Las Vegas Sands CEO Discusses Q3 2010 Results - Earnings Call Transcript
Las Vegas Sands. (LVS) Q3 2010 Earnings Call October 27, 2010 4:30 pm ET
Operator
Good afternoon my name is Christine and I will be your conference operator today. At this time, I would like to welcome everyone to the Las Vegas Sands Corporation Q3 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers remarks, there will be a question-and-answer session. (Operator Instructions).
Thank you, I would like to turn the call over to our host Mr. Daniel Briggs, Vice President of Investor Relations. Please go ahead.
Daniel Briggs
Before I turn the call over to Mr. Adelson let me remind you that today’s conference call will contain forward-looking statements that we are making under Safe Harbor provisions of federal securities laws.
The company’s actual results could differ materially from the anticipated results in those forward-looking-statements. We see today’s press release under the caption forward-looking-statements for a discussion of the risks that may affect our results. In addition, we may discuss adjusted net income, adjusted diluted EPS and adjusted proper EBITDA 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. With that let me please introduce our Chairman, Mr. Sheldon G. Adelson.
Sheldon G. Adelson
Thanks Dan. Ladies and gentlemen I am very excited to report that Las Vegas Sands blew out the third quarter of 2010, with record EBITDA of $645 million, net revenue of $1.9 billion. Our EBITDA results were the highest in our industry since late 2006 when Las Vegas was at the very peak of this profitability. These results are part of a powerful and continuing trend which can be explained by the company’s longstanding strategic direction in combination with prudent new management and the team that Mike Leven and I have assembled and continue to build around us.
Some of you may recall that at our annual shareholders meeting in June I suggested that the company might be able to reach $3 billion in EBITDA in 2011. Well it turns out I might have been wrong. Looking at our results from the first 25 days of October, our annualized run rate is now substantially in excess of $3 billion. It’s good to be wrong in that direction.
So with that important clarification out of the way, let me take a few minutes to discuss the highlights for this quarter’s historic performance and some of the trends we are seeing moving into the end of October. Adjusted EBITDA reached a record 645 million for the quarter. Our EBITDA climbed by more than 73% from the beginning of June to the end of this September. The trends continues into October where we are on pace to grow an additional 31% from the September to October.
Net revenue reached a record 1.9 billion in the quarter. From June to September, net revenue increased more than 8%. And from September to October, we are projecting an increase of 12%. EBITDA margin also reached a record 33.8%, up nearly 1,000 basis points from the 3.9% in the quarter last year. Adjusted diluted EPS reached $0.34, up over 1100%, that’s 11 times from $0.03 in last year’s third quarter and is the highest third quarter EPS in that company’s history.
Let’s turn to Singapore where Marina Bay Sands in its first full quarter of operations generated a whopping $245 million in EBITDA and an outstanding EBITDA margin of just a 10 under 50% at 49.7% for the quarter. Both our record trending property in our company’s history. This is in spite of the fact that low hold on rolling play of 2.65% negatively impacted our revenue by approximately $20 million. These results are particularly impressive considering we are still in the very early stages in Singapore, after opening the doors just six short months ago.
Let me share with you some of the exciting trends we are experiencing in Marina Bay Sands, these figures are based on a four week average comparison. Gross gaming revenue has increased to 126% since May reaching $8.4 million per day in October at an annualized run rate of 3.1 billion. Rolling volumes have increased to 182% since May to reach 116.3 million per day in October. At that rate we will roll $42 billion annually approximately. Gross gaming revenue from our mass tables and slots increased 49% since May to reach $3.2 million per day in October at an annual run rate of $1.2 billion.
Non-rolling drop increased 21% since May to $9.6 million per day in October. That’s an annual run rate of 3.5 billion. Slot handle increased 165% to reach 18.3 million per day in October, that is 6.7 billion annually. And slot win per unit per day increased 43% since May to reach $517 per unit per day so far in October. These results reflect the addition of electronic cable games which came in August and September. The annual run rate for gross slot win is approximately $350 million.
Let me now provide some quick color on the Macau. I'll address the issue of EBITDA versus gross revenue in a minute, but let me first point out that our EBITDA margin and Macau reach a record 31.3%, up 310 basis points from the 28.2% in the same quarter last year. I believe that’s a result of having an integrated resort where you have other departments that are contributing to lot of the fixed and of course the variable census.
Additionally, you all know the Golden Week holiday took place earlier this month. This was a strong Golden Week for Sands China as we said set two daily records for EBITDA and with a full week and still ahead of us and despite the prior week's typhoon warning, we are on pace to have a record month in October overall. We are certainly enjoying tailwinds for both Singapore and Macau at the moment. Our progress in both the Las Vegas and Bethlehem Sands should be discounted either.
We are optimistic about trends in Las Vegas including momentum from our recently announced marketing alliance with InterContinental Hotel group. And in Bethlehem where table games and the completion of our hotel next spring should continue to produce increased growth revenue and EBITDA.
Simply put, our business overall has never been healthier. We are growing at a significant rate while generating more cash flow than ever before. As a widely read Macau publication recently said on separate occasions and I quote, “LVS will one day still be remembered for in the quarter in which it separated from the pack and became the one”. It’s not the kind of stock you would want to put in your children’s trust fund simply because Adelson has pulled away thanks to its huge bets in Asia. For properties he already has are going to provide fantastic cash flow in the coming years for investors”. Not our words, but we couldn’t agree more.
The fundamentals of this business and our basic business model have not changed and were always valuable. Our strong results reflect a successful execution of the integrated development strategy that we have aggressively pursued since we founded the company. That is the key to our growth story is the liberty of our assets. We can't possibly know how these trends will continue to develop, but we can give you a real-time look at what we are seeing right now. As a starting point for our Q&A discussion let me share my thoughts of three additional points.
First with respect of the granting of credit in Singapore. We have more than 10 years experience granting credit to Asian customers in both Las Vegas and Macau. We've been very judicious about granting credit. Notwithstanding the ramp up we've been experiencing, we are managing this very tightly and monitor it on a daily if not on hourly basis. We have been measured and prudent about granting credit. Second, a strong belief is that the appropriate measure of our financial performances EBITDA, not market share of gross revenue. For instance in Macau and Sam has given us tens of sub licenses an according to rumors MGM, Galaxy and Melco have decided to follow suit.
And I believe Galaxy and Melco are also doing so. Under these arrangements, the operator may actually receive and these are the most recent offers. The operator may actually receive as little as 3% of gross revenue. But the used 100% of the gross revenue could determine their market share.
I personally think there is an over-exaggeration of the issue of gross revenue for market share, but all you are getting is 3% out of it when you are counting the entire 100% as part of your market share. What’s more important, 3% of revenues before expenses or EBITDA of more than 30%. I think that the answer is obviously. Anybody who has read the dummy’s guide to doing business knows that what really counts is the cash we are able to put in the bank. So I hope that will put an end to the market share quotations the way it has been done.
While our market share of gross gaming revenues in Macau has remained approximately 20%. Our share of EBITDA in the market place is significantly higher. We estimate that we are currently generating between 35 and 40% of the total EBITDA in the market. Now that is how we define market share leadership in Macau. One final thought. Sometimes we yield a little less, sometimes we yield a little more, but we are right where we should be so will be averages over time. So with that Mike, Rob and Ken are also here to your questions.
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