Your Guide to Understanding Casino Earnings: Las Vegas Sands Corp. (LVS) and More

Page 1 of 2

When looking at earnings from gaming companies, trying to figure out what all of the numbers mean can be confusing. Revenue and net income are easy enough, but luck plays a role and companies throw out terms like “rolling chips” and “drop” like they’re everyday terms. So, let’s take a look at what those numbers mean and how they impact earnings reports.

How the house works
There are generally three categories in any earnings reports: mass market play, VIP play, and slots. Mass market is simple enough: It’s the average person who walks into a casino and puts money down at a table or into a slot machine. VIP players play on credit and use what are called rolling chips. Slots are just that — slot machines. Here’s what the terms and numbers mean.

Las Vegas Sands Corp. (NYSE:LVS)Slots
Before we dive into the all-important VIPs, let’s start with slots. Not every company reports the same data, but full disclosure would include the following.

1). Slot handle: The amount wagered at a slot machine.

2). Slot hold %: The percentage of the slot handle that is won by the casino.

3). Slot win: The casino’s win, which flows to the revenue line of the income statement.

Below I have two examples, one from Las Vegas Sands Corp. (NYSE:LVS)‘ Venetian Macau and the other from Wynn Resorts, Limited (NASDAQ:WYNN)‘ Las Vegas operations. Note that all numbers in this article are from third-quarter 2012 because not all companies have reported fourth-quarter results.

Casino Slot Handle Slot Hold % Slot Revenue
The Venetian Macau $1.26 billion 4.9% $61.9 million
Wynn Las Vegas $723.5 million 6.4% $46.3 million

Source: Quarterly SEC filings.

You can see that hold percentage in The Venetian Macau was lower than that at Wynn Las Vegas, a typical difference between Las Vegas and Macau. Las Vegas Sands’ U.S. properties experienced a higher hold percentage, likely due to lower-odds penny and nickel slots.

To put these numbers into some perspective, MGM Resorts International (NYSE:MGM) expects slot hold percentage to be 7.5% to 8.5%, so both of the percentages above are lower than MGM expects every quarter.

Mass-market table games
When you walk up to a blackjack table in Las Vegas and you hand the dealer a $100 bill for chips, they put that money into a drop box. This is what is known as the “drop,” “table game drop,” or sometimes “non-rolling chip drop.” The corresponding casino win is the amount left over when you cash out your chips at the cashier. Win is usually expressed as a percent of drop, which also corresponds to revenue.

Below are mass market drop numbers from three casinos in Macau, including Melco Crown Entertainment Ltd (ADR) (NASDAQ:MPEL)‘s City of Dreams. I’ve also included the expected win percentage for companies that publish such data.

Casino Table Game Drop Table Game Win % Expected Win % Table Game Revenue
The Venetian Macau $1.14 billion 31.3% N/A $357.1 million
Sands Macau $739 million 20.8% N/A $153.7 million
Wynn Macau $686.1 million 30.8% 26%-28% $211.3 million
City of Dreams $889.8 million 27.4% 25%-30% $243.8 million

Source: Quarterly earnings releases.

Think about these win percentages next time you enter a casino. The numbers say you’ll only walk out with about 70% of what you put down at a table.

Where the big bucks are made
In recent years, investors have become focused on rolling chip drop, or VIP play in Macau’s casinos.

Page 1 of 2
Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

The 10 Largest Pharmaceutical Companies In the World

The 10 Most Expensive Android Apps

The 9 Most Expensive Designer Bags in the World

The 7 Most Expensive Real Estate in the World

The 10 Most Expensive eBay Items Ever Sold

The 10 Most Expensive iPhone Apps

The 9 Most Expensive Designer Shoes in the World

The 10 Most Expensive Cigarette Brands

The 10 Most Expensive Law Schools in the US

The 10 Best Wall Street Movies

The 10 Most Expensive Golf Clubs Ever Sold

The 10 Most Expensive Golf Memberships

The 10 Best Disney Characters Ever Created

The 8 Best Foods for Gaining Weight

The 10 Most Expensive Colleges in the World

The 7 Most Memorable Ad Campaigns of All Time

The 7 Most Expensive High Schools in the World

The 10 Electric Vehicles with the Longest Range

The 10 Cities with the Worst Drivers in the World

The 10 Most Expensive Dresses Ever Created

10 Islands to Visit Before You Die

10 Famous Celebrities Who Needed Rehab

The 15 Countries with the Largest Oil Reserves

The 10 Most Overused Excuses in the World

The 5 Best iOS Apps You Can’t Get on Android

5 Companies Damaged By Social Media Blunders

The 10 Most Legendary Blues Songs

The 10 Most Lawless Places in the World

4 Reasons China is a Threat to the US

The 17 Most Sugary Drinks in the World

The 10 Most Ruthless Rulers in History

The 10 Greatest Generals in History

Top 8 Travel Destinations for 2015

The 10 Safest Dog Breeds for Children

The 10 Most Stolen Vehicles in the US

The 7 Most Expensive Celebrity Weddings

The 10 Best LoL Teams in the World

Top 10 Worst Marketing Campaigns Ever Produced

Top 5 Diets that Help You Lose Weight

The 10 Best Ways to Stay Awake

7 Artists That Switched Musical Genres

The 10 Most Expensive Cities to Live in New Jersey

The 10 Best High Schools in New York

The 10 Countries With the Least Gender Inequality

The 6 Biggest Musician-Manager Feuds

The 10 Countries with the Cheapest Gas Prices

The 7 Most Theatrical Bands of All Time

The 8 Worst Band Breakups of All Time

The 10 Most Important South American Leaders

The 7 Most Successful Casting Show Winners

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!