Adjusted property EBITDA
Las Vegas Sands Corp.’s (LVS) adjusted property earnings before interest, taxes, depreciation, and amortization (or EBITDA) consist of operating income—loss—before depreciation and amortization, amortization of leasehold interests in land, gains or losses on disposal of assets, pre-opening expenses, development expenses, royalty fees, stock-based compensation, legal settlement expenses, and corporate expenses.
Adjusted property EBITDA helps a company track the performance of each property. The above chart shows the company’s adjusted property EBITDA, across all its properties, for the nine months ended September 2014.
You can see that the Venetian Macao and Marina Bay Sands generated the highest adjusted property EBITDA. Sands Cotai Central followed, with adjusted property EBITDA growth of 56%, year-over-year—the highest of all the properties.
Four Seasons Hotel Macao’s adjusted property EBITDA grew 24%, and The Venetian Macao, 15%. However, Sands Macao and Sands Bethlehem experienced negative growth of 5% and 9%, respectively.
Las Vegas Sands’ important disclosure
When evaluating adjusted property EBITDA, investors should consider factors such as increasing or decreasing trends, and how adjusted property EBITDA compares to levels of debt and interest expense. Meanwhile, adjusted property EBITDA shouldn’t be regarded as an alternative to looking at income from operations, which indicates operating performance. Nor is it an alternative to looking at cash flow from operations, which measures liquidity.
Las Vegas Sands uses cash flow in many ways, including capital expenditures, interest payments, and debt principal repayments. These aren’t reflected in the adjusted property EBITDA.
Companies don’t all calculate EBITDA in the same manner. As a result, adjusted property EBITDA as presented by Las Vegas Sands may not be comparable to adjusted property EBITDA as presented by other companies, such as MGM Resorts International (MGM), Wynn Resorts Limited (WYNN), and Melco Crown Entertainment Ltd (MPEL).
Investors looking to invest in all of these casino companies might choose an ETF such as the Consumer Discretionary Select Sector SPDR Fund (XLY).
In the next part of this series, you’ll learn why Las Vegas Sands is committed to creating shareholder value.