Las Vegas Sands reports massive Q4 losses

Las Vegas Sands reports massive Q4 losses

Las Vegas Sands reports massive Q4 losses

Las Vegas Sands, the global casino operator, reported a huge loss in Q4 as the pandemic took a major toll on the casino’s operations.

The Las Vegas Sands reported a loss of 32 cents per share, compared to increased earnings of 88 cents in 2019’s Q4, on an adjusted basis. On a GAAP basis, the casino operator reported a loss of 39 cents per share, down from a gain of 82 cents per share just a year earlier.

Fourth-quarter revenue amounted to a little over $1.1 billion, a massive 67% decrease from $3.5 billion in the same period in 2019. In after-hours trading on Wednesday, the stock was at $48, a 1% decrease from where it closed earlier in the day.

The company’s financial results were in a way masked by the death of its founder and longtime CEO, Sheldon Adelson, earlier in January aged 87. Many of the analysts on the earnings conference call on Wednesday shared their condolences for Adelson, who was seen as being a visionary and driving force in the casino and convention business.

Company veteran Robert G. Goldstein, who temporarily stepped in as chairman and CEO, was officially named to those positions earlier this week. Goldstein has been with the company since 1995, and served as chief operating officer in his most recent position.

Speaking to analysts on the company’s Q4 earnings call Wednesday after the market closed, Goldstein, who spoke of Adelson as being a great friend and mentor, said “the last two weeks have been the most difficult in our company’s history.” 

In a release after the market’s close on Wednesday, Goldstein stated “the recovery process from the Covid-19 pandemic continues to progress in both Macau and Singapore.”

When asked about trends in Macau, which is where the Las Vegas Sands generates a large portion of its revenues, a company executive on the call cited “the trending of the pandemic and some of these isolated outbreaks” in certain provinces in China. “With that in mind, it’s not easy to see a relaxation in terms of the current guidelines in terms of travel” in China, the executive added.

Another main problem that Las Vegas Sands faces is that the company’s right to operate its properties in China will be up for renewal in less than two years. Even though the company is based in Las Vegas, a large chunk of its revenue comes from operations outside the U.S. in places including Macau and Singapore. 

Back in 2019, about $1.8 billion, or about 13% of the company’s $13.7 billion of net revenues came from Las Vegas. Macau made up $8.8 billion, or nearly two-thirds of net revenues. The stock, which has a one-year return of about minus 22%, has lagged behind a lot of its peers.

A primary reason for that underperformance is that the company heavily relies on convention business, which has suffered largely during the pandemic along with business travel. In its annual report filed about a year ago, the company cited its “best-in-class properties and convention-based model.” One of its signature holdings is the Venetian Resort Las Vegas, which is located on the Strip.

Wynn Resorts (WYNN), which also has a huge exposure to Macau, has returned about minus 17% over this last year. MGM Resorts International (MGM), which is much more of a play on the Las Vegas Strip, has returned about minus 6% during that period.

On the contrary, many U.S. regional casino operators have been successful during the pandemic since their business mostly involve customers who drive to the properties rather than fly. And those companies attract customers who are there more for gambling instead of conventions, meetings, and entertainment.

Shares of Penn National Gaming (PENN), a regional casino company, have a one-year return approaching 300%. Boyd Gaming (BYD) is up about 60%.

Goldstein said Las Vegas Sands has been looking into opportunities in Texas and New York. The Wall Street Journal reported last October that Las Vegas Sands was considering the sale of its Las Vegas Strip operations, a development which was confirmed by company back then.

Patrick Dumont, the former CFO who was announced as the president and chief operating officer, stated on Wednesday: “From our standpoint, we are very returns-focused. We are always looking at new opportunities and always looking at our portfolio to see how we maximize shareholder returns.”

Goldstein said that Las Vegas has been struggling “but we believe Las Vegas has plenty of gas in the tank” and that “our customers want to come.”

“We need to understand what the cash flow trajectory of the business is, what the growth is of that cash flow trajectory is,” Dumont said in a reply to a question about restoring the dividend.

As of Dec. 31, the company’s unrestricted cash balance amounted to $2.12 billion.

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