2010Q1 LVS Concall Transcript

8/12/2019 2010Q1 LVS Concall Transcript

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Las Vegas Sands Corp LVSQ1 2010 Earnings Call Transcript

ExecutivesDaniel Briggs : IRKenneth J. Kay : SVP and CFORobert G. Goldstein : EVP and President, The Venetian and Palazzo Las VegasMichael A. Leven : President and COO

Sheldon G. Adelson : Chairman and CEO

AnalystsLarry Klatzkin :Mark Strawn : Morgan StanleyShaun Kelley : Bank of America Securities Merrill LynchRobin Farley : UBSJoe Greff : JPMorganJanet Brashear : Sanford C. BernsteinFelicia Hendrix : Barclays Capital

Transcript Call Date 05/06/2010

Operator : Good afternoon. My name is Taneka and I will be your conferenceoperator today. At this time, I would like to welcome everyone to the Las VegasSands Corp. Q1 Earnings Conference Call. All lines have been placed on mute toprevent any background noise. After the speakers remarks, there will be aquestion-and-answer session. (Operator Instructions).

Thank you. I would now like to turn the call over to Mr. Daniel Briggs, VicePresident of Investor Relations. Please go ahead, sir.

Daniel Briggs - IR : Thank you, operator, and good afternoon, everyone. Thank youfor joining us today on the call. With me today are Mr. Sheldon G. Adelson, ourChairman and Chief Executive Officer; Mike Leven, our President and Chief Operating Officer; Rob Goldstein, Executive Vice President and President of TheVenetian and The Palazzo Las Vegas; Ken Kay, our Chief Financial Officer; andGayle Hyman, our General Counsel.

Before we begin, let me remind you that todays conference call will containforward-looking statements that we are making under the safe harbor provisions of federal securities laws. The Companys actual results could differ materially from

the anticipated results in those forward-looking statements. Please see todayspress release under the ca ption Forward-Looking Statements for a discussion of risks that may affect our results.

In addition, we may discuss adjusted net income, adjusted diluted EPS and adjustedproperty EBITDA, which are non-GAAP measures. A definition and a reconciliationof each of these measures to the most comparable GAAP financial measures areincluded in the press release. Please note that the presentation is being recorded.

With that, Ill turn the call over to Mr. Adelson.
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Sheldon G. Adelson - Chairman and CEO : Thanks, Dan. Good afternoon and thankyou all for joining us today. Ill begin the call today with some big picture thoughtson this quarters results and the preview opening of Marina Bay Sands inSingapore. Ill then hand the call over to Mike and the team to provide someadditional detail.

Big picture. We are quite pleased with our results. Our business is doing very wellat the moment, each of our properties is growing revenue, operating efficiently and

expanding EBITDA margins. The strength of our business model in Macau remainson display in our quarterly results. We again generated record revenues andEBITDA in the quarter and continue to lead the mass market in EBITDA generation.

While total net revenue at our three properties in Macau increased 24% comparedto last years first quarter, adjusted property EBITDA increased 47% across ourportfolio of the properties in Macau. It just validates what weve been saying thatsomebody once told me, you cant put revenue in the bank, only EBITDA goes inthe bank.

At The Venetian Macao, EBITDA for the quarter was $170 million, an increase of 40% compared to last years first quarter. EBITDA margin increased to a quarterlyrecord 30.9%. That financial performance reflects strong revenue growth coupledwith our continued focus on efficiency throughout our operations.

The results of the Sands Macao and Four Seasons Hotel Macao and Plaza Casinoalso reflect these trends. Revenue is up 26% at Sands Macao for the quarter, whileEBITDA was up 38%. At the Four Seasons Hotel Macao and Plaza Casino, revenueswere up 118% for the quarter, while EBITDA was up 343%.

Focus on the highly profitable mass gaming hotel and retail businesses together

with our attention at cost structure and efficiency has allowed us to bring recordrevenue dollars through to the EBITDA line. We will recommence constructionshortly on Parcels 5 & 6, which is our largest Cotai Strip development today. Webelieve that 13.3 million square foot integrated resort complex with its array of world-class attraction and amenities will broadly appeal in Macau as aninternational tourism destination.

Importantly, the development will more than double the hotel inventory on theCotai Strip. That hotel inventory is critical to increase the competitiveness of Macauas an International MICE Destination and enhancing retail growth. I might say that Ibelieve there are several thousand employees already on the site that are doingsome remediation work and that may have already started some of the minorreconstruction works.

Let me spend a moment on Las Vegas. Revenues increased modestly this quartercompared to the quarter one year ago, due principally to record volumes in thegaming portion of our business. Group business is also returning, although pricingremains competitive. Forward bookings are increasing for both 2010 and 11, whichis encouraging. We are also seeing stronger pricing trends in the FIT portion of ourbusiness, particularly on weekends.


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Finally, let me touch on the newest and most exciting property in our portfolio,Marina Bay Sands in Singapore. After years of hard work and preparation, weopened the doors of Marina Bay Sands on April 26, just 10 days ago. While itremains early days, the initial results are extremely promising. Visitation andgaming play levels have been robust. We hosted our first group meeting earlierthis week and will host a second major group next week. Forward booking trends,which were already quite healthy, have increased markedly since we opened thatdoor.

Let me provide a few early observations on Marina Bay Sands that weve learnedsince we opened. One, we have a substantially different customer profile than ourcompetitor, which should lead to a high revenue per visitor. Two, the departmentalprofit from gaming has ranged between 45% and 60% depending on the volume of play per day. This is what we have been saying for quite some time and othershavent agreed with it.

Three, direct VIP play has been robust to-date with over 450 credit applicationscompleted in the first week. Customers have come principally from Malaysia,

Indonesia and Singapore, which weve always maintained has been our primarymarket, with additional customers from Taiwan, Mainland China, Hong Kong, theMiddle East and India.

Four, both our premium direct and slot play have been quite robust and haveexceeded our expectations. Five, to-date visitation has been mostly from overseasvisitors with a much smaller component coming from Singaporeans.

Sixth, we are learning rapidly about our customer taste and we have significantopportunities to reconfigure our gaming floor, as well as minimum wages andgame mix to deliver the most popular games based on customer demand in the

future, particularly on the ETG, the electronic table game side. We believe that cansomewhat increase our average win per game per day on the slots.

We are confident about the propertys potential to generate both significant growthand strong returns for the Company, while increasing visitation to Singapore andenhancing its reputation as the leading international business in tourismdestination. We look forward to formerly celebrating the debut of Marina Bay Sandswith the people of Singapore and a grand opening celebration on June 23.

I look forward to addressing your questions later, but Ill turn it over to the teamfor a quick update first. Mike, you are on.

Michael A. Leven - President and COO : Thank you, Sheldon. Ill add just a coupleof thoughts. Weve worked hard to instill a culture of class discipline across theCompany and expect that focus to be an ongoing component of our future success.Now, our principal focus has turned to opportunities for growth, which we believeto be significant.

In Macau, we have outstanding organic growth opportunities in the gaming, hotel,MICE and retail areas. We will also significantly expand our asset base in Macauwith the debut of Parcels 5 & 6 on the Cotai Strip.


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In Las Vegas, our recovery of consumer spending and an eventual recovery inroom rates will occur over time. At Sands Bethlehem, the addition of table gamesthis summer and our 300-room hotel in the spring of 2011 as well as the expansionand maturation of our regional marketing programs will benefit that property. Andof course, Marina Bay Sands should provide substantial growth in the comingquarters.

The Venetian Macau remains the market leader in mass play in Macau, delivering

non-rolling drop of $922 million and record slot handle of $670 million for thequarter. The trend of high hold at The Venetian Macau on non-rolling play continuedlast quarter and also occurred in April. We believe these higher hold rates at theVenetian Macau on non-rolling play, which are impacted by many factors, includingthe length of play, the customer profile and the mix of games on The Venetianfloor, should continue in the foreseeable future.

Our contribution to EBITDA at The Venetian Macau continues to reflect thatstrategy. For every dollar of EBITDA generated at the property during the quarter,nearly 60% was produced by less volatile higher margin mass gaming and slot

play. Over 25% was generated from non-gaming areas, including our hotelconvention banquet and retail operations, and less than 15% was contributed bythe more variable lower margin VIP rolling play segment.

We remain focused on developing and growing our premium direct business, whichis the higher margin segment of VIP play. Our direct VIP play at The VenetianMacau grew to $2.1 billion or approximately 21% of the more than $10 billion of rolling volume during the quarter. At the Four Seasons Hotel Macao and PlazaCasino total rolling volume was $3.7 billion with direct VIP rolling business growingto $1.6 billion or 43% of that total.

Looking ahead we remained confident that the development of additionaldestinations on the Cotai Strip will expand the market, driving greater mass play,hotel and retail revenues to our current and future profits.

Let me spend a moment on the Sands Macao. The Sands remains both a cash cowand a market leader in mass play on the Macau Peninsula. EBITDA increased 38%to $70 million for the quarter. EBITDA margin improved to 24.6% this quartercompared to 22.4% in last years first quarter. So that covers Macau.

Let me spend a minute of Sands Bethlehem, before Rod covers Las Vegas. I ampleased to share the Sands Bethlehem had its best quarter since we opened theproperty last summer, generating $11 million of EBITDA, the improving resultsreflect stronger slot revenues, the introduction of additional marketing programsand in concert with our efficiency effort that was just completed.

We continue to believe Sands Bethlehem has potential. We plan to add 89 tablegames this summer, which should increase the properties appeal and shouldcontribute to greater profitability of the property overall. We have also restartedthe construction of our 300-room hotel, which is expected to open in the spring of 2011. The addition of the hotel will increase the length of stay at Sands Bethlehem,while adding higher margin hotel revenues to the propertys financial results.


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With that, lets go to Rob and Las Vegas.

Robert G. Goldstein - EVP and President, The Venetian and Palazzo LasVegas : Thanks, Mike. Our Las Vegas property delivered EBITDA of $105 million inthe first quarter of 2010 compared to $90 million in the first quarter of last year.The gaming segment of our business remains strong. Hotel occupancy also remainshealthy. The challenge continued to be room rates, which remain weaker comparedto historical levels, although FIT rates have shown improvement, particularly on

weekend.

Food and beverage business is also down compared to levels we enjoyed in thepast. Table game drop was a record $547 million during the quarter, a 23%increase in the first quarter of 2009, while slot one was $49 million during thequarter, about the same as it was in the 2009 first quarter.

Looking forward, we expect to realize more group rooms in 2010 than realized in2009. The pace of group business bookings continues to improve. 2011 should bestronger than 10. In 2009, we realized approximately 478,000 group room nightsor about 18% of our total room nights. Today, we have about 515,000 group roomson the books for 2010. We expect our actual group rooms to exceed that numberas we add additional business throughout the remainder of the year.

We do expect that pricing will improve over time as business expands, ourcompetitors in Las Vegas will raise prices and the economic recovery continues.So, in summary, our gaming business is healthy with record volumes in our mostrecent quarter, while our cost was down. Given that backdrop, we are confidentthat Las Vegas properties will continue to exhibit significant operating leverage asprice in the FIT and group segments improve.

And with that, Ill turn the call over to Ken.Kenneth J. Kay - SVP and CFO : Thanks Rob. We made steady progress thisquarter on our de-leveraging strategy. Excluding our development financing inSingapore, we paid down or retired approximately $850 million of our debt duringthe quarter. Those repayments include the total outstanding balance of $776 millionon the revolving portion of our domestic credit facility.

Repayments also include the purchase and retirement of approximately $35 millionof faced value of our senior notes, which were purchased at a discount. Theserepayments will reduce our cash interest expense by more than $25 million per

year in the future.

As of March 31, we had in excess of $4.2 billion of cash, cash equivalents andshort-term investments on our balance sheet. That cash provides us with significantfinancial flexibility and will enable us to execute additional components of our de-leveraging strategy in the future.

In addition to our cash balances at March 31, we have approximately $1.3 billion of availability under our undrawn credit facilities at current exchange rates, includingamounts available through our U.S. credit facility and our Singapore credit facility.So together, we have approximately $5.5 billion of cash, cash equivalents and


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short-term investments and available sources of liquidity.

The principal usages for that $5.5 billion includes approximately $1.4 billion of capital expenditures, pre-opening, FF&E and construction period interest to spendon our Marina Bay Sands development in Singapore through the end of calendar2010, although we expect as much as $400 million of that amount to be paid out of cash flow generated by Marina Bay Sands during the year. An additional $400million, principally retainage payments on the development will be paid out of cash

flow from the completed property in 2011. Approximately $400 million in additionalequity contributions will be made towards the development of Parcels 5 & 6 on theCotai Strip in Macau.

In addition, we expect to close later this month the previously announced $1.75billion credit facility to fund construction of Parcels 5 & 6 in Macau. The $400million in equity and the project financing together are sufficient to complete thefirst two phases of that development, which will feature approximately 6,000 hotelrooms and all of the major cash flow generating components of the development.As of March 31, total debt was $10.5 billion, while our cost of borrowing remains

low. Our weighted average interest rate for the quarter was approximately 3.5%.At our current levels of operating performance, our cash balances provide amplecushion for compliance with the financial covenants in our domestic credit facility.At March 31, 2010 for the U.S. restricted group covenant compliance purposes ourtrailing 12-month EBITDA was $439 million our total gross domestic debt was $4.3billion, our cash balances within the U.S. restricted group were $2 billion and ourcalculated net debt was $2.4 billion. Our leverage ratio was 5.4 times compared toa maximum leverage covenant under our U.S. credit facility of 6 times.

For The Venetian Macao restricted group, at March 31, 2010, our trailing 12-month

EBITDA for compliance purposes was $1 billion, total gross debt at The VenetianMacao restricted group was $2.6 billion and our leverage ratio was 2.6 timescompared to a maximum leverage covenant of 4 times.

We remain focused on maximizing operating profitability to enable debt reduction.While our business will naturally generate a significant amount of free cash flowthat will enable de-leveraging in the future, we also expect to execute in duecourse the sale of non-core assets, which will enable additional debt repaymentsand enhanced returns.

Before I turn the call over to Sheldon for concluding comments, let me highlighttwo changes we are making this quarter with respect to our expectations for tablegames hold. For rolling play, we are establishing a range of 2.7% to 3% across ourportfolio of properties, which is consistent with the actual hold rate we haveexperienced over the last few years.

For non-rolling play, our range of expectation for hold rates has historically been18% to 20% in Macao and 20% to 22% in Las Vegas. We do not believe theseranges accurately reflect our evolving non-rolling cable games business in eitherLas Vegas or Macau.


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Joe Greff - JPMorgan : Just to clarify that the 400 that you have been assured inwriting

Michael A. Leven - President and COO : That is correct.

Joe Greff - JPMorgan : that is inclusive of table games that you would move fromother properties?

Michael A. Leven - President and COO : No. 400 new tables plus 2,200 slots wehave assurance from the government and we received that assurance and theassurance that they will work with us to get additional tables by the latest in Marchof 2013. But if that doesnt happen, we will still open. We will move some tablesthat we are not using in the other facilities as well as add electronic games. So thenumbers that we projected are the numbers that are in the loan documents andhave been approved by the banks.

Sheldon G. Adelson - Chairman and CEO : Id like to add on that and say I believethe number is approximately 170 tables that were going to move that either arenot being used right now or that are what used to be marginal games that are

being used at lower rates. We are adding 100 electronic table games, which offersome very good potential. Were going to try different electronic table games. Weare also assured by the government weve been assured that well have the 270extra games that we original put in our plans in 2013. So well operate for two orthree years without well, well still operate with that number of tables, but wellbe able to get another 270. That is before we start to make adjustments like weare making in Singapore, we make with all new properties. Increasing ordecreasing the number of tables and denominations as we open the property andwe see the demographics of the visitation.

Joe Greff - JPMorgan: And then with respect to Marina Bay Sands, Sheldon, I washoping you can share with us, I know its been only 10 days, any revenue metrics

at the property, whether its one per slot per day or slot revenue per day or massrevenue per day. It would be nice hearing what those numbers are relative to othernumbers that we might be hearing from your competitors?

Sheldon G. Adelson - Chairman and CEO : Lets put it this way. None of theanalysts have come up first of all, we dont have one thing we are sure of thatit takes long time to order a stadium-style electronic table games that seem tohave gone gangbusters in Gentings (indiscernible) I call it Genting, other peoplecall it RWS. They are completely full and weve ordered them and these have to bemade custom, but we expect them in four to six weeks. So that will make a bigdifference. However, the lowest number per day that weve experienced is higherthan the maximum number that any of the many analysts have been estimating.The estimates that weve seen in the market are similar to Las Vegas numbers,$200 plus or some other numbers around the country. But we have ranged depends upon the day and depends upon which machines have been opened,because in the few first few days, the what they call them, surveillancerequirements are really, really very particular, very meticulous, veryperfectionists. What weve learned, Ill give you a range from $400 to $900 per unitper day and I dont think any one analyst came out with our lowest number of


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$400. So I think well have a somewhat higher average when we bring in thoseelectronic table roulette games. Its obvious at the roulette games we get 8 turnsan hour, 8 to 10 turns an hour out of the roulette games, the live roulette games.And the ETG, the electronic table games to roulette are 80 games an hour, and itsunbelievable cash cows.

Joe Greff - JPMorgan : Rob, I almost didnt recognize you actually not sounding sonegative on Las Vegas. Your comments about the FIT rates on the weekends, can

you explain, why do you think that is? Is that just demand coming back, andtherefore, you and others on the strip are yield managing appropriately or is it justa rationalization of how the operators are looking at charging room rates?

Sheldon G. Adelson - Chairman and CEO : Before your answer, Joe, I just want tosay we around here completely agree with you. We dont know if were talking of Rob Goldstein the new or Rob Goldstein the old. His birthday is tomorrow.

Robert G. Goldstein - EVP and President, The Venetian and Palazzo LasVegas : My birthday is Sunday.

Sheldon G. Adelson - Chairman and CEO : Sunday.

Robert G. Goldstein - EVP and President, The Venetian and Palazzo LasVegas : Yeah.

Sheldon G. Adelson - Chairman and CEO : So he is the older long-term Goldstein.

Robert G. Goldstein - EVP and President, The Venetian and Palazzo LasVegas : I am getting old and tough. Theres been a nice

Sheldon G. Adelson - Chairman and CEO : How optimistic.

Robert G. Goldstein - EVP and President, The Venetian and Palazzo LasVegas : Theres been a nice movement, Joe, in the weekends. To be clear, though,its not across the board. Its been especially in the FIT leisure segment, has shownsome relative strength in the last month. April was very good for the entireindustry. I think that May is holding up that trend. And I dont know how to attributeto what, but I think there is some confidence building among our competitors andcertainly in this hotel that we are seeing weekend rent rates and leisure are tradingup. Its nice to see. Group demand, as weve said in previous calls, continues to bestrong. Unfortunately, pricing doesnt seem to accompany that demand. So I wouldlove to see our group business get back up in the higher ranges, but what ishappening, clearly, last weekend all of April was very, very encouraging, on theweekends in the leisure segment, and I am hoping it bodes well for the summerbecause a lot of folks in town are very concerned this summer and they should be,but theres been in the last four to six weeks a nice trend upwards.

Sheldon G. Adelson - Chairman and CEO : Could we say the number? I thinkweve been averaging on weekends between 240 and 260.

Robert G. Goldstein - EVP and President, The Venetian and Palazzo LasVegas : Last weekend 262. We had nice and lots of it just look good. Its been a


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recent trend now, Joe. I think you saw the MGM number this morning and I thinkyou know whats happening in town. The first quarter was not that strong. And Ithink we got ways to go in Las Vegas, but Im a little more optimistic than I havebeen in last six months because I do see some positive leisure trends. And clearly,demand on the group side is very strong, but the rates havent been as strong.

Operator : Janet Brashear, (Sanford C. Bernstein).

Janet Brashear - Sanford C. Bernstein : I wanted to ask about lots 5 & 6 inMacau. Weve heard stories of labor rallies against foreign labor and potentialrequirement that you have one local worker for every non-local worker and costescalations due to labor shortage. And you have a few thousand people on sitenow, but typically would have more like 10,000 to get a project of this size done.What are you hearing from the government about your ability to bring in moreworkers and what does that mean for your timetable and your cost projection?

Michael A. Leven - President and COO : We had a meeting last Friday in Macau.We had a very good meeting. And the indications we got were that there is somelevels of low theres a very low level upon employment in Macau. We actuallyhave about, I think, 3,900 workers on the site now and the indications we got aswe left the meeting is that we shouldnt be worrying about whether or not well beable to have the blue cards for workers. But we have to absorb some of those non-employed workers in Macau, which were willing to do, and we dont expect eitherus and I cant speak for Galaxy who is going to have the same situation, abouthaving a problem there. We feel very confident well have the workers to finish theproject.

Janet Brashear - Sanford C. Bernstein : Will you have them on a quick signing?So if you do what your part is which is absorbing the non-employed workers, is

that a process you can work through quickly so that you can get your blue cardsexpeditiously?

Michael A. Leven - President and COO : Yeah, we believe so, Janet. I think thatits in the interest of Macau and the government and the citizens there that well besuccessful and get done. And at this point, there will be some time that we have toexecute certain construction contracts, which will probably last three or fourmonths before we get fully operational. There are workers available outside of Macau, obviously, for that. And at this point, candidly, we dont expect to have aproblem. We will go through the process, well work through the process and weexpect that we will be okay.

Janet Brashear - Sanford C. Bernstein : If we switch to Singapore, what was yourbig surprise in opening Singapore?

Michael A. Leven - President and COO : The biggest surprise in Singapore.

Janet Brashear - Sanford C. Bernstein : Yes.

Michael A. Leven - President and COO : You are talking about the biggest surprisein the first week of opening?


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Janet Brashear - Sanford C. Bernstein : Yes.

Michael A. Leven - President and COO : Its a tough question. I think that Ill haveto say, from a casino standpoint, I think the biggest surprise is the VIP premium,the direct premium business, the credit business the amount of credit applications,and the activity in our casino results, which indicate a roughly around 50% comingfrom that particular segment right off the back. I think that was a big surprise tome. I think the other surprise was that how well the casino was accepted in the

community in terms of its positioning vis- -vis the competitor. All the press and allthe support lifted it to a different level. And in the mass play, the non-slot massplay was surprisingly good. I thought the slot play would be what it is, but I didntknow that the mass play would hold on the tables. The way we set the floor up, weset it up so that we would have enough tables to accommodate everybody whocame. So at some points there were empty tables or very slow play at sometables, but there were no lines, no pushing, no shoving, no crowd that occurred inthe other environment, and that was intentionally done. So, I was surprised howwell that worked. We had no lines, no difficulties, et cetera. On the negative side, Ithink we were surprised that how much surveillance activity we had to do in the

last minute to get tables open, the amount of cameras being added. And so, as aconsequence, we didnt open some of the VIP rooms. Only got about half of ourtables opened in the Paiza area, and that was a little bit of a surprise. We thoughtwe were okay that way, but in the last of couple of weeks it went away from us. Ithink the resort that is basically even though 50% of the GFA space is open, onlyreally about 20% to 25% to 30% of the total resort is open and I think we weresurprised at how well it was accepted by the community.

Janet Brashear - Sanford C. Bernstein : You said that the local crowd was lessthan was a low percentage. Can you give us some idea of how low and was itlower than you expected and

Sheldon G. Adelson - Chairman and CEO : No, one third, two thirdsapproximately.

Michael A. Leven - President and COO : In the first number of days in the casinowe had foreigners about 66% and about 33% Singaporean.

Kenneth J. Kay - SVP and CFO : For a couple of days, it was even 50-50, but most if you looked at the whole over the course of eight days, it was up there many more foreigners, Malaysia, Indonesia and foreigners from Singapore primarymarkets, which we expected, and the Singapore market about one thirds 40%maybe at the most of Singaporeans.

Sheldon G. Adelson - Chairman and CEO : There is 36,000 other rooms inSingapore. And they enjoy very high occupancy rate 80s typically net high 80s.And there is a lot of opportunities for foreigners to come in that visitation to theother hotels were just going to try to set up shuttle buses between some of thebigger hotels if they will allow us to do it. There is good news and bad news on theopening day. The good news is we had an awful lot of people. The good news well, I shouldnt say the good news or bad news. The second part of the good newsis that people looked at it and said, well, there werent a lot of crowds, there


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werent long lines that there was at Genting, but oh god, did they have a lot of people. Well, Genting didnt have a huge 1.25 million square foot convention centerto warehouse the people in. So what we did is set up the they didnt have any airconditioned space to put them in. So we turned the air on in the convention center.We put in thousands of chairs. We put in foodservice. We put in counters wherethey could pay the Singaporeans could pay their $100 entry fee. The real badnews was that we werent allowed to advertise that we were going to be open. Butpeople just knew and the rumor had gone around that we were going to open onthe 27. We werent able to advertise it till the 27 until most people already went towork. So, then we let the people in an orderly basis, straight line with extensionsand ropes and very orderly. So we have thousands of people waiting, but I guessthe journalists didnt know that they were in there, they were just shooting picturesof the people that were on a very orderly basis coming into the casino from theconvention center.

Robert G. Goldstein - EVP and President, The Venetian and Palazzo LasVegas : Janet, we should have I think all of us were there, the one thing aboutthe building we should say its a stunning building, iconic, its beautiful. And I think

everyone who went to the opening was, I think, very, very impressed both touristsand business (indiscernible) is an amazing iconic building. In fact, if you are ever inthat region, you have to see it.

Operator : Mark Strawn, (Morgan Stanley).

Mark Strawn - Morgan Stanley : Two quick questions. First question on Singapore,I know its early, but given the strength in the slot market that you are seeing sofar, do you guys have any thoughts on reconfiguring the floor and maybe includingmore slots and pulling table? And if you are to do so, would there be any labor orCRA issues in doing so? And then I have a quick follow-up on Macau.

Michael A. Leven - President and COO : Mark, let me just give you this answer.Were in there eight days, and although there were subsets of urgency to get thestadium electronic slots in, at this point its really too early to tell what themovements will be and we know we have to make some changes in the floor. Butits going to take another week or two before we find some very I am on my waythere next week also. So its going to take a little while to get exactly the right mixof business and thats going to be ever changing. So the only really sure thing nowis we have ordered the electronic stadium seating games, and our mix of Baccaratto other tables is being looked at very carefully. The size of the casino a lot of

the traffic is coming into the sides and not moving towards the middle. And so,there is a number of things were looking at which youll find as you go. So theanswer to your question is, yes, there will be movement, there will be changes.And on the other side, on the labor side with the CRA, its a pretty freeenvironment for us to do what we want to do as long as the surveillancerequirements are taken care off. But from a table side standpoint, it doesnt really they wont affect us in terms of staffing.

Mark Strawn - Morgan Stanley : On Macau, just looking at the mass performance,while its certainly impressive if you look at it sequentially, volumes have beenrelatively flat. Do you guys have plans in place, whether marketing or otherwise,


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to try to stimulate volumes somewhat in the market?

Michael A. Leven - President and COO : A lot of the emphasis in Macau by theindividuals in charge now has been on trying to build the VIP direct market with ourown credit. We are doing a lot of that. Its growing, as I mentioned in the call. Ithink it was 21% of our business in the quarter. That will help us. But with thatstrategy as well as our strategy in terms of MICE business and the tour and travelbusiness that weve been working and getting good results on, that doesnt build the

same kind of revenue, as you know, of the junket rolling revenue. That dominatesthe revenue perspective of Macau. So I cant tell you that our revenue will havesequentially the amount of growth, but I feel very confident that our EBITDA willcontinue to grow exponentially as we produce that kind of business. We have noreal plans to build a junket level traffic. As weve held to the 1.25 also, wevepotentially lost or have been impacted by some of the peninsula properties thatgive better rates. So weve taken another approach to it. I dont know if thatanswers your question.

Mark Strawn - Morgan Stanley : Thats helpful. One quick follow-up, have you

seen any impact from City of Dreams across the street been any more promotionaland have you felt the need to match that at all or that had not been necessary atthis point?

Michael A. Leven - President and COO : To our knowledge here we haventmatched it. I have not heard anything from Steve Jacobs and the people over therethat City of Dreams has been changing their 1.25 rate. The changes that I hear youre talking about in the mass market.

Mark Strawn - Morgan Stanley : Yeah, more on the mass side.

Michael A. Leven - President and COO: Theyve done some things on mass.Theyve done some promotion and some advertising. We are doing some things in

other areas now, promoting business. Weve been pretty successful at it so far. Butyou dont really see that unless you actually look at, particularly in The Venetianand the Four Seasons at how many rooms are being sold every night to the non-VIP, the non-junket play. And were selling about at least two thirds of our roomsor more at The Venetian on a paid customer basis now. Thats a big indicator. Idont know what City of Dreams is doing, but my guess is its not nearly as muchas that.

Operator : Shaun Kelley, (Bank of America Securities Merrill Lynch).

Shaun Kelley - Bank of America Securities Merrill Lynch : Just wondering goingback to Singapore for a second if we can get a little bit more color on the VIPversus mass mix. I think youd mentioned just briefly that about 50% of thebusiness was coming from VIP. Is that correct?

Kenneth J. Kay - SVP and CFO : That is correct. I think the actual number for eightdays is 48% of the revenue from VIP.

Shaun Kelley - Bank of America Securities Merrill Lynch : And just where are youat right now in terms of the tables that are up and running, given the surveillance


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issues, how many VIP and mass market tables are you at and where are youheaded over the next?

Kenneth J. Kay - SVP and CFO : We are at 70 VIP, 440

Sheldon G. Adelson - Chairman and CEO : Out of 139.

Kenneth J. Kay - SVP and CFO : Out of 139. We have 442 out of 559 and we have1,450 slots out of 1,642 slots.

Shaun Kelley - Bank of America Securities Merrill Lynch : And then, Mike, wevetalked before a little bit about the commission and rebate structure, obviously youare not using junkets today. Is that right now in line with your expectation? Howshould we think about the rebates that are being demanded in the market rightnow?

Michael A. Leven - President and COO : Rob can speak to that, I think, but let me just weve always said and continue to say on the junket side that if there are junkets that are licensed by Singapore we wil l do business with them. We dont

expect that to be many, but there will be a few. On the commission rate side, webasically our strategy on the commission rate side on the private for the VIPprivate play, we positioned ourselves much below the competitor in Singapore. Wehave not had pressure to move those rates so far. And the reason for doing thatwas that we thought that we would impact RWSs VIP business, and if we competea dollar for dollar on the commission rate and they lost the business to us, thenthey will start moving the commission rate up again. So weve positioned ourselveslower on commission rate. And I cant tell you what the average is because Ihavent really looked at it in the eight days, but it is below what the competitor haspublished as their commission rates. And so far were not budging on it because

were doing okay.Sheldon G. Adelson - Chairman and CEO : The ramp up of the high end is goingwell, but it is ramping up. We are getting customers from places that we didntconsider in our priority countries. We look at the breakdown of the apps for thecredit, and we find it coming from the main three areas; Singapore, Malaysia andIndonesia. And there are lots of very high rollers, substantially higher - at least thenumbers I have seen, substantially higher than we have experienced here LasVegas. We dont get a lot of $10 million, $12 million credit players here, althoughwe do get some, but there is a lot of this there is more than what I expected. Sowere still ramping up. Particularly the first night that we opened we had somesurveillance table issues and we couldnt open all the tables. Id like to point outsomething that nobody has really asked, our gaming table. Our gaming table winper unit is very encouraging. Its difficult for me to give you the exact numbers.But lets put it this way, when I did some estimates of what we would do, and Iscreen them extensively, the number that I came up with now, adjusted basedupon the tables that are not open because for various reasons, mostly surveillance,the number is coming in at higher than what I originally estimated to come up withour overall EBITDA number. So we are very encouraged about the high end. I thinka good part of that relates to the fact that we have a higher quality visitorcompared to Genting. People say they have a lot of the construction workers. I


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personally wasnt able to get there for the few days that I was there, buteverybody else has been there. And so, the word that comes to me is they havedomestic helper and construction workers a lot of Bangladeshis. And we seem tohave just eyeballing it myself, we seem to have a higher quality of person,mostly it would appear to be middle class lower to upper middle class people.

Shaun Kelley - Bank of America Securities Merrill Lynch : And just one last oneon that number, Sheldon, just to be clear you are talking about the 1 billion to 1.25

billion estimate thats been put out in the market previously?

Sheldon G. Adelson - Chairman and CEO : We havent given any guidance. Wehave debated. We have debated and we said we came up with certain figures thatwere in excess of 1 billion and nobody got there. But we are looking at numbersand metrics that are on a ramp and that seem to go very well. We can estimate.We believe that the final numbers after the ramp-up period and on a 12-monthbasis will be a heck of a lot closer, if not equal to or maybe even exceeding ournumber that we expected then and the average of the consensus of all theanalysts together at a substantially lower number. Most of the analysts are

estimating, say, slots as an example, at the normal U.S. type of slot numbers, butthe slot numbers of the 200 range. Slot numbers are over there. I am sure youveheard about Genting and our slot numbers. I have told you what they were ondifferent days. And we still dont we havent maximized the most desirablegames. We have to do the fine tuning of both the table games and denominationsand the slots in denomination. By the way, the electronic table games over thereare considered slots slot units, which will go up to 2,500. And we believe that theslot return is so good and so promising for the future that were going to wereseriously considering putting in as many as the maximum that we can in the nearfuture 2,500.

Operator : Robin Farley, (UBS).

Robin Farley - UBS : I wonder if you could help us quantify a little bit the impact of luck in the quarter. I know that you said your ranges for normal hold are going tochange, but based on the ranges that you talked about before the quarter, if youcould help us quantify because some of the factors arent in the release that wouldimpact it, like whether the play came in under what (indiscernible), so if youcould help us quantify that for both Vegas and Macau? And then, also a question onSingapore, in terms of the stickiness of that local play, are most of the localvisitors paying a one-time fee or are you getting some signing up for the annual

membership, just trying to think about how long-term or how sticky that localvisitation is?

Sheldon G. Adelson - Chairman and CEO : Actually, I dont think we have thatinformation. Were focusing on the other side. Does anybody here have thatinformation by chance?

Robert G. Goldstein - EVP and President, The Venetian and Palazzo LasVegas : While we are searching information, I will just answer the Vegas holdissue. I think our number is dead on and should be because of our mix. Obviously,we had about U.S.$547 million in Las Vegas. About 50% of the drop came out of


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our Asian Baccarat, Chinese New Years week, couple of weeks. And so we didntplay lucky, we played what we should have play, which is we held very well. Ourhistorical is in the high 20s. It was actually held in the low 30s. But balancing that,the other half of the drop came out of our non-Baccarat more typical U.S.customer. We held very poorly, about 13%. We blended at the rate you see on thestat. we blended 234. But if you really look at I dont think we held high at all,but I think we held that dead on we should be because the Baccarat business forthe 10 years weve been doing this weve held 28%, 29% against billions of dollarsto drop. I think its reflective of the Baccarat market. The Asian play wasdisappointing because we held 5 points under the norm on the balance of the drop.So I dont think in Las Vegas results because of the mix would be considered, 234would be considered higher at that. I think its where it should be. Perhaps you cantalk about Macau.

Sheldon G. Adelson - Chairman and CEO : We have tried to skirt this issue. Welltry to find a way to neutralize that will level it out on the hold. So I came up withthe idea that we should take a 200 day 100, 200-day or two or four quartermoving average. So we put together some of the figures, and the moving average,

say, on the roll and do you have the figures in front of you, Ken the movingaverage on the roll, I believe, was exactly 2.84% over four quarters. 2.84%, youcant get any more accurate than that. We could have come 1 basis point higher at2.85%. But I think 2.84% is a very good moving average. You got to remember.So, every time we came over the low number nobody wants to adjust that upwardsbecause we had lower than normal number. And everybody wants to reduce ourperformance down, when we come with a high numbers. So, I think the averagenumber should be, what it should be, what the average is over the long thelonger the period the greater the law of average is assuredly kicks in. Ken, do youwant to make some comment about that?

Kenneth J. Kay - SVP and CFO : Well, breaking it up between the rolling and thenon-rolling. On the rolling side, Sheldon is exactly right, in terms of the average,which is the 2.84, 2.85. If you look at the actual numbers for the first quarter, wewere unlucky if you go by about $5 million on the role. And its a little complicatedbecause you have to look at it on the volume base and win base. And the volumebase was more from an overall kind of revenue perspective and we were unlucky,if you will, from that standpoint and a little bit lucky on the win side. So, when youmarry the two together because the volume base is with the higher percentage of the overall revenue stream. Our net hold impact was an unfavorable 5 million. So,you basically have to add about $5 million to our performance for that. On the non-rolling side, if you compare it to the moving averages, we were a little bitfavorable from that perspective. But, nonetheless, you have to look at it from thestandpoint of we think that the actual performance that we achieved in the firstquarter consistent with where the business has been performing over the last fourquarters, and falling within that range. So, if you consider that our actual firstquarter 2010 performance was within the range of performance that weve seen onthe non-rolling business for each one of the properties in essence thered be noadjustment for the non-rolling business. Now, if you compare it to just a single datapoint which would be the moving average then we would have been favorable byapproximately around $10 million or so. So, when you marry the two together


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meaning rolling and the non-rolling we are favorable in total by about $5 million.

Robin Farley - UBS : And then just last question. Can you break out what yourcasino receivables are and for both regions?

Kenneth J. Kay - SVP and CFO : What was that?

Robert G. Goldstein - EVP and President, The Venetian and Palazzo LasVegas : Receivables.

Kenneth J. Kay - SVP and CFO : Yeah, just one second. Well, our casinoreceivables for Las Vegas on a net basis its about $118 million and for Macau itsabout $190 million.

Robin Farley - UBS : And do you have in front of you what percent reserved thatis?

Kenneth J. Kay - SVP and CFO : Yeah, so in Vegas were about 31% reserved butwe have to look at it between breakup between junkets and non-junkets. Overallits about 23% versus the non-junket business its about 39% reserved.

Operator : Felicia Hendrix, (Barclays Capital).

Felicia Hendrix - Barclays Capital : So, Sheldon on Singapore in your preparedremarks I thought that you had said have something to the tune of your generating45% to 50% profit. Did I hear that right?

Sheldon G. Adelson - Chairman and CEO : You heard that the range of thedepartmental profits of the casino, which we do every day. Different days,depending upon the amount came in between 45 and 60 maybe its give or take 45,maybe 43, maybe 47. But the highest I would tell was 60. I keep saying that wepick up 24% of the taxes alone versus Macao. We pick up 24%. And although wedo give away from 0.75 to 1.0 to the players direct, we save at least 25 basispoints. Well, the average is probably somewhere between 0.75 and 1.0 so far atthe high end. So, we are picking up 24 bps 24 points on taxes. So, thats a toughexplanation. We pick up probably another 11% or 12% on the savings vis- -vis to(tackle reps). And by the way Mike said, and Id like to put little more color to that,said that there will probably be some junket reps. Now, there are junket reps andthey are junket reps. Lets calculate the Macao styled junket reps and then the LasVegas styled junket reps. Las Vegas styled junket reps are really field sales peoplethat send customers in, for which they get paid a basis of theoretical win with acap. And some of the higher end players that people send in they make about$8,000 to $10,000 the field sales people, the junket reps in the field. But they bothunfortunately called the same thing. And there is the Macao styled junket reps thatnot only deliver the customer they provide the credit and collection and theyprovide the cash. So, I dont believe there is going to be a lot of the Macao style

junket reps approved because I have talked to a couple of them myself, the onlycouple Ive ever talked to. And they say they certainly dont want to give out theinformation. They are very private people and they have they deal in a lot of cash. And theyll never submit that kind of information. So, I am very pessimisticthat any of the Macao style junket reps will be approved or will I do it or will not


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approved for inadequate information in Singapore. Now there may be some fieldsales people type of junket reps like you see in Las Vegas that might be approved.

Felicia Hendrix - Barclays Capital : So this range which is impressive to beginwith is within your first eight days. Assuming that like other new casinos you mightnot be as efficient. Could we see this range shift higher?

Sheldon G. Adelson - Chairman and CEO : Well, you have certainly fixed

expenses, so I dont know how much high you can get. It has been our highestrange of estimate was in the 60s. But I dont know how it can get much higher thanthat, because we have certain fixed charges.

Robert G. Goldstein - EVP and President, The Venetian and Palazzo LasVegas : It really depends on the mix. We are doing three very diverse segments of this so far the spot business is one terrific segment thus far. Sheldon might(address this). The mass table market so far has been very exciting to us. As wementioned the premium, really depends on segments you are in, because obviouslythe most difficult segment margin wise is going to be the premium. Right, becauseyou are discounting and doing other things you are rolling, so you got expenseagainst that. As long as our (volume) mix we are doing very well in all threesegments. But depends on the mix how strong the margin gets, because obviouslythe spot machine just example on $400 million or $500 million of slot revenue yourmargins are going to be extraordinary far beyond 45%. It really depends on yourmix and if you mix the mass tables ends up being $5 to $10 million that could beextraordinary (volumes as labor) and nominal complementary, so really dependson the mix of your revenues. The most difficult, it would be obviously the premiumsegment. But I think it really depends, what Sheldon was referencing thus far. Andall three segments are very strong. So, it depends which segment performs thebest as to what the eventual margin would be.

Felicia Hendrix - Barclays Capital : Just staying on the margin topic, if we couldmove to Las Vegas for a minute, Rob. In this quarter you guys obviously saw a nicebenefit from strong baccarat play, which helped margins. But when we think about I know youre getting a little more optimistic, but when we think about how youshould look for I dont know the next year or so. Is this the margin base you arecomfortable with or should we when we go forward and model take intoconsideration that maybe you had just extra good baccarat play this quarter?

Robert G. Goldstein - EVP and President, The Venetian and Palazzo LasVegas : Well, lets be candid. No one can refute the fact we had exceptional ourLas Vegas based sales team for the Asian business I think is extraordinary and theyare proving it right now in Singapore and they are proving in Las Vegas. However,unfortunately, we cant figure out a way to get Chinese to come every quarter likewe want to make Chinese years every month we havent figured that out yet. So,lets be clear that we dropped $550 million and hold 37% thats a pretty goodthing right. But what I think is most exciting for Venetian to Las Vegas is this is what Sheldon prophesied a decade ago in terms of the group connection businessstill holds true and as the market returns, keep in mind, something I always tellpeople which is every $10 of ADR can contribute $20 to $25 million of EBITDA. So,I think, we are really the first guy to step up and anticipate as a top-tier property.


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When the commission segment moves up and group segment appreciates $10 lousyof ADR translates to $20 million, $25 million of EBITDA, I dont want to depend onAsian high rollers or even foreigners. The base business were in is rooms and rate.And we need rates to move for us to get back. We want to be back to six andseven. But I think when it does come to be, well be the first guy to jump in andparticipate from that side. So, margins are not be consistent when youre holding when you have that kind of handle. Obviously, that drives our business. We arevery proud of our slot win. We had exceptional slot results, and again, almost $50million of top line. But again, what drives Las Vegas are room rates, and right nowroom rates will continue to be the decider of margin, decider of EBITDA. I just thinkwhen things get better and I hate to be overly optimistic, but its been a goodcouple of three, four weeks of weekend stuff. And reentering ADRs back $30, $40,this place makes a whole bunch of money.

Felicia Hendrix - Barclays Capital : And then speaking of that, when you just thinkabout 2011, you touched on this somewhat, but what kind of rates are you bookingyour group business at yet so far?

Robert G. Goldstein - EVP and President, The Venetian and Palazzo LasVegas : Were trying to stay above $200. In some groups were getting higher thanthat. Very candidly, thats our goal is to exceed $200 in 11. I cant say that werethere yet. We have some business with (indiscernible) that goes back six to eightmonths. This is a very competitive group market. And unfortunately, some peoplein the town just dont believe that they can charge $250 and $300. We believe if some people would stop discounting aggressive, this market could move quickly.Very sincerely, I think the upside to us is significant. Its material to our EBITDA.But for our group business to move every time we take a piece of business, we gotto knock it down $30, $40 because someone else has (opened) with a 1.70. Itspainful, but its a fact of life, I think the town has to regain its sea legs, its belief that its a great place to visit. Its stupidly inexpensive. Groups are flocking herebecause despite some comments on Las Vegas earlier, Las Vegas is the best placein the world that your group people who dont have a group for a meeting here itis silly. The rates are ridiculously cheap. I think theyre going to trend upaggressively when people believe in the town, and I hope its going to happenshortly. But I think our rates for 11 will be, hopefully, above 2, 2.15, but thats thebest I can hope for now for 11.

Felicia Hendrix - Barclays Capital : And then final question, Sheldon, how are thecondo sales going?

Sheldon G. Adelson - Chairman and CEO : What condos?

Felicia Hendrix - Barclays Capital : Co-ops. I am sorry, the co-ops.

Sheldon G. Adelson - Chairman and CEO : We are just in the throes of getting thefinal okay. In days the last email I got from Jacob said that. He expects the abilityto move it to the separate corporation that weve setup and that he wouldimmediately start selling. The responsibility for that was moved from the Ministerof Finance to the Minister of Public Works. And the last email I got was positive,was optimistic about our getting okay. And the sales activity that condo they


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dont have co-op over there, but the condo market in Hong Kong, as an example,was very strong and the condo market in Shanghai, which caused the ChineseGovernment to say, well, we want to cool this hot market up, the market has beenhot enough. And as Mike has said, we are looking for other foreigners. We are notlooking for Macau residents. Steve Jacobs the sales department was looking at1,500 a foot and I told them that we should keep our original target of $1,750 afoot and were looking at strong market in both Korea and Japan.

Operator : (Larry Klatzkin).

Larry Klatzkin : Actually majority of my questions have been answered. I guessone question would be, as far as Singapore goes, are you guys still in the mode of ramping up the mall and would you still consider selling that mall if you areallowed to?

Sheldon G. Adelson - Chairman and CEO : Not yet.

Kenneth J. Kay - SVP and CFO : We cant sell it for

Sheldon G. Adelson - Chairman and CEO : No. Under the sale of real estate, wecant sell it I think for seven years. However, I still think well get a lot more up inthe next several months. Well ramp up to completion. It should be completed bythe end of the year, but I wouldnt even consider it until we found out that itmatured. By matured meaning that it has gone up substantially. Now, a lot of thetenants are in percentage rents, which go from 12.5 to 18 there, just like Macau.And I wouldnt consider selling it now.

Larry Klatzkin : So, once you hit Orchard Street numbers and past, you will look atwhat you can do with it?

Sheldon G. Adelson - Chairman and CEO : Well have to grow, Larry, and then seewhat happens. If we level off the growth or the growth rate stops if we feel weregetting towards the maximum, we got to leave some room for anybody who buys itto have some growth in it too besides just inflation. So I would say its if I had togive an answer today, I would say its probably at least two years, maybe threeaway.

Larry Klatzkin : Monetizing the cash flow stream. Okay, thats good. Other thanthat, I think all the rest of my questions have been answered. So, congratulationson a great quarter.

Sheldon G. Adelson - Chairman and CEO : Thank you. And I think on a good rate,I think that well be able to sell it. At a good cap rate, well be able to sell it andhave money to pay off our debt.

Larry Klatzkin : That would be fantastic.

Sheldon G. Adelson - Chairman and CEO : Originally the original budget, and if we get into percentage rents, well get back to the original budget. But a lot of theleases were signed during the economic tsunami, but we still have the percentagerents. And if they hit where the original budget was, well be able to sell it and get


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back most of our costs.

Larry Klatzkin : That would be great, $1 billion of cash flow and no debt.

Sheldon G. Adelson - Chairman and CEO : $1 billion? Who said just $1 billion?

Robert G. Goldstein - EVP and President, The Venetian and Palazzo LasVegas : It sounds Larry.

Sheldon G. Adelson - Chairman and CEO : Is your analyst orientation leaking out?Are there any further questions?

Operator : There are no further questions.

Sheldon G. Adelson - Chairman and CEO : Okay. Thank you, everybody. Its beena good time, except that it felt like September 18. The stock market today feltmore like September 18, 08. But Im sure youll all respond positively to ourbusiness. Thank you.

Operator : Thank you for participating in todays conference call. You may now

disconnect.

Copyright 2014 Morningstar, Inc.

2010Q1 LVS Concall Transcript

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