, our cash flow generation continues to be strong and predictable. The structural advantages from our scale, critical mass and product diversity continues to translate into strong financial results. The marked acceleration in mass market growth in the Macao market has continued during the current quarter.

We will continue to make significant investments in Macao, because we have a long-term and unwavering commitment to this market. We look to the future with confidence. We have a strong organic growth outlook. We are strategically reinvesting in our existing assets while also pursuing new development opportunities.

And we have both the intent and the financial strength to continue to return excess capital to shareholders. Thank you for joining us on the call today. And now, we'll take questions..

We have a question comes from the line of Shaun Kelley from Bank of America. Your line is open..

Hi. Good afternoon, everyone. I just wanted to maybe start with the current market and operating environment. I think the last couple of months of GGR growth, we've seen a little bit of a deceleration in the market overall, but obviously LVS is taking a material share and performing well.

I was just wondering if you could give us your latest thoughts on both the operating environment, a little bit about that deceleration, and if I caught it correctly, I think at the tail end of the prepared remarks there was something about an acceleration or continued strong growth in the current quarter, and I just want to clarify that comment.

Thank you very much..

Hi, Shaun. It's Rob. I think the success of this quarter demonstrates material growth in all our segments in our business with the Macao rolling, mass, premium mass, slots, ETGs, rooms, retail, all showed material growth, and our EBITDA reflects $150 million year-on-year improvement.

But the most important driver of this growth is premium mass, and on page 11 of the deck, you'll see our references to our win per unit per day in mass and premium mass tables. We're basically at $7,300 a day in mass and about $17,000 a day in premium mass.

This strong growth comes – we think it comes from a non-Guangdong segment of our business and it bodes well for our future. We intend to emulate the success of The Venetian from a lodging and from a perspective of how we move forward and grow.

The Venetian's renovated room and suite product has resulted in about 33% year-on-year EBITDA growth, mass table drop is up by about 32%, rolling volume up 44%, slot volume by about 20%, retail sales up 27%. This property just continues to accelerate and it's hitting on all cylinders.

And this is the blueprint as we move forward in our CapEx, how we see the market for our company. The Parisian currently has about 30% of its rooms out of order. But by the end of this year, by the end of 2018, we'll have about 350 newly converted premium suites.

The theoretical win of the ones we've been – we've finished thus far is four times what we're getting at the old rooms. So by year end, The Parisian is a whole different product. And again, the blueprint here goes back to our Venetian success.

Same holds true with the Four Seasons and we've renovated and we've literally about 22% year-on-year growth, EBITDA growth. But, next year, we'll see the addition of 300 new suites of the Four Seasons which is going to be a material impact on the performance of that product.

The SCC is showing growth, but when it comes to The Londoner, with newly converted suites at both The Londoner and St. Regis, we believe this property could go far beyond its current $700 million to $800 million run rate. It will feature 2,000 premium mass suites, and by far our greatest growth vehicle in the future.

Let's address non-Guang [Guangdong] growth for a second on page 12. This is the penetration store we've been waiting for that will grow our EBITDA to $3 billion and beyond. The penetration beyond Guangdong province is critical to our growth and our ambitions. These people come to gamble. They stay longer at our hotel. They come to our arena for shows.

They shop at our 850 retail stores. This is a lifestyle segment and the situation of these visitations of these affluent Chinese consumers, we think, is the future of the growth at our company.

In summary, the long term demand is there, non-Guangdong penetration, younger premium mass demographic which consumes our lifestyle driven Integrated Resort product with retail, entertainment, dining, luxury.

At the same time, we have a clear path to end at what we've achieved at The Venetian followed by at first – The Venetian this year, The Parisian, Four Seasons and lastly The Londoner. So we're extremely confident that we found the key to growing our business not just this year but beyond.

And unlike '14, which will probably rival our '14 EBITDA this year, unlike '14, obviously the growth is based on a much more sustainable segment, that being mass, premium mass.

So we're extremely confident of not just this quarter, next quarter, but next few years of meaningful growth of our properties, assuming the market continues to tick up like it is. We feel very bullish..

Great. Thanks for that Rob..

.

I could. I could..

Thanks for that, Rob. I appreciate it. Just the other update would be, you mentioned the importance of getting some of the new premium mass suites opened at both Four Seasons and I assume St. Regis as well. Just – I know there's been some scope changes you guys have been looking at there.

What's the latest on timing for when we could expect or think about those opening?.

At this point we're working through the issues with our development team and we'll get back to you when we have a final date. But we feel good about the timing, we feel good about the scope. We've expanded some of the quality. Our main goal, as we move forward, is to get these right.

If it comes in poorly done and poorly executed, it will reflect in the revenue. We've learned the hard way. But when you get things right, it does pay off, and if it takes more dollars to do it, we'll do that. So we'll come back to you with a finite number in terms of design schedule and timing, but we're not prepared today to talk about that..

Thank you very much..

Sure. Thank you, Shaun..

Thanks, Shaun..

Our next question comes from the line of Thomas Allen from Morgan Stanley. Your line is open..

Hey. How are you? Can you talk about the Singapore performance in the quarter? Mass trends look to have grown pretty strongly, but obviously VIP fell significantly. So can you just talk about what's driving that and how should we think about the future? Thanks..

Sure. As you see MBS stood about $368 million for the quarter. We ran – our business ran very well there with the exception you called out, the hotel ran about at s97% at $418, RevPAR of $405. Retail had I think its best quarter ever at $1,753 sales per square foot.

And non-rolling slots, as you mentioned got to – non-rolling slots tables got to $4.8 million per day with margins hanging up in there in the low-60%s. And that is of course the main driver of our success. The weak link of the performance was the rolling segment and we have our lowest rolling volume in our history, under $6 billion.

And we held about, in the range, 2.84% but down than last – from last quarter's 4.77%. We've always represented this is a highly concentrated quarter and this quarter there was no concentration. The business was soft and there's no denying it. We are working towards – looking at what we can do to improve that.

Even with that weakness, this place still shows about $1.5 billion annualized run rate which is acceptable. The question is how can you drive more business in here, and the answer is twofold. We've got to keep ramping our premium mass business, which clearly is the real driver of the underlying EBITDA.

And we gotta work harder to figure out how to get better quality play in from the rolling segment. It's – again, it's concentrated, it's confusing to us at times how it jumps up some quarters to $7, $8, $9 billion and then tumbles like this quarter. We're not happy with it. We plan to work at it. We're looking at our suite product.

We need to renovate some suite product. The competition for that segment is strong regionally, Macao and Australia, et cetera. But we're not pleased with that rolling segment performance. We've got work to do and there's no other excuse and we've got to keep looking at how to improve it.

And we still don't want to give up on it because the next thing you know we could have another $8 or $9 billion quarter this year. But, clearly, that's the weak link in the performance at MBS..

Very helpful. Thanks, Rob. And just as my follow-up, there's obviously been some new supply that opened up in Macao this year.

How is it influencing the market and your position within the market?.

I'm sorry, Tom, one more time I was looking at something, I'm sorry. One more time..

The new supply in Macao, how is that impacting the market in your view and how is it impacting your share in the market? Thanks..

I think it's positive, very positive when Macao gets new product. And I think the Morpheus tower, the Wynn, MGM, all these things are very positive for the market. We view Macao as a growing market, as a growth market. Those products make it, honestly, bulletproof to the rest of the region as it grows into a $40 billion, $50 billion CapEx there.

It's an amazing place to watch – what started – I'm here 11 years ago with the sole Venetian product and that has morphed into this amazing visitation machine. Very honestly, it just benefits us.

We think the new product helps us because with 13,000 rooms, we have the – the MICE business is ours, the entertainment business, we have the only arena of scale, we have the only place with 850 stores. The pure scale of what we have over there helps us when these guys bring new product to market. The competition is great.

The quality of product is excellent. Our job is to, again, take our Venetian model to fuel our growth and emulate it. We do think, at the end of the day, it's a rooms-driven market. I kind of chuckle when people say a few years ago people say, oh it's a bloodbath, there's too many rooms. And now we're running at 94% across our portfolio.

Our biggest problem is the team there wants more rooms, more quality rooms because we're sold out every weekend. So I believe that we are – everyone's going to win in Macao just those with the most capacity will win the most. So I think this quarter reflects the beginning of a good strong trend, the non-Guangdong visitation.

And I think it's great that Cotai keeps bringing more products like Morpheus, like Wynn, like MGM, it just helps us bring more visitation which bodes very well for our company..

I want to point out that – this is Sheldon – I want to point out that this $1,753 per square foot sales in....

MBS..

...Marina Bay Sands in Singapore is probably the second highest – if you were in the United States, it would be the second highest. Beyond, I think, a couple of one or two shops, one or two malls in Florida. It may even be one of the top two or three highest.

I want to point out that the reason for that is while all the malls in the United States are frequented by local visitors – they're not visitors but the local people, we are frequented by tourists. And the same thing is happening at malls in Macao, at the duty-free shops, the first level of the Four Seasons Mall is over $5,000 per square foot.

On an average, I think, between the duty-free shops and the one or two additional floors, we're at close to $3,000 a foot sales. There's nothing like that in the world and it's nothing like our Integrated Resorts which acts as the anchors.

If you think about it, we don't have any department store anchors and we won't have any because we don't need them. The Integrated Resort is the anchor..

Thomas, what you mentioned Q3, I don't think we gave any indication of Q3 and we won't..

All right. Thanks, Rob..

Thank you. Appreciate it..

Your next question comes from the line of Stephen Grambling from Goldman Sachs. Your line is open..

Hey thanks. Good afternoon. I guess just a follow up on Marina Bay Sands.

Have you seen any change in the competitive environment specifically there within the market? And I guess has anything changed from a promotional intensity and how you think about that as a lever?.

Not really. I think the market remains. We – I don't see competitive problems there as far as – Genting does a really good job in the market. But we continue to run our business as we see fit. Our concern is about ourselves with our product was getting the right kind of team out in the field to get the rolling segment we are missing.

But we're very pleased with our $4.8 million a day. We couldn't be – Sheldon referenced the mall sales are extraordinary, hotel is sold out. If anything we lack in that market, Stephen, is more capacity. What's frustrating is we just need more – a lot more sleeping rooms and more gaming capacity.

Slots there do terrific numbers, and it's hard to see that as a competitive problem. It's simply a problem of capacity. We have built a building that's always full. Retail's full, slots, ETGs – we actually have 80%, 90% occupancy at weekends. So, I don't think it's a competitive problem in terms of pressures from Genting.

We just try to do a better job in our rolling segment..

Fair enough.

And then maybe changing gears, I think last quarter you gave some good detail on Japan and now with the bill passing, can you just remind us of how you're planning and anticipating the process to unfold from here? And how you assess the opportunity, I guess, across various markets as well as how you're thinking about capital allocation in pursuit of that opportunity?.

So, Japan, as we all know passed finally and we're thrilled. And I think Sheldon has talked about the passing of a very, very important part of our – we'd love to be there as a third country along with Macao and Singapore. We don't have a timetable, we wait for the government to direct us as to how to go forward.

We've had a presence there for over a decade and we're eager to be there. I think our plan is simple. We have the balance sheet. We have the reference point IRs in both Macao and Singapore that the Japanese government look to. We have the defining MICE space in Macao and Singapore. We have the defining entertainment activity in those places.

So I think when you realize what we've done in Macao, I think Sheldon's reference to MBS is true, but also the buildings we built in Macao are pretty extraordinary too. I think, again, strategically what makes this company different is our balance sheet and Sheldon's ability to figure out what to build and where to build it.

What he built in Macao remains the reference point for Asian IRs. He took up in the Cotai Strip and that's amazing achievement. I think they look at that, look at his MICE focus, look at his retail focus, look at his grand plan, I think that bodes well for our future development in Japan. We have the balance sheet. We have the reference sites.

We sure have the appetite and we just want to get started. So we're hoping the government to move forward. We'll wait for their direction and adhere to their advices..

What about our good looks and charm, Rob..

Yeah we're getting old, so. You and I are the old dogs in the hunt here, so I don't think that's gonna get us there..

What I'd like to point out is that we have – everybody says, local Japanese business people, banks, everybody says, we have the leading position in Japan because of my background. I used to produce Comdex show in Japan, and I also helped them to redesign the biggest exhibition center they have in Japan called Makuhari Messe.

And when they went to build that in the 1980s, the Governor of Chiba, in which Makuhari is located, came to my office in Boston and I helped them redesign the center, the exhibition center. So I've got a good background and reputation in Japan for being the leading MICE Integrated Resort developer and operator.

And I think that the estimates by people who know – say they know, whom we believe they know, say that we're in the number one pole position..

I guess one quick follow-up.

Is there anything, I guess, as you're looking at the market that has changed that makes you reconsider either how much capital you would deploy or how you're thinking about returns in that market?.

We're not – as I've said before, we're not going to do anything that will – we don't intend to do anything that will bring returns down below 20% cash-on-cash. And we just don't know the details. The law was just passed last week. It consists of hundreds of pages. There's about 250 different items in the bill.

And I think it's going to go down to the various prefectures before we know what can be done and when. And to get further clarification on several of the important things like the percentage of overall build space. They're saying 3% but there are a lot of variables that might be able to get us.

I mean, we normally count front of the house and back of the house in our casino allocation or space. But over there, we will count only the front of the house. And, as we understand it, we won't have to count the aisles and the food and beverage space as part of the 3%.

So it's a matter of how many gaming positions we put in and I think it's too early now. This implementation bill will take at least a year for any city that wants to be involved to come up with their requirements and their criteria..

Fair enough. Thanks so much. I'll jump back in the queue..

Thank you..

Your next question comes from the line of Joe Greff from JPMorgan. Your line is open..

Good afternoon, everybody..

Hey, Joe..

Rob, what was interesting to me going through the earnings release and the supplemental presentation was when we look at your Macao results in mass and VIP compare it to your growth versus the growth of the market segment you meaningfully exceeded on the VIP side. And on the mass side, you're a little bit below the estimated mass segment growth.

And I can understand the rationale of each of those but can you talk about sort of, from here, your efforts in growing the VIP business through the use of maybe underutilized junket rooms and maybe what the path is there..

Sure..

And then my second question is with respect to the mass growth, this quarter was maybe the first quarter where you didn't meaningfully exceed or maybe match the segment growth. And I get it, we probably have to sort of total up all the operators to get a really true segment number for the market.

But from here, does it get more difficult to keep pace with the mass side of things just given your historical position in the mass and that's all for me. Thank you..

Yeah. Joe, I'll take the second part first. I think just the opposite. I think our mass business is going to continue to do very, very well. We grew so quickly in the last few quarters. Our base grew so quickly that perhaps you're right we underperformed by a point or two. But we'll see that once all the numbers come out.

I think we're built for growth far beyond anybody understands because of the products we have. As we complete these renovations, what we did at The Venetian, which now puts us on track to do $1.4 billion, maybe $1.5 billion next year, that's going to just keep like dominoes. You're going to see it at The Parisian next at the end of the year, boom.

And you're going to see it hit the – the Four Seasons is going to become a very, very strong player. And then lastly you're going to see it at The Londoner, that conversion. So my belief is that this company, with 13,000 rooms, the dominant position in both rooms, retail, arena, it just has all the elements of growth.

And as that non-Guangdong visitation continues, I think we're going to be a very strong player in the growth segment. I have total confidence and I should also throw in there, in case you missed it, we opened the first Apple flagship store outside United States last month. We're very proud, it sits outside of Cotai.

We were with the people from Apple last month in Asia and they're delighted with the store and we sure are. We're hoping for more stores with the Apple people if they want to do more with us. We think that that store is going to become a traffic machine, great for our retail business, but not so bad for gaming.

Again, I think these kinds of things, the Cotai Arena, the new Apple Store, the renovation of literally thousands of rooms and suites in over the next 18 months to 24 months, I think it redefines our growth and who we are.

I am very optimistic that this non-Guangdong visitation which is we built this company for us to go beyond Hong Kong and Guangdong into the outer reaches, the outer provinces of China is the story. That's where the growth is. They're younger, but they gamble. They want all the amenities. They want the lifestyle we offer.

And I think we're built for that kind of growth. And frankly, if you don't have the rooms on weekends, you can't get them. And they come over the border and they want quality product, they'll pay for it. They'll buy the retail products. They'll buy the shopping. They'll buy the dining. But that's the growth engine that we are – we're dependent upon.

And if we execute our rooms suite product properly and get the right product in front of the consumer, we have total confidence. On the junket piece, I think, again it looks – it behooves us to look at the 44% year-on-year growth at The Venetian. What we did in The Venetian, we redefined some of the rooms there.

We re-did our suite product, we worked with our junket partners and we're just doing some great numbers out of The Venetian. That we think happens at The Parisian. That's what happens at the SCC. It's happening, as we speak, at The Plaza.

The only problem with The Plaza, we need more sleeping rooms of the quality we have currently and that comes on board with the completion of the Four Seasons. That Four Seasons, 300 suites, is going to really make us rethink the value of that asset at Plaza and Four Seasons. We're really excited. The junket business we need to do more.

We keep redefining the physical structures in the rooms. We keep talking to our junket partners. We think there's a lot more growth ahead of us. And as you know, that relationship also spills over into our premium mass.

So there is a relationship there that's undeniable in Macao and you have this strong junket, you have liquidity that fuels other segments.

So you're seeing in our business this quarter that $750 and it hopefully gets to $800 and keeps growing is the beginning of, we think, a strong growth pattern with 13,000 sleeping rooms, the dominant retail position, the dominant entertainment position in Macao to fuel more growth in all segments.

And we just started our work in junkets, it's just beginning. And we're at the early phases of adding more rooms and make the rooms nicer and more acceptable to our customers. So we are very bullish on our growth..

Great. Thanks, Rob. And just a follow-up on the VIP segment.

Do you think you're growing that segment or do you think it's more just a share shift?.

Well, that's – I think we're growing that segment. I think when you see the kind of growth, we get the majority. Obviously, our business coming out of Cotai about 93% but you're running $18 billion portfolio wide and you're seeing, like Venetian by 44% growth, you're seeing The Plaza growing, you're seeing The Parisian.

The Parisian is just handicapped by – these are better room product, it's going to get it, but even that product is growing. I think we're – I believe we are growing but that's hard to say adjusting everyone else's numbers but I feel that our products are getting better and our competitive position is getting stronger.

And, again, I think our junket partners recognizing that, too. So – and don't forget we have a strong premium mass, premium direct business as well as the junket rolling, so we kind of hit them on two fronts..

Thanks, guys..

Sure..

Your next question comes from the line of Anil Daswani from Citigroup. Your line is open..

Good afternoon, guys. My question is also along the lines of The Parisian. You mentioned in your remarks earlier that you're getting 4x the return from these new suites at The Parisian.

Again, given the markets being driven by premium mass, would you consider doing even more conversions to these premium mass friendly rooms, whether it be at The Parisian or even at some of the other properties in The Londoner going forward? That's my first question..

It's a really good question, a very fair question. The answer is, I would certainly talk to Mr. Adelson and our Board about that because if we can deliver our current returns we're seeing on the first hundred or so suites converted, why wouldn't you? I mean, the truth is, we've learned in Macao – a room – all rooms are not created equal.

A better room product definitely speaks to the segments you want to speak to. So if we can get ourselves up to a couple of $3,000 a day versus $500, $600, why wouldn't you convert, and that's a good question and the answer is sure, why wouldn't you. We're here to make money and get margin and grow our business beyond $3 billion.

And the way to get there is intelligent CapEx. We've demonstrated you our willingness. Our Board and Mr. Adelson have shown willing to write checks to improve our products. The Parisian opened up and it's a good hotel. It just has more premium mass demand and we have rooms to give it.

So we got the 300 or 400 suites and that thing grows to $500-some-million-dollars and $600 million, gee, I would think we definitely think about more conversions, of course. But one thing I would mention to think about....

And my follow-up is, could you tell us a little bit about the opportunity to expand your room product in Singapore, because obviously that has been what's hurting the growth over there?.

I'm sorry I missed that, Anil. I just want to say one thing just follow up on that, the one thing you should think about with The Parisian is it's going to benefit by its proximity to the conversion of the Four Seasons products going forward when we finish those 300 suites.

So you can walk out of that Four Seasons product into The Four Seasons or The Plaza or you can walk into The Parisian, it may be that between the 300 there and the 350 at Parisian, we may have enough. But just to make that clear.

Your second question was about MBS?.

Yes.

So at MBS, is there an opportunity to get more room product now that the moratorium is up in Singapore?.

We can't, at this point, comment on that about, if it's an opportunity now. We like to believe there is at some point but we can't discuss that today. Clearly, we have maxed out the occupancy from a cash and comp demand. And, clearly, at $4.8 million a day, we have tremendous demand for that product, but it's not worth discussing at this point today.

That's also true in a gaming capacity issue as well but nothing to discuss at this time..

Did you have another question?.

Operator, let's take one more question..

We have a question comes the line of Jared Shojaian from Wolfe Research. Your line is open..

Hello?.

Hello, anyone there?.

Operator...?.

Okay. So apparently, we don't have any more questions. We appreciate your time today. Thanks for joining us..

This concludes today's conference call. You may now disconnect..