拉斯維加斯金沙集團 (LVS) 2014 Q2 法說會逐字稿

Welcome to the Las Vegas Sands Corp. second-quarter 2014 earnings conference call. I will now turn the call over to Mr. Daniel Briggs, Senior Vice President of Investor Relations.

Thank you, Mike.

Before I turn the call over to Mr. Adelson, please let me remind you that today's conference call will contain forward-looking statements that we are making under the Safe Harbor provisions of federal securities laws. The Company's actual results could differ materially from the anticipated results in those forward-looking statements. Please see today's press release under the caption forward-looking statements for a discussion of risks that may affect our results.

In addition, we may discuss adjusted net income and hold-normalized adjusted net income, adjusted diluted EPS and hold-normalized adjusted diluted EPS, and adjusted property EBITDA and hold-normalized adjusted property EBITDA, all of which are non-GAAP measures. A definition and a reconciliation of each of those measures to their most comparable GAAP financial measures are included in the press release.

Please note that this presentation is being recorded. We also want to inform you that we have posted supplementary earnings slides on our investor relations website for your use. We may refer to those slides during the Q&A portion of the call.

With that, let me please introduce our Chairman, Sheldon Adelson.

Thank you, Dan. Good afternoon, everyone, and thank you for joining us today.

We are pleased with our financial results, which reflect continued execution of our principal strategic objectives. We delivered strong growth in revenue, cash flow, net income, and earnings per share again this quarter, with our adjusted diluted earnings per share increasing 31% from the prior year's quarter to reach a second-quarter record of $0.85 per share.

We initiated a bonus program in Macao this quarter that impacted our EBITDA by approximately $29 million and our adjusted earnings per diluted share by $0.03. That means, and I want to make this clear, our EBITDA would have been $29 million higher, which is $1.34 billion, had we not initiated the bonus program. We also meaningfully increased return of capital to shareholders. And our $0.85 earnings per share would have been $0.88.

Let me take you through some of the highlights of our results in Macao for the quarter. I suspect there are a number of common questions that you will want answered in Q&A, so I will take this opportunity to give you my perspective on the issues and drivers that impacted the quarter.

Macao adjusted property EBITDA grew by 22% to $801 million in Quarter 2. Had we not made the adjustment I mentioned previously, our Macao EBITDA would have been $830 million and the growth would have been --

27%.

27%.

During the quarter, we again outpaced the market in terms of gaming revenue growth. Our gross gaming revenue was up 12% versus a market that was up 5%. Two points to note here. Firstly, our mass table and slot revenues continue to grow ahead of the market. Secondly, during the period when VIP is experiencing a slowdown, our business mix is clearly more defensive than the overall market as we have a much higher proportion of our gross gaming revenue and less market revenue.

For the second quarter, our gaming revenue mix was 44% VIP and 56% non-VIP, whereas the Macao market, the overall Macao market, was 60% VIP and 40% non-VIP. The VIP segment represents just 17% of our departmental profit in Macao.

Now let me give you some commentary on each segment. With respect to VIP gaming, the factors behind the slowdown have been well documented. One, the kind of liquidity conditions that built the Chinese economy and the junket system; two, the slowdown in the Chinese real estate market; and three, a general backdrop of uncertainty and caution in the economy. The latter has affected not just VIP gaming, but also other sectors of luxury spending.

The press has extensively reported a crackdown of corruption in the PRC, not in Macao. As in the past, as I have experienced, that type of crackdown creates uncertainty and that uncertainty temporarily slows the VIP market in Macao. Let me emphasize, it is temporary and it is cyclical. I have seen that happen several times in the past, in the last 10 years.

Clearly, the World Cup had a negative impact on overall GGR in June, in particular in the VIP segment. June VIP revenues were down by 20% versus May this year. I had somebody check this out, and what we found was that the same thing happened in 2010, the previous World Cup. The decline then was 24%, whereas in 2011 and 2013, the average decline month on month was only 11%. So there was a 24% drop during the World Cup four years ago, and whereas the traditional May to June drop for intervening years was only 11%.

We aim to get our fair share of the VIP market, which, albeit low margin, is still a $30 billion a year market. And we continue to invest in our premium direct segment where we deal directly with VIP customers, which experienced a lower level of rolling volume decline in Quarter 2 than our junket volumes.

At the same time, we will continue to reallocate resources between VIP and mass in order to optimize our profits. You will notice that compared to a year ago, we have reduced VIP table capacity by 28% and increased mass table capacity by 14%. As a result, our win per unit in VIP segment is actually up 32% year over year, while our mass win per unit is up 17%.

With respect to mass table games, the market growth obviously continued to be very healthy with 33% growth. Suffice to say that even with the World Cup effect, the mass table revenue per day in June for all of Macao was only 1% lower than last October, the best month of 2013. That was also the best month in Macao's history up until the end of 2013. This is really worth noting.

In terms of our own performance, we were impacted by no hold in the premium mass segment. We estimate that factor alone contributed about a $32 million negative impact on our revenue for the quarter. If we adjusted for this mass hold, as well as the 14-month bonus, our Macao EBITDA would have been $850 million, not the $801 million that it is -- that we reported.

So, it's a further adjustment that would bring it up $49 million more to $850 million.

Clearly, we have experienced very strong growth in premium mass, and as this segment becomes a greater proportion of our non-rolling table win, the volatility in hold percentage naturally becomes more of a factor, especially over a three-month period.

Now a quick comment on business mix within non-rolling. As most of you will appreciate, we have a dominant position in the core market, core mass segment, given the sheer scale and breadth of our gaming and non-gaming capacity and product. Q2 was typically a bit slow in terms of the base mass business and the non-gaming segments. As the second half progresses with the summer holiday months and then the seasonally strong October and December months, the full extent of our competitive advantage in the mass market becomes much -- will become much more pronounced.

I highlighted in the Q1 call our strategy of fully utilizing our room inventory for our high-value mass gaming customers. We continue to execute very successfully on this strategy. Our database continues to grow rapidly; our revenue per room night remains stable, despite a rapid increase in room usage; and we continue to build customer loyalty. This is clearly evident in the continued success of the mass business in Sands Cotai Central.

I now want to make a few comments on margin. Sands China enjoys industry-leading operating margins. This quarter, we achieved 34% margin, up almost 200 basis points against the prior year. There are many factors contributing to our superior profitability versus the competition -- business mix, operating efficiency, and the ability of our properties to attract an outsized share of Macao visitation.

For example, in 2013 with just under 30 million visitors to Macao, we had 63 million visitations to our properties. That is outpacing the market. For every person that came in to Macao, we had two visitations in our combined properties. We built the property -- our portfolio of properties that position us as the destination of choice for virtually every type of visitor coming to Macao.

With that being said, there are a number of factors affecting the margin for the quarter. Firstly, there is the accrual for the 14-month bonus for our employees, which totaled $29 million in the quarter. Secondly, there is the impact from low non-rolling hold in premium mass. And thirdly, the business mix was somewhat less favorable to margin.

Rob can elaborate on these drivers in more detail during the Q&A, but let me emphasize one point. We are committed to judiciously reinvesting in our business in Macao. This includes upgrading our physical product and nurturing and retaining our employees. We also have every intention of continuing to promote local talent in Macao.

In business, there is strategy and there are tactics. The [crew] of our success to date derives from having the right strategy from the outset. Today, everyone likes to talk about Macao's diversification from pure gaming, whereas we're actually delivering on all aspects of diversification.

I want to point out that our competitors call their properties integrated resorts, but not one has the nice facilities that we have, which is the most important characteristic of an IR.

We are the creator of the integrated resort. We are the creator of the integrated resort, and therefore, we are the very first and only true presenter of the convention-based integrated resort business model.

Let me highlight three truly unique differentiators. First, the scale of our hotel room inventory, covering every price point and every customer segment. Second, a retail mall portfolio, which, with completion of The Parisian, will encompass four distinctly positioned but complementary retail shopping experiences, all under one roof. You won't have to walk outside and experience the weather to connect to all of our properties when they are completed.

The utilization of our pedestrian connection, our raised pedestrian connection, over the Cotai Strip has increased from year to year, and I watch it every day, about 60%. And the end result of the retail mall on both sides of the pedestrian walkover -- by the way, it is air conditioned and with moving sidewalks, and has significantly increased to the point where the Four Seasons Mall is the highest grossing mall of sales per square foot anywhere in the world.

Let me highlight three unique differentiators. First, the scale of our hotel room inventory, covering every price point and every customer segment. Second, our retail mall portfolio, which, with completion of The Parisian, will encompass four distinctly positioned but complementary retail shopping experiences, all under one roof.

Third, our unique and ambitious events and entertainment strategy, fully utilizing our advantages in having multiple performance venues, including the Cotai Arena. We are the only property in all of Cotai that has an arena.

Again, like so much of what we do, we have been pioneers in entertainment and we now have a track record of bringing world-class events to Macao.

I don't believe any of these unique competitive advantages can be matched by our competition, even after the completion of the next wave of their developments.

Let me end my opening remarks on Macao by looking back and looking forward. I have eyes on both sides of my head. I was in Macao in May to join the celebrations of the 10th anniversary of the opening of Sands Macao. That year that we opened, 2004, the mass table and slot revenues in the entire Macao market were less than $1.5 billion. In 2007, the year we opened The Venetian, mass-market revenues were $3.4 billion. In 2012, the year we opened Sands Cotai Central, mass revenues were $11.7 billion. The run rate for the past 12 months has reached $17.5 billion.

While there have been and will continue to be cyclical bumps along this path of cyclical growth, I have every confidence in our ability to continue to grow. I have more than confidence. I am absolutely certain we will continue to grow.

We have a still underpenetrated market. We have improving transport infrastructure, and we, Las Vegas Sands and Sands China, have a uniquely differentiated portfolio of properties and product offerings in Macao.

When I created my vision for the Cotai Strip, I was roundly criticized and belittled. Today, the market now knows that the Cotai Macao is the Cotai Strip.

So that completes my opening remarks on Macao operations.

Now I am turning to Marina Bay Sands in Singapore. We generated $418 million of EBITDA at Marina Bay Sands during the quarter. Despite a 27% decline in rolling volumes, our EBITDA is up 18% year on year and our hold-normalized EBITDA is only marginally down.

I think this demonstrates the quality and resilience of the cash flow generation at Marina Bay Sands. As I'm sure many of you are aware, the sharp swings in rolling volumes from quarter to quarter are attributable in part to ultra high-end patrons. This segment contributes significantly to volumes, hold volatility, and Accounts Receivable, but not nearly as much to profits and margin.

We are maintaining a strong base of highly profitable rolling customers and we continue to make significant progress in our receivables, accompanied by a very [firm user] ratio.

At the same time, we continue to invest in our foreign premium mass growth initiatives. Of course, the value of Marina Bay Sands to our shareholders is much more than its operating results and financial success, impressive as these may be. Marina Bay Sands serves as the most important reference site for emergent jurisdictions anywhere in the world that are considering large-scale integrated resort developments, particularly convention based.

On that note, let's move on to our potential development opportunities in new jurisdictions. In Japan, we are pleased to see the progress that has been made in the last few months. The Diet recently began a discussion of proposed IR legislation. We are pursuing the potential for IR development in Japan with great enthusiasm and believe our convention-based integrated resort development model will bring meaningful benefits to Japan in terms of business and leisure tourism, employment, and economic growth.

We have also been spending time on the ground in Korea, whereas in Japan we believe integrated resort developments can deliver significant economic benefits for the local economy. In both Japan and Korea, we are willing to commit substantial capital investment to developing large-scale iconic integrated resorts.

Remember, we are the pioneers in the industry and we took risks when others hesitated. Our track record speaks for itself. Our development capabilities, our operating know-how in every business segment of the integrated resort, and our financial spend are unmatched. We believe we are exceptionally well positioned to compete for these development opportunities.

Finally, let's address the return of capital to shareholders. The confidence we have in the strength of our business and the reliability and predictability of our cash flows have allowed us to progressively increase the return of capital to shareholders. Ours is a uniquely privileged business model. We can continue to return significant amounts of capital to shareholders through dividends and share buybacks, while retaining more than sufficient financial firepower to pursue both organic growth and new development opportunities.

I am sure you have heard my motto, yay, dividends. Over the last 10 quarters, to June 30, 2014, we have returned $8.3 billion to our shareholders through dividends and stock repurchases, including over $6.7 billion to Las Vegas Sands shareholders and, in Hong Kong dollars, the equivalent of over $1.5 billion to the non-LVS shareholders of Sands China.

Also, we increased the annual dividend by 42.9% this year. In addition of raising the LVS recurring dividend, we increased the Sands China Ltd. interim dividend for 2014 by 30% to HKD0.87 per share. SCL also paid a special dividend of HKD0.70 in February of [24]. We have every intention of increasing the dividends at LVS and SCL in the years ahead as our business and cash flows continue to grow. I will repeat, yay, dividends.

In addition to dividend growth, we returned $320 million of capital to LVS shareholders this quarter through our stock repurchase program, leaving approximately $300 million remaining under our current LVS stock repurchase authorization. We look forward to continuing to utilize the stock repurchase program to return capital to shareholders and to enhance long-term shareholder returns.

In conclusion, we are continuing to successfully execute our business plan and I am more confident than ever about our future success. It is my job, together with our outstanding management team, to ensure we stay disciplined and continue to execute the strategies that will both extend our industry leadership in current and new markets and generate strong growth and outstanding returns for our shareholders in years ahead.

With that, let me thank you and let me turn the call over to the operator to begin the Q&A session.

(Operator Instructions). Joe Greff, JPMorgan.

Sheldon, you touched on the reasons for the VIP performance in the second quarter for the market as a whole. And you mentioned liquidity and credit tightening. Can you talk about what you're seeing on the VIP side, knowing it is not nearly as important as the mass is, but what you are seeing on the VIP side with respect to either credit extended to players on the direct side or to the junkets?

I will turn that over to Rob, who will comment on that.

Hi, Joe, this is Rob. The softness in the junket segment has been well documented. The explanations have been explored by a lot of people.

Our Macao business, as you know, is not dependent on that. As Sheldon referenced, it is about 17% of our EBITDA makeup.

We will keep monitoring the progress of the segment and we will use our 1,500 tables on 9,000 rooms to make the best of our profitability. But again, our core drivers in the mass business, it is hard to sit here with a complete -- all the answers what's happened in the VIP segment. There are so many diverse explanations out there. I am not sure if we can add a whole lot of value. I just believe in the end it's backend consumer demand is soft, and it is soft industrywide. And I think it's foolish for us to guess when that demand will return.

I think that's as much as I want to say about that segment.

I'd like to add that that applies to Macao and not to Singapore.

Yes (multiple speakers)

I think that the uncertainty created in the market by the crackdown in the PRC always -- it's cyclical, by the way -- and that always creates uncertainty, and people -- that's reflected by fewer people coming to Macao.

So, even though none of it applies to Macao, but it doesn't affect people coming to Singapore and we have seen an increase in Chinese customers, high rollers, coming to the VIP market coming to Las Vegas.

And so, with respect to the VIP customer in Macao, are you seeing extended timetables to repay credit? Are you altering reserves or reserving more as a percentage of the credit that is outstanding? That was more at the heart of my question.

We are definitely monitoring credit extension. Actually, we are pulling back on some of the credit, but that, I don't think, is the issue in Macao for us. It is just back-end demand.

We are very comfortable with our reserves. We think we're in the right place vis-a-vis our junket partners. We are not that concerned at all about credit from a risk perspective. I just continue to believe that the absolutes are no one is completely clear in what is -- all the reasons for the pullback, and when that pullback reverses, we will be able to take advantage of it. Until that time, let's monitor it closely.

Great, and the topic of my follow-up --

(multiple speakers). It's like you said, Joe. It's not a major part of our business. Not the major part, and it is decreasing as a percentage of our total GGR.

Sheldon, you spent -- as my follow-up, you spent a decent amount of time talking about capital return and what you have done historically. Maybe, since we are getting a lot of emails and questions on this, maybe you can revisit with us how you are thinking over a period of time about increasing the dividend and what the dividend growth policy is from here, and that's all for me. Thanks.

We are -- we had a Board meeting yesterday, and I discussed with the Board that I wanted them to think about the dividend policy and about stock repurchase, and that we would bring it up -- we have enough money for the stock repurchase to go through -- on our regular program -- to go through this current quarter, and I expect that we will have some dividend news and stock repurchase news on the next earnings call for the third quarter.

Great. Thank you.

Shaun Kelley, Bank of America.

Sheldon or Rob, in the prepared remarks you also mentioned some of the reasons for where you guys performed on your Macao EBITDA margins. I think the third thing that you cited was a less favorable business mix, and I was wondering if you could actually elaborate on that a little bit, just because I think we would have expected with mass being -- with VIP being down and mass being up, that business mix would have been in your favor a little bit. So what did you mean by that comment? And anything you could call out there would be helpful.

I'll take that. Let's begin with the second-quarter seasonality issue. We had a stellar first quarter. The industry did as well. We weren't expecting to have material growth, seasonality-wise. That didn't happen.

Sheldon referenced the World Cup. I think that goes without saying, that impact. We can't quantify to the dollar amount, but clearly it impacted our mass business, especially in the June period. The mix changed unfavorably, so a higher share of our business came out of premium mass, which is a little bit lower margin, a few points lower. So the mix was definitely unfavorable in terms of -- the premium mass performed fine. We took some beating in terms of the hold percentage, a few points low. It probably cost us $30 million, plus, of revenue, higher risk business, as you know.

Our strength, the LVS advantage, resides in all those rooms and all those gaming positions, and it really blossoms and performs very, very well when the market blossoms. When the market is softer, we don't get that pure mass customer with the highest margins and, frankly, we don't get to fill up all of our table positions and all of our sleeping rooms.

So, I think what happened is an aberration. I'm totally confident this summer reversal will happen -- we believe the summer is going to be stellar for us. We have a lot of confidence in the ability to fill those rooms, fill those gaming positions, especially weekends, with more mass customers. We don't want to see a falloff of our premium mass. We are spending a lot of dollars to drive that premium mass business and be competitive.

And again, that's our advantage. But the truth is with the -- when the market is not as strong as it was in the first quarter, we suffer a bit. Those weekend rooms are not as filled up and the table positions are not as filled up. So, I think the mix absolutely played against us this quarter.

I still -- Sheldon referenced the October period. You realize the demands in this market and the expectations are so huge that, a few months later, what was a very good October looks like a very soft June. It is kind of ironic how the expectations have climbed immeasurably.

But, again, when you add in the $32 million of hold-related revenue [mass] or $30 million, the 14th month issue, the World Cup issue, and the seasonality, I think it starts to explain some of the disappointment we have in terms of the mix and some of the margin and what happened. And I fully believe it is aberrational. I fully believe this summer will be very, very gratifying for us and for shareholders.

And then, Rob, maybe not to beat the dead horse on this, but (multiple speakers)

(multiple speakers)

-- is the second part of this. So your overall mass table share then dipped down sequentially, right? And you have opened up -- but you have dedicated more tables to this segment. So the question is, was that expected and do you expect that to, then, I guess, sequentially bounce back as some of these factors probably will out?

As we have said on previous calls, we're agnostic about the use of tables. We have 1,500 gaming position -- tables, rather. We have 9,000-plus sleeping rooms. We have 4,800 slot ETG positions. It is a massive advantage in this market, and as the summer months kick in, we will continue to deploy those assets based on market demand and market interest in them.

Obviously, the junket segment is not where we are focusing right now in terms of growth, the market. We will have to wait and see when that returns. Our focus remains, our driver of our core EBITDA remains mass, be it mass tables, mass slots, ETGs, premium mass. That's our focus. That's our core ability to grow this market.

Do we believe? I couldn't be more of a raging bull on Macao. I am headed there this weekend. It is still the greatest game market in the world.

I guess we opened up -- one thing I can't help but think about, 10 years ago we opened up Sands Macao. There was questions about could Macao equal or surpass Las Vegas in terms of gaming revenues? I think we all know how that turned out. Cotai will continue to drive Macao beyond Hong Kong and Guangdong into the provinces of China. The infrastructural improvements, coupled with cultural propensity to gamble, makes Macao the most important market in the world and a very, very safe bet to grow and grow.

And finally, the penetration in mainland China is still sub 2%.

So, do we think Macao is going to boom? We sure do. We think 100 million -- $100 billion of GGR is reasonable to expect. This last month has been a disappointment, but it's a month in a very, very long race, and I think when you see the summer quarter, you will feel a lot better about our performance.

I think that's very clear. Thanks, Rob.

I want to emphasize that one month or quarter doesn't make a trend.

And nothing is going to change in Macao. Nothing is going to change in the propensity of Asian people to come to Macao and play. It has not changed in thousands of years and it isn't -- there is no catalyst to make a change now.

Jon Oh, CLSA.

Could we talk a little bit about your mass business, especially in the premium mass? Are you seeing customer behavior or the demographics at the very high end of premium mass to be similar to the VIP segment? And if it is the case, do you think this segment could be at risk of slowing down what we are seeing in VIP today?

Jon, it's Rob. I don't believe that is the case at all. It is a different customer.

There might be some overlap. There certainly is some overlap, but the great majority of mass customers and even premium mass are not coming out of the junket segment. I think it is a very different audience, and again, although we were flattish sequentially, our year-on-year performance, 34%-plus indicates while the junkets have come down quite a bit year on year, unfortunately, the mass business has boomed 34%. I don't know many businesses that grow 34% year on year and yet are worried about future growth.

I think it is clear the growth is there. This second quarter, when Sheldon referenced World Cup, et cetera, I think those are valid variables that impacted our mass business and the business in the industry, but I think it's very myopic to think that's going to be an issue for the future. And no, I don't believe as the junket business is in decline -- and I believe it will resurrect -- the mass business continues to do very well and I don't believe there is risk of that deterioration. No, I really don't believe that at all.

I think it's not as close a customer as you think it is. Because the VIP customer is used to going in the rolling program and the premium mass players are -- they are not all from VIP coming downwards. They are playing in the non-rolling segment and it is just a different -- it's a different kind of person.

The player is not just coming from the VIP coming down to, say, $100,000 and under. They are coming up from $1,000 to $2,000 and above that. So that's what the premium mass is.

We've got a $5,000 daily theoretical win from our premium mass customer. That's not a settling down of, quote, VIP customers. And again, one is rolling; one is non-rolling.

Okay, thank you. And if I could follow up with a question on hotel rooms, would you talk to us on how would you think about your comping strategy in Macao? Do you think there's an opportunity to do things a lot more differently now versus from what you have done before, maybe get more aggressive with comping rooms to take market share in mass? That's it for me. Thanks.

(multiple speakers). I think it's very simple. Let's be clear. Our biggest asset, beyond gaming capacity, is sleeping room capacity. And for those of you who have watched this industry, as I have for 35 years, the ability to put someone in a room above that casino is a number one driver where that person gambles. We have that ridiculous advantage of having 9,000 keys in our portfolio and growing shortly.

So I think the answer, as you know, that's a huge advantage. Our approach has been simple. We have proven over and over again that as we give away complementary rooms, the return is breathtaking, and as long as it continues, the team in Macao can continue to deliver those kind of numbers where you're earning $2,000, $3,000, $4,000 per occupied room, that's a huge advantage to us.

So think about it. As that premium mass customer comes in further and further away with a larger budget, has to sleep someplace, can't go back and forth in a day or two, we will be the place of choice, in my opinion, for not just this year, but for years to come in Cotai. And that relationship between where you sleep and where you gamble is unequivocal. It's a huge important -- that decision years ago to build those rooms puts us in the pole position today.

We will continue to deploy that resource as long as we get a $2,000, $3,000, $4,000 per night return on that complimentary room. So to me, while others are running out of capacity, that becomes a wild advantage to this Company as this market swings back to huge growth, and which it will.

So Rob, do you think -- sorry, Rob, if I can follow up. Do you think you have the right room comp ratio today? And what do you think is the right mix?

No, we want to be more comps, Jon. We want to keep driving -- we want to get to $5 billion, $6 billion, $7 billion, $8 billion of mass table win, and the way to get there is keep giving away rooms to the right customer base. So no, we don't have the right (multiple speakers). We want to be more complimentary towards the right customer mix.

There is no place like it in the world. It is not like that in Las Vegas or any place in the US or anyplace anywhere where you can comp a room to a customer and get a $2,000, $3,000 yield that night in the casino.

So, no, the mix is keep comping. As long as you maintain that margin and maintain that profitability, we will be aggressively pursuing that customer. That is the strategy, along with our mass customer, who margins are even 10, 12 points higher.

We're in a very, very privileged place. This has been a disappointing month in June, but look forward to the future because it will return to growth year on year, 33%, 34%, 35%. Those numbers, there is no place in the world like it, no place like it. And we're in the right place with the right strategy at the right time.

Awesome. I like the sound of it. Thank you.

Carlo Santarelli, Deutsche Bank.

I just had a question. It's a two-pronged question on the premium segment. Rob, you mentioned, and Sheldon mentioned in the prepared remarks as well, about the margin drag, slight margin drag on that premium mass segment and when that is a higher portion of the mix. I was hoping you guys could clarify that.

And maybe in the same breath, if you could talk a little bit about why we are seeing mass hold percentages come down. And my understanding, and please correct me if I'm wrong, but the premium mass customer would be a customer who is more prone to buy at the window, and I know you guys do a little bit of different accounting, but does that premium mass mix, because of the way that you guys calculate it, have a negative effect as that premium mass customer becomes a bigger overall customer as a percentage of the total?

No, not at all. So I think it remains just the opposite.

Here is the way we look at the market. We're lucky that still the majority of our mass business is non-incented business that comes without a complimentary room, without promo chips, without gifts, et cetera. So I think the point is that customer, what we were trying to reference was the mix change when it swings to the premium mass customer, who is more highly incented because of the marketplace.

So we're getting high 30s, let's say 36%, 37%, 38% due to promo chips, complimentary rooms, complimentary meals, and the ilk. We all know these things in the gaming world are part of that better premium mass customer. We are very happy to take 38% of billions of dollars.

However, when you marry that to what has made our business so spectacular in the first quarter and 2013 was we are -- when capacity is constrained, we are the guys that get the great lion's share of the mass, mass customer. Sheldon referenced $60 million, plus, visitations. Who is that guy? Who is that person? They are a high frequent that comes in and has the ability to gamble at our places, our ETGs, because of capacity. They can't go to many of the stores because the rates are too high on the gaming minimums.

So we're in a very, very fortunate place. I don't think it is -- to the whole percentage issue, I don't think it is a question of it changing. It is not changing. It is simply more volatile than the -- the more you bet larger sums of money -- some of these folks are betting huge amounts of money on table, that volatility will translate into hold percentage.

It is different -- same thing in Las Vegas, where we hold 25% of baccarat and 10 points south of that on the mass mass. It's no different. The geography doesn't change the mathematics on the tables.

So our volatility -- this quarter, how we held a few points higher and got more mass mass if we had had a $900 million quarter, which we are going to see again in the future.

We are not concerned about volatility. It is part of the game. We are not concerned about margins. We will take 38% or so on the premium mass, but again, our stellar advantage comes from that mass mass customer other people do not have the capacity to service.

That's helpful, Rob. And then, if I just could, one follow-up on Singapore. It appears again every time we see a big roll quarter, it seems like hold is suppressed, and every time we see a big hold, it looks like roll is suppressed. Are you guys still pretty confident that there is not a relationship between that, just from a pure gambler's perspective, who would happen to play more if they happened to be winning, so we would expect that inverse correlation between the two variables?

Yes.

Yes, for sure. (multiple speakers). The bigger the percentage, the lower the roll. Because people -- the players lose earlier on in their presence in their visit, and if they lose later, that means there is more roll. So we have a lower percentage of hold. That's dogma in the industry. That's the law of averages.

I think we adjust also, in addition to Sheldon's comment, the idea that we can stimulate, very honestly -- I will be blunt with you. I always look at Singapore. The roll is disappointing, but it is not disappointing relative to what we are doing in Singapore.

We made a very conscious decision, management in Singapore and the team here in Las Vegas. There is an incenting situation going on over there which we will not be part of. It is overincenting in some segments, and frankly, we're not going to play that business.

We're also being more judicious in credit extension because we see some of the concerns we have with -- our policies are very strict about how we give credit and how we collect credit. So we are somewhat -- I wouldn't say disadvantaged; we are just more compliant, if you will.

And again, what we have learned is that sometimes driving roll to $14 billion, $15 billion isn't all that advantageous if you are giving away huge commissions and huge amounts of credit extension.

So we have made a conscious decision to take customers that we feel we can collect from, we can extend -- get a nice fat margin from, a fair margin, and this is a highly concentrated segment.

If we took -- we can grow our rolling business any time we want. It means giving away a lot more credit and doing a lot of things we think are not a good long-term decision. We are very pleased -- if we end up with a $50 billion annualized roll, that is acceptable to us, and the hold percentage -- we said it all last year when we were suffering with inadequate hold, we told you it come back. It is just mathematics.

The chips don't know who is playing, and frankly, the people who won last year are losing this year. It is a very simple mathematical equation. So we have had a very strong hold and we are gratified by it. But at the end of the day, the math always prevails and we'll always [told] you we'll be at [two eight five] and beyond. There is nothing structurally wrong.

What is more pleasing to us is our growth in our mass business over there, on an ongoing slot ETG business, is accelerating. We're at [four seven] a day, 63 point margins. So if we can get Singapore to be a [one five, one six, one seven] store, we will accept that.

That's great.

Carlo, this is Sheldon. What I want to say is that if we had zero rolling, $1 in rolling and $1 billion in profit on a quarter, I think I would take the profit -- I would take the EBITDA revenue rolling.

I'm shocked.

You can't put the rolling in the bank. I can only put the EBITDA in the bank.

Understood.

When we came back -- Carlo, when we came back to Sheldon and Mike, we were very clear with our last meeting over there and said, look, we're going to sacrifice some roll, but we are going to get you a better margin and long-term better business, and that's what we're doing in Singapore.

We are very gratified. We would like to roll $15 billion and hold 5%, but we're going to have to take what we can get, and so this quarter, we are very accepting of a very fat quarter.

Thanks, everyone.

Felicia Hendrix, Barclays.

Sheldon, on the buyback, given the magnitude of the buybacks in the first quarter and then what you repurchased in April, the [$]175 million, I would have thought that the buyback level would have been higher in the quarter, especially given where the stock was.

So I am just wondering. Was there anything legal or structural or anything in the quarter that prohibited you from buying more shares?

Nothing. It's just the way it went.

Okay, so -- and nothing --

There was no other consideration whatsoever.

Okay. And then, obviously, you said that you think you will get the further authorization, which a lot of folks have been asking us about. So that's a positive there.

And then, Rob, on -- you recently opened the new premium mass area at Sands Cotai Central, The Dragon's Palace. I was just wondering, can you give us an update on the ramp of that area and when do you expect it to be running at a full run rate?

It opened up, as you know, and successfully. It is not running at the level we want to run at, but the ramp is continuing. I think you will see it this fall. We always believed it would take about three months to get there.

Very confident of its performance. A slower start than we anticipated, very candidly. It opened up in the wrong time in terms of the seasonality. Opened up into the World Cup, opened up a lot of things, but remain -- we will be there this weekend, have a look at it. The team there is highly confident of its growth, and although we had a disappointing quarter from my perspective, in terms of growth in general and as Sands Cotai Central, those rooms sitting above it will start to get very, very busy this summer and so will The Dragon's Palace. I'm completely confident of its performance.

Okay, great. Helpful, thank you.

Robin Farley, UBS Securities.

On the mass market side of things in Macao, I know you have talked about (multiple speakers)

Can you speak up a little bit, please?

Sure. On the mass market side of things in Macao, I know you have talked about hold and mix and the World Cup. But you haven't talked that much about the competitive environment. Can you talk about what other operators are doing in the mass market, particularly as VIP has declined and kind of changed the competitive environment and maybe others focusing more on mass? Hopefully you could hear that okay.

I will give you my macro overlook. They can't focus more on mass because they don't have enough tables. They only have a fraction, a small fraction, of the number of tables that we do, and the mass requires a lot of tables. So, there isn't anybody who has got the number of tables we have or anything close to it.

You can say that SJM has a lot of tables, but they have got 20 sublicensed casinos and a whole bunch of -- maybe 50 or so VIP rooms, if they still have them. I'm not sure. But how can they do this? It is not as though they have the number of hotel rooms, they have the number of -- they have the must-see properties, and they have the number of tables, number of hotel rooms, number of tables, they just don't have.

So, it's not as though our competitor can say, oh, SCL is doing very well with the mass market. Let's compete with them. We will go into the mass market. It is like Sheldon Adelson at five foot seven say, hey, basketball is a great game. I would like to get into it. (laughter).

Okay, great. My follow-up question is on Singapore, and let me just preface it with I totally understand about hold affecting your volumes, so that's not the question.

I am able to play basketball, but I don't have the way, and it's -- our competitors may have the will, but they don't have the way.

Okay. So just shifting to Singapore for my follow-up question, I understand how hold affects your volume, so that's not the question. The question is you mentioned that you felt that Singapore is not seeing the same slowdown in VIP that you are seeing in Macao, so first, I guess, how do you know -- what do you see that makes you feel comfortable that that is the case, that it was just a hold issue in the quarter?

If it is uncertainty that the Chinese people are concerned about -- they want to lie low until things recycle, I think they would lie -- it is clear they would lie low and where the Chinese government could see them if they were looking for them. And that the Chinese government can't go -- they are not in Singapore. It is not a Chinese -- it's not Chinese soil, and so they can go to Australia. They can go to Singapore. They can go to the Philippines. They come to Vegas. But their most popular places.

Since we offer more to the high rollers, like much higher gaming bets, and we offer credit of large amounts to big players, we get that in Singapore and we're starting to get some of that here in Vegas.

Robin, going back for second to Macao, just want -- your comment interested me -- your question interested me when Sheldon talked about. First, we are dealing with some of the most focused, intelligent, seasoned operators in the world. Our competition there is very, very good at what they do. And we work very competitively, but we have a huge respect for what they do every day.

However, to Sheldon's point, they are disadvantaged physically in terms of capacity, and again, when the market gets back this summer and this fall, that will be something they can't overcome, despite their intellect.

The second piece is I have not seen margin erosion at all. As the junket business becomes more challenging, I have not seen erosion at all in the margins in the premium mass. The aggressive behavior in the market has been there the last couple years, the Melco, Wynn, MGM, Galaxy in terms of those margins. I have not seen erosion at all.

In fact, if anything, I think it is being maintained. But that focus will get intense in the premium mass, and we expect it.

On the Singapore (inaudible), I would just make a comment that we are not seeing necessarily a slowdown as we are seeing a -- we're thinking differently about how to incent and how to give credit to the foreign customer coming in to Singapore. I'm not sure it is market driven as much as our own initiatives that may have impacted our decline in the rolling segment this last quarter.

Okay, that's great. Thanks. And just last question is on The Parisian. Is there any change at all, any slippage by a month or two? Or do you feel that is going full speed ahead exactly at the pace that you want it?

Robin, this is Mike. Construction at the moment has stopped, pending the receipt of certain approvals from Macao government that we hope to obtain shortly. We're positioning ourselves right now to be able to resume full activity once those necessary approvals are received. And we have no plans to change the anticipated opening at the end of 2015 at this point.

Thank you.

Thomas Allen, Morgan Stanley.

As we think out to the rest of the year, there are a couple of things happening, both in the market and for you. You have the smoking ban going into -- going in in October. Can you talk about how you expect that will impact the market and how you expect to deal with it?

And then, also, just on St. Regis and Four Seasons, haven't heard any update there. So could you just talk about how those are coming along and how you think those could benefit you? Thank you.

(multiple speakers). The smoking. We're building smoking rooms that we are going to drop down in the middle of the mass gaming four. And the rules are still being clarified as to how much of the gaming floor is VIP'd and what is the VIP -- what is the definition of a VIP?

It appears as though premium mass, if it's in a separate room and it is enclosed, it will be considered VIP. So that's where we stand out. We have a much greater premium mass business than our competitors. So with a combination -- all VIP rooms are going to be allowed to be smoking, and as a matter fact, the ramping up of The Dragon's Palace that was the subject of a question a few questions ago, we are waiting for the okay to smoke in there.

And we have an open entrance to that property and we put a strong sense of urgency on the design and construction of an enclosure to make it a fully enclosed room, essentially fully enclosed.

So, I don't know. I haven't smoked since I was a teenager and that's at least 10, 12 years ago, and so, I don't know about how people are smoking. But I could tell you that the press is saying that they don't expect, and you guys, you analysts, know this better than I do, the people are not expecting more than a 2% or 3% impact on the smoking issue. I don't know if that's true or not. I hope that is all it is.

I thought that we might be able to go with e-cigarettes, but I understand e-cigarettes have been outlawed in Macao. So they can't use e-cigarettes in Macao.

Listen, many years ago when the no-smoking ban first came in, I used to be a frequent visitor to the Peninsula Hotel in Los Angeles. And I loved the smoking -- the cigar bar because I was then a cigar smoker. And I said to myself, it will kill the cigar bar. Nobody will ever go in there again. They might have to close it down and turn it into a coffee shop or something.

The next time I went there, there were as many as people as they were not smoking at all than there used to be with people with big, fat cigars and small, thin cigars.

So, I don't know. People have a tendency to roll with the punches and they evolve with the rules, with the governmental rules on the smoking issue. And listen, it's good that they don't smoke. So -- but we don't know. Your guess is as good as ours, at least as good as mine. There could be other people in my Company who -- after all, we have 15,000 employees, could be a lot of people that think differently than I do and they may agree with you.

But I will be honest enough to say I am not that smart and I don't know. But I'm not giving up being smart on other things. I am not surrendering that.

I think there was a second part of that question regarding St. Regis?

(technical difficulty)

There was a second part of the question regarding (multiple speakers)

Sorry, I am on a train. So the second part of the question was, can you give us an update on the St. Regis and the Four Seasons? That's actually -- that's it. Thanks.

Ahead of schedule. Probably open the rooms, not the apartments, next summer. That schedule is right on at the moment. There are no delays at the present time.

Openings are always subject to government approvals, but if we maintain that construction schedule at this point, you should be in to open that building in next summer's period.

Four Seasons, we have completed 40 of the apartments and we are now awaiting inspections in terms of being able to put those apartments on the market. As a part of hotel situations, that licensing process is with the government as we speak.

And one last thing on the smoking, I would add the capital community of SCL, as well as LVS, approved yesterday about $33 million of expenditure to put the no-smoking facilities in, which is supposed to be due by October 6.

No, the smoking facility.

The smoking facilities in by October 6. And that construction will begin as we speak. So we should be ready. Some of the hotels -- the older hotels have significant disadvantages in doing that. We're in pretty good shape for that.

We better speak fast, so it will happen faster.

Okay, I hope that answers your questions.

Thank you.

Steven Kent, Goldman Sachs.

A couple questions. One, Singapore, you are now running and have been running at very, very high occupancies for a while. You've talked in the past about building something there or trying to build something. Could you give us an update on that?

And then, second, just on the real estate side, at different points you've talked about selling the malls and getting some asset value out of Macao. Can you just talk about it, if there any limitations on your ability to do that and how we should think about it?

We have to -- although they did say in the past that it will be okay for us to have a strata title on the malls and that there was no objection to that, we still are growing at a very healthy rate.

And as I said in my prepared remarks that the mall at the Four Seasons, The Shoppes at the Four Seasons, is the highest sales per square foot of any mall in the world, $7,000 a square foot for the first level and the second level. I think the average for the entire mall, first, second, third or mezzanine level, is $5,500 per square foot. And the next highest, to the best of my knowledge, that I have been told, is the Bal Harbour Shops in Bal Harbour, Florida, part of Miami, at $3,500 a foot.

So, we are very proud of that and it continues to grow significantly.

I don't know why -- we don't need the money. I have got to wait until we finish The Parisian and if we are able to build the tropical garden mall across from The Parisian and next to the second Sheraton tower on the border of lot 6 and lot 7. I don't know. We can either sell the existing retail properties.

We have made Macao the second shopping (multiple speakers)

Sheldon, is there a restriction on -- I am sorry to interrupt you. Sheldon, is there a restriction on your ability to sell them or is it (multiple speakers) just you are waiting for value?

Say again?

I said, is there a restriction on your ability to sell or is it that you are simply waiting for greater value, because I've heard both sides?

It is not just waiting for -- no, there is no restriction in Macao. There is a restriction (multiple speakers)

You could sell the malls.

We could sell the malls.

Okay.

If we don't sell condominium title, we could sell the cash flow from the malls, just like we sell stock in the Company. There is no restrictions. And (multiple speakers)

Okay, and then, building a hotel in Singapore?

I don't mind your interrupting me. It happens all the time to every husband in the world.

Steve, you had something else, a follow-up?

No, my question -- it was in the original question, which was are you building a hotel in Singapore? The idea at different points of building something in Singapore?

We would love to build another extension of our hotel. We are running at 99.4% occupancy, and it is probably the most occupied and the greatest income for any hotel in the world, and with 2,563 keys. But there is some land adjacent to it, but we haven't gotten the approval from the Singapore government yet.

We're in a very, very dire need of more hotel rooms. We have got the demand. We could sell it out handily.

Okay, great. Thank you.

This will be the last question as we have reached the end of the allotted time for Q&A.

Harry Curtis, Nomura.

Can you give us an update on your CFO search and what are the features that you're looking for in the individual you want to put in that chair?

We have the capability of the CFO in house and we are extremely pleased with it. We have both corporate finance and accounting, and I -- it is simply just allocating the title, which we haven't gotten to because we're happy with the functions.

Okay, so you're not going to bring anyone in from externally, then?

There is no need to bring somebody in externally.

Okay. And then, the second goes back to the VIP piece of it and recognizing it is not an enormous part of your business. But to the extent that Beijing has increased the scrutiny on VIP players, or VIP players just are feeling it indirectly, do you have any sense of what is behind that and how long it might last?

This has happened several times in the last several years. I remember at least three or four other times, and it doesn't last more than a few months, three or four months.

When the press starts to reduce their print about the crackdown on corruption in the PRC, then it seems to go away. That seems to create a sense of uncertainty, and I have looked into this at length, and the Chinese people say that if once the government starts inquiring about things, it creates a sense of uncertainty.

As much as the Chinese government, it doesn't want social instability, the population of the country doesn't want uncertainty. They don't know what's going to happen.

So, it doesn't necessarily mean that people are targeting them or targeting their category. It just means there is some uncertainty. And they don't like uncertainty.

But as a quick follow-up, doesn't this new administration strike you as being a bit more hawkish on the issue than prior ones?

I don't know. I try as hard as I can not to get involved in foreign governments' political affairs and what their choices are all about. It's not my business and I don't want to be involved in it.

Okay, thanks a lot. Appreciate it.

That was our final question and this concludes the Las Vegas Sands Corp. second-quarter 2014 earnings conference call. You may now disconnect.