拉斯維加斯金沙集團 (LVS) 2015 Q2 法說會逐字稿

Good afternoon, my name is Kate and I will be your conference operator today.

At this time, I would like to welcome everyone to the Las Vegas Sands second quarter 2015 earnings conference call.

(Operator Instructions)

Mr. Daniel Briggs, Senior Vice President of Investor Relations, you may begin your conference.

Thank you Kate.

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 projected net income and hold-normalized adjusted net income, adjusted diluted earnings per share, and hold-normalized adjusted diluted earnings per share, 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 these measures to the 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 and reference.

We may refer to those slides during the Q&A portion of this call.

Finally, for those who would like to participate in the question-and-answer session, we ask that you please limit yourself to one question and one follow-up question, so we might allow everyone the opportunity to participate.

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

Thank you, Dan.

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

I'm pleased we continued to execute our strategic objectives during the quarter.

And despite the continuing challenges in the Macao market, we delivered a solid set of financial results with Company-wide adjusted property EBITDA reaching $1.02 billion.

At the same time, we continue to return excess capital to shareholders.

It has always been clear to me that our unique MICE-based integrated resort business model positively differentiates us from our competitors, in terms of both financial performance and economic contribution to our host jurisdictions.

During the quarter, it was not surprising to see our Company weather this cyclical downturn in Macao better than the industry overall.

Our EBITDA in Macao grew sequentially by 6%.

Against a backdrop of double-digit market revenue decline, new competition, and general wage inflation, the Macao operations managed to improve EBITDA and profit margin on a quarter-to-quarter basis.

In addition, our gaming revenue market share in Macao reached 24.6% for the quarter, our highest market share in any quarter since quarter one of 2009.

In Singapore, Marina Bay Sands delivered another record quarter in mass gaming win-per-day when measured in Singapore dollars.

At the heart of our Company's success is having the right strategy at the outset.

We had the courage of our convictions to build early and aggressively.

We developed critical mass to scale and diversification and we offer product and amenities that are best positioned to capture long-term tourism and consumption growth in Asia.

I remain steadfast to my belief that we will grow and prosper in the long-term, while continuing to contribute to the economic development of our host jurisdictions.

Our industry-leading financial strength enables us to stay fully committed to our markets, our development plans, and the return of capital to shareholders.

We remain confident that our recurring dividends will increase in the years ahead as the Macao market and our cash flow grows.

Let me take you through some of the operating highlights of our results in Macao for the quarter.

Quarter 2, Sands China EBITDA was $564 million.

This represents a decline of 29% over the prior year, but a 6% sequential increase over the prior quarter.

Sorry you guys who projected we'd come and $50 million less than consensus.

Furthermore, our EBITDA margin at our Macao properties improved by 200 basis points sequentially to 32.2%, primarily reflecting strong gains in customer [base], which more than offset the impact of wage inflation.

Hold-normalized EBITDA margin also improved sequentially by 150 basis points to 31.7%.

In the base mass segment, we continue to benefit from the scale of our hotel room inventory, the diversity of our product offering, and the attraction of the Venetian as Macao's must-see destination.

I'm also pleased that we managed to achieve market share gains while being disciplined and judicious in our casino reinvestment expenses.

Rob will get into more detail during the discussion later.

In VIP gaming, the strength of our premium direct business has offset a lot of the weakness in the junket segment and enabled us to outperform the Macao VIP market.

Our premium direct rolling volumes were up 3% quarter on quarter, resulting in our overall rolling volumes declining by 10% sequentially versus the 15% decline in Macao's VIP junket volumes.

We also experienced strong growth in retail mall revenues.

Based on the latest published government statistics, overall Macao market hotel occupancy for the period January to May of 2015 was 79%, a decline of 8 percentage points compared to 2014.

This decline in occupancy was principally related to the decrease in casino room occupancy across the market, particularly in the junket segment.

Sands China's hotel occupancy for the same period was 4 percentage points higher than that of the Macao market at 83% and our occupancy decline of 6 percentage points also outperformed the market.

The scale of our hotel room inventory remains one of our key strategic advantages.

It allows us to target higher value overnight visitors from greater China and the rest of Asia and to grow the base of high-value visitors for Macao.

With the completion of the St.

Regis and the Parisian, we will have almost 13,000 hotel rooms and four interconnected resorts, over 840 stores across four shopping malls with the potential to add several hundred more stores [in two relevant spaces] subject to government approval, 2 million square feet of meeting and exhibition space, and four performance and event venues, including our Venetian Cotai Arena, which can be utilized for either our MICE business or major entertainment events.

We have the room inventory, the resort content, the iconic must see destination, and the operating experience in growing the overnight visitor market in Macao.

We remain fully committed to playing the pioneering role in Macao's transformation into the world's leading business and leisure tourism destination.

Our track record in being transformative pioneers in MICE, retail, and entertainment speaks for itself.

Moving on to Marina Bay Sands in Singapore.

We delivered on another solid quarter at Marina Bay Sands, which, despite the impact of the stronger US dollar, generated adjusted property EBITDA of $363 million.

Despite a 9% decline in rolling volumes, our hold-normalized EBITDA was down by only 1% year-over-year.

On a constant currency basis, our hold-normalized EBITDA was up 6%.

I think this again demonstrates the quality and resilience of the cash flow generation at Marina Bay Sands.

Mass win for us in Singapore, per day, was $4.7 million, up 1% year-on-year.

Again, when adjusted for the currency effect, our mass win-per-day in Singapore dollar terms was actually up by 9%, principally driven by our successful efforts in bringing in foreign premium mass customers to Singapore.

We set another all-time quarterly record in mass win per day in Singapore dollars.

In addition, we have maintained a prudent reserve ratio during the quarter and we will continue to maintain the highest compliance standards in the industry, not only in Singapore, but globally.

Marina Bay Sands continues to serve as the most important reference site for emerging jurisdictions that are considering large-scale, MICE-based, integrated resort developments.

Our MICE-based integrated resort business model allows us to meaningfully contribute to the long-term economic success of our host jurisdictions; something we are both eager and uniquely well-positioned to replicate in new markets.

Las Vegas enjoyed strong gaming volumes, but low hold impacted our reported results.

Bethlehem continues to grow and delivered a second calendar quarter record EBITDA performance.

Now on to my favorite subject, the return of capital to shareholders.

Let me be clear, we remain committed to the maintenance of our generous recurring dividend programs and we remain committed to increasing those recurring dividends in the future as our cash flow grows.

Our industry-leading cash flows and balance sheet strength enable us to continue our recurring dividend programs at both Las Vegas Sands and Sands China, while retaining more than sufficient financial resources to invest for future growth and pursue development opportunities.

Yay dividends and yay buybacks.

We bought back $65 million of stock in the most recent quarter.

We have approximately $1.7 billion remaining under our current stock buyback authorization and we look forward to continuing to utilize the stock buyback program to return excess capital to shareholders and to enhance long-term shareholder value.

In conclusion, we will continue to stay disciplined and execute our business plan.

I am today more confident than ever about our future success.

Let's take some questions.

(Operator Instructions)

Your first question comes from the line of Felicia Hendrix from Barclays.

Hi, good afternoon.

Thanks for taking my questions.

Sheldon, in your prepared remarks and also in the press release, you referred to efficiencies that you guys have been able to take advantage of to help your margins and some of the flow through.

The question is both for you, Sheldon, and for you, Rob, you've talked in the past about some of the financial flexibility that you've had to cut costs.

Can you just talk about some of the things that you did in the quarter?

And as you kind of look at the different scenarios for the market going forward, what kind of programs can you employ to continue to cut costs and basically, to offset some of the cost pressures that you're seeing in the market, particularly in labor?

Thanks.

Felicia, it's Rob.

Our team in Macao, I think, has done a really good job of addressing costs across the board.

Of course, there's always an opportunity to cut more costs, but we have to balance that with our employees and their development and our long-term plans to excel in Macao.

We don't want to throw the baby out with the bathwater.

A lot of the costs relate that relate to marketing spend, costs against customer spend, and in general costs as it is to labor, non-Macaonese labor for the most part.

Keep in mind that we are burdened somewhat with having a very, very strong team in place already for the opening of the Parisian, which will be very beneficial.

Next year, we open the Parisian, we're carrying a lot of, especially in the casino side, most of our teams in place have been in place for a while.

The majority of the costs in this quarter related to promotional spend, marketing spend, some labor costs, I don't expect to see this continuing in terms of cutting additional costs in any kind of material way.

We'll just remain disciplined.

I would add also, we're fortunate the market has remained disciplined as to how it spends money against the customers promotionally.

We're very pleased with the quarter.

We want to maintain the margins we did.

I think for the quarter, we came in just under 32%, which is very acceptable to us, especially for this very difficult time in Macao.

We are hoping for a GGR increase and even better margins in the future.

Thanks.

As a follow-up question, Sheldon, yay dividends and you talk about your commitment to that return to shareholders and also, potentially raising the dividend.

Just as you think about the difficult environment and you look at your different scenarios, what kind of scenarios are you using to underwrite your current decision or your current commitment to raising the dividend?

Before we announced in the last earnings call that we intended to raise the dividend in the future, we did a very thorough cash flow and we looked at all the sensitivities that could affect it.

What the market, I think, is missing, it didn't used to miss it, but we haven't heard very much about it lately, is that we created an integrated resort MICE-based business model.

The critical mass of the components that make up an integrated resort is something that the competitors don't have.

And we will say that, I mentioned in my prepared remarks, there were several instances in which we outperformed the market.

I was tempted to interrupt but I knew somebody would ask this question, while I was reading, what I'm saying is that the critical mass, our perception, and not just to call us words and say we're integrated resort.

I remember when we put all the components of attraction and entertainment together on the strip, everybody called themselves the mega resorts because they were big.

People are forgetting that critical mass, must see attractions, the very broad mixture of the various and the depths of each of the integrated resort components is what assures us that we're going to continue.

Why, all of a sudden, have we jumped for the whole quarter into first place?

SJM has got 25, 30-some odd gaming licenses out there bringing money into them.

Why is it that we've always been number one in EBITDA and that is not going to change?

The other guys can't catch up to us.

That train has left the station.

When I first envisioned the idea of Cotai Strip, other people criticized me and said it's never going to work and now everybody's cutting off their arms to get into Cotai.

So, my answer to you is we are different.

We originally envisioned the difference.

We built the difference.

We continue to maintain and improve that difference.

Thank you.

Thanks Felicia.

Your next question comes from the line of Joe Greff with JPMorgan.

Good afternoon, everybody.

My first question relates to the Macao margins; obviously, better than expected, 150 basis points of sequential improvement on a normalized basis.

You mentioned in the earnings release a function of strong cost discipline.

Rob, can you help us understand what specific costs you're taking out?

Or is it really just a more favorable mix that's bidding out a better margin?

And if it is the function of taking out specific costs, how much did you get out on the run rate basis in the 2Q that you think we can actually tangibly see going forward from here?

Then I have a follow-up, thanks.

Joe, it's across all - you can't get these kind of costs out any one specific area.

There's some labor costs in there, mostly non-Macaonese.

There are some direct marketing costs against the customer.

There's costs against general marketing spend.

We're looking at every aspect of our business and again, just trying to be disciplined and not cut out the muscle, just cut out the fat.

We're also trying to look forward to the fact we plan to be in Macao for many years to come and we want to maintain a great approach or a great environment for the employees and for the customers.

It really is not one specific area.

It is general marketing, direct marketing costs, labor costs, anywhere and everywhere we see excess spend that we think is irrelevant.

It will continue to be that way.

We're not done, but I think the team has been very disciplined, very focused.

We understand it's a harsh new environment that we're operating in.

We have to maintain margin and to grow EBITDA, we have to do this.

You see, as in the first quarter, obviously, our spend is just improving.

Our spend against the customer, our spend against the employee, everything.

There's not one specific area, it's across the board, Joe.

It won't stop here.

We'll just keep looking at it.

But, again, the bigger term picture, you have to think long-term to how to maintain our leadership position, especially vis-a-vis the employee and the customer.

We can't be shortsighted and just cut costs to cut costs.

Thanks, Rob.

One other thing I found interesting in your earnings slide deck on slide 14 was that the base mass revenue was down sequentially more than the premium mass revenue was on a sequential basis.

I would've otherwise thought it would've been the reverse.

Can you help us understand that?

I know you talked a little bit about success on the direct side of things on the VIP, is that impacting the premium mass?

Actually, we had some junket space that physically, we converted some junket space in the Plaza, for example, over to the premium mass.

We've had some wonderful success going direct to the customer in the premium mass side.

The Plaza has had a very good quarter and we'll continue to make that transition.

As the junkets weaken, soften, in some cases, leave us, we're making that transition.

We're getting more revenues out of that premium mass side and premium direct side than we had in the past and I think there's a positive to this.

Hoping for some strength in the junket space, but it hasn't been there.

Our success there, and also, we've controlled the margins against that premium mass and premium direct customer and that's been part of the reason why the Plaza performed so well this quarter.

Great, thank you.

Your next question comes from the line of Jon Oh from CLSA.

Thanks for taking my questions.

I'll start with a follow-up on Rob's point on costs earlier.

As you think about the cost cut and I think you alluded to a sustained or at least a sustainable cost cut going forward in the future, how do we think about the new competition that has come up?

We had Galaxy opening in May.

We've got a couple more properties opening maybe over the next nine months or so.

How much of the costs have you taken out, especially as it relates to general marketing, do you think could be something that you may want to maybe exercise some restraint to stay competitive?

To your point about you want to be relevant on the long run, but I'm just trying to map out how do we think about the sustainability of what you've taken out in the second quarter and how do we extrapolate that over the next four quarters or so?

I'd like to point out to you the number of years experience between Rob and myself and others in this industry.

The number of years of experience of other people, actually sitting in the hot seat and making hard decisions.

Galaxy made an enormous mistake.

The other companies will make big mistakes.

They're already making big mistakes.

Now, don't ask me what they are because I don't want create another Houdini.

Houdini doesn't tell his secrets and LVS and [SCL] are not going to tell its secrets.

They're going to throw properties onto the market, but if you look at the fact, take for instance Galaxy, one, they were never in the business before at all, so they have little experience, cumulative experience, in their executive ranks to back up their strategic judgments.

SJM and Ambrose So has been a monopolist for decades.

I don't see that they have the ability.

They're not used to living in a competitive environment, all of them.

It's the same thing, by the way, with Kenting and Singapore, they never worked in a competitive environment.

We never worked in anything but a competitive environment.

So you take Lawrence Ho, very bright guy, very nice man, he's done a good job starting off slow and picked up [sodent] and Galaxy, started off slow, picked up.

But at one point, you've got to do something besides opening the doors.

Wynn is used to competing, but he specializes, as we know all know, he has specialized and done an excellent job in the high end of the market.

MGM, the only thing they ever developed was City Center.

And for those of us in the United States, particularly those of us who live here in Vegas, it doesn't need any further comments.

From our standpoint, we are very pleased.

We've worked in competitive environments all of our life.

We have never not worked in a competitive environment, so we know what it takes and I can tell you the mistakes that have been made.

I don't want to go into them and make them public, because I don't want to stop them from making mistakes in the future.

After all, we're competitors.

But other people are making mistakes.

We're not making the same mistakes.

We're staying the course.

We're sticking to our critical mass, very broad, very in depth entertainment and consumer attraction components of the integrated resort model, which we claim we have started.

We are the pioneers of it.

Jon, just to follow up, it's Rob.

One thought: the diversity of the room product we have and the price points we have and the [mountains] we have, have given us a terrific advantage in this market.

We have 9,000 keys in the Parisian and 3,000 more in the St.

Regis.

What is happening is this is becoming much more of a traditional resort market, I mean, weekends, high demand periods, special event periods, holidays is when a lot of the casino winners coming out of those high demand for room time periods.

Having 9,000 keys representing all types of accommodation and rates, the diversity is critical in these peak periods.

It's helping earning power terrifically in our margins, frankly.

This market looks a lot more like it used to be in Las Vegas or in more resort markets where you have a lot of demand weekends, lot of demand where there's a special event.

We're very fortunate to have diversity of product and pricing.

Our room product, more than ever, is performing and a big part of our success.

What I'd like to say, Jon, is that notwithstanding my previous comments about our competitors, we do want to work together with them because collectively, we can work together and bring a lot of visitation to our grounds, to Macao.

We can fight over the customer and our claim to be able to do a better job fighting over the customer, when they get off the plane, they get off the boat, or they get off the bus.

We can do that, that's legitimate, we can fight.

But we've got to work together to help Macao, to improve it, and to improve the visitation.

If I could follow-up with a question on policy, there was a recent trends in visa relaxation that came into effect in early July and I think a lot of us saw them as a positive signal.

Many investors have asked us if this particular reversal is an indicator of maybe the government's willingness to take a softer stance in Macao on any future policy decisions.

Do you think that's a fair statement?

Do you think that this is at least a signal that things are going to be better going forward?

Would you read it that way?

Jon, there's just no way for any of us to forecast the government's position in terms of visa, smoking.

I think we have to wait and see.

I think it would be silly for us to pretend to know.

We don't know.

We hope for the best.

We wait patiently for the government's direction, be it smoking, be it visas, but for us to say and pretend to know, we just don't know.

We are respectful to the government.

We're hopeful that they'll support Macao.

The citizens there, our employees, our futures reside there, so we're hoping for the best and waiting for further direction, no forecast though.

Okay, thank you.

Your next question comes from the line of Shaun Kelley from BofA Merrill Lynch.

Good afternoon, thank you for taking my question.

I was just wondering if you guys could give a little bit more color on some of the trends that you're seeing from kind of on a customer basis?

Because within Macao, if we look at REVPAR, you guys are obviously seeing numbers that are down in the mid-teens right now, although, I think as it was mentioned in the prepared remarks, the numbers are pretty good relative to the market.

But I was curious on the decline in REVPAR versus you're actually seeing some continued sequential growth and year-on-year growth, for sure, in the retail business.

Can you just help us understand what you think you're seeing reading between the lines and customer behavior at this stage, at least on the mass market?

I think that the other hotels -- the other operators really are having difficulty and challenges confronting their situation, the challenges for all of us in Macao.

We are maintaining a higher -- and they're taking all their rooms and doing something with them that they didn't do before.

They're going to sell them.

They're not selling their rooms.

They don't have the experience in selling rooms.

All they did was give them all away.

We have experience in selling rooms, it's what I said before.

I'm sorry to sound boastful like this, I apologize for it, but we have to look at the reality.

The reality is that our experience tells us what to do when other people are confronting experiences they've never confronted before.

Rob, do you want to say anything?

Yes, Shaun, you mentioned retail and that's why I want to stop for a second and mention that ex-jewelry and watches, our retail business is pretty good and I think its good on two fronts.

One, we're getting great traffic and our sales are holding up pretty well if you take out the very premium -- not the fashion, but the watches and jewelry are particularly soft across the Macao market.

You saw that in some of the larger report numbers, but our retail malls provide both income but also visitation to the properties and I think it's a really important point.

We built those malls a long time ago and they get stronger year after year.

Visitation's stronger, it's a reason to come to our properties and we're very proud what's happening in the retail segment, how it translates down to the casino and the room occupancy.

What you see in Macao, very clearly, is it's a mass-market.

It's premium mass, it's no longer driven by junket GGR.

I hope the junkets resurrect, but right now, it doesn't look promising.

But what is happening is a mass-market's emerging and again, mass markets demand lots of product, retail product, room product, diversity of pricing, lots of tables, lots of slots, ETGs, that's who we are.

That's our background.

We build our products for that.

When Macao was developed and Cotai was brought to be, Sheldon's vision always was a Vegas style strip with lots of visitation, lots of mass market.

It's happening.

So, our products are a lot more -- I think they're diverse in both pricing and quality, the room product is over the board from very high-end suites to base rooms, lots of ETG slot machines.

That's what's happening in Macao very clearly.

It's a mass market.

The question becomes in the future, how fast can it develop and get deeper into mainland China and more China visitation, that's the real question to grow GGR for all the operators to benefit and we're hoping we see that shortly.

That's the trend we're seeing and we hope for the return of the higher end, but right now, we're living in a mass-market with weekend penetration very strong, midweek's not so strong.

You're seeing, obviously, deterioration of metrics because of the loss of the 10% or 15% of the very high end customers that drove so much more GGR on certain tables.

Thanks for that.

Just as my follow-up, as tempting as it is to ask about Sheldon's views on Donald Trump, I'll hold back.

I'd love to get your thoughts on one other thing which is on the dividend last quarter, I think, in some of the remarks, you mentioned the target was still at least to try and be able to increase your dividend by 10% for a year for the next three years.

Is that something that you believe is still on the table at this stage?

The 10% increase?

Is on the table assuming that revenues keep growing and business gets better.

I don't see any reason why to even reconsider it.

We've constantly maintain a rolling evaluation and rolling cash flows.

There is no reason to even question it.

Patrick, do you want to say anything about that?

We spend a lot of time analyzing different scenarios with the Board and with the Chairman regarding our return to capital program, specifically the dividend.

And we feel very confident that as our cash flows continue to grow, that we'll be able to support the Chairman's wishes on dividend growth.

We're getting more and more vibes that something's going to open up in Asia.

Clearly, if you talk to anybody in any of the countries where we've been, let's use the word lobbying, for a number of years, there isn't anybody who doesn't think that we're in the pole position in any one of these countries.

It's getting to smell like something's going to be coming up soon.

We've considered that in our cash flows vis-a-vis estimating the dividend and knowing that were going to have enough to do.

We're not taking into account opportunity to borrow money to pay the dividend, which by the way, if we did, we'd have a very, very, very super healthy dividend.

But at this stage of the game, we're not anticipating borrowing to pay the dividends.

We've got enough cash flow.

Notwithstanding the reduction in overall cash flow because of the challenges in Macao, we're still earning a huge amount of money, billions of dollars.

Just to be clear, dividend growth seems like it's tied to cash flow growth.

Is that the key part of the algorithm that investors should be aware of?

I think that's a fair statement.

Great, thank you very much.

Your next question comes from the line of Thomas Allen from Morgan Stanley.

Hey, good afternoon guys.

Can you just give us an update on the Parisian?

Given the state of the market, are there any changes on the timeline or the scope or anything like that?

Thanks.

I think the timeline is give or take about 12 months from now for a full opening.

We haven't lately looked at a partial opening.

It all depends.

There are still some things, some imponderables out there, but right now, the way things are going, we don't have as much labor as we'd like to have, et cetera, et cetera.

But we're happy enough with the what the government is giving us.

We're grateful.

We're appreciative.

Right now, it looks like we are probably going to have an opening in about 12 months.

Thomas, it's Rob.

On the opening Sheldon addressed, but again, we think more than ever in this environment, the Parisian's European themed is exactly the right focus for the mass visitation, just like the Venetian's the most visited hotel in Macao.

We think the Parisian is just situated perfectly in terms of the consumer in today's Macao.

Great, thanks.

As my follow-up, following up on a previous question, just on your thinking around the rooms, can you give us some more color on the mix today versus maybe six months or a year ago on the number of rooms that are going into junket versus direct casino customers versus selling rooms?

You guys have a lot of experience, you have over 7,000 rooms in Vegas.

Can you just talk about how you're thinking about that mix in general?

Thanks.

It changes every day, obviously.

To your point, six months ago, a year ago, it was different.

But the biggest single change, you well know, is the decline of junket participation in the rooms.

That used to be a very important part of the mix and has become much, much less important.

We are spending more time focused on getting more premium direct customers and premium mass customers in those rooms.

We use the rooms more directly as a tool.

We have been more aggressive in the pricing and how we get premium mass customers in.

There was a time when we were as high as $1,200 or $1,400 a night ADR.

That's dropped to half that.

We're now looking at $600 or $700 a night.

Again, we sell rooms.

Our network, we're very aggressive on the pure cash sales.

We always have been, because we've had to be from day one.

Unlike competitors that maybe have 1,000 hotel rooms and comp 90%, we've always been heavily skewed toward cash sales.

We built -- our network to sell rooms is a lot more advanced, perhaps, than others because we had to be in that business.

But I think in the future, you're going to see the increase on pure cash sales, the decline of junket sales, the increase of pure premium mass and direct mass play.

We're becoming more self-reliant because the junkets just can't pick up the slack at this point.

That mix will move based on the market, but one thing is very clear: we make most of our money these days on weekends.

Weekends look a lot like they did a year ago.

There's huge rooming demand on weekends, we run very occupancies at very high rates.

There's all kinds of competition among the segments weekend.

Where the trouble comes in Macao, like Las Vegas was, when we first got here 20 years ago is midweek demand is soft.

There isn't much junket pick up, there isn't as much premium mass play.

So, we're making a lot more of our money, it's much more skewed to weekends because demand is there.

The nice thing is, the old church for Easter Sunday, or synagogue for the high holidays, depending on your religious beliefs, but we have a lot more ability to fill those seats, those rooms on the high demand weekends, special event periods, holidays, that's where the money is going to be made in Macao today.

When you've got 9,000, soon to be 13,000 keys, you can participate more than ever in that high demand period.

Just like the fight when the MGM guys bought the fight late in May, you couldn't get enough rooms, enough gaming tables.

That's happening on weekends in Macao.

That's where the demand is and that's where the market's moving to.

Everyone's struggling midweek in my opinion.

It's the weekends that the money's being made.

So that's my take on the demand.

We're struggling less than our competitors are struggling because we have a unique tool, it's called MICE.

They can't fill up, but with MICE, we can.

So that's why our occupancy is higher, our rates are higher, our high cash rates are higher, and we have more of a mass-market in the casino.

Again, you've got to look at what the fundamental business model is.

We are MICE-based.

We're supposed to fill up the midweek at the rates of the weekend when you have good MICE business.

That's the fundamental nature of being in the trade show and the convention business.

Just to throw one other quick one in here, you guys don't often give a lot metrics around your MICE business in Macao.

Is there anything you can talk about in terms of year-over-year growth or anything like that, that may help us think about how that's helping kind of sustain your business in Macao versus competitors?

We can provide those stats, but I'd rather do it in a different time because it's complex and time consuming.

I'd move on to the next question.

I'd be happy to do it off-line with you, Thomas.

Thank you very much.

Your next question comes from the line of Carlo Santarelli from Deutsche Bank.

Good afternoon and thanks for taking my question.

I had a two-part question, both of which were pertaining to the balance sheet.

First and foremost, as you talk about using a little bit more of your direct, using the balance sheet a little bit more for direct play in Macao, could you talk us through the thinking in terms of credit extension and doing a little bit less with the junkets?

And if you see that being a real focus going forward or just kind of offsetting some volatility in the near-term?

Additionally, as it pertains to uses of cash from the balance sheet, what leverage level are you guys comfortable with as it pertains to paying the dividend on a go-forward basis?

Is there a certain level of net debt to EBITDA where you would think that maybe additional dividend growth would be something that you'd have to think a lot more about?

Hi, it's Rob.

I missed the first part of your question, I was listening to your dividend question.

Your question relates to the junkets and the premium direct?

Exactly.

Just how much you're willing to kind of use the balance sheet?

I know in the position that you're in, obviously a position of strength from a balance sheet perspective, using the balance sheet for more direct play and kind of offsetting some of the junket softness is an option that's available to you.

It's really not a balance sheet question from my perspective because it's a creditworthiness question.

The reason I say that is we've got plenty of capacity to use the balance sheet if we could feel comfortable about the credit issuance.

The first question's always not can we afford to take the risk, it's is it a good risk to begin with.

The problem I have, unfortunately a lot of the success in Macao has been through the junkets because it's not as transparent, the creditworthiness of some of these customers.

The people we know well, the people who have proven to be credit-worthy and can pass all the regulatory compliance issues, we're happy to extend credit to.

We did it aggressively in this quarter, we've done it aggressively in the last few quarters.

We love to step into that position, but it's getting enough transparency and comfort from a regulatory perspective of who we're dealing with to issue credit.

We'd love to give millions of dollars of credit every day in Macao like we do in Singapore.

As you know, in Singapore, we've issued probably $20 billion of direct credit, but the customer is very high profile.

They're very scrutinized, they've got long track records, and they're very regulatory compliant.

If we can get that kind of transparency in Macao, we'd be big advocates of direct credit.

We have no -- we're the biggest credit grantor in the world by a lot in terms of the casino business.

We're aggressive in Singapore, we're aggressive, heck, in Las Vegas.

But to get to Macao means we need to know the customers deeper and far more customers in Macao much more diverse and much less transparent to us.

As we become more conversant with those customers, understand it, I think we can issue more credit.

But I wouldn't look for us to replace the junket segment nearly the quantities they've issued.

We are getting closer to a balance with our junket play.

I look at this quarter, our junket play balance in terms of premium direct it getting more in balance.

But do we ever get to the same level credit the junkets do?

Not in the near-term, no.

As to the dividend question, I'll turn it to Mr. Adelson.

We're committed to the dividends.

As I've said a number of times, our interest, my family's interest is on the same page as yours.

Our interests are very much aligned.

To answer your question very specifically, we are comfortable with a 2 to 3 times leverage to EBITDA.

We're not near that and we don't have, as I said earlier in the call, our present intention is not the to borrow money to pay dividends.

We have sufficient cash flow and excess cash flow to be able to do that.

We're just thinking about new development opportunities.

There's a lot of conjecture about what a new development opportunity in an emerging market like Japan or somewhere else in the Far East, keeping our powder dry so we can go after that aggressively.

And we can build what it takes to build to win the day, to when the competition.

We're keeping our powder dry in our borrowing capacity.

We're not uncomfortable with 2 to 3 times, but we are uncomfortable right now to go out and borrow money to pay dividends.

As I said earlier, we're beginning to feel vibrations that a development opportunity is hopefully around the corner.

Thank you very much.

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