Century Casinos, Inc.

Good day, everyone, and welcome to today's Century Casinos Q1 2020 for Earnings Call. At this time, all participants are in a listen-only mode. Later, you will have the opportunity to ask questions during the questions and answers session. You may register to ask a question at any time by pressing the star 1 on your telephone keypad, and you may withdraw yourself from the queue by pressing the star 2. Please note this call is being recorded, and I will be standing by if you should need any assistance. It is now my pleasure to turn the conference over to Mr. Peter Hotzinger. Please go ahead.

Good morning, everyone, and thank you for joining our earnings call. We would like to remind you that we will be discussing forward-looking information, which involves risks and uncertainties that may cause actual results to differ from our forward-looking statements. The company undertakes no obligation to update or revise the forward-looking statements, whether as a result of new information, future events, or otherwise. We provide a discussion of the risk factors in our SEC filings and encourage you to review these filings. Throughout our call, we refer to several non-GAAP financial measures, including but not limited to adjusted EBITDAR. reconciliations of our non-GAAP measures to the appropriate GAAP measures can be found in our news releases and SEC filings, available in the investor section of our website at cnty.com. I'll now provide an overview of the first quarter 2024 results, as well as our outlook for this and next year. After that, my co-CEO, Erwin Heitzman, and our CFO, Margaret Stapleton, will join me for a Q&A session. For the quarter, we delivered net revenue of $136 million, an increase of 25% over Q1 of last year. The increase came from the additions of the Nugget in Nevada and Rocky Gap in Maryland, as well as good performances of our Canadian operations, offset by extremely bad weather, a weaker retail customer, construction disruption at a few properties, and the temporary closures of three casinos in Poland. Adjusted EBITDA was 21 million, down 18% from last year. The U.S. operations were flat, and Canada was up, but Poland and the corporate segment were down. So it was a rather challenging start to the new year. While we knew our performance was comping to a strong first quarter of 23, the results were also impacted by severe winter weather. As you have heard from others in regional casinos, January was essentially wiped out because of weather. And because most of our casinos are located outside of major cities in destination areas, such as Rocky Gap, Mountaineer, Central City or Cripple Creek, and North Corottersville, our customers need to drive half an hour, an hour or more, outside of city lights and urban streets. You can imagine the dramatic impact winter storms with unsafe driving conditions have on visitations. In addition to the January weather, we faced several other transitory issues as well. Three of our casinos in Poland were closed for some or all of the quarter. Two reopened towards the end of the quarter, and the third one, the largest of the three, will reopen in Q3. So from about August on, we will have all eight casinos in full operation again. Also, our increased spend on capital projects throughout our properties caused construction disruption at most of our casinos. And finally, remember, we acquired Nugget and Rocky Gap just about 12 months ago, meaning we are still early in the process of managing everything as one cohesive portfolio. But to really get a good picture about what was going on in the quarter, we need to take the weather impact in January out of the equation and look at February and March. And what we see is that beyond January, gaining volumes from our core customers actually grew. In addition, operating margins in February and March were better than in Q4 of last year, and they were very close to the margin of Q3 of last year, which is typically a very good quarter. So there's no worsening trend or anything like that. I mean, all of the substantial declines that happened happened in January. February and March were quite normal. In fact, March showed signs of real strength at our properties. Take Nevada. The slot revenue in the Reno Sparks market was down 3%. But slot revenue at our Nugget grew 9%. In Colorado, Settle City and Black Rock were up 3%. Our casino was up 7%. In Cripple Creek, the market was up 2%. We were up 6%. And while Missouri's lot revenue was down 1% in March, we were up 2%. Very encouraging signs as we move into the second quarter. Looking at the segment results for Q1, we start with the Midwest, which includes our Colorado and Missouri operations. Revenue of the segment was flat year-on-year. EBITDA was down 9%. That's not bad at all. considering the general weather as well as construction disruption at both Missouri properties. And also considering that Cripple Creek was totally closed for two full days in March because of a heavy snowstorm. In Cripple Creek, a competing property opened directly across the street from us with 300 hotel rooms, which certainly increases the market. And as anticipated, we continue to benefit from our proximity to their location. As mentioned, in March, we outgrew the market, and April is up double digits as well. In Missouri, revenue from rated play was up 6%, both the number of trips as well as the spend per trip increased. Retail play was softer, mostly because of the weather in January and disruption from construction of both properties. But in March, Cape Girardeau bounced back and said that new all-time record for table game revenue, the highest since inception. And I'm happy to report that the strong performance continued into April, which posted the third highest table games revenue in that property's history. Last month, on April 4th, we opened our new hotel, The Riverview, at Century Casino, Cape Shore, Idaho. The hotel transforms the property into a full resort destination, offering gaming, dining, conferences, concerts, events, and more. And it's off to a great start, better than we expected. Total project cost of $31 million. We funded that with cash on hand. In Corradoville, construction of the new permanent land-based casino hotel is progressing according to budget and schedule. We plan to open at the end of this year. That new property will have a total of 74 hotel rooms, 12 gaming tables, and over 600 slot machines, which is a 20% increase in gaming positions compared to the old riverboat and a 50% increase in gaming positions compared to our current interim casino. The way we think about it is this. It's a significantly enhanced facility moving from an old riverboat and a small temporary location to the dry side of the levee a brand-new land-based casino with a hotel, convenient parking, and convenient food and beverage amenities, and much better environment overall. The new property will provide significant operational efficiencies, it will be much more convenient for our customers, and it will certainly increase our catchment area. We expect a good uplift on the overall performance from that property, both revenue and EBITDA. The project is fully funded by VG at an 8% gap rate. Our east segment includes the Mountaineer Casino Resort in West Virginia and the newly acquired Rocky Gap Casino Resort in Maryland. Because of that new acquisition, revenue of the segment was up 44%. EBITDA was up 23%. In January, both properties suffered a lot under the bad weather and unsafe driving conditions as they are both destination resorts with many customers having to drive two or three hours to get to our casinos. So not surprisingly, the number of trips declined significantly, but the spend per trip was up a bit. At Mountaineer, available hotel rooms, hours of operation for casino and food outlets are still limited as a result of continued staffing challenges. However, it will get much better next month in June, with many J-1 visa holders returning and allowing us to improve and expand our offerings. We will enhance our entertainment offerings throughout the year to further diversify our portfolio, giving our guests more reasons to choose us for their entertainment. Rocky Gap enters its busy season now in early May. We anticipate rebounding travel and capture of pent-up travel demand throughout the summer. Great amenities such as our newly constructed swimming beach, in addition to continued enhancements of menus in F&B, will allow the property to maximize wallet share. Within renewed marketing efforts in the major feeder markets, Pittsburgh, Baltimore, and the DC metro area, we expect to attract more affluent customers and grow the overall database. Continuing to the west segment, which includes the Nugget Casino Resort in Reno, Sparks, Nevada. The Nuggets saw mixed results during the quarter compared to prior year. Average spent per tip increased by 4%, but trips during the quarter decreased by 8%. Performance from the high-end segment was strong, increasing by 18%, but the low to mid-tier segment decreased 6%. Our management team is working on refreshing restaurants and bars and upgrading the sportsbook, and in three weeks, a high-limit VIP slots area will open. We are optimistic that the second half of this year will be strong, and most of the transitional extraordinary expenses, as well as most project capex and the destruction that comes with it, will be behind us. The properties entertainment and special events calendar looks great. We see strong bookings, and all of that points to a very busy summer season for the Nugget.

The Canadian segment.