Daniel Politzer

Daniel Politzer followed up on Macau's hold-adjusted EBITDA margin decline quarter-over-quarter, seeking clarity on the impact of OpEx, any one-off factors, and the effectiveness of the current promotional strategy.

Answer

Grant Chum, CEO and President of Sands China, explained that the decline was primarily due to higher reinvestment, a shift in segment mix towards more rolling and premium mass business, increased OpEx from event costs and payroll for expanded table capacity, and a lower non-rolling hold percentage.

Daniel Politzer asked about several Q4 moving pieces: the Tunica closure, the Norfolk temporary casino opening, an update on the managed and other segment, and any impact from the cybersecurity incident. He also inquired about the timing of the FanDuel stake sale tax payment and potential offsets.

Answer

President and CEO Keith Smith stated that the Tunica closure and Norfolk temporary casino would have a negligible impact, with Norfolk expected to be break-even. He confirmed no business operation impact from the cybersecurity incident, which is covered by insurance. CFO Josh Hirsberg added that the managed and other segment is expected to be stable in Q4, with benefits from expansion later, and the FanDuel tax payment is likely in Q1 next year with no significant offsets.

Daniel Politzer from JPMorgan Chase & Co. asked for a breakdown of the moving pieces for Q4, including the impact of the Tunica closure, the Norfolk temporary casino opening, an update on the managed and other segment, and any effects from the cybersecurity incident. He also inquired about the expected payment timing for taxes on the FanDuel stake sale and any potential offsets from the new tax bill.

Answer

Keith Smith, President and CEO, stated that the Tunica closure and Norfolk temporary casino opening would have negligible impact on models, with Norfolk expected to be break-even. He confirmed the cybersecurity incident had no impact on business operations, with cyber insurance providing backstop. Josh Hirsberg, CFO, added that the managed and other segment is expected to be stable in Q4, similar to earlier quarters, with benefits from Sky River's expansion expected in Q1 next year and mid-2027. Regarding FanDuel taxes, Josh Hirsberg indicated payment would likely occur in Q1 next year, with no significant offset from the new tax bill.

Daniel Brian Politzer asked for a broad overview of the M&A environment, including the level of activity and interest, especially in light of recent transactions and Churchill Downs' acquisition of Casino Salem.

Answer

CEO Bill Carstanjen acknowledged a recent pickup in M&A activity in the brick-and-mortar space, which provides clarity on property valuations. He stated that Churchill Downs is an opportunistic acquirer and seller, remaining a flexible participant in the market.