A $96 million legal settlement may have contributed to a drop in first-quarter earnings at Las Vegas Sands Corp., which reported a 54 percent decline in net income Tuesday.
The March settlement between Las Vegas Sands and Hong Kong businessman Richard Suen was not explicitly referenced or listed in the company’s earnings report, but instead was referred to as a “nonrecurring legal settlement” that resulted in a 12-cents-per-share hit to earnings.
The terms of the settlement in the 15-year-old legal dispute over Suen’s compensation for helping the company secure a license in Macau were not disclosed when it was announced last month. Suen had been seeking $346.9 million for his role in helping Sands while the company said the maximum payment should be $3.8 million.
Despite the drop in net income, the Las Vegas-based company still had a positive quarter with revenue topping analysts’ expectations.
Sands Chief Operating Officer Rob Goldstein, standing in for the second straight quarter for Chairman and CEO Sheldon Adelson, who is being treated for non-Hodgkin lymphoma, said the company’s continued reinvestment in its major properties would continue to propel earnings in the future.
Entertainers drive dollars
In a question-and-answer session with investors, he and Chief Financial Officer Patrick Dumont explained that Sands’ strategy of reinvesting in existing assets has proven more valuable than considering mergers and acquisitions.
“Look what happens when you bring Bruno Mars or Jacky Cheung or BTS or Maroon Five or Celine Dion to Macau,” Goldstein said. “Revenues explode. In Las Vegas, entertainment drives room rate. In Macau, it drives gaming revenue — it explodes gaming revenue.”
Dumont said that in addition to a series of remodeling projects, the company is anticipating the 17,000-seat MSG Sphere being developed with The Madison Square Garden Co. will drive new traffic to The Venetian and Palazzo on the Strip after its scheduled opening in 2020.
“We’re investing heavily in Las Vegas,” he said. “We spent hundreds of millions of dollars in (capital expenses) in room refresh and casino refresh and redoing our restaurants and entertainment spaces. We feel very strongly about the trajectory of Las Vegas and the potential, particularly with some of the investments we have coming in. The MSG Sphere is going to be the most technologically advanced arena in the world and is going to be an absolutely stunning investment, completely unique and a must-see globally.”
Additionally, a $3.3 billion investment in Singapore with the addition of a 15,000-seat arena is expected to boost that market.
Goldstein and Dumont said they expect improvements in the company’s Macau, Singapore and Las Vegas markets to drive revenue in the future.
“Macau is showing real strength by evidence of our numbers,” said Goldstein, who added that the “demand for rooms is very, very strong.”
The Las Vegas-based company said first-quarter revenue totaled $3.646 billion, surpassing analysts’ expectations of $3.47 billion, the average amount from 15 surveyed.
Revenue was up 1.9 percent, while net income fell 54 percent to $744 million, mostly as a result of a nonrecurring non-cash income tax benefit of $670 million in the first quarter of 2018. The company also is paying a 77-cents-per-share dividend, up from 75 cents a year ago, on June 27 to shareholders of record on June 19, and had $174 million in share repurchases during the quarter.
Earnings per share also dropped 59.2 percent to 75 cents for the quarter that ended March 31.
Las Vegas Sands shares closed down 0.4 percent, 25 cents, to $67.91 a share on average trading Wednesday. After hours, the issue got a 2.9 percent boost, $1.94, to finish at $69.85 a share.
The Review-Journal is owned by the family of Las Vegas Sands Corp. Chairman and CEO Sheldon Adelson.
Las Vegas Sands Corp.
First-quarter revenue and earnings for Las Vegas-based Las Vegas Sands Corp. (NYSE: LVS)
1Q 2019: $3.646 billion
1Q 2018: $3.579 billion
1Q 2019: $744 million
1Q 2018: $1.616 billion
Earnings per share
1Q 2019: 75 cents
1Q 2018: $1.84