Las Vegas Sands Corp.

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Good day, ladies and gentlemen, and welcome to the SANS Third Quarter 2023 Earnings Conference Call. At this time, all participants have been placed on the listening mode. We will open the floor for your questions and comments following the presentation. It is now my pleasure to turn the floor over to Mr. Daniel Briggs, Senior Vice President of Ambassador Relations at SANS. Sir, the floor is yours.

Thank you, Paul. Joining the call today are Bob Goldstein, our Chairman and CEO, Patrick Dumont, our President and COO, Dr. Wilfred Wong, President of SANS China, and Grant Chung, EVP of Asia Operations. Today's conference call will contain forward-looking statements. We will be making those statements under the same hardware provision of federal securities laws. The company's actual results may differ materially from our results reflected in those forward-looking statements. In addition, we will discuss non-GAAP measures. Reconciliations to the most comparable GAAP financial measure are included in our press release. We have posted an earnings presentation on our website. We may refer to that presentation during the call. Finally, for the Q&A session, We ask those with interest to please post one question and one follow-up, so we might allow everyone with interest the opportunity to participate. This presentation is being recorded. I'll now turn the call over to Rob.

Thanks for joining us today. McHale Blue is $630 million of EBITDA for the quarter, and we are only eight months into our post-COVID reopening. These are early dates. We began in Q1 with $400 million of EBITDA. Q2, we did $540 million EBITDA, and Q3 is now $630 million EBITDA. Look forward to growth in both the gaming and non-gaming revenue to lift the entire market. SEO has the largest share of non-rolling TIG win, rolling TIG win, and slot ETG win. We've always believed that a completed Londoner will meet and perhaps exceed the earning power of a nation. Our future growth in Macau has tethered these powerful assets, which have all the variables necessary to drive growth in years ahead. Whether it's rooms, gaming capacity, retail, entertainment, food and beverage, we have stellar assets. There is speculation about future growth of Macau. The relevant question is, can the market grow to $30 billion, $35 billion, $40 billion of GGR and beyond? We are firm believers that it will and may occur in a much shorter timetable than anyone realizes. This underscores our confidence in the returns that will be generated by our capital investment programs in our portfolio. We are staunch believers in the growth of Macau market in the near and long term. The OPS has invested $15 billion in Macau, which is the most important land-based market in the world. A few reference points to consider. Third quarter EBITDA represents strong growth compared to previous quarters, as I mentioned. Our retail business in Macau has far exceeded pre-COVID numbers. I expect the game portion of our business to follow the same trajectory as Singapore, and accelerate 2024. Let's look at MBS in Singapore. Six quarters into a reopening, MBS delivered a $490 million quarter. The power of this building is evident based on the results despite the disruptive impact of our ongoing $1.75 billion U.S. dollar renovation program. Disruption notwithstanding, MBS is hitting on all cylinders from a gaming, lodging, and retail perspective. Slots and ATGs at MBS are approaching $1 billion annually. Non-rolling tables are exceeding $20 million in drop per day. The ADRs are escalating, and our retail component is doing far beyond pre-COVID numbers. MBS is a testament that quality assets prevail and validates the thesis that reinvesting in our assets will generate sustained returns. MBS has it all. an iconic building with superb decor and service levels which attract the most desirable customers in every segment. At the completion of both phases of our refurbishment program, MBS will feature 770 suites. We used to have 200 suites before the refurbishment. There is no denying its future. How far can MBS go? Our expectation starts with $2 billion and more in the future of annualized EBITDA. Finally, we're bidding for a license in New York. We've secured the Nassau Coliseum and the process of getting the necessary zoning requirements to move forward. We're also receiving strong local support from the local community. The resort will cost in excess of $5 billion, which enables us to develop a five-star resort with unlimited appeal. This is simply an extraordinary opportunity. We are very excited about the prospect. Our bid is compelling. If we were awarded the license, we would be in the ground as quickly as possible. Thanks for joining us again. I'm going to turn the call over to Patrick before we move on to some Q&A. Patrick? Thanks, Rob.

I would like to cover two important topics before we get on to your questions. The first is the long-term margin structure we expect in our Macau business. As the Macau market revenues continue to recover, our margins will naturally benefit from an improved business mix. This quarter, our Macau EBITDA reached $631 million at a 35.3% margin, which is an increase of 210 basis points compared to the second quarter of 23. As revenues continue to grow, we expect our margin to exceed the 36% of Macau business in 2019. This quarter, the Venetian Macau grew EBITDA to 290 million, with margins reaching 40.1%. This is an example of a property achieving strong revenue recovery with financial performance and margin that reflect the improved business mix. The Londoner Macau grew EBITDA to $167 million EBITDA margin expanding 660 basis points sequentially to reach 32.2%. The strong flow-through of revenue to EBITDA reflects the operating leverage of our business once the fixed costs have been covered. The transformation to Londoner has created a world-class product that is a must-see for visitors to Macau. We will naturally have some construction disruption in 2024, but we expect future EBITDA growth and margin expansion over time. So that's Macau. The second item I wanted to cover is an update on our plans for the return of capital to shareholders. Our Board of Directors has authorized a $2 billion share repurchase through 2025, and we're looking forward to restarting our share repurchase program. In the nine-year period from 2012 to 2020, we've returned over $22 billion of capital to Las Vegas State shareholders in the form of dividends and repurchases, which was split roughly 80% dividends and 20% to share repurchases. As we consider our future capital return, we expect share repurchase will be more heavily weighted than dividends. We believe repurchases will be more accretive than dividends over time as they reduce the denominator. We fundamentally believe in the compounding long-term benefit of share repurchases. So that's the capital return update. Thanks for joining us again today, and let's move to Q&A.

Thank you. Ladies and gentlemen, the floor is now open for questions. If you would like to enter the queue to ask a question, please press star 1. on your telephone keypad now. If listening on speakerphone today, please pick up your handset to provide optimum sound quality. Also, we ask each participant to limit yourself to one question and one follow-up. Please hold a moment while we poll for questions. And the first question today is coming from Carlo Santorelli from Deutsche Bank. Carlo, your line is live.

Hey, guys. Patrick, thank you for the additional color. Rob, or anyone over in Macau, maybe this one's best for. But as you guys think about the base and the premium mass, it looks like in the quarter you guys kind of converted some premium mass tables to base mass tables. And obviously with the increases in visitation, that makes sense. Is that something you expect to do going forward? Do you have what you need basically in terms of the premium mass footprint in terms of table count at this point?

Oh, you know, the beauty of our business model is we've got plenty of capacity to do what we want. We'll move to the market. As you saw in the quarter, we moved tables around to accommodate what we saw demand. But, again, with the number of rooms and our table capacity, we can grow into any market, any segment that shows strength, and that's what happened here. The truth is I expect that we'll move forward in the future and show growth both in base and premium. But our assets are built to be just this, which is versatile, able to accommodate the market. Grant, maybe you have some color. That's true of any market. The only difference in this market for me is we have such a huge amount of table supply, and we're very nimble. Grant?

Yeah, thank you, Rob. Yeah, I think the... Repositioning this quarter for more towards base mass tables, that's just a natural part of our optimization between the segments. And of course, as you rightly referenced, the summer saw a big increase in visitation and the base mass business. So that was just a natural repositioning to optimize the table count. As you can see, sequentially, a wind per unit increased substantially in premium mass up 19%, and base mass, even though we reorientated the table count towards base mass, we also increased the wind per unit by 7% sequentially. I think that you can see very clearly that we actually did optimize pretty well for the quarter between the two segments in terms of table capacity. And these numbers will change again as the market evolves depending on which segment is growing faster.

Great. And then thank you for that. Patrick, if I could just kind of follow up on the Venetian and acknowledging that there was some high hold in the period on the VIP side, but it's a relatively small number in terms of revenue. As you think about kind of the margin profile, the 40.1% margins in the period at the property kind of rivaled 19 despite annualized third quarter net revenue being down, I think, close to 18% versus what you did in 2019. If we think about that gap, that 600 odd million flow through getting back to kind of 19 revenue levels at that property or any other property, how would you think about kind of the incremental flow through on that incremental net revenue? And perhaps, you know, we could obviously take it from there to get a sense for where margins could kind of prove out over time.

So it's a great question. I think for us, The first thing is, this is what happens when you cover your fixed cost base. So when we were 70% recovered, we had to cover our fixed cost base in Macau. And as the market recovered and as tourism and visitation continue to grow, we will reach our run rate margin levels, which we always felt was in this context. So what you see, the Venetian, is the result of a great product that has, you know, it's really an example of a property reaching a more run rate level of operation post-pandemic. and the performance and margins that result. And we feel very strongly that the Venetian Macau is going to run as mass visitation continues to return to the market. Remember, Macau visitation is still about 20% less than it was pre-pandemic. We're down about a million visitors in the same period. So we feel very strongly about the margin potential. We're very proud about what's going on at the Lunder. We think the market is starting to understand that product, how great it is, and we're starting to see the results in terms of productivity in terms of market. But again, in that product as well, we think there's more room to run. So, you know, I think it's a great testament to the team there, the work they've done to grow these businesses. But to be fair, we think there's strength in margins to continue as revenue continues to come into the market through visitation.

Great. Thank you very much, guys. Appreciate it. Carl.

Thank you. The next question is coming from Joe Greff from J.P. Morgan. Joe, to your line of life.

Good afternoon, guys. Before COVID, you guys used to disclose department margin ranges for base mass table games and premium mass table game ranges. I think base was 35 to 45% and premium mass is 25, 40%. Are those margin ranges or the midpoint and higher still viable or does the Londoner and that ramp and clearly is in ramp mode right now, does that cause those ranges to be more middle or the lower end of that range than the aggregate in Macau?

So, you know, I think for us, because of the mix of business and where we're investing, we sort of run the business in aggregate. So what we're looking at is the 40% margin that the Venetian just put up in the quarter and the 660 basis point expansion of margin that the Londoner saw as the market discovered how great it was, and we started getting, you know, more visitation and more growth. So I think for us, that's really how we're looking at it. You know, departmentally, I think we manage the business overall. And as Rob said earlier, we're going to shift assets to the segment that is most productive and provides the best returns. So I think for us, we're not really looking at that as a guide. We're really looking at overall productivity of our asset base in total. You know, I think one thing that's interesting to consider is, so in Macau, room occupancy was 96% versus 95% in the same period of 19. But the thing that's interesting is we're actually driving more daily casino nights at higher yields per room. And so in the premium mass segment, we're seeing that recovery. But our base mass segment is starting to recover strongly. And this is really what you see is the businesses that used to support Macau mass tourism continue to come back online after what was basically a three-year hiatus. So this increased visitation will drive base mass revenue growth, and we'll start to see margin return to a more normal mix. So I wouldn't look at the departmental. I would look at the recovery and the aggregate margin of the operating asset. That's kind of how we're managing the business, and we're trying to manage segments throughout. And then we look at EBITDA, which is the most important thing. Thank you, Rob.

Thanks. And then with respect to the buyback, that was great to see, Patrick. Do you look at that as more episodic or opportunistic, or do you look at it as, you know, there's a minimum level or a consistent level per quarter per year that you would look at?

I think we're going to be measured across time. I think we want to return capital through share over purchases in a meaningful way. We think there is a real benefit to reducing the denominator. We think it's creative. We think there's a compounding effect in share over purchases. And so we're looking forward to doing it on a regular basis. You know, the amounts to be determined. But for us, you see the size of the authorization. You see our balance sheet strength. You see the amount of cash flow we're generating out of the business. And we're going to go out and be aggressive. I think for us, we fundamentally believe in the dividend. But if you look at that split that we had, you know, let's call it pre-pandemic of a return on capital story, I think we're looking to be majority share of purchases and get that benefit. And so, you know, if you look at how we've returned capital historically, in a regular and repeatable way. I think we're going to look to do that again.

Hey, Joe, we can't help but be somewhat opportunistic as we look at the market. Our stock is trading roughly at COVID levels, and we think our buildings are going to make $5 billion and more, $40 billion, $50 billion the next decade. It's hard not to look at the stock and say, gee, that's opportunistic. On the other hand, we'd also like to be long-term and be consistent. So it's kind of a mixture of both. But it's hard for us to sit here today and look at Pricing is if we're closed in Macau or half open in Macau and Singapore and not think there's opportunity, but we also have a long-term perspective.

Great. Thanks, Rob. Thanks, Patrick. Thanks, Dan.

Thank you. The next question is coming from Robin Farley from UBS. Robin, your line is live.

Great. Thank you. I wonder if you could give us some thoughts on kind of what is holding back that lower spending customer rate it sounds like transportation bottlenecks are no longer really the issue in Macau. You know, if it's the RMB depreciation, is that something we have to kind of wait for that to anniversary next year? Or, you know, I guess what do you think will change that, you know, the kind of visitor levels for that lower spending segment? Thanks.

Yeah, I think, you know, it's interesting. If you go to page 16 in our deck, you know, And by the way, we debate this all the time. I think the team on the ground there is very focused on it. I think what you'll see is that, you know, visitation is from China excluding Guangdong is 72%. You know, Guangdong's back to 92. But if you look at the airlift, you know, Macau Airport was only at 64% of 2019 capacity in the quarter. And Hong Kong was only at 63%. So it's a pretty meaningful difference. And so, you know, frictional transportation difficulties are still real. And they're getting better. Customers can get to Macau a little more easily in this border than they could before. But we're still not back to normal. And so what we're starting to see is, as I mentioned earlier, some of the infrastructure for mass tour groups are returning, which is very positive. Starting to see some of the increased volumes due to their visitation. Some of the higher value customers, premium mass customers and VIP customers, airlift isn't great. And some of this airlift coming into Macau is domestic and some of it's international. So I think I think for us, as we see this airlift capacity recover, we're going to start to see more and, of course, benefit not only us but also the entire market as more people are able to get here more easily. But I think the recovery story is not fully there in terms of air travel and in terms of accessibility. I think it's on the way, but it's not fully back.

I guess I'm thinking that the air travel wouldn't necessarily be – where the lower spending customer be coming from. And high speed rail, I think, is back to pre-COVID levels. So I just, is there anything else that you think is impacting it that needs to change, whether it's, you know, policy in mainland China or kind of anything else outside of that transportation issue? Thanks.

Brad, do you want to jump in here?

Sure. Yeah, I think, Robin, what Patrick referenced, 72% out of non-Guandong. Actually, if you look at the regional differences between provinces, I mean, there are some of the highest spending provinces are actually way above 2019 in terms of visitation, and some are lower than than 2019 so i i think there are just some regional differences um depending on a whole host of factors um you know ranging from the transportation to the availability of hotel rooms uh and so on so forth and their propensity to to go cross-border in in their trips i mean this is the first set of summer holidays uh since uh covid and uh And I think what you see is actually a very strong acceleration in that non-Guangdong visitation this quarter. So we're really up 22% overall visitations, but within that, mainland China is up a lot more sequentially. And that is also reflected in the property visitations that we saw this quarter, the 17% increase in the base mass revenue that we saw. So it is picking up, but it just accelerated at a different pace from the premium mass, which, as you know, came back right from the start. in a stronger fashion than the base mass. So I think as more hotel inventory is actually opening up and the propensity improves, people know the Macau market is back with all the non-gaming investments and events that are driving the interest in the destination. I think that base mass segment will naturally improve over time, as it did already significantly this quarter.

Okay, great. Thank you all. Thanks.

Thank you. The next question is coming from Stephen Grambling from Morgan Stanley. Stephen, your line is live.

Hi, thanks. This may be a bit myopic, but we'd love to hear a little bit more color on how Golden Week may be trending and how the pace of recovery has continued across different customer categories more recently, especially around these big events that seem to have given kind of a step function move in the recovery historically.

We traditionally don't talk about current quarter. We'll keep that intact here as well. I think you look at the numbers in the market as they print, you see the strength of Golden Week. It's pretty evident. The numbers print by the government and other sources. But we never comment inside the quarter.

Fair enough. And maybe changing to something more specific. Go ahead.

Sure.

On Londoner phase two, we'd love to just hear anything around potential near-term disruption. I think that that's going to be starting in November, and then when that might be thought most and when we can anticipate the re-ramp.

Yeah. I'll turn to Grant. There will be some disruption, but we still feel as though the initial results, Londoner, are obviously we're looking at as a future hope for London's prospects. My brand ticket through 24, both brew and casino, I'm seeing that better. How do you see it?

Yeah, sure, Rob. I think clearly we will work to minimize the impact on the guest experience and the business operations. But this is something that we have managed many, many times over the years. And indeed, we did that during 2019 when we started the Holiday Inn conversion into the Londoner Hotel. I think you'll see some disruption on the gaming side in the middle of next year. And I think we'll be managing the Sheraton Tower renovation methodically and judiciously over the entire period, over the next 15, 18 months, so as to really continue to enhance the yielding on the customer front. but at the same time try to get these works done as quickly as possible. I think the intent here is to move forward and complete the renovation and the repositioning of the entire south side of the resort, the Sheraton Towers and Pacifica Gaming, as quickly as possible. The sooner we make the entire resort Londoner, the better it will be for everyone, our guests, our staff, our business, and the brand positioning. The only other point I would make is we should take note that this part of the property portfolio is the lowest yielding part of the entire Kotai portfolio that we have, both on the hotel and the gaming side. So we do hope to be able to successfully manage to minimize the disruption to the business. But when we get to completion on the other side, in the first half of 2025, I think the earnings power through the holistic and expanded experience of the London and Macau will be significantly enhanced. That's the goal.

And just sort of one thing to think about. Yeah, one thing to think about. So we're very focused on return on investing capital and growth in Macau. And so our anticipation is that the returns on these investments will be commensurate with those that we had previously and will drive meaningful growth. And by the way, the initial market reaction to this product really to what's been brought in line so far really helps us with this view. Given the customer response and the performance of the asset, in the long run, will we believe that the completed Londoner, when it's done, will be on par with the Venetian? That's where our target is.

I'd also add to Grant's comments, Stephen. Just, again, the size, the scale of our portfolio gives us flexibility. You have 10,000 or 10,000 other rooms. Money gets seen in these new customers, too. So, I think we minimize the disruption and maximize the opportunity to deploy the rest of our assets to keep our business strong despite that. And to Patrick's comment, London looks like it's going to be a juggernaut. It'll be neck and neck, maybe exceed those two assets that are going to be hugely important in the future. But getting to 24, while not easy, I think it's very manageable if the team deploys other assets in the portfolio intelligently.

Thanks. I'll jump back in the queue.

Okay. Thank you.

Thank you. The next question is coming from Chad Bainon from Macquarie. Chad, your line is live.

Chad, you got it?

Chad, please check your mute button. Your line is live if you wish to ask a question.

Okay, we can come back to Chad later. The next question is coming from Sean Kelly from Bank of America. Sean, your line is live.

Hi, good afternoon, everybody. I just wanted to go back to the margins in Macau and maybe that flow-through discussion a little bit more. If we look at it, it does look like flow-through just sequentially was a bit better in the third quarter here than in the second. I was just wondering if we could get a little color on sort of maybe some of the mixed impacts that drove that. Was that, you know, normalized staffing? Was it some of the non-gaming, you know, amenities, which are now kind of fully back on, which flow through at really good rates like retail and and hotel was it sort of the base mass mix coming back just kind of how do you see it in terms of you know what maybe some of the factors were that drove that because it does look um you know quite impressive thanks for that and appreciate the the question i will tell you that there's there's a little bit of magic to it it's called revenue increase 28.9 so for us it really is just

More people showing up, spending money at the product, recognizing how great it is, and increased demand. I mean, it's a phenomenal product. We were there last week. It really looks great. The team is really providing unbelievable customer service. And it's a highlight for Macau. It's a great asset and will continue to grow. And for us, it was just covering the fixed cost base. You know, we just had to get open. It was not a known product in the market. People are starting to figure it out, and it's going to keep growing. And so for us, this was really just growth and revenue across all segments. That was really the secret to it.

Great. Thanks, Patrick. And then as my follow-up, I just wanted to dig a little deeper into the buyback authorization. Obviously, a big kind of strategic change. Could you give us a couple parameters? I mean, pre-COVID, the company was actually pretty high on its sort of overall payout ratio. You obviously have a pretty ambitious capital program across all potentially New York, certainly what you want to do on the big project in Singapore, some renovation activity, and some of the CapEx in Macau. So, you know, should we think in parameters of a payout ratio and maybe how could we, you know, put some numbers around that if possible? And then ultimately, I'll just help us think about medium-term leverage, just given you're probably the most under-leveraged gaming company I've ever covered. So a big compliment to where you sit at the moment, but obviously it presents a lot of potential firepower there.

So really, really appreciate the commentary and the question. I will tell you, so right now we're sitting at about $5.6 billion worth of cash system-wide. Macau is starting to become very cash-generative. Singapore is very cash-generative. So the way we think about this is due to the timing of our development obligations and those cash flows, we will be able to invest in our core markets and grow through organic growth and through redevelopment of key assets. We'll be able to do IR2 in Singapore. We'll be able to do our concession commitments in Macau. And then we'll have excess capital and we'll pursue New York and we're going to pursue other growth opportunities in new jurisdictions. And we'll be able to do it all because of the timing of the cash flow, the cash we have on hand. and the cash-generative nature of our assets. So in terms of a payout ratio, as we addressed earlier in the call, we're not going to be as heavily weighted towards dividends as we were before. So if you look on page 30, we sort of included a look on what were our prior return of capital programs looking like for both share of purchase and dividend. And on page 30, what you'll see is historically we were very dividend-weighted. And to your point about payout ratio, we don't typically guide to payout ratio, but the point is well taken. we're looking really to flip it. So for us, the majority is actually going to end up being shareholder purchases because we're very focused on growth. So if we can grow the company's EPS through share shrink, we're going to do it. If we can grow through capital allocation through high-growth projects, we're going to do it. It's really an ROIC, and we're going to pursue it aggressively. And the good thing is we've got cash on the balance sheet, we've got cash generative assets, and we have a historical program to provide a good guide that we can launch off of and really hopefully drive real shareholder return in the future. So that's kind of how we're thinking about it.

Thank you very much.

All right. One thing. Thank you, Dan. You mentioned leverage, and this is a very important thing. So prior to the pandemic, we spent about five years transforming the company to be an investment grade name. We thought this was really important. It gives us access to the largest, most liquid debt market in the world because it's a very efficient cost of capital, which in the long run provides flexibility, but also drives returns on our new projects. And so having this investment grade balance sheet also helps us in new jurisdictions because we have the financial capability to execute on projects we propose. So for us, we like being leveraged two to three times on a gross basis. We've said it before. You know, you've heard it from us on prior calls. Nothing's changed. We still believe that. We think we'll deliver over time through EBITDA expansion. But more importantly, I think for us, that's a key metric so that we maintain our investment grade rating for all the benefits we just described. So that's kind of how we're thinking about it.

Thanks for that.

Thank you. The next question is coming from Brandt Montour from Barclays. Brandt, your line is live.

Great. Good evening, everybody. Thanks. So for Marina Bay Sands, first, in your slide, you show flight capacity hovering around 80% recovered. Based on the momentum that you guys have seen in that asset, do you still feel like you need that last 20% of China inbound to fully recover to hit that $2 billion run rate target. And can that happen actually while Tower 3 is under reno?

Well, it's happening, isn't it? I mean, this quarter we just did $4.90. I hate to say it, but it's happening. Good question. We always need China. Let's be clear about that. We always want more business from all countries. But I think what you're seeing in Singapore is a very diverse economy. a bunch of assets all coming together. I think the biggest story is the sweet product, which you haven't seen. It's pretty extraordinary. When it goes from $200 to $770, it's just a very potent combination of great food and beverage, great service, and enables us to get to places we've never thought of before. The real question for me is I think $2 billion is our goal in the future and beyond. The real question is when you get more China, when you get more flights, when you open up totally. You know, the funny thing is we talk about Singapore. It's been open about six quarters of now. If you follow the trajectory of Singapore, we're hoping the same thing happens in Macau. We're in early stages in Macau. As Singapore opened up, it wasn't that powerful in the first couple quarters. And, you know, it limped along. All of a sudden it caught fire, and now it's certainly performed. We're surprised how strong it is because the place is kind of torn up if you've been there. It's got some real challenges from a physical perspective. So to answer your question, we think we can get there without more or want more. We'll take all the customers that you get. We think this is a unicorn asset. It's one of those places you just want to go to. You'll pay up for whether your room product or the gaming opportunity, retail. It just is going to keep getting stronger. Do we think it's achievable? Yes. But we prefer to have all airlifts coming in and all the potential customers and try to have business. Sure. We just have a huge faith in this product. We don't think two is the end. It's the beginning. So I do think it's important to give Macau the benefit of understanding. We've gone from a dead stop in January, back to the very difficult times of no one coming, to a mere nine months later, about 80% of Q3 2019. But how much further are they going to go? I think a lot more. If you look at Singapore, this trajectory, I think it's very telling what's going to happen in Macau. So, you know, I think, again, another illustration of what's happening was on page 25. I think the retail slide is just, you have to look at it. I don't know how many malls you guys spend time in, but $3,000 a foot is a pretty good local mall. The Four Seasons Macau is $8,400 a foot in the luxury segment and $3,700 in the non-luxury. Even Venetian Macau, which is not a necessary luxury mall, is doing $1,700 a foot. So the power of the spending right now in retail opportunity always seem to happen first. The gaming seems to follow us. Happens in Singapore, it's gonna happen in Macau. But to your question, we have huge confidence in the future of MBS. And I think our investments will prove in the end, we'll make works in these places supremely strong buildings with great service and great architecture. And that's what you have residing in MBS.

Great. That's super helpful. And then over on Macau, on slide 14, it shows the win per visitor coming down quarter over quarter. It's the second quarter that's declined. Is that sort of wholly explainable by the reallocation of tables to base mass, which we talked about earlier in the call? Or is there any other constraints that you'd want to highlight why that sort of win per visitor is hovering around, yeah, some of the quarters that we saw in 2019?

Just a quick thought on page 14. This is really driven by visitation, by the number of visitors who are showing up to the market as it averages down. But I would like Grant to comment if he's got any thoughts, just for some additional color.

Yeah, thanks, Patrick. No, I think what you're seeing is the evolution of premium masks coming back first. So for the first couple of quarters after the borders reopened, you saw The revenue per Macau visitor arrival, which is what this page shows, skyrocketed versus the historical levels. And you're now obviously getting more of the base mass, especially during the summer. So you are normalizing. But it's important to note that you are still getting a much higher quality mix of customers even with that when you compare to the same quarter in 2019. I think from this slide you can see it's 610 per visit to arrival in this quarter versus 557 in the same quarter in 2019. So the narrative continues that you are getting that higher quality across every segment, a higher spend per capita. But between the premium and base mass, you're now seeing the base mass starting to accelerate, especially during those July and August summer months.

Got it. So just sorry to clarify. So it's mixed to the base mass, but also more well-heeled customers that might be gambling slightly less, like families and such. Is that kind of a way to look at it?

No, this is actually showing you that the mass revenue per visit arrival is actually higher than the same quarter in 2019. So actually, it suggests that the highest spent per capita is actually prevalent in all segments of the market right now. And that also shows through in the retail more that Rob referenced as well.

Perfect. Thanks for all the color. Thanks for all the color. Thank you.

Thanks, Brent.

Thank you. The next question is coming from George Choi from Citi. George, your line is live.

Thank you very much. While we do believe concerts can help you get incremental revenues in Macau, how should we speak about the associated incremental expenses? And I guess more specifically, Do you expect the Ethan Chang concerts and the Venetian this month to be both EBITDA-accurative and market-enhancing at the same time?

So, one thing just to begin, and thank you for the question. Entertainment is a very important part of our business. We're very focused on using entertainment to drive premium as visitation and create the programs that our customers feel like they'll get experiences with us they can't get in other places. It's a very successful thing in Asia. And in fact, we just recently opened a brand new venue in the Londoner that allows us to do that in more scale. So I think for us, these programs are very accretive. You know, directionally, we think more entertainment as high quality is good, not only for the market, but also for diversification in Macau and in Singapore. I think it brings a prominence and an entertainment glow to the region. But I would like to turn it over to Grant to see if he has any additional comments about entertainment and costs associated with it.

Yeah, thanks, Patrick. Yeah, I think we've always been pursuing the entertainment strategy to create a better, more attractive destination. And that hasn't stopped since the borders reopened. In fact, we have been redoubling our efforts, as Patrick said, with the opening of the London Arena in May and June. So if you look at In the third quarter, we actually did around 15 different show events with about 19 performances across the two arenas and obviously only 13 weekends in the quarter. So there were some weekends where we are doing both a show at the Londoner and also in the Venetian. And we believe this is critical to driving not just the diversification in Macau and the non-gaming, but also to enhance the attractiveness and the propensity to come to the destination, especially our properties. And we can see the impact on our business. The economics of this hasn't changed. We've done this for 15 years, so we know how to calibrate the investment in entertainment versus the return we get on the overall resource spending. Also, there are different types of partnerships that we do in entertainment events, and that can range from just pure venue rental to us being the actual promoter. It varies and it's a calibration. It's an analysis between the revenue benefit that we get and the visitation benefit that we get versus the cost and also depends also potentially on the entertainment partner. whether they invest or they want us to co-invest or us to invest. So that really hasn't changed, and we've been doing it for more than a decade. But what has changed is that we are actually significantly increasing the content because we now have a new spectacular venue in the Londoner for live music, which is already getting great feedback in terms of its quality as a venue. both for the audience but also for the office?

George, I would say, in my experience, entertainment is an essential component of any top-tier resort. And you can never underestimate how powerful it is as a statement of customer, longevity, commitment. And honestly, for us, it's been a staple. I wish only regret I had we can't do more. because it's so powerful, just like retail. It's part of the package that makes people want to come and visit. It's the reason why we have been so successful at the foundation of the arena. And it was true in Las Vegas. It was true in Atlantic City. It was true in any place that ever worked. It's always been essential. It's going to be very powerful in Singapore as well. So to me, it's not even a question. It's a question of how we do more of this stuff, because it pays and pays and pays. Very powerful.

That's very good, Carlos. Thank you very much.

Thanks, George.

Thank you. The next question is coming from Dan Pulitzer from Wells Fargo. Dan, your line is live.

Hey, good afternoon, everyone. First, on Singapore, the CAPEX, the $750 million for Phase 2, how do you think about this maybe relative to your longer-term expansion plans at the property? I know that's been pushed out and the budget's probably higher than it initially was, but I mean, is this more kind of a bridge to that or how should we think about that, you know, long-term and maybe when we get an update there?

It's commitment to phase one because the product, as good as it was externally, architecturally, it lacked, frankly, it was necessary that what happens in phase two. It's the best money we could have spent to make that product successful and stronger. It's going to pay off enormous dividends in the future. The room product was lacking. from size perspective but also a finished perspective some of the casinos space was not very good I always thought the MBS as good as was architecturally is lack the pizzazz inside the building and in our business great buildings boys prevail and prevail for decades and just grow and grow so that money is money very well spent it's not connected at all it's meant to make MBS one a a very powerful two-plus billion dollar product. We built Singapore years ago. The speculation was it would never be more than $500 million, $600 million being the dollar. We're going to push through $2 billion and beyond. And I think it's a testament to reinvestment and spending money wisely. It doesn't have any association with Phase 2. Patrick, Phase 2? Yeah.

to follow what Rob said. So fundamentally, we believe it's a product driven business, right? And so that investment in quality, investment in innovation with great service and guest experience are going to drive outside returns over time, right? So, you know, I think you're seeing that with the Londoner. And in Marina Bay Sands, the rooms we just completed, Hour 1 and Tower 2, the design is luxurious. It's residential. It has unmatched levels of service. These are the best things we've ever done, and they're basically setting a new standard for hospitality and customer experience on our properties. And to Rob's point, when Tower 3 is done, Marina Bay Sands is going to be the oldest hotel property in the world. We're really focused on it. From a food and beverage standpoint, from a retail standpoint, as Rob said before, from a guest experience standpoint, that's what we're focused on. IR2 is going to be something different. It's going to be a new standalone development. It's going to have unique spaces, unique design, unique service, but it's something that's probably six months to a year away, depending on how things go with approvals in order to get started. It will be additive to Marina Bay Sands. It will grow the market for us, be a different product, and allow us to also have a live entertainment venue in Singapore, which is something that we really haven't had in scale before. And so if you look at the power of the Venetian and what we're doing in the Londoner with the venue that Grant mentioned, we will not have that capability in Singapore to drive high-value tourism, to drive further growth, and to really work that tourism that's related to live entertainment that we never really could do before. So for us, the expansion of Marina Bay Sands is a step function in growth potential. We're looking forward to doing it. We think it'll be an unbelievable product. We've been spending a lot of time on it, and hopefully we'll get a chance to start soon. but completely different thing.

Got it. Thanks. And then just moving to Macau, I think for the last two to three quarters, your non-rolling chip win has been kind of in that 22% to 23% range. Is this a function of just really premium mass being a bigger piece of the mix, and so we should think about this kind of edging up over time back to that 23% to 24% plus range, or is there something different in this market and I'm sorry to harp on 1%, but when we're talking $24 billion. Yeah.

You're right to harp on it. It's something we speak about quite a bit. Now that your question is an excellent one, and we look at it all the time. I was on the phone last night with our kingdom accounts just discussing it. It's fascinating because we don't have an honest answer to tell you exactly why the entire industry seems to be down a point, point, and then two points. It's very impactful. The kind of money we're talking about, it'd be worth probably, you know, a couple hundred million dollars a year to us if we go back 2% and just ebitda. So it's very impactful. We just don't have a good answer. Is it mixed? Maybe. Is it the removal of junket and that type of thing? Maybe. But until we have a really coherent and certain answer, we don't want to give you a response. I'd like to believe the whole industry trades up a point or two. I'd vote for that. I'm sure our competitors would. But we can make it happen. We need perhaps – it's very simple. The math on the Baccarat games don't change. The customer bets can change. Ties and bears can change. Flatbacks can change. So the point is we don't know the answer ourselves. A lot of people are scratching their heads. Until we have a certain answer we consider confidence, I want to hope along with you that we trade up to 24 again – Because it would be a wonderful thing for us with our volumes. It would be incredibly impactful. We'd be at $700 million probably this quarter of EBITDA. So, excellent question. I don't have an excellent answer. We're working through it. Grant, you have that answer?

No, you're exactly right. We don't have a clear answer on that. You know, there's In theory, actually, just a point to make is, in theory, the premium mass being higher mix in the drop actually should be positive for the whole percentage. And it could also obviously add more volatility to the metric. But I think Rob is absolutely right that we don't have a clear answer. And in truth, I mean, this is only like eight, nine months into recovery where the segments and the customers, I mean, all that is still evolving. So I think it's also premature to make specific pronouncements on what should be the non-rolling whole percentage range. So right now, the numbers are what they are. But as you referenced, as Rob also said, half a point of difference, not even just one point, makes a tremendous difference to the numbers, to the EBITDA, to the margin, et cetera. So we're closely watching this, but there's no clear answer we can give on that in terms of why the whole percentage is where it is versus before.

You know, we're really in a new world, Macau, and I think people really don't understand. I think it's fascinating people don't understand how quickly this thing has reopened. I mean, I know you know it, but the problem is, you know, Vegas opened, regionals opened, Singapore opened quite a while ago. Macau is new to the game. It's only been open for eight months, eight and a half months. So things are evolving and turning. It's happening quickly. Again, I think it's an instructive look at the trajectory of what happened in Singapore. Go back to eight months after it opened and watch what's happened. Double that time. It's incredibly important. I think it's interesting to see the comparisons. I think this whole percentage thing is evolving. We don't know. It would be wonderful to find out we're back at 24 in Q2. It would be wonderful. But without certainty, we would only give you an answer which we don't have clarity on ourselves. And we do. We're happy to share with the market.

Got it. I appreciate all the detail and the perspective. Thanks.

Thank you. And the last question today is coming from David Katz from Jefferies. David, your line is live.

Hi. Good day, everyone. Thanks for taking my question. I just wanted to go back on one detail. I'm not sure if you discussed this, but I'm just looking at the historical margin levels in Singapore, which were north of 50. Could you just talk about the puts and takes of getting back to that level again, or if there's some specific headwind, and then I have one quick follow-up.

Yeah, no problem. I think one thing to highlight is that there was an increase in our tax rate by three percentage points, and then there was a 1% GST. So what you see there is the impact of that along with inflation in the market. We've been able to manage expenses, manage business mix, manage pricing, and push the business to be better. But our long-term there is going to be with strong margins, with revenue growth, just based on our investment and what we're seeing in the market. So, you know, we sort of manage the productivity yield and return on invested capital. You know, obviously we look at margins and do our best, but we like where this business is going and we think the future is very strong.

Understood. And as my follow-up, you know, with the very, very good quarter that you had, And it's not just for your stock, but many in our coverage. The market seems to expect some macro pressure in the future. And it's almost an obligatory question for all of our management teams. Are you seeing anything or providing anything that would validate any macro pressure at this point?

So I'll tell you what's interesting. You heard Rob earlier reference our retail productivity. We, you know, we are in very fortunate markets. So Singapore is an unbelievable place to do business. It's just a great place to visit as a tourist. There's a lot of exciting things to do there. It's a great business environment to trade. And I think Singapore has benefited from its years of investment in the structure. People are going there and people are going there and consuming. And so, you know, we don't have A huge physical plant there. You know, we've got, you know, 2,500 hotel rooms are, you know, going down as we add more suites. And I think in Macau, we're less than 1% penetration in the market. And so when you look at, you know, business and leisure tourism opportunities, I don't know that, you know, we're impacted like a broad-based consumer staple. I think we're, for a narrower segment, we don't appeal to everyone, but I think we're a great tourism asset in both of our markets, and we've continued to see growth through different cycles because of who we appeal to and the volumes that we need to be successful. Got it.

Thank you very much. Appreciate it.

Thank you. Thank you, ladies and gentlemen. This does conclude today's conference call. You may disconnect your phone lines at this time.

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