Las Vegas Sands - Q4 2023

Transcript

Operator (participant)

Good day, ladies and gentlemen, and welcome to the Sands' fourth quarter 2023 earnings conference call. At this time, all participants have been placed on a listen-only mode, and 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 Investor Relations at Sands. Sir, the floor is yours.

Daniel Briggs (SVP of Investor Relations)

Thank you. Joining the call today are Rob Goldstein, our Chairman and CEO, Patrick Dumont, our President and Chief Operating Officer, Dr. Wilfred Wong, Executive Vice Chairman of Sands China, and Grant Chum, CEO and President of Sands China and EVP of Asia Operations. Today's conference call will contain forward-looking statements. We'll be making those statements under the safe harbor provision of federal securities laws. The company's actual results may differ materially from the 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 will 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.

This presentation is being recorded. I'll now turn the call over to Rob.

Rob Goldstein (Chairman and CEO)

Thanks, Dan, and thanks for joining us today. Macao delivered $654,000,000 of EBITDA for the quarter. The number would have been $40,000,000 higher if we had held as expected in the rolling segment. It's only been one year since the end of COVID in Macao. We began in Q1 with $400,000,000 of EBITDA. In Q2, we did $540,000,000. Q3, we did $630,000,000, and the growth just keeps coming. We look forward to continued growth in both gaming, non-gaming revenue, which will lift the entire market. Sands China Ltd. continues to own the largest share of non-rolling table win, rolling table win, and slot ETG win. Most importantly, we have the largest share of EBITDA in the Macao market by a wide margin.

We believe a completed Londoner will meet and perhaps even exceed the earning power of the Venetian. Our future growth in Macao is tethered to these powerful assets, which will drive growth in the years ahead. Whether it's rooms, gaming capacity, retail, entertainment, or food and beverage, we have stellar assets. Those assets will even get better as we complete the ongoing $1,200,000,000 Londoner reinvestment program. There has been ongoing speculation about the future growth of Macao. Can the Macao market grow to $30,000,000,000, $35,000,000,000, or even $40,000,000,000 and beyond? We believe that it will. This underscores our confidence in the returns that we generate by capital investment programs in our portfolio. We are staunch believers in the growth of Macao market in near and long term. LVS has invested $15,000,000,000 in Macao to date.

Macao is the most important land-based market in the world. A few reference points to consider: fourth quarter EBITDA, assuming expected hold on rolling play, represents considerable growth when compared to the previous quarters. Our retail business in Macao has already far exceeded pre-COVID numbers. I continue to expect the gaming portion of our business to follow the same path as Singapore and accelerate in 2024. Let's pivot to MBS in Singapore. Seven quarters into our reopening, MBS delivered a $544,000,000 quarter. This is the largest EBITDA for one quarter in the history of the building. The power of this building is evident based on the results, despite the disruptive impact of our ongoing $1,750,000,000 renovation. Disruption notwithstanding, MBS is hitting on all cylinders from gaming, lodging, and retail perspective.

Slots and ETGs at MBS are approaching a $1,000,000,000 annual run rate. Non-rolling tables are exceeding $20,000,000 of drop per day, ADRs are escalating, and the retail component is delivering far beyond pre-COVID numbers. MBS validates that quality assets prevail, and 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 the renovation program, MBS will feature 770 suites. We previously had less than 200 suites. There is no denying its future. How far can MBS go? Our future expectations start at $2,000,000,000 and beyond in EBITDA per year. As you know, we're bidding for a license in New York. We're receiving strong local support.

The cost of the building will be in the $6,000,000,000 range, which enables us to develop a true five-star resort with unlimited appeal. This is a massive opportunity. We are very enthused about the prospect. Our bid is compelling. If we receive the license, we'll be on the ground as quickly as possible. Thank you for joining us today. I'll turn the call over to Patrick before we move on to Q&A.

Patrick Dumont (President and COO)

Thanks, Rob. We wanted to highlight some changes in the materials that we typically provide for the quarter. After discussions and review with the SEC, we will no longer be presenting hold normalized adjusted property EBITDA in our press releases, SEC filings, and supplemental earnings materials. These changes are being made to our materials for this quarter and for our reporting going forward. We believe that the analysis of our financial and operating results in any quarter will continue to benefit from an understanding of the impact of expected hold in our rolling volume segments for our reported results. We will continue to provide the impact of expected hold in our rolling volume segments for our earnings materials. Please see pages 6 and 7 in our earnings presentation for an overview of the new presentation format.

For this quarter, the quarter ended December 31, 2023, we generated $654,000,000 of adjusted property EBITDA in Macao, a very strong operating result. It is important to note that we held 2.16% in our rolling segment in Macao. EBITDA would have been higher by $40,000,000 in Macao had we held as expected in our rolling segment. At Marina Bay Sands, for the fourth quarter of 2023, we generated $544,000,000 in adjusted property EBITDA, another strong result. We held 4.57% in our rolling segment in Singapore. EBITDA would have been lower by $71,000,000 at MBS had we held as expected in our rolling segment. It is also important to address our margin structure had we held as expected in our rolling volume segments in Macao and Singapore.

In Macao, our margins in the fourth quarter of 2023 would have been 35.9%, an improvement of 100 basis points as compared to the third quarter of 2023, if our hold was as expected in our rolling volume segment. At MBS, had we held as expected in our rolling volume segment, our fourth quarter of 2023 margin would have been 48.8%, an increase of 170 basis points sequentially. It's important to note that both in Macao and at Marina Bay Sands in Singapore, we are generating revenue growth, EBITDA growth, and when considering expected hold for our rolling volume segments, margin expansion. We are very focused on the quality of our offerings, on further investment to drive high-value visitation to our properties, on the resulting revenue growth, and on margin expansion over time.

Looking ahead, we are excited about our progress in our markets, and we are focused on growth for the long term. Let's move to the Q&A portion of our call. Thanks.

Operator (participant)

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 one on your telephone keypad now. If listening on speaker phone 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. Your first question today is coming from Joseph Greff from J.P. Morgan. Joseph, your line is live. Please go ahead.

Joseph Greff (Managing Director and Senior Equity Research Analyst)

Good afternoon, guys. Thanks for taking my question.

Rob Goldstein (Chairman and CEO)

Hey, Joe.

Joseph Greff (Managing Director and Senior Equity Research Analyst)

Obviously, the premium mass had a significant sequential growth and exceeded the base mass. I was just hoping, can you talk about the progression of base mass recovery throughout the fourth quarter? And then clearly, what we're seeing out of information for the Macao market as a whole in January month to date is a nice overall mass growth pickup. And as you said before, Rob, the growth keeps coming. I was hoping if you can talk about sort of the relative performance of base mass in January, and if we're seeing this hopefully anticipated pickup in that mass segment.

Rob Goldstein (Chairman and CEO)

Thanks, Joe. As you know, we don't comment on the current quarter. The numbers speak for themselves, though. The market appreciation in Macao in January, thus far, has been published, and very encouraging, doesn't it? A continuation of December. As for our performance in Q4, I'll turn it to Grant to talk about the acceleration of base mass and premium mass. Grant?

Grant Chum (President and CEO)

Yes, Rob, thank you. Yes, Joe, the segment differential growth in the fourth quarter, we had 13% growth in premium mass, and 8% growth sequentially on base mass. So I think base mass was progressing nicely through the quarter. It's just that premium mass had a great performance that exceeded that. If you look at the visitation trends during the fourth quarter, Macao actually recovered to almost 90% of 2019 levels on visitations. So I think the base mass is continuously progressing and building up. Transportation infrastructure has been improving. I think the demand to come, I think the desire to take advantage of the non-gaming events that have been coming on stream across our properties, but across the whole industry, have been very effective.

I think you should expect that growth pattern to continue.

Rob Goldstein (Chairman and CEO)

Grant, is it fair to say also, Grant, I want to ask you, is it fair to say transportation and visas, the whole lubricant that supplies the market into Macao is getting better, a year after COVID? It seems to me as if the ability to get there, the desire is there, but also the ability to get there is improving daily. Is that fair to say?

Grant Chum (President and CEO)

Yes, the ability to get there has been improving, but the desirability of the destination is even clearer. You can see that the domestic flight to mainland key Greater Bay Area airports has all but fully recovered. And if you look at our ferry statistics, passengers that we carried in fourth quarter recovered to 93% of pre-COVID, but on only 52% of our sailing capacity. So clearly, people are enthusiastic about coming, even though the transportation capacity is still recovering. And that's also clear, very gratifyingly, the overseas foreign visitation recovered dramatically in fourth quarter, especially from Southeast Asia, and that's great to see from Macao.

And that's despite the direct flights from foreign countries into Macao haven't recovered even by, I think, 60% in the fourth quarter versus pre-COVID. But the visitation now is getting back up to 80%-90% of what it was before, despite the flight connectivity still catching up. Great. And then my follow-up question-

Patrick Dumont (President and COO)

Hey, Joe, Hey, hey, hey, Joe, before the follow-up, one thing important to note also. It's been a while since we talked about this. But we actually have capacity to absorb base mass business as it continues to come into the market. So, you know, when you think about the property portfolio that we have, the investment that we've made, in terms of amenities, the tourism attraction for the base mass customer, the ability to service that customer in terms of food and beverage, shopping, entertainment, but also the fact that we have the capacity as that market continues to grow, we'll be the beneficiary of that. And it's important to note because the market is not at capacity yet. So as more visitors come in, in this base mass segment, we'll have the ability to absorb it. Sorry, what's your next question?

Joseph Greff (Managing Director and Senior Equity Research Analyst)

Thanks. My next question is for you, Patrick. Obviously, it's nice to see $500,000,000 of buyback activity this past quarter. Do you view that as a sustainable level unless there's some huge volatility in the share price level?

Patrick Dumont (President and COO)

You know, I think there was some activity during the quarter. To be fair, I think we looked at the share price levels as an opportunity. When we think about our future capital return, as we said before, we kind of expect our share repurchase will be more heavily weighted into events. And so I think we fundamentally believe in the long-term value of share repurchases, the benefit of the compounding, the benefit of the share shrink, shrinking that denominator. In terms of amount, I think we'll be measured across time. You know, if you sort of look at our balance sheet, you look at the free cash flow we generate, we're gonna look to be aggressive when we can.

I think we're gonna run a program where we look to acquire shares consistently over time. But I think it, you know, I don't know that we'll necessarily buy the same amount that we bought in this quarter going forward every quarter.

Joseph Greff (Managing Director and Senior Equity Research Analyst)

Okay. And then one final thing. Congratulations, Grant, on your promotion. That's all for me. Thanks.

Grant Chum (President and CEO)

Oh, thank you, Greff. Thank you very much.

Operator (participant)

Thank you. Your next question is coming from Stephen Grambling from Morgan Stanley. Stephen, your line is live. Please go ahead. Stephen, your line is live. Please, you may go ahead with your question now.

Stephen Grambling (Managing Director and Senior Equity Research Analyst)

Hey there. Sorry, can you hear me?

Operator (participant)

Yes.

Patrick Dumont (President and COO)

Yes.

Stephen Grambling (Managing Director and Senior Equity Research Analyst)

Sorry about that. So, you may have touched on this a little bit, but as we think about the renovations coming up for the remainder of Sands Cotai Central/The Londoner, can you just maybe help contextualize how that will compare to the first renovation, both in terms of disruption and then contribution?

Patrick Dumont (President and COO)

Yeah. I think we'll turn over to Grant for that comment. Grant, Londoner?

Grant Chum (President and CEO)

Sure. Thanks, Rob. Thanks for the question, Steve. I mean, I think we can say in terms of the timeline, we've already commenced the renovation of the Sheraton Hotel, and that will continue through the whole of 2024, and will hopefully complete sometime in the first quarter of 2025. And yes, there could be some impact from construction disruption, especially as we go into the second half of the year. And that a little bit depends on when the works are approved to commence on the Sheraton side of the casino floor, and also as well as the number of keys that will be out at any given time at the Sheraton.

That said, I think we'll be managing this whole process just as we did in the first phase when we converted the Holiday Inn into The Londoner, starting in 2019. So we'll be well used to yielding the rest of the portfolio. As you know, the yields we're getting at the Sheraton side of the building is lower than the rest of the portfolio. So we will be trying to, you know, not miss any opportunity to yield the rest of the portfolio whilst the works are going on. And this is something that we've been doing throughout these existing building renovations. Right now, the schedule is still a little bit fluid, just pending some statutory approvals, but at this point, our expectation is the first half will be relatively normal, and then expect to see some disruption into the second half. But then by 2025, we're going to be in a dramatically elevated and different position in terms of the entire The Londoner. You asked about the phase one and phase two contribution. Well, we have done the bulk of the work in the public areas and the external façade

But we only touched 1,000 keys out of the 6,000 that we have. So, the main difference is that phase two is going to address the majority of the hotel inventory in terms of renovation, and of course, the other main gaming floor that we have on the Sheraton side.

Rob Goldstein (Chairman and CEO)

Stephen, just to follow on Grant's comments. I understand the market's concerned about Londoner disruption. It's a valid point. However, two thoughts for you. One is that, I think if the market continues to accelerate like we're seeing with those January market numbers, perhaps we can overcome that by using other assets in the portfolio. But secondly, to Grant's comment, I think when you see the eventual transformation of Londoner, it'll be a juggernaut on par with the Venetian or beyond. So it gives us two assets we think can probably make $3,000,000,000 by themselves.

... While there's disruption in 2024, 2025 and beyond gives us something that's unique in that market. The number one and two assets, or number one and one assets in that market for years to come. So there may be some disruption, but maybe market force can overcome that, but I think the end result is well worth the pain.

Stephen Grambling (Managing Director and Senior Equity Research Analyst)

That, that's all super helpful. Maybe an unrelated follow-up on Singapore. Looking at least at the visitation data, it seems like it was mixed at best, but yet you're still seeing that market grow sequentially from an EBITDA standpoint, revenue. I guess, what are you seeing from China customers coming back to the market? Any initial read in how we should be thinking about that building into next year?

Rob Goldstein (Chairman and CEO)

Well, first thing about Singapore-

Patrick Dumont (President and COO)

Oh, oh, go ahead, Rob. Go ahead, Rob.

Rob Goldstein (Chairman and CEO)

No, go ahead, Patrick. I'll follow yours. Go ahead.

Patrick Dumont (President and COO)

Yeah. So I think the key thing about Singapore is it's really about quality of tourism. So we've been very focused on investment. If you heard us over the last couple of calls on what our investment thesis is, that the higher quality assets we have, the higher quality tourism we'll attract, and that's really on full display here. So it's not about quantity, it's not about the full recovery, it's the fact that we're getting very high-value tourists. You know, if you look at Singapore as a market, it's incredibly attractive, right? It has a growing high net worth, you know, population, there's a lot of family offices moving there, there's a lot of business activity there, there's political stability, it's, there's strong tourism infrastructure, it's got a strategic location.

All of those things are benefiting the Singaporean market overall and helping drive the business that we're in. And so for us, you know, there's been a ramp from China, that's true, but there's still a lot more to go. It's still, you know, let's call it 50% on visitor arrivals. You may have heard that at some point, they're going to go visa-free this year. We're hopeful that that actually occurs, which, you know, there's no way to know exactly how beneficial that'll be, but it can't hurt.

But I think the key thing is it's just a very attractive market, but it really, the results you see in this quarter, in a building that was really under construction, didn't have its full suite complement, and didn't really have a lot of the amenities that we'll have in halfway through 2024 and 2025, you know, I think really speaks to the capability of the market and where this building can go. You heard Rob in his remarks about our view of the trajectory of this business. We're very bullish on it, but I think it's really just about high-value tourism. I wouldn't look at the absolute number of visitor arrivals and use it as a determining factor for where the business can go.

Rob Goldstein (Chairman and CEO)

I think Patrick's comments are spot on, Steven. We have limited capacity constrained building at MBS. Unfortunately, we only have so many rooms and suites. We wish we had 10 times as much, but we don't. So the mass, the mass market tourism isn't as important to us as the right tourist in the market. We look at this asset as a $2,000,000,000 asset today, annualized EBITDA, but we believe it can grow 10%-20% over the next three or four years. Then hopefully, if we can finalize our plans with the government, once the government blesses another building, we believe that could open later this year and make us a $3,000,000,000 projected EBITDA by end of decade in Singapore.

So we see ourselves now at $2,000,000,000, going to $2,200,000,000, $2,300,000,000, $2,400,000,000, and eventually stepping up to $3,000,000,000. We see huge growth in this asset. It's just beginning. We got obviously hampered by COVID, but to watch it grow like it's growing, our only disappointment in Singapore is we just don't have more space, because it's a very desirable market, and that building, probably the most valuable iconic hotel building ever built in the world, and will just accelerate in the next 3, 4, or 5 years until hopefully we can tell you with finality, we have a deal in phase two.

Stephen Grambling (Managing Director and Senior Equity Research Analyst)

Makes sense. It's all helpful. Thanks so much. Best of luck.

Rob Goldstein (Chairman and CEO)

Thank you.

Patrick Dumont (President and COO)

Thanks, Steven.

Operator (participant)

Thank you. Your next question is coming from Carlo Santarelli, from Deutsche Bank. Carlo, your line is live. Please go ahead.

Carlo Santarelli (Managing Director and Senior Equity Research Analyst)

Thank you. Hey, guys. Rob, you touched on it a little bit just there, but I was wondering, obviously, there's a ton of moving parts with COVID and everything else, but, you know, $1,000,000,000 in phase one at Marina Bay Sands, returns on that product look to be very favorable. $750,000,000 over 2024 into 2025. I was wondering how you think about returns there, and then to your point there at the end of your last comments, when do you expect to kind of have an update around the timing and perhaps the spend on the larger-

Rob Goldstein (Chairman and CEO)

Yeah

Carlo Santarelli (Managing Director and Senior Equity Research Analyst)

... scale project there?

Rob Goldstein (Chairman and CEO)

I'll just reiterate how much we believe in Singapore as a market. My comments about $3,000,000,000, we actually believe that's very attainable when we open this new building late in the decade. As for the update, Patrick has been right, right in the middle of that, so Patrick, please take it away in terms of phase two Singapore.

Patrick Dumont (President and COO)

Yeah, I think, you know, it's an interesting comment. I think the key thing for us is that we are an investment-driven story, right? So the more we invest in high-quality assets, the better service levels we have, the more we're going to have pricing, the more we're going to differentiate our product, the more we're going to have high-value tourists, and the more our EBITDA margins will grow. And so you're seeing that happen in real time in Singapore. And so for us, I think, you know, we'll finish the third tower by Chinese New Year next year. That $750,000,000 will go in.

We'll still have some amenities that have to be done across parts of 2025, but by the mid part of 2025, we're basically going to have what is a, in effect, a brand-new building. It's going to be fully renovated, and you'll get to see the full power of the suite product on the rolling side. You get to see the power of the premium mass and all the amenities that we have, the shopping, the entertainment, all the things that we're adding in terms of our premium mass lifestyle program that you can't get anyplace else. These are all very positive things, and the quality of these amenities makes customers want to be repeat visitors. And so for us, these investments will drive very high returns. That's the reason why we're, why we were willing to do, and that's the reason why the board was supportive....

You know, you can see the trajectory of EBITDA now. We're not even done. So we think Tower Three will be very accretive in terms of investment. You heard the numbers Rob just mentioned. We're very confident in those numbers. We feel very strongly that that's where we should be going. And then in terms of the next building, IR Two, we've been in very close discussions with the government over many months. There's a lot of moving parts here, a lot of things we have to satisfy. This is a project of national significance. We wanna make sure that everyone's comfortable with it and that we get all the proper approvals, and we're hoping in the next quarter or two that we'll get everything done. We've been making good progress.

We've been visiting Singapore, and we feel very confident where we are, and hopefully we'll be able to get all the green lights we need, and we'll be able to get going soon.

Carlo Santarelli (Managing Director and Senior Equity Research Analyst)

That's all I need. Thank you, guys. Helpful.

Rob Goldstein (Chairman and CEO)

Thank you. I appreciate it.

Carlo Santarelli (Managing Director and Senior Equity Research Analyst)

Well-

Operator (participant)

Thank you. Your next question is coming from Shaun Kelley from Bank of America. Shaun, your line is live. Please go ahead.

Shaun Kelley (Managing Director and Senior Equity Research Analyst)

Hi, good afternoon, everyone. Wanted to offer my congrats to Grant on the promotion as well. And maybe speaking of promotions, you know, Grant or whoever, if you could comment a little bit just on the promotional environment. I mean, I think this is a big question or theme that came out of the quarter, you know, last quarter. And just sort of what you're seeing, particularly at the upper end of the Premium Mass segment right now. And in general, are Premium Mass market margins consistent with your pre-COVID expected ranges, or are they still a little bit below that? And what would it take for them to recover? Thanks.

Rob Goldstein (Chairman and CEO)

Grant?

Patrick Dumont (President and COO)

Shaun, that was good, by the way. Thank you.

Grant Chum (President and CEO)

Thank you, Shaun, for the question. You know, I think if you look at the competitive landscape, of course, it is very intense at the premium mass segment. But if you look at also at our margin structure, I think the way we've driven our business is no different from before, which is to really drive and elevate the product, and to drive the content and the events that we put on, across a whole range of sectors, to attract visitors and patrons. And I do think that, back to Patrick's opening comment, if you look at that margin progression, underlying margin grew another 100 basis points. We actually saw a good improvement in our mass margin, sequentially.

So you know, we are dealing with the competitive market as any competitor does. It is intense, but we believe strongly that in the end, product wins. And The Londoner and Grand Suites at Four Seasons are true, living, evolving testaments of that argument, that good product wins. And there are going to be fluctuations in the competitive intensity, in particular segments, at different points in time. But to have a sustainable competitive advantage and sustainable profitable growth, product and service and the content we put into the resort calendar are still going to trump everything else. And you can see that, through what we've done at The Londoner. It's already at a run rate of close to $800,000,000 as it was exiting the year.

And you can see that the way this is going, we will end up with a margin structure, as we already are in Q4, back to the same level as we were in 2019. And then, as the revenues continue to grow, you should logically expect that margin to continue to improve and therefore exceed where we were in 2019.

Rob Goldstein (Chairman and CEO)

Shaun, can I just follow on Brandt's comments? My experience has always been the same. Regardless of the market, great buildings and great experiences always prevail. We have those in Macao. If you look at our EBITDA in Q3, I believe our EBITDA exceeded our next two competitors combined, which is a, quite a statement to the power of our buildings. There'll be promotional issues occasionally here and there, but in the end, we have a structural advantage, which can't be undermined. We have more capacity for lodging, food and beverage, retail, entertainment, and gaming capacity than anybody in Macao by a bunch, and that will enable us to prevail both on margin and EBITDA basis. And so, yes, there'll be occasionally a, a promotional issue here and there, but it really shouldn't concern you as far as our business.

Our margins remain intact, and our dominance remain intact in all segments in Macao.

Shaun Kelley (Managing Director and Senior Equity Research Analyst)

Thank you both for that. Maybe just as a quick follow-up, you know, last quarter it was mentioned, you know, Grant, I think in one of your comments or one of your responses, a little bit about a bit of an uneven recovery we were seeing coming out of some of the source markets from, you know, broader mainland China as some of the air travel's reopening. Wondering if we're continuing to see that uneven recovery, or just any other broader signs of the kind of where the macro situation sits in China? Because so far, and again, seems to be continuing through January, seems like Macao is relatively unaffected there. But I wanted sort of an update on that, you know, on that trajectory, if you could give one.

Grant Chum (President and CEO)

Sure, Shaun. I, I think if you look at fourth quarter, it did even out quite a bit. I think if you look at Dan's visitation from non-Guangdong versus Guangdong slides,

Patrick Dumont (President and COO)

Page twenty.

Grant Chum (President and CEO)

We are catching up. Yeah, thanks, Dan. We're catching up significantly on the recovery rate in non-Guangdong. That said, it is still uneven in the sense that if you look at the breakdown by province, some of the wealthier provinces have recovered way beyond pre-COVID levels of visitations, particularly in the Yangtze River Delta, versus even Guangdong. The recovery rate is actually much higher. But overall, I think you can see an evening out in terms of the recovery rate in Guangdong versus non-Guangdong. And then also, I think the fourth quarter, the overseas, the foreign country visitation also started to accelerate and even out as well against the nearby region source markets.

So I think you are seeing a progressive improvement across all these source markets. You know, I don't know, maybe Wilfred, I don't know if you have anything to add on the China side in terms of the economy?

Wilfred Wong (Executive Vice Chairman)

Yeah, Shaun, China is still recovering from the tough COVID period, and, but what is evident is the company's quarterly performance has actually been trending well. We have seen, as Grant alluded to, healthy growth in the number of visitors, especially from the non-Guangdong region. Now, one observation is that when long-haul travels of Chinese travelers has not fully recovered, Macao is emerging as a top tourist destination for short-haul travelers from the Chinese mainland.

Shaun Kelley (Managing Director and Senior Equity Research Analyst)

Good point. Thank you, everyone.

Wilfred Wong (Executive Vice Chairman)

Thank you. Appreciate it.

Operator (participant)

Thank you. Your next question is coming from Chad Beynon from Macquarie. Chad, your line is live. Please go ahead.

Chad Beynon (Managing Director and Senior Equity Analyst)

Afternoon. Thanks for taking my question. Wanted to ask one just about the retail portfolio. We've been hearing and seeing a little bit of pressure just kind of in the luxury retail space, particularly in Asia. Based on the numbers that you put out and I guess the turnover rent that you collected, you're not seeing that. But how are you thinking about the recovery in retail? Are you getting the right customers in there now? And do you think this could continue to improve as visitation and overall spend improves in 2025 or 2024? Thank you.

Rob Goldstein (Chairman and CEO)

If you look at your deck on, I think it's page 28 and 29, it gives you a pretty good look at our retail portfolio in Asia. Be blunt about it, I could be unhappy with these numbers, almost $3,000 a sq ft in a 600,000 sq ft mall at MBS. Venetian, almost $2,000 a sq ft with 800,000 sq ft, and of course, $9,200 a sq ft at the Four Seasons luxury, and a mere $4,300 a sq ft on the non-luxury. So the answer is, we are seeing a retail portfolio that's approaching $700,000,000 of contribution and growing. Of course, there's discussions out there, at least by LVMH, about a slowdown globally.

But it looks to me that I spoke today with Bill Nay, our retail expert, and it feels like we continue to see opportunity to re-merchandise and get better and better at the retail segment. We still believe that retail has a long way to go. Our buildings are a little different than other retail, in that we attract a higher value customer, both in Macao and Singapore, as you referenced, the lack of supply in Singapore. So I think that mall just keeps appreciating, and we keep re-merchandising it to be more effective every day, more luxurious and more upscale. In Macao, we've got our work cut out for us in some of our buildings, not there yet in the Parisian.

There's some work to be done, but I don't know how you argue with these kind of results, $677,000,000 of contribution, and it just keeps accelerating. It compares very favorably with 2019, so we feel very bullish about our retail prospects. And again, it takes work. David Sylvester constantly re-merchandises, rethinks, and reassesses the portfolio. He's got a lot of work to do, but the numbers, I think, are stellar, and I think will continue to be stellar for years to come.

Chad Beynon (Managing Director and Senior Equity Analyst)

Thanks, Rob. Makes sense. And then just in terms of the hold, understanding that, you know, it's kind of random here in terms of luck or unlucky. Has there been any difference in terms of gameplay or, you know, you talk about kind of the recovery from the Chinese consumer, and I'm speaking of Singapore, but hold has been high now for three quarters. So is there anything that could kind of lead to maybe an elevated hold in that market in the near term, or should we expect kind of the reversion to the mean that we've seen in prior quarters and years? Thanks.

Rob Goldstein (Chairman and CEO)

I think it's safe to say this business always runs on mathematics. The mathematics prevail, and I wouldn't take three quarters as an ongoing trend forever. There'll be a dark day in Singapore. We'll miss by $70,000,000 because we take the highest volume players in the world, and the people bet lots of money, and some days it goes with you, and some days it doesn't. This quarter, obviously, in Singapore, went with us, but I would caution, I don't think it's the-- that the bettors are changing. In fact, if anything, there's more of them, more affluence coming out of Asia, and we're fortunate enough to have the capacity to handle all of it.

But I don't think you can point to a change in betting patterns in either jurisdiction that would elevate or hurt the whole percentage. It will be, it reverts the mean always, and Macao will come back next quarter, probably and do $70,000,000 higher, and Singapore may have a bad quarter. Grant, you want to comment on that? That's how I see it.

Grant Chum (President and CEO)

... That's exactly right, Rob, and, and people have relatively short memories. But in the fourth quarter of 2022, there's like a $100,000,000+ adjustment on the downward impact from low hold at Marina Bay Sands. So I, I think one or two, three, four, even five quarters is actually a relatively short period of time and, and sample size for you not to get, you know, potentially very random results that deviate from the expected normal hold. But I think it's fair to say, yeah, the mathematics always prevail, and given the scale of our business, you know, over time, over one year, two years, I think we should stay very much in within the expected range.

As you saw in Macao as well, we had the first three quarters holding significantly above the expected mean hold, and then fourth quarter reversed. But for the whole year, we end up at about 3.3%, which is exactly where we expected to be.

Rob Goldstein (Chairman and CEO)

Yeah, Chad, going back... Yeah, just for fun, going back, I don't know, maybe 8, 10 years ago, we had a horrific number of quarters in a row due to a few players. I think it was Indonesia or Malaysia, and we lost obscene amounts of money, quarter after quarter to them. And some people on our board were concerned, and they wanted to be sure, and we talked, we looked at everything, and we were very comfortable. And there was a belief there for about, for a while, that these people were magical and couldn't be beaten, and then they lost back their entire winnings and then some. It always goes that way, and I don't think you could ever get too emotional about... This quarter is very interesting to see the Macao miss and the Singapore overachieving.

But in the end, the games stay consistent. Pairs and ties versus straight bets do matter, but the Asian gambler is special, and he or she shows up consistently, and they're great customers. I wouldn't let the success of a few quarters change your views on the mathematics of baccarat. We don't. So thank you.

Chad Beynon (Managing Director and Senior Equity Analyst)

That's great. Thank you.

Grant Chum (President and CEO)

Thanks, Chad.

Operator (participant)

Thank you. Your next question is coming from Robin Farley from UBS. Robin, your line is live. Please go ahead.

Robin Farley (Managing Director and Senior Equity Analyst)

Great. Thank you. Two questions, if I could squeeze it in. One is just any comments on, Chinese New Year upcoming, anything with trends, approaching that? And then, totally unrelated, just your latest expectations for timing of a decision, in New York. Thanks.

Rob Goldstein (Chairman and CEO)

I'll take New York first, Robin. The governor, Governor Hochul, I think it was this week, commented on seeing something happen this year. I hope that's true. We're, you know, as you know, we've been working in New York for quite a long time, and we think we have a very compelling bid. But we don't have any great insight if that'll happen or not. We sure hope the governor is correct, and either way, win or lose, we've got a decision calendar year 2024. That's our hope. But I think it'd be silly to tell you of any insight beyond the governor's comments. I think we just worked very hard on this project. We believe we have a really good chance of getting one, but I couldn't give you any guidance beyond that.

Grant, Chinese New Year's, do you think you'll maybe be there for that? Will the Year of the Dragon bring anybody to the building? I hope so.

Grant Chum (President and CEO)

Well, Robin, I mean, we can't really comment on the current quarter, and obviously, booking windows are short here. But I think you can see, you know, from the December holidays, in these peak holiday periods, even though the end of December is not a big China holiday, it is in Hong Kong and some other parts of the region. But you know, the ramp up in demand during those peak periods was tremendous. So hopefully, that will be replicated through into this Chinese New Year as well. So, there is a lot of optimism and expectations that this will be a strong one. Yes.

Rob Goldstein (Chairman and CEO)

Robin, I do think-

Robin Farley (Managing Director and Senior Equity Analyst)

The-

Rob Goldstein (Chairman and CEO)

...December was, Robin, I think December was really a great tell of what might happen in China, because December numbers that closed were just terrific. And again, you see the market numbers for January. So we're very hopeful that the Year of Dragon is a huge year for us and for the market.

Robin Farley (Managing Director and Senior Equity Analyst)

Great. Thank you. Grant, congratulations on the new role. Thanks.

Grant Chum (President and CEO)

Thank you, Robin.

Operator (participant)

Thank you. Your next question is coming from Brandt Montour from Barclays.

Brandt Montour (Director and Senior Equity Research Analyst)

Good evening, everybody. Thanks for taking my question. So in Singapore, on the phase two, I was wondering if you could maybe remind us the total room count exiting the year, and then specifically with regards to disruption cadence, you know, what does the quarter-to-quarter and overall year look like in terms of how that'll flow through the P&L?

Rob Goldstein (Chairman and CEO)

Rob, do you want to grab that?

Patrick Dumont (President and COO)

Yeah. So, yeah, sure. So I think when we finish the year, we're around 2,200 keys available. Next year, because of the construction in T3, Tower 3, we're gonna get down into the mid-1,600s in Q3, which is probably gonna be our peak of disruption. But, you know, those rooms are our smallest right now and really have our lowest yield, so hopefully the impact will be minimal, and we'll be able to yield because of the compression to higher value customers. You know, the performance in Marina Bay Sands has been quite good, and we think we'll be able to yield up in the renovated portion of the building. Sorry, what was the rest of your question?

Brandt Montour (Director and Senior Equity Research Analyst)

Sorry, so then the ending key count when all is said and done with suites and normal rooms?

David Katz (Managing Director and Senior Equity Research Analyst)

... It's mid-1800s.

Patrick Dumont (President and COO)

Mid-1800s. Perfect. Okay, and then as a quick follow-up, just a broader question. We haven't really talked about non-gaming spending. I was just curious if you could give us an update on your efforts on that front, and maybe how your outlook has evolved for the return profile as we sort of go into 2024 on non-gaming spend?

Rob Goldstein (Chairman and CEO)

When you say non-gaming, can you be more specific? Are you talking retail, food and beverage, hotel?

Patrick Dumont (President and COO)

Of course. Sorry about that. Yeah, with regards to the concession agreements.

Rob Goldstein (Chairman and CEO)

Oh, I see. Okay. I'm gonna let Grant handle that, but I would, I would say we are a little bit different than the rest of our competitors in terms of we've been spending money aggressively in Macao forever, for 20 years, on entertainment and other things. We believe in it. It's a huge value add. I'll let Grant take the question specifically, but I think, again, it's important to note we are a different animal than other people in terms of this concession. We welcome it. We've been doing it before the concession mandate. I think it's been very beneficial to our company. Grant?

Grant Chum (President and CEO)

Yeah, thank you for the question. Yeah, I think in 2023, we went very intensely on investing across all of the non-gaming categories that we committed to in the concession. As Rob said, many of these categories are categories that we have been investing in and involved in for a very long time. So I think whether you look across entertainment, we had almost 80 shows that we put on during 2023, with some amazing record runs, attendance. Obviously, firstly with the Jackie Chan concert in Cotai Arena, and then towards the end of the year, Hins Cheung, a singer in Hong Kong, and had a great 14-show run at The Londoner.

So this probably set a new standard and precedent for mini residencies in Macao. And then across other categories in MICE, in art and culture, in themed attractions, in gastronomy. Across the board, we've been investing heavily. I should also give a chance to Wilfred to speak to some of those events and projects that we've been heavily investing in as well. But suffice to say, versus our original forecast, for what we would invest in the first year of the ten years, we greatly exceeded that during 2023. And we're looking to do so again in 2024.

Wilfred, I don't know if something you want to add to the non-gaming concession and investments we're making.

Wilfred Wong (Executive Vice Chairman)

Yeah, we have in the past years been investing heavily in the areas that Grant just described, and by a long way off, we are the leader in the MICE market, so we are still seeing a very strong presence of MICE activities in our properties. For non-gaming, apart from the shows, we've been helping to promote Macao as a destination not just for gaming. Therefore, we have a lot of art exhibitions, cultural shows that really put us apart from the other competitors.

Brandt Montour (Director and Senior Equity Research Analyst)

Great. Very helpful. Thanks, all.

Rob Goldstein (Chairman and CEO)

Thank you.

Operator (participant)

Thank you. Your next question is coming from David Katz, from Jefferies. David, your line is live. Please go ahead.

David Katz (Managing Director and Senior Equity Research Analyst)

Hi, evening, everyone. Thanks for taking my questions. I'll ask sort of both in one shot. If I could follow up on the share repurchases. You know, Patrick, not asking about how much or when, but just thinking about how, you know, the sort of family stake, you know, takes a long-term view on where you'd like to be or how we might think about that evolving over time.

And then second, you know, since we last, you know, spoke on an earnings call, there's been an awful lot of activity and focus in Texas, and if you could, you know, share some of your views and theses around, you know, what, what, you know, what the family's activities are and how that might relate to the company and, and, you know, shareholders, you know, that would be helpful as well. Thanks.

Patrick Dumont (President and COO)

Sure. So you know, I think first off, I think we see value in both equities. So we're very long-term bullish. You know, from a company standpoint, we're gonna continue to be aggressive, as you said before, you know, focusing on investment for growth. You see the success of our capital allocation programs, both in Macao, as Grant just described, and in Singapore, in driving growth in high-value tourism, in diversifying our amenities, and by creating margin and revenue expansion. So you know, we're very focused on investment for growth. That being said, we generate a lot of free cash flow, and we anticipate to generate free cash flow in the future that we'll be able to use to return capital to shareholders.

So I think the company will look to be aggressive and measured over time, as we return capital share through share repurchases to shareholders. I think, you know, we've always had a dividend, you know, aside from the pandemic, and I think we like having a dividend. We think it's helpful for shareholder returns. We think it's an important component of our overall, you know, shareholder value strategy. But that being said, we're going to be overweight to share repurchases. In terms of Texas, I think the most important thing is that Las Vegas Sands is actively, you know, trying to facilitate the development of integrated resorts in the state of Texas and through the legalization of gaming. And so we're very excited about it. We think it's an unbelievable market. Over time, we hope that it happens.

I can't tell you when it's going to be, but we're very focused on it as a company, and we'd like the opportunity to develop some very unique tourism assets, specifically in Dallas. You know, we think that's a great market, we've been very focused on it, and we think the opportunity there would be a great one. In terms of the family's activities in Texas, I think we like the state. We're very obviously happy with our investment there. We're very excited about it, and we'll look to be a part of the business community there. But in terms of LVS, we're very focused on bringing integrated resorts or designated resorts to the state of Texas, and the development opportunity that would exist there.

Rob Goldstein (Chairman and CEO)

Thank you.

Operator (participant)

Thank you. Your next question is coming from Dan Politzer from Wells Fargo. Dan, your line is live. Please go ahead.

Dan Politzer (Director and Senior Equity Research Analyst)

Hey, good afternoon, everyone, and thanks for taking my questions. I wanted to follow up on Sands China and as it relates to capital allocation. Your net leverage there, I think is around 3x at this point. It should be much lower than that as you kind of make your way through 2024. How do you think about, you know, the subsidiary there resuming dividend payments up to the parent? And then obviously, your stake went up a little bit through the quarter through that repurchase. So maybe does that incentivize some of those dividends coming up sooner than later? Thanks.

Patrick Dumont (President and COO)

Hey, if it's okay, I'll take that one. I think the key thing here, as I just mentioned in the prior question, and as Grant mentioned, as Wilfred mentioned, you know, we're very committed to investing in the long term in Macao. And so our primary focus is going to be deploying capital there for growth. That being said, we are generating meaningful free cash flow there, as we did in this last quarter. And I think what you'll look to see over time is that some of the leverage that we put on the balance sheet during the pandemic will decrease. So we have a maturity coming up in 2025. We'll look to decrease some of that, and in front of the refinancing, and our goal is really to bring leverage down in terms of quantum.

But then also our leverage is going to come in naturally, as our EBITDA expands over time, you know, which is our expectation. So, you know, I, I think once that occurs, we're going to start looking to begin the dividend again, at the Sands China level. That's something that's going to be determined by the board there, but I think overall, it's something that we'd like to see, and I think the goal is to begin that dividend in the years ahead. It was a very strong dividend payer in prior years, pre-pandemic, and we'd like to become an investment-grade name there, keep that investment-grade rating, invest for the future in terms of scale and scope to grow our business there, and then, you know, return excess capital through dividends to shareholders there. So that's the plan.

Dan Politzer (Director and Senior Equity Research Analyst)

Got it. Thanks. And then just for my follow-up, as you think about Macao, and we've talked a bit about, the margins and the improvement, it more or less has been about 100 basis points quarter-over-quarter. As you think about kind of the trajectory from here, and, and I know you're, you're on pace to get back to those 2019 levels, you know, what, how should we think about maybe the pacing of improvement, and do you think, you know, that, that operating expense structure is really in place at this point, you should benefit from, from scale here on out?

Patrick Dumont (President and COO)

I have one quick comment, then I'd like to turn it to Grant. You know, we've mentioned this a few times in the past couple of quarters. I think the story of our margin expansion in Macao is going to be based on revenue growth. You know, as the market continues to recover, as tourism continues to recover, as more high-value tourists come online, they see the types of high-quality offerings we have, they experience the amenities and the entertainment that Grant referenced earlier, we're going to continue to grow and expand our customer base. And that will lead to pricing, that will lead to expansion, that will lead to revenue growth. So from that standpoint, I think our long-term margin view is expansion because of the investment and because of what we just described.

But, you know, I'll turn it over to Grant Chum to see if he has some additional comments.

Grant Chum (President and CEO)

Yeah, Patrick, I think you covered it well. I think it's dependent on revenue growth. As the market continues to grow and we'll be more than a full participant in that market growth, the margins will have a positive trajectory. I think we obviously have a more efficient and more productive cost structure today than we did in 2018 and 2019. So we are benefiting from that as revenues grow, and you get the operating leverage on the fixed costs. We will continue to do so, and I think it is very much about, you know, how revenues grow from here. And as revenues grow, our margins will have further upside.

Dan Politzer (Director and Senior Equity Research Analyst)

Got it. Thanks, and congratulations on the promotion, Grant Chum.

Grant Chum (President and CEO)

Thank you very much.

Operator (participant)

Thank you. Your next question is coming from George Choi from Citi. George, your line is live. Please go ahead.

Rob Goldstein (Chairman and CEO)

Thanks for taking my questions. My questions were answered earlier, but I do have a housekeeping question. Would you please remind us how the turnover rent mechanism works at the Macao properties? Should we be expecting a normal uptick in the quarter? That is when you guys receive the turnover rent. Thank you very much. I will turn back to the queue. I'm sorry, George, I think we missed that. Could you repeat yourself? It was unclear. There was some difficulty-

Operator (participant)

... With the line.

Rob Goldstein (Chairman and CEO)

Got it. Yes. Can you try it again, George, about Macao? Apologies. So, I just wonder how the turnover rent mechanism works in the Macao properties. Is it a fourth quarter event, is that when you receive your turnover rent? Grant, do you want to handle fourth quarter turnover in retail?

Grant Chum (President and CEO)

George, there are leases that are on monthly turnover rents, and there are leases that are on annual turnover rents. So historically, what happens is, for those annual turnover rent leases, as we get into third quarter, the end of the third quarter and the fourth quarter, we will obviously be recognizing more of those turnover rents, as we hit the annual sales targets. So historically, you should expect seasonally, the second half of the retail rental revenues will be higher than the first half.

Rob Goldstein (Chairman and CEO)

Okay, understood. That's all I have. Thank you very much. Before we finalize the call, I just want to reach out and recognize the great contributions of Wilfred Wong, who's now Executive Vice Chairman. Wilfred's been with us about eight years and made a great contribution. Wilfred, congratulations on the elevation to Executive Vice Chairman. Grant Chum, well deserved. We hired Grant many years ago. The big concern was he old enough to run the casino at that time? And over the years, he's aged sufficiently, so he can now run the casino. Congratulations to Grant. Both of you guys have built a terrific team over there. We're very proud and grateful for your efforts. We look forward to many more years of working together. Thank you for your time today and interest in our company. We bid you adieu.

Operator (participant)

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