Las Vegas Sands (LVS) Q3 2013 Earnings Call October 17, 2013 4:30 PM ET
Daniel J. Briggs - Vice President of Investor Relations
Sheldon Gary Adelson - Chairman, Chief Executive Officer, Treasurer, Chairman of Las Vegas Sands LLC, Chairman of Sands China Ltd and Chief Executive Officer of Las Vegas Sands LLC
Robert G. Goldstein - Executive Vice President and President of Global Gaming Operations
Michael Alan Leven - President, Chief Operating Officer, Secretary, Director and Chairman of Advisory Committee
Shaun C. Kelley - BofA Merrill Lynch, Research Division
Felicia R. Hendrix - Barclays Capital, Research Division
Steven E. Kent - Goldman Sachs Group Inc., Research Division
Thomas Allen - Morgan Stanley, Research Division
Carlo Santarelli - Deutsche Bank AG, Research Division
Cameron Philip Sean McKnight - Wells Fargo Securities, LLC, Research Division
Harry C. Curtis - Nomura Securities Co. Ltd., Research Division
Robin M. Farley - UBS Investment Bank, Research Division
Good afternoon. My name is Toni, and I will be your conference operator today. At this time, I would like to welcome everyone to the Las Vegas Sands Corporation Third Quarter 2013 Earnings Conference Call. [Operator Instructions] Thank you. I would now like to turn the conference over to Daniel Briggs, Vice President of Investor Relations. Sir, you may begin.
Daniel J. Briggs
Thank you. Before I turn the call over to Mr. Adelson, please let me remind you that today's conference will contain forward-looking statements that we are making under the Safe Harbor provisions of federal securities laws. The company's actual results could differ materially from the anticipated results in those forward-looking statements. Please see today's press release under the caption Forward-looking Statements for a discussion of risks that may affect our results. In addition, we may discuss adjusted net income and hold-normalized adjusted net income, adjusted diluted earnings per share and hold-normalized, adjusted diluted earnings per share and adjusted property EBITDA and hold-normalized adjusted property EBITDA, all of which are non-GAAP measures. A definition and a reconciliation of each of these measures to the most comparable GAAP financial measures are included in the press release.
Please note that this presentation is being recorded. We also want to inform you that we have posted supplementary earnings slides on our Investor Relations website for your use. We may refer to those slides during the Q&A portion of the call. [Operator Instructions]
With that, let me please introduce our Chairman, Sheldon Adelson.
Sheldon Gary Adelson
Thank you, Dan. Looks like we have so many adjustments, our adjustments have given birth to other adjustments. Good afternoon, everybody, and thank you for joining us today. We are extremely pleased with our record financial results, which continue to reflect strong execution of our strategic objectives. We delivered outstanding growth in revenue, cash flow, net income and earnings per share this quarter, with our adjusted diluted earnings per share up 78.3% to $0.82 per share. Hold-normalized diluted earnings per share increased 47.2% to reach $0.78 per share. Take that you guys who underestimated us. Importantly, the power of our unique convention-based, Integrated Resort business model, which truly sets us apart in the industry, is increasingly being reflected in our financial results. Looking back to the 2-year period ending December 31, 2012, and out of the largest 100 U.S. public companies, we were the 11th fastest in net revenue growth, the ninth fastest in EBITDA growth, the eighth fastest in net income growth and #3 out of 100 in earnings per share growth. Looking ahead, we are confident that our business model gives us a sustainable competitive advantage in the Integrated Resort industry as we seek new development opportunities. We are the leaders in the industry and our unique convention-based business model, coupled with our financial strength and focus on operational excellence, will contribute to our growth in the years ahead.
The highlights of the quarter, from my perspective, are as follows: First, we delivered another record quarter in Macau, where we are growing faster than the market, in both the mass and VIP segments. Second, the confidence we have in our business and the reliability and predictability of our cash flows has allowed us to raise our recurring dividend for the 2014 calendar year to $2 per share, an increase of 42.9%, compared to the $1.40 recurring dividend we will have paid this year. Yay dividend! And third, we returned nearly $300 million of capital to shareholders this quarter through stock repurchases. I guess $299 million is close enough to say $300 million.
Our financial results continue to reflect the strong performance of our 4 principal strategic objectives. Please allow me to remind you of those objectives and to what they do, and our execution against them. Number one, maximize organic growth from our property portfolio; objective number two, deliver additional growth by making new investments in our current markets; objective number three, identify and nurture new Integrated Resort development opportunities in geographic areas outside of our current markets; objective number four, continue to increase the return of capital to shareholders. So focusing on organic growth, adjusted property EBITDA across our Macau property portfolio grew 60.8% to reach a record USD 784.3 million. Our mass table win in Macau for the quarter was up 61.2% to reach a record USD 1.06 billion in a market that grew approximately 38% in the quarter. So our growth was 61% faster than the Macau market in the most important and most profitable segment in Macau. The VIP business is also experiencing [ph] growth, with our Rolling Volume increasing 26% to reach a record USD 45.4 billion. That represents VIP market share of approximately 18.2% of Macau market Rolling Volume, compared to 15.5% one year ago. Our growth in VIP revenue for the quarter was nearly 2/3 faster than the Macau market.
The Venetian Macao delivered another strong quarter, and due to our market-leading investments in non-gaming operations, continues to lead the Macau market in visitation and business and leisure tourism appeal. Our fundamental multi-tiered Integrated Resort development strategy, which features convention, exhibition, hotel, retail and entertainment offerings, helped delivered 16.7 million visits in the quarter to our property portfolio, including nearly 8 million visits to the Venetian Macao. EBITDA at the Venetian Macao increased to USD 357 million. The Venetian's Non-Rolling chip drop increased 75.8% to reach a property record USD 2.01 billion.
The Four Seasons Macau delivered a property record $112.9 million in EBITDA, an increase of over 107% compared to the third quarter of 2012. Rolling Volume per table per day increased 48%, while mass table wins increased 113%.
Sands Cotai Central, our latest and largest property on the Cotai Strip, continues its steady ramp and delivered a property record $224 million in EBITDA this quarter. No property in the history of Macau has reached that level of profitability so quickly. It looks to me like it's kind of close to a run rate of $1 billion. Sands Cotai Central is rapidly approaching becoming the third property in our portfolio to produce more than $1 billion of EBITDA per year and we look forward to it soon joining The Venetian Macao and Marina Bay Sands in Singapore with that distinction. We welcomed over 4.5 million visitors to Sands Cotai Central during the quarter, as our investments in non-gaming amenities have contributed meaningfully to both the tourism appeal and financial success of the property. Looking ahead in Macau, we look forward to generating growth in our Cotai Strip properties across all segments, as tens of billions of dollars of infrastructure investments in Macau, Guangdong Province and Southern China enable more people to more easily reach Macau. These infrastructure investments includes the world's most expensive and extensive high-speed rail system, a $10 billion bridge directly connecting Macau and Zhuhai with Hong Kong, and more than $20 billion of investments in the Special Economic Zone of Hengqin Island, which is adjacent to Macau and Guangdong Province, essentially adjacent to Cotai. The infrastructure expansion will be kept up by the opening of the Hong Kong-Macau-Zhuhai Bridge, which is currently scheduled for completion in 2016. The bridge will allow passengers arriving by plane at the Hong Kong International Airport to reach Macau in as little as 20 minutes, which is faster than the time it takes to reach Hong Kong. It's really a phenomenon. How many cities get the opportunity to adopt and bring as close to your city as almost as close as the airport of your city, to bring in a substantial portion of Chinese residents that cannot get to Macau because of the size of the airport and the number of airlines servicing. They have over 100 airlines servicing Hong Kong. So all you have to do is come out of the Hong Kong airport, where the side of the bridge is located on Lantau Island. Turn one way, and you go to Macau in 20 minutes. You turn the other way, you go to Hong Kong in 45, that is, Hong Kong Island. The Hong Kong International Airport served over 56 million passengers in 2012, and was the world's 12th visited airport last year. The airport provides service through more than 100 airlines, to more than 180 cities around the globe, including 44 in Mainland China. If Macau is looking to attract many times the visitors that it has today, nobody could have picked a better situation as to be close to a fully mature, major international. So in the future, Macau will be conveniently served by 2 airports, including one of the most important in the world, not just one.
Now I want to turn to Marina Bay Sands in Singapore. We produced EBITDA of $374 million this quarter, which was up over 43% compared to the $261 million we generated in the same quarter 1 year ago. Rolling Volumes were stronger compared to the quarter last year, and we have 2.85% against that volume, compared to 1.79% last year. In addition, our hotel business reflected strong growth, with ADR increasing to USD 401, with occupancy approaching 100%.
That means like between 99 and 100. Let's turn to strategic objective #2, development growth in our current markets. Construction continues at The Parisian Macau, our fifth property on the Cotai Strip and our sixth in Macau overall. Based on our current schedule, and subject to timely government approval that may be required, we are targeting a late 2015 opening of our latest Integrated Resort, so no change in that targeted opening date. However, I talked to our head of development yesterday and he said there was some opportunity to potentially -- not committing to it -- to potentially pick up, pick up, up to a couple of months in schedule, and he told me yesterday that we, of 3, out of a couple thousand pylons [ph], we have 3 pylons [ph] left to go. We already have a lot of pile caps in and we're starting the structure above the pile caps. So very pleased with the progress we're making on that, on the Parisian.
Moving onto strategic objective #3, the development of Integrated Resorts in new markets in geographic areas. In Asia, activity levels in Japan have increased and we are pursuing the potential for IR development in this promising market, with great enthusiasm [indiscernible]. Korea has also shown increased activity and we are looking forward to potential development opportunities. With respect to our European development in Madrid, there are a number of various steps left in the development process. Any investment would be subject to the receipt of government approvals and the finalization of the grants and incentives package that would enable investment and provide the environment [indiscernible].
Finally, let's review strategic objective #4, the return of capital to shareholders. Yay return of capital! We have now returned more than USD 5 billion of cash to our shareholders through dividends and stock repurchases over the last 21 months, including nearly $4.4 billion to Las Vegas Sands shareholders and over $700 million to the non-LVS shareholders in Sands China. That $5 billion includes nearly USD 600 million returned to LVS shareholders this quarter alone, through dividends and stock repurchases. As I mentioned before, we raised our recurring dividend to $2 per share for the 2014 calendar year, an increase of 42.9%. We have every intention of increasing the recurring dividend at Las Vegas Sands in the years ahead, as our business and cash flows continue to improve. We have $1.65 billion remaining under the current stock repurchase authorization, and in the future, we expect to repurchase at least $75 million of stock per month. We look forward to continuing to utilize the program to return capital to shareholders and to enhance long-term shareholder returns.
Before moving to your questions, please allow me to share with you the reasons we believe our leadership in Integrated Resort development and operation will be sustainable in the future. First, we have a convention-based business model that is unique in the Integrated Resort industry. That expertise sets us apart from others and positions us extremely well to win the most promising future growth and development opportunities. There is hardly a city or country in the world that doesn't want more tourism and convention- and exhibition-driven business. We are the dominant specialist in that. Second, we are long-term strategic developers in our business. When we developed the Cotai Strip, we were building for the future market. The market that will develop with the emergence of the Asian middle class and the completion of the major infrastructure projects that provides them greater access to the [indiscernible]. Our focus on building non-gaming amenities, dining, retailing, entertainment, convention and exhibition facilities as vital components of our Integrated Resort properties, is another example of our long-term strategic vision. We have invested the most in Macau in non-gaming offerings, with 25% of our EBITDA generated from hotel, retail, convention and exhibition businesses, and those non-gaming investments benefit us in both financial returns and is differentiating us from other companies as we pursue new development opportunities. A third point that will contribute to the sustainability of our business is that we have the industry's most experienced leadership team, with the proven ability to execute our strategy. Fourth, we run our operations efficiently. We generate the industry's highest profit margins. We are focused on maximizing cash flow and delivering for our shareholders on the bottom line.
Let me emphasize one final important point. The scale of our business and the strength, reliability and predictability of our cash flows allow us to return capital to shareholders while maintaining balance sheet strength and the ability to develop large, iconic projects that will generate great utility for our host markets and outstanding return for our shareholders. It's my job, together with our outstanding management team, to make sure we stay disciplined and continue to execute strategies that will both extend our industry leadership in current and new markets, and generate strong growth and outstanding return for our shareholders through the years ahead. I couldn't be more confident about our continued success.
With that, let me turn the call over to the operator to begin the Q&A session.
Daniel J. Briggs
Operator, we're ready for the first question, please.
Earnings Call Part 2: