Mr. Daniel Briggs welcomed the participants to the Sands' Second Quarter 2023 Earnings Conference Call and introduced the members of the call. Rob Goldstein, the Chairman and CEO, then explained that the markets in Macao and Singapore are recovering and that there is still room for growth. He noted that Sands has a structural advantage in Macao and that Singapore is doing well despite two impediments.

Macau is in the midst of a $1 billion renovation and has yet to see a full return of the Chinese premium mass segment, but cash flow recovery is in full bloom. Rob Goldstein believes that the market is starting to get stronger, evidenced by June's $200 million EBITDA, and Grant is optimistic about the flow-through of incremental revenue growth from here.

Rob believes GGRs will increase due to more visitation and they will be a major beneficiary. Grant explains that margins have improved due to a more profitable business mix, with a greater proportion of mass relative to VIP and a shift to nongaming. They are reinvesting revenues to increase their capability to handle more visitors, such as increasing their headcount to service more hotel rooms.

Rob Goldstein explains that the recovery in Macao has been strong, with mass revenue in June reaching 97% of 2019 levels. He also notes that non-Guangdong visitation is still behind pre-pandemic numbers, but that there is capacity to participate across the board and that this will fuel the business. He reconciles the disconnect between China macro and Macao's fundamentals by noting that the recovery is still in its early stages.

Rob Goldstein and Grant Chum discussed the average spend for mass customers, which is expected to normalize as more hotel room capacity is opened up. They noted that premium mass recovered faster than base mass, but both segments saw strong growth in spend per head. They believe that as the base mass picks up, there will be a mix shift in spending over time.

Grant has stated that the higher-valued segments are growing and recovering at a faster rate, with the spending per visitor heading in a positive direction. Patrick Dumont then follows up with the capital return strategy, discussing the company's focus on return on capital and how they will likely have a balance between share repurchase and dividends. The dividend size allows for flexibility with their capital allocation and will enable investments in the future, as well as future share repurchases.

Grant Chum states that the competitive environment is stable, with all operators investing in non-gaming activities and event programming to grow the tourism economy and increase business volumes. Robert Goldstein adds that this also allows for more flexibility in the future to do more programmatic share repurchases and shrink the share count.

Patrick Dumont has stated that Marina Bay Sands is looking to expand in Singapore due to the positive results from the quarter, the visitation, and the growing economies in Southeast Asia. They are currently in discussions with the government about the final form of the project.

Rob Goldstein believes that the $200 million number mentioned in June for Macao is a good starting point, and that it should increase as base mass continues to recover. He believes that Macao will continue to get stronger with recoveries predicated on visitation in all segments. He also believes that their advantage is structural and different, with capacity to grow in all areas that customers want. June is the beginning, with hopefully a strong summer to follow.

Dumont states that the Macao market is in a good position to benefit from the recovery of China, and that their non-gaming lifestyle programs, which were successful pre-pandemic, have been started again. He mentions that Jackie Chung is a popular program, and allows Grant or Wilfred to comment on it.

Patrick and Grant discuss the success of the non-gaming programs at Macao, noting that air traffic is at 50% of pre-pandemic levels and that customers are responding positively to the amenities and events. They mention Jackie Chan's record-breaking 12 shows across four weekends as an example of their successful lifestyle programming.

Grant Chum was asked to provide more information about the cost side of the quarter. He stated that room complement was up to 10,700 on average in the quarter and heading to 12,000. He also said that they had reached the 12,000 mark by the end of the quarter, and that it implied a necessary ramp-up in either headcount or cost.

Grant Chum states that the operable capacity of rooms during the quarter averaged around 10,700 rooms a day, and that by the end of the quarter, they were up to 12,000. Patrick Dumont then explains that Marina Bay Sands is undergoing a lot of changes and renovations, and that these investments are creating the best product they have ever had, with a strong customer response. He states that they are in the middle of these changes, and that this should be taken into account when considering costs and margin leverage.

Patrick explains that the full earnings potential of the renovated Tower 1 and Tower 2 will not be realized until the 200 multi-day suites are online. He also notes that the casino floor renovation is coming to a close and that China airlift is increasing each month, which will help the business price better and improve margin. Rob Goldstein adds that with an exemplary product, there is pricing power.

Shaun Kelley is confident that Macao's pricing power will increase when the building is complete. He believes that offering a great product and charging higher prices will lead to success and better margins. He believes that people will pay for the superior product and that the margins will reflect this.

Rob Goldstein and Grant Chum discuss how the company is well-equipped to handle the current market and how the margins will rise with increased revenue. They also discuss how the higher-margin segments, such as non-gaming and mass versus VIP, will drive the most revenue recovery and growth. Finally, they note that tenant sales and hotel revenues are already strong, and with full seats, they are expected to remain so.

The Board and management have expressed confidence in the long-term performance of the business, and have restarted their return of capital program this quarter. This includes a share repurchase program, although the volume of repurchases cannot be specified at this time. CapEx may be delayed due to large projects being considered, but the company will aim to modulate it in order to return excess capital to shareholders through share repurchases.

Rob Goldstein explains that the Venetian is still the king of Macao and is expected to be the first place to reach $1 billion in EBITDA. He also states that Sands is the only location that has not seen potential growth, but the other locations, including the Four Seasons and the Londoner, are doing well. He also mentions that the Londoner is halfway through its renovation and the full renovation is still a while away.

Rob Sands remains confident in the potential growth of the Sands in Cotai, Macau, citing their larger suites and share than other competitors, as well as their focus on lifestyle and retail. Grant Chum states that their strategy for VIP players has not changed and they are focused on bringing in premium direct players from other Asian countries, and have already seen success in doing so.

Patrick Dumont discussed the decision to temporarily take off the Singapore expansion due to the lack of a finalized project and approval from the government. He also discussed the success of The Londoner Phase I, the excitement for Phase II, and the potential for it to match the earning power of the Middle East. Lastly, he mentioned the potential for a new hotel tower at The Venetian to be included in the $3.5 billion CapEx commitment.

The Londoner has seen a successful wholesale reinvention of its positioning and branding, but much of the hotel room accommodation and half of the main gaming floors still remain the original Sands Cotai Central rooms. Phase 2 is focused on making The Londoner more Londoner by repositioning and upgrading the Sheraton and Conrad hotels, upgrading the Pacifica Casino, adding more non-gaming amenities, and developing a new landmark garden-themed attraction. The goal is to address the market and drive visitation.

The Venetian and other assets have been seeing a successful recovery in terms of visitation since the pandemic. Hong Kong and Guangdong have already returned to pre-COVID levels, while the rest of China remains below pre-COVID levels. The recovery is largely attributed to the return of air capacity, as well as the mass players that drove high volume and high margin business.

Macao has the capacity to accommodate visitors, and has many non-gaming amenities and entertainment options to draw people in. The airlift and transportation have improved, and the hotel room availability has been increasing. This has resulted in a high recovery rate from Eastern China, especially Shanghai and Zhejiang Province, which is higher than Guangdong's. The recovery rate in the first quarter was less than 30%, but now it is approaching 50%. Non-Guangdong visitation increased in the high 40s in the second quarter.

Rob Goldstein believes that Macao's recovery is certain, and he hopes that July will show a strong number that will indicate the start of the recovery. He attributes the delay in recovery to multiple factors such as the economy, visa restrictions, and seasonality, but believes that summer has been a strong time for the recovery since the pandemic.

Patrick Dumont explains that the company is investing in digital activities from the ground up, rather than buying them. He states that it is still early days, and they do not have much to share yet. However, they are confident in the potential of the digital initiatives and are focusing on highly regulated markets such as Europe and North America, while also maintaining regulatory standards.

The speakers on the conference call have concluded their discussion, thanking everyone for their participation. They are committed to focusing on highly regulated markets in the long-term. The call has ended and participants are advised to disconnect their phone lines.

This summary was generated with AI and may contain some inaccuracies.