Q2 2023 Las Vegas Sands Corp Earnings Call

Speaker 1: We'll be back in just a moment.

Speaker 2: Thanks for holding. We appreciate your time and patience. Please stay on the line and we'll be back in just a moment.

Speaker 3: Good day, ladies and gentlemen, and welcome to the SANS second quarter 2023 earnings conference call. At this time, all participants have been placed on a listen-only 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.

Speaker 3: Senior Vice President of Investor Relations at SANS. Sir, the floor is yours.

Speaker 4: Thank you and thanks for joining us today. Joining the call today are Rob Goldstein, our Chairman and CEO , Patrick Dumont.

Speaker 4: our President and COO Dr. Wilfred Wong, the President of Sanchina, and Grant Chung, EVP of Asia Operations and CFO of Sanchina. Today's conference call will contain four looking statements. We'll be making this a safe harbor provision of federal security laws.

Speaker 4: the company's actual results made different materials and the results reflected in those board meetings.

Speaker 4: In addition, we will discuss non-GAAP measures.

Speaker 4: Reconciliations to the most comparable GAAP financial measure are included in our press release.

Speaker 4: 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 pose one question and one follow-up so we might allow everyone with interest the opportunity to participate.

Speaker 5: This presentation is being recorded. I'll now turn the call over to Rob. Thank you, Dan, and good afternoon. Thank you for joining us today. The powerful recovery taking place in Macau and Singapore is evident in our results. We believe it's only days and there's still room to run in both of those markets. We continue to invest in both markets for our future growth.

Speaker 5: We do have a structural advantage, Macau, based on our scale. As the market accelerates, we will be a major beneficiary in the future.

Speaker 5: Singapore continues to do well despite two impediments to the midst of a billion dollar renovation which does adversely result in Singapore. In addition, we haven't seen a full return of the Chinese premium mass segment yet. This iconic building has a very bright future. Cashflow recovery is total mission achieved on September 21st and is Mioks

Speaker 5: So it's very very enjoyable to say yay dividends. Let's go some Q&A.

Speaker 5: you're able to say yay dividends. Let's go to Q&A. First question, please.

Speaker 3: 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.

Speaker 3: And the first question today is coming from Joe Graf from JP Morgan. Joe, your line is live.

Speaker 3: from Joe Graf from JP Morgan. Joe, your line is live. Hey everyone.

Speaker 4: Hi, John . Rob Patrick, Dan and the team in Macau. I'd love to get your view on margins in Macau, both within the quarter and then just broadly how you're thinking about it going forward. When you look at the months within the 2Q, was there a differential between margins exiting the quarter in June ? In response to your queue up your screen.

Speaker 4: versus the first couple of months. And then, related to that, I'm assuming you're under the belief and impression that monthly GGRs can continue to grow sequentially. I would imagine in the summer months that would follow typical sequential seasonal trends. And margins from here probably have more upsides and downsides from two Q levels.

Speaker 4: So my question is specifically this going forward, how do you think about the flow through on incremental revenue growth from here? And then I have a follow up.

Speaker 5: Yeah, John , starting in terms of a grant to the margins, obviously do believe that the market is starting to get stronger. And you saw that in our numbers, our June results were the strongest, almost $200 million leave in June alone. So we had acceleration in the quarter. Our numbers, I think, speak for themselves, they speak loudly. Just months ago, we were virtually closed.

Speaker 5: We have adequate room to run because we have capacity in every segment, be it gaming and on-gaming. I think a very strong advantage in that regard. So again, we think as the GGRs escalate for more visitation, we will be a major beneficiary. In terms of the G rookies, I think that's always important to share because many of

Speaker 5: I hope you're winking the cow. Please answer that.

Speaker 6: Thanks Rob.

Speaker 6: We have continued to improve as we grow the revenues on optimal cost structure. Normalized margins up about 240 basis points quarter on quarter. And I think that will continue to rise as revenues continue to recover. We do have a more profitable business mix.

Speaker 6: than 2019, as does the whole industry, because we have a greater proportion of mass relative to VIP. But recall, relative to the industry, we always had a much greater proportion of our GTR in mass.

Speaker 6: So 87% of our GGR this quarter is in mass versus 71% in Q2 of 2019. And also the shift between gaming and non-gaming. And recall we're the dominant revenue generator in non-gaming in the industry. And non-gaming is rising.

Speaker 6: as a percentage of our revenues going from 17% in 2019 to 22% this quarter. So both of these mixed shifts are positive for margin. We are obviously reinvesting our revenues back into the business to increase our capability to handle.

Speaker 6: more visitors, chiefly increasing our headcount to service more hotel rooms. That's for sure one of the things that we've achieved this quarter, where our room operating capacity was back to 10,700 rooms on average for the quarter.

Speaker 6: And as we go into the summer, as we discussed last time, we're heading back to 12,000 rooms in terms of our operable hotel room capacity. So that entire labor issue, shortage issue has dissipated as an impediment. And then in terms of intra-quarter, we're going to go back to 12,000 rooms.

Speaker 6: Yeah, margins are related to the revenue recovery rate and June was the standout month for sure for us. We recovered for the second quarter as a whole, as you can see, 85% of 2019 levels in terms of mass revenues for the second quarter.

Speaker 6: but in June our mass revenue were about 97%, almost at full recovery to June 2019. So the acceleration in June was really very support based. We saw underlying visitation recovery obviously, how this patient.

Speaker 6: recovering to almost 70% of 2019.

Speaker 6: And all of our key volume metrics were up significantly against April and May. So a non-rolling drop increased 15% against April and May in June . Slot handles up 9% and rolling volumes up 10%. So across the board we saw a very sharp acceleration in June .

Speaker 5: I also referenced page 14 of the deck. I think the instructor to look at what's happening in the provinces beyond Guangdong and non-Guandong visitation and lack of penetration. It's just really days in its recovery. I think if you look at 14 it gives you a really good snapshot.

Speaker 5: of what we believe is the beginning of a strong recovery. Hopefully this summer will have more and more return to pre-pandemic numbers and the non-gone visitation numbers. That's going to fuel this business. As you know, we have the capacity of gaming, non-gaming to participate across the board. And that's what we believe will happen. That will impact margins, but also...

Speaker 5: We all know that's an inevitable factor, Mical, six months into this recovery, and we're still way behind in terms of visitation. Great. My follow-up question is this.

Speaker 4: We've seen, within mainland China, more mixed macroeconomic performance year-to-date. And yet at the same time in Macau, growth gaming revenues, visitation, retail sales, pretty much most metrics have steadily improved. How do you reconcile the disconnect between China macro and the fundamentals on the ground in Macau?

Speaker 4: How do you see that relationship playing out going forward?

Speaker 5: Well, obviously we prefer a strong macro economy in China. We're hoping to have a future, but we can perform and will perform even if recovery is slower than our business. We'd like to see it come back quickly. But as you see in other business, you saw at the LVMH's numbers, you see other retail members, the retail market, our business doesn't require.

Speaker 5: Everyone's be making a strong economic recovery. Certain segments can make it happen. But again, we're hoping for a strong rebound and a stronger MACC code to also impact this positively. I still believe this market will continue to grow in spite of slower recovery than we'd like in that region.

Speaker 7: Thank you.

Speaker 7: Thank you. Thanks, Joe.

Speaker 3: Thank you. The next question is coming from Robin Farley from UBS. Robin, your line is live.

Speaker 2: Hi, thank you. This is actually Arsena for Robin. I was wondering if you could talk about average spend for a mass customer and where you expect that to sort of normalize, thinking about the fact that a portion of higher spender in VIP obviously ends up in mass, but also as you open up more hotel room capacity, that ramps up.

Speaker 2: probably higher percentage of grind mass returns to Macau. How do you think about that more normalized spend per mass customer looking forward into the back half?

Speaker 2: percentage of grind mass returns to Macau. How do you think about that more normalized spend per mass customer looking forward into the back half?

Speaker 6: Thanks for the question. I think you can see from the results that premium mass recovered still faster than the base mass. But sequentially base mass still grew strongly on the back of improving visitation. And as you alluded to, I think as room inventory increases, we're able to cater to more visitors.

Speaker 6: I would say the spend per head directionally continues to be very strong across both premium mass and base mass. So whilst obviously as the base mass picks up, you'll see more of a mix shift I think over time, but within each of the segments.

Speaker 6: spent per head is actually rising. So we are getting high quality, high value tourists into Macau at this point and also we're broadening this to high value foreign tourism as well so we can see.

Speaker 6: strong results this quarter again in terms of the high-end foreigners. So I would say at this stage the higher value segments are growing, recovering still at a faster rate, base mass is picking up as visitation grows and hotel capacity increases. But within each of the segments, i.e. both premium mass and premium mass,

Speaker 6: and base mass, the spending actually continues to be very high and indeed the spend per visitor is heading in a positive direction.

Speaker 2: Great. Thank you, Grant. And just one quick follow-up. With your dividends being stated here, I was wondering if you could update us on your overall kind of capital return strategy and how you think about buybacks. Thank you.

Speaker 5: Hi, how are you? So I think when we view the business in terms of capital allocation, we feel like we have a lot of good opportunities, really for big growth, both in Calhoun and Singapore.

Speaker 5: And that investment will continue to drive our expansion of non-gating amenities and drive our cash flow.

Speaker 5: But we also think that we're going to be able to return a lot of capital in the future. We were a very shareholder-friendly company in the past. We're very focused on return of capital. But I think when you look at our prior program and what we're looking to do going forward, I think we'll probably look to have more of a balance between share of a purchase and dividends. I think when we talk about the dividend size,

Speaker 5: It was something that leaves us plenty of room for investments in the future. It allows us to grow over time, which is our focus, to really grow our asset base and grow our cash flow capacity. But it also allows for future share purchases, which is something we're motivated to do. I think the dividend size today gives us flexibility with our capital allocation. And really, over time, we tend to shrink the share count. I think having a balanced capital return program is very important for us.

Speaker 5: We talked about it with the board. I think management's very focused on it. We'll probably look to be more programmatic about share repurchase than we have been in the past.

Speaker 5: And I think really this gives us the flexibility to repurchase more shares over time and to really address our capital expenditure needs. So I think what we're going to try to do is allocate capital to growth, which we think we have a lot of opportunities that are unique for our company, focus on the dividend as a core sort of our program, as we always have, but allow ourselves to have more balance, more flexibility.

Speaker 5: in the future to be more problematic share of purchases and really shrink that share count. Thank you very helpful.

Speaker 3: Thank you. Thank you. Next question is coming from Carlos Santorelli from Deutsche Bank. Your line is live. Hey, everybody. Thanks. Robert, or maybe one of the guys in Macau, I was wondering as kind of the market has shifted and you've seen a couple quarters that at least look more normalized.

Speaker 5: the market wide.

Speaker 6: Yeah, Graham wants to take that. Sure. Yeah, thanks for the question. I think on the whole, we see a very stable competitive environment. I think all of the operators, the entire industry is…

Speaker 6: is continue to invest in non-gaming and diversification and bringing about, I think, a really stellar event programming into the market which is helpful I think, not just for growing the tourism economy.

Speaker 6: but also increasing the business volumes for all of the operators. So I think you're seeing the positive results from that investment in non-gaming and events programming, even in this past three months.

Speaker 6: Not least in terms of our non-gaming programming that we put in place that's been really driving business levels and visitation. In terms of reinvestments, yeah, I think it's relatively similar to what we've seen in the recent quarters. Clearly.

Speaker 6: It's become, you know, continues to be actually always been a very competitive market in premium mass and will continue to be. But I think this very rational behavior amongst the operators and the industry in general, led by the larger players. But it's said the focus of the industry has been to...

Speaker 6: to reinvest in non-gaming programming and that's been a tremendous driver to the recovery so far.

Speaker 3: Great, thank you for that and then if I could as a follow-up just in terms of the expansion at Marina Bay Sands I know you guys were going through some stuff and reviewing some budget needs and design plans and everything else. Is there anything you guys could share at this point in time with how we should be thinking about that timeline spend etc.

Speaker 5: Sure. First off, we have very strong feelings about the future success of Singapore. If you look at the results from the quarter.

Speaker 5: Look at the visitation that we have, the type of customer we have coming through the building, and the fact that China has not fully recovered. And if you look at sort of the nature of where Singapore sits today, any confluence of events in terms of the growing economies in Southeast Asia, we have a very strong view that the future of Singapore is very positive.

Speaker 5: And so we're very motivated to make an investment there and expand our capacity.

Speaker 5: at Marina Bay Sands. Right now we're in discussions with the government about what the final form of our project will look like. There's obviously been a lot of changes to the market in terms of market potential. The government's goals around high-value tourism and to be fair the way we want to grow into that market. And so there's some adjustments that we're making and hopefully we'll have a better sense of what that'll look like in the upcoming quarters.

Speaker 5: But right now we're in discussion and we have a chance to continue with the final version of our project in short order. We're looking forward to getting started. Great. Thank you, Patrick. Appreciate it.

Speaker 3: Thank you. The next question is coming from Stephen Grambling from Morgan Stanley . Stephen, your line is live.

Speaker 3: Hey, thanks. As a follow-up from Macau, the $200 million number you mentioned in June , is that a clean number that you would think of to build off of given normal seasonality? Or should we see that build as basemask continues to recover?

Speaker 8: What was the second portion? The last part. The last part.

Speaker 3: I guess it's a question of as base mass continues to recover, how should it impact that 200 million number?

Speaker 8: It should go up. I mean, honestly, I think that 200 million is just, we call that Atlas, because obviously it's a strong month, especially in light of the seasonality of June not being a great month.

Speaker 8: Look, our position is simple. We think that Cal will just continue to get stronger. And the recoveries we've predicated on visitation in all segments. And again, our advantage is very structural and very different than our operators. We have capacity to grow. Basemask, premask, rooms, retail, everything you think of for the customers what we have to provide to service that. And that does go to some of our competitors. So,

Speaker 8: I think June is the beginning, hopefully the summer will be heaven to that. We'll see how July , August , September holds up. But our story is pretty simple. More visitation, especially more basements, more penetration in China will yield bigger GGR. And we'll be a huge recipient of that. And I think that's the story we believe in wholeheartedly. I guess I take comfort in fact again.

Speaker 8: Six months ago, we weren't sure we'd be open. We had a basically closed business. We were just one and two. Here we are in the summer of 23 looking at a $2.4 billion run rate just based on June , immediately back in February . So we're firm believers in the calories happening. We've never vastly believed that market is just special.

Speaker 8: And the recovery in China is slower in general for all segments, and probably, but it's coming on now, and some will be a great indicator how fast it will go back to 26 billion, 30 billion, 32 billion. I don't know what the peak is, but I just believe the acceleration will be evident this summer. And again, we are in this very, very good position of having plenty of...

Speaker 8: assets to put to work in the account. Plenty of rooms, the rooms are all open, retail is open and functioning, slots and tables. So as the market grows we should be a big beneficiary from that new demand that's coming. And so just to be clear, you don't, you don't, do you think that there was any kind of one-time benefits?

Speaker 5: in June , whether it's Jackie Chung or other things that could have been driving that, so that may have been an outsized number, or you're saying that is a clean number to build off of? So I think the key thing to note is that we've had these non-gaming, what we call lifestyle programs, which includes entertainment and other activations.

Speaker 5: for years. They were very successful pre-pandemic because we were able to connect with our customers and bring in very high value tourism that was high frequent. And so we've started those programs again.

Speaker 5: And so the concert you just referred to is very popular. And I could like Grant comment on that or Wilford comment on it. But I think the key thing for this is our non-gaming programs are working. That the investment in non-gaming, that the activations, that the driving customer visitation through social media is working.

Speaker 5: And so the visitation of high value customers flows through in our results in that month. I think the interesting thing is

Speaker 5: Air traffic to Macau and to Hong Kong is like around 50% of where it was pre-pandemic. So our story is one of visitation. It was led by higher value customers and premium mass, but now as people can begin to travel to Macau more easily, more frequently, they're starting to return, they're starting to consume all of our different amenities.

Speaker 5: Not only the hotels, the concerts, the food and beverage, the retail, all of it's working. And so we'd like to believe we can grow from that number materially as our base masks, non-ready-to-play returns, as more premium mask customers show up, and as Grant said earlier in the call, more of our hotel rooms come online.

Speaker 5: So we think we've invested through the pandemic in very high quality products. The customer response has been very strong and we're able to price through it. So we'd like to believe that there's margin room there. We'd like to believe that as we activate our non-gaming activity that will draw more customers to concerts and other events. And then I'll continue to grow overall the desirability of visitation.

Speaker 6: Grant, do you have anything to add? Thanks Patrick. As you rightly say, we've had a very long track record going back 16 years in terms of hosting world-class entertainment events at the Venetian Kota Arena. And this was always part of our lifestyle programming.

Speaker 6: Jackie has been terrifically successful in the past with us as well. He played in both 2017 and 2018 in the summers of those years. I think what makes this tune special is firstly he played a record-breaking 12 shows across four weekends.

Speaker 6: I don't think that's ever been done before in Macau. But not only that, Macau was the first touring stop of the entire global tour that Jackie Chung has just launched. So that he chose to launch his new global tour at the Venetian Macau, I think is testament to both Macau's.

Speaker 6: rising destination appeal, the importance of it as an entertainment hub regionally, as well as our own track record in partnering with Jackie and his team over many years. So the month was strong, not just the days when the concert was on, which is nine months of the month. So it's a combination of factors, I think the underlying visitation to...

Speaker 6: Macau like Patrick referenced was improving throughout the quarter and into June even though it was into a traditionally weaker part of the travel calendar. Hotel availability improved, transportation improved, concert series undoubtedly played a part but that's just one component of the ongoing lifestyle program.

Speaker 6: is pursuing and I think is a great start to the new concession.

Speaker 6: Thanks so much.

Speaker 3: Thank you. The next question is coming from Sean Kelly from Bank of America. Sean, your line is live. Hi. Good afternoon, everyone. Good morning, Grant. So maybe I just wanted to go back to the cost side a little bit. It's probably for Grant, but if I caught it correctly, I think in an earlier question you said,

Speaker 4: room compliment was up to 10,700 on average in the quarter, heading to 12,000. Can you just give us a little bit more color on that? Are we at the 12,000, we exit the quarter there, and just what does that imply for kind of necessary either head count or kind of cost ramp up from here? Either a little bit more remaining or...

Speaker 6: a day in terms of our operable capacity from a labor standpoint during the quarter. We actually increased further towards the end of the quarter. So as we go into the third quarter, we're roughly at that 12,000 rooms mark, which I said plus or minus, but typically there's always a handful of rooms out of order for regular maintenance.

Speaker 6: We're effectively back at full inventory now and ready for the peak summer season, which is getting underway later this month.

Speaker 4: Great, thanks for that. Maybe a similar question, but kind of transferring over to Marina Bay Sands. There, you know, we've seen kind of two quarters in a row with margins kind of in the, you know, 46 to 47 camp. That's still a couple hundred basis points below pre-COVID. And I know there's a lot going on there.

Speaker 4: I do believe in the slide deck you guys called out that the some of the renovation activity was either over or close to so maybe just an update on some of that renovation disruption and how we sort of you know exited the quarter there and just your thoughts on costs which I think we're up about 10% Q on Q you know is there anything any is there as a full complement of rooms comes back

Speaker 5: Can we also see some margin leverage or improvement sequentially or going forward? And how should we think about that in the second half? So I think what's important to note about really SANS as Robin is, in his remarks earlier, the building's under a lot of change. It's changed for the better. We're investing a lot and we're creating what is arguably the best product we ever had.

Speaker 5: and the customer response is very strong, but we're mid-flight in that. And so I think a couple of things to consider, our biggest suites, so our 200 multibase suites, are the last to come online.

Speaker 5: So that's what's going to come in this quarter and in next quarter. So the full release potential of the renovated Tower 1 and Tower 2 will not really be reached until those suites are online.

Speaker 5: So we've been operating without them. So we'll be able to price better, we'll have higher margin, and we'll have like a larger quantum of cash flow from this high value segment coming into the building because they didn't have any place to stay. And now we're adding 200 suites of the highest quality we've ever had. So that's going to be meaningful and that will address let's call it some of the operating leverage we want to get out of our cost base. We've had a significant number of rooms out of inventory.

Speaker 5: And so I think between some of the cost increases that we've seen in the market for inputs, and to be fair, the gaming tax increase, there are some things we need to overcome through higher value customers, through pricing, and through volumes. And I think the one thing that's important to note, aside from the fact that we haven't had our most important room inventory available to us, our casino floor has also been on renovation. That's coming to a close.

Speaker 5: But most importantly, airlift from China isn't really back yet.

Speaker 5: And so when you look at play across the quarter from rated play from China, it's increased each month across the quarter. And so as China visitation comes back into the fold, and our new multi-based suites come online, we will have an opportunity to price through some of the cost increases and improve margin.

Speaker 8: Thank you Patrick. Thank you everyone. I just want to say Sean, I think we're going to do a lot of labor side. I think Mars will escalate because in every business, the hospitality or retail, when you've got an exemplary product people want, you've got pricing power. And I think we're finished over there. It's taking a long time.

Speaker 8: It's a slug, but we get through this thing. The room product that offer the F&B to retail, rethinking our retail, you see this all over the map in terms of why is there mesh, and now we're moving time to get these ridiculously high price prices. People want the product, they offer a superior product. Same thing happens in the watch world, same thing happens in the hospitality world.

Speaker 8: I think we're building something over there. People don't understand how good it is until you see it understand it It's going to be really special and we'll be able to get pricey in every level be it be rooms casino gaming retail And this but this building is done. I'm amazed we're doing these kind of numbers with ripped up building when this building is done our pricing powers will go

Speaker 8: to another level. I think that's MBS takes a different gear. The margins always take care of themselves as long as you have the product people want and will pay for it. And I do believe when you guys have a chance to get over there and see MBS and experience what we're doing, you'll appreciate these comments. It's going to be a pricing power issue. We're not going to cut costs of any more ad costs to add more labor. We're gonna have

Speaker 3: Thank you very much. Thank you very much. Thank you. The next question is coming from David Katz from Jefferies. David, your line is live.

Speaker 8: Hi, afternoon everyone. Thanks. I know you've touched on this from a number of different perspectives, but I'd love just a little more help or insight in terms of how margins should evolve, specifically for the Macau enterprise in total.

Speaker 8: And just looking back at where normal was in 2019 and what a new normal could look like now, how high the ceiling is, any qualitative perspectives around there and how we get there, the next several quarters would be helpful. Thank you.

Speaker 8: I want to give Grant take that question, but I do want to say, David, again, I think I'll use the words structural advantage. I think we're in this very different position. Some people, in that we were built for this market in terms of scale and size in every area of our business, you know, base masks, premium masks, we're still handicapped by me.

Speaker 8: the base mass has before they're covered. But I think our reinvestment last 20 years is going to make this product grow and grow. There's a margin in demand. I think we're just built for this environment. So I'm highly confident margins will rise with our increased revenue. Thank you.

Speaker 6: Thanks for the question. We don't have a specific forecast on how high.

Speaker 6: the margins will rise to. I think you can look at the structure of the business. I mean, as Rob says, I mean, we have an excellent structure in terms of our business mix. We have an efficient cost structure. And I think, you know, the.

Speaker 6: the way you will be looking at this is, you know, how high will revenues go? But it is true that the segments that are going to drive more revenue recovery and then eventually growing structurally will be the higher margin segments within gaming mass versus VIP.

Speaker 6: and then also non-gaming versus gaming. I think our non-gaming is recovering even more strongly than gaming. We're at 93% of our 2019 non-gaming revenues. Our hotel revenues for the quarter are 8% higher than 2019 on fewer rooms being available. Our retail business is looking very strong. Tenant sales were up 28%.

Speaker 9: around when and where and how much, but any color on sort of boundaries or accomplishments or how we might think qualitatively as to when we get there and when we can start to think about that in a more tangible way.

Speaker 5: So I think we just restarted our return to capital program this quarter. I think it shows the board and management's confidence in the long-term performance in business.

Speaker 5: And we'll look to grow that dividend over time in a way that also allows us to have our purchase program. I can't give you a specific size about the volume for purchases for the time being today because we still have a lot of things to plan for. But in our capital allocation thought process, we're going to think about it in the way that it was described previously.

Speaker 5: I think what's also important to note is that we're going to have variability in our CAPEX. We have a lot of large projects that we're considering. Some of them are more certain than others. We're very excited about ready-made standards expansion. We think it's going to be an unbelievable asset. We're very excited about it. The timing may be a little delayed from where we are today.

Speaker 5: In the past, we're going to invest as much as we possibly can, because we think the growth there will be extraordinary. But we have other options, other things we're looking at, and the timing of that potential outflow is unknown, or if it's going to happen. The good news is, we'll have the ability to modulate our CapEx based on how we grow the business and use excess capital and return it to shareholders through share repurchases.

Speaker 5: and hopefully in a programmatic way. So while I can't give you an exact amount today, I will tell you our intent is to look at our, what's called CapEx for growth, CapEx for the future, a way to grow the business, look at the dividend program, ensure that it grows in an appropriate manner, and then look at a return of capital program through shareable purchases.

Speaker 5: than a shareholder friendly. But I think that's how we'll look at it. But as it were, as where we are right now, I can't give you a side yet. But we'll continue to look at it in the upcoming quarters and we'll talk about it. Okay, appreciate it. Thanks very much. Bye. Bye. Bye.

Speaker 3: Thank you. Thank you. The next question is coming from Brant Montour from Barclays. Brant, your line is live. Hey, good evening everybody. Thanks for taking my questions. So on the VIP business, which grew nicely for you guys in the quarter, but wasn't as strong as the overall market. Could you just update us? How important is this segment to you when you plan the next couple of years?

Speaker 8: I think we're very comfortable going to VIP and the base mass. I think our portfolio is so well-rounded. Venetian is still the king of the cow. It's going to be the first place. The billion-plus dollars is our deepest allies. And it shows no signs of the buck to recover its previous position.

Speaker 8: We built a portfolio that is very well rounded. The four seasons enable us to compete very well with anybody. The room product there and the gaming products pretty much unparalleled. Again, the London early stages were halfway done the renovation. The full renovation was still a while down the road. But except for the sands, which I think we give up on the potential of a lot of growth being done.

Speaker 8: share than anybody else and I need more potential growth because of the sheer mass size of our buildings. And again, we referenced lifestyle. We built a business there with Jackie this month or somebody else next month, whether it's the best retail, the best restaurants. We built a lifestyle approach that puts us at the top of the heap in that area.

Speaker 8: both as a product offerings but also quality products.

Speaker 8: Where are we going and have no reason to keep growing both in base and premium? I think the idea of premium players is unfair and unjustified by numbers. Grant? I think on the VIP our strategy hasn't changed. In fact, obviously the way the market has evolved in Macau for VIP.

Speaker 6: So we're working very hard bringing foreign top tier players into Macau and we're having I would say initially great success in doing so. Foreign rolling volumes are already back to 2019 levels.

Speaker 6: in the second quarter, obviously far ahead of the general tourism recovery from overseas.

Speaker 6: markets for Macau. So I think it's anchored around premium direct, a very strong sales network around Asia and a continued effort intensifying the effort to bring more foreign top tier patrons.

Speaker 6: to Macau as Rob said, it's a great destination for all of those markets. And we intend to make full use of our great product and destination to attract those foreigners.

Speaker 3: Great. Thanks for that. Just to follow up on CAPEX, I'm trying to reconcile slide 23 that's really helpful year by year build you guys do for us with last quarter. Looks like MBS expansion, I guess, was temporarily taken off. You guys commented on that already. You added London or phase two.

Speaker 3: want to make sure that that's new and hear any maybe thoughts about targets, return targets for that project. And then lastly, I think there were some reports from you guys or came from you guys through the media mid-quarter about a new hotel tower at the Venetian. And if that's a true or a plan, I'm just curious if that's going to be included in the three and a half billion CAPEX commitment.

Speaker 5: that you've agreed with the government on? So just a few points. We did take Singapore expansion off because until we finalize the program and have final approval from the government, we don't know exactly what it will cost. So we're gonna hold off on that until we have a project decided upon.

Speaker 5: in terms of the Londoner phase two. I think the great thing about the Londoner is when we first started, we actually did it pre-concession during the pandemic and we built through the pandemic and into the concession renewal. It came out on the other side and the thesis was validated. It's incredibly well received by the market. It looks spectacular.

Speaker 5: Customer response has been very strong and we're excited about the result and that market validation was very important. And now we're gonna roll into the second part of the building and really hopefully tap into the absolute earning power of that. Call it really well laid out really thought through hotel offering and amenity offering. The next part of the building is really well laid out really thought through hotel offering and amenity offering. And now we're gonna roll into the second part of the building and

Speaker 5: And so in our long-term view, that's something that will hopefully today come close to the mid-eastern in terms of its productivity and potential is there. Very excited about that opportunity. In terms of return targets, I think it's not something that we talk about directly, but in our mind, there's a lot of potential growth in our deepest and most profitable segments, which is mass and premium mass. And so with the revised or renovated hotel suite.

Speaker 5: hotel rooms and suites that we'll have there, we think we'll be able to address the market incredibly well just like we did with the first phase of the long term. So I think that's kind of how we're thinking about it. And in terms of a new hotel tower, I don't think we can comment on rumors. I don't think that's something we're familiar with. I think for us, we're really focused on really delivering against our concession renewal requirements.

Speaker 5: investing in the non-gaming amenities that really help to find our portfolio in Macau and really drive visitation. So Grant, do you have any other comments you'd like to add? Patrick, you covered it very well. I think...

Speaker 6: The Londoners success, we've had the wholesale reinvention of the property's positioning and the branding and the functionality and actually it's easy to forget that most of the hotel room accommodation today still remains the original Sands Kottai central rooms.

Speaker 6: as is half of our main gaming floor. So phase two is really about making Londoner more Londoner. We need to reposition and upgrade Sheraton and the Conrad hotels, as well as a comprehensive upgrade of the Pacifica casino on the Sheraton side. And we'll be adding more non-gaming amenities and attractions to the Londoner.

Speaker 6: And many of which are also included in our concession commitments. More signature restaurants that have international appeal, state of the art wellness center, other sort of lifestyle attractions. And then beyond that, over a longer time frame, we've always committed since the concession. Over moving fast food stores in various hit markets and or other pet stores that private sector, we've assigned the the gesture center

Speaker 6: retender to developing this new landmark garden themed attraction, the conservatory, located to be located in the gardens south of the London resort. That will take longer time frame to develop but first off we're able to get get right down to work on London phase two on the hotels and the casino refresh.

Speaker 6: because we've been working on this during the pandemic on the design. So we're now as Patrick said, I mean, we've seen it, the product that we have come out with being hugely validated. And with the market recovery with the return of visitation and the hotel guests. So we're now as Patrick said, we've seen it, the product that we've been working on. And with the market recovery with the return of visitation and the hotel guests.

Speaker 6: We're keen to get moving onto this Phase 2, and that's why we're able to start the actual construction in the second half of this year.

Speaker 3: Great. Thanks all. Thank you. The next question is coming from Steve Wojcicki from Stifo. Steve, your line is live.

Speaker 9: Yeah, hey guys, good afternoon. So Rob or whoever wants to take this, and Patrick, you touched on this a little bit, so this might be you, but slide 14 I think is pretty interesting. You know, around visitation trends during the quarter with Hong Kong back to actually above pre-COVID levels, Guangdong pretty much back.

Speaker 9: The rest of China though remains well below pre-COVID levels. So wondering how you guys are thinking about the recovery in that segment moving forward and what you're watching. And I know Patrick, you talked about air capacity. Is it really just air capacity or are there other factors out there that might be holding that segment back? I think one thing I do want to say is we're really excited about it.

Speaker 5: Seeing the visitation come back has been thrilling. Customer responses, seeing patrons from before, seeing new patrons. It's really a fantastic place. We were in Macau recently and it just, there's great energy, great electricity in the city. So I think some of it is air capacity. To be fair, some of it's, you know, the, let's call it the more mass player, the unrated display that the Venetian and other of our assets were so strongly set up for.

Speaker 5: that really drove a lot of high volume and high margin business. All those segments still haven't come back in full. So between the airlift and if you turn to the next page, actually page 15, where it shows the visitation for 2019, and then compared to this last quarter, you can kind of see that we have a lot of room to go. We have a lot of patrons who will want to come back and see us.

Speaker 5: and they're just starting now to make their trips happen. So I think, you know, from where we sit, we have a great ability to accommodate these customers as we've done in the past. We have the capacity. We have very interesting non-gaming amenities. We have entertainment. And we think this is the most important tourism market in Asia and the region, and people are gonna show up. We also have international visitors showing up.

Speaker 5: which is kind of a new thing. So I think the power of Macau is gonna continue to grow and grow, but when I look at slide 15, I just see a lot of potential, and our team is working hard to try to capture that potential. Ran, I wanna turn it over to you, if you have any additional remarks.

Speaker 6: Yeah, I was going to point to that page as well, Patrick. Dan's famous page 15 on the penetration. Actually you can see from the eastern China, Yangtze River Delta region, especially Shanghai and Zhejiang Province, in fact the recovery rate is higher than Guangdong.

Speaker 6: Because I think you have better airlift, better propensity to travel cross border from those source markets. And we've already seen a very big upward shift in the recovery rate of non-Guangdong relative to first quarter. So I think in the first quarter, we've seen a very big upward shift in the recovery rate

When we're looking at that recovery rate, it was less than 30%, and now we're approaching 50%. So non-Guadong visitation, second quarter, grew almost, I think, in the high 40s sequentially. So it is coming back, as we said, as airlift improves, transportation in general improves.

and also hotel room availability has been increasing and actually will be further increasing for Macau as a whole in the third quarter. We have some new hotel rooms coming online so all of that I think is positive for the outlook for continued recovery in the visitation outside of Guangdong province.

I think you guys' trajectory may be uncertain, but the end result is very certain. I mean, it's Mark who always comes back, and I think he walks this summer and he'll see some very positive indications. I don't think anybody knows when exactly why it's not fully recovering in certain areas, but we just know it's going to recover. It's a question of when that happens. And the result, I think, is unquestioned. Again, I hope this summer.

We show some strong evidence that in July Hopefully we'll show a big number the best number of the year thus far and then starts to add this news recovery Okay, great. I'll leave it there guys appreciate the color. Thanks. Thank you. Thank you

Thank you. And the final question today is coming from Daniel Pulitzer from Wells Fargo. Daniel, your line is live. Hey, good afternoon, everyone, and thanks for taking my questions. Just a quick follow-up, Rob, on that comment about July . I mean, is there any reason other than just the airlift capacity that we wouldn't expect that normal seasonality in the build-off of momentum that you saw in June , whether it's macro concerns, behavioral, entertainment calendar?

Like is it really just, you know, simply airlift or there are other reasons in particular? No, there's multiple variables at work here. I wouldn't want to, you know, fidget hole, airlift, economy, visa. I don't think we really know the answer to that. It's an accurate answer that can't be unpacked clearly. I do think though, seasonality, summer has always been the time. This is the first summer post-COVID. I for one believe summer has improved very strong.

Some distance people boasting about what the joint numbers look like. Hope they're right. I believe some of them will be very indicative of new growth in this market. And again, I think you have to look back on how quickly this has been coming. Six months ago we were in dire straits and now we're

unpacking $200 million a month in June . So we're very bullish on the cow long term. And again, trajectory may be uncertain, but end result's very clear. We're going to get there. We're going to make a lot of money in the cow, and we hope we have more good meters in the near future to offer to you. So I'm hoping for a big summer for the market.

Got it. Just one more quick one. We haven't touched on the digital strategy. There's been some headlines lately that there's been some progress there. Do you have anything that you could possibly share? In high level, as you think about this strategy, how do you reconcile that with regulatory concerns, given your presence in Macau and your relationship with the government there? I think we said a while ago that we were going to invest in Ground Up.

digital activities. So we're not buyers, we're builders. And I think for a while we've been working on a couple of digital initiatives. And I think the key thing for us is it's still early days yet. We don't really have much to talk about. We're very confident about it. We think long-term there's real potential there.

but our focus is going to be on highly regulated markets. So that would mean Europe and North America. Our goal is to make sure that we maintain our regulatory standards in the best possible way, only working with partners where that makes sense, and being very selective. But in our mind, we're very focused on regulatory certainty and being in strong legal. We're very focused on regulatory certainty and being in strong legal.

Ladies and gentlemen, this does conclude today's conference call. You may disconnect your phone lines at this time and have a wonderful day. We thank you for your participation.

This does conclude today's conference call. You may disconnect your phone lines at this time and have a wonderful day. We thank you for your participation. Thanks everybody. Thank you.