Century Casinos, Inc.

Good day, everyone, and welcome to today's Century Casinos Q3 2024 earnings call. At this time, all participants are in a listen-only mode. Later, you will have the opportunity to ask questions during the question and answer session. You may register to ask a question at any time by pressing the star and 1 on your telephone keypad. Please note, this call is being recorded, and I will be standing by if you should need assistance. It is now my pleasure to turn the conference over to Peter Hotzinger. Please go ahead, sir.

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 SSE filings and encourage you to review these filings. Throughout the call, we refer to several non-GAAP financial measures, including but not limited to adjusted EBITDA. 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 cntui.com. After our prepared remarks, we will open the call for your questions. My co-CEO, Erwin Heitzman, and our CFO, Margaret Stapleton, will join me for that. Our first quarter results were released this morning. We delivered net revenue of 156 million, a small decrease of 3% compared to Q3 of last year. Adjusted EBITDA was 32.9 million, down just 1%. Consolidated EBITDA margin increased from 20.6 to 21.1%. The main reason for the small revenue decline was the temporary closure of one of our casinos in Poland. I'm happy to report that in the meantime, 10 days ago, that casino has successfully reopened and Poland is back to normal run rate of around 10 to 12 million in annual EBITDA. And we had another important opening recently last Friday on November 1st, we've opened the brand new land-based casino and hotel in Missouri. It was a fantastic opening weekend there. More about it a little later. Throughout our portfolio, the underlying customer trends remain stable in the third quarter. I'm sure you have heard the same from our gaming peers and from other consumer discretionary businesses. The retail customer as well as the low-end customers are still relatively weak, stable at least. We see that more or less in all our markets. While rated play was flat, non-rated play was down throughout our portfolio. We believe this is mostly due to macroeconomics and wallet softness in our markets. To dig a little deeper into the quota, let's look at segment results, starting with the East, which includes the Mountaineer Casino Resort in West Virginia and the Rocky Gap Casino Resort in Maryland. Revenue of that segment was up 7%, EBITDA up 5%. At both properties, the low-end consumer produced less trips, with the spend per trip pretty flat. The mid and upper levels of the database also came less often, but the spend per trip increased versus last year. The performances of the hotels at Mountaineer and Rocky Gap have been improving. Cash rooms increased, while comp rooms went down. We did put a bit more marketing dollars to work to drive revenue and get more brand exposure. For Mountaineer and New Ohio and Pennsylvania feeder markets, and for Rocky Gap in the DC and Baltimore metro areas. Continuing to the Midwest with Missouri and Colorado. Revenue of the segment was essentially flat. EPITAR was down 5%. That is a respectable result considering the disruption we experienced at Corradoville from the development of the new land-based facility. As mentioned, the new property opened last Friday with a total of 74 hotel rooms and over 660 gaming positions, which is a 20% increase in gaming positions compared to the old riverboat and a 50% increase compared to the temporary location. And I can tell you, I was there, it was a fantastic opening weekend. Right from the get-go, on the very first day, the new facility set an all-time record for coin-in and daily revenue, even though we did not have all slots in operation yet. The entire team in Missouri and all of us are really excited about the bright prospects the new property offers. It provides significant operational efficiencies, it's much more convenient for our customers, and increases our catchment area. The new property transitions the Carradosville operation from an old riverboat and small temporary location to a modern-style land-based facility, adding significantly enhanced non-gaming amenities, expanded gaming options, and convenient parking for our guests. We expect a strong uplift of results and should see that on the revenue side fairly soon. The impact on EBITDA will probably take a quarter or two until we have worked out the initial growing pains and figured out the most efficient staffing levels. Our other property in Missouri, in Cape Girardeau, saw a positive revenue trend in the quarter, up 7%, driven by the new hotel as well as food and beverage sales. The hotel we opened earlier this year is ramping up nicely. You see a steady incline in occupancy and revenue, and that continues into Q4 with a strong start in October. Additionally, we have been seeing a lot of multi-night stays recently, which is a nice surprise. The hotel is also driving meaningful growth in F&B sales, offset by higher COGS and staff costs. The team continues to fine-tune operational expenses to further increase profitability. Those efforts showed during the quarter. We saw gradual improvements with higher revenue and lower expenses month after month, and we expect that to continue into Q4. In Colorado, our property in Cripple Creek continues to benefit from the new 300-room hotel that opened directly across the street from us earlier this year. Point in was up. Table drop was up and F&B revenue was up as well, all because there's a higher volume of visitors in town. All of that was partly offset by a lower slot hold this quarter and the loss of some of our sports betting revenue. As you know, we had three sports betting providers using our licenses in Colorado, but two ceased operations recently, namely Circa and Tipico. The one remaining is Bet365. Overall, the Missouri and Colorado segment did a great job in maintaining operating efficiencies with some property level margins at 39% during the quarter. Next is the West segment with the Nugget Casino Resort in Reno, Nevada. After a quite disappointing first half of the year, the Nugget showed good sequential growth. Sequentially, revenue was up 40% and EBITDA doubled compared to Q2. but still a bit behind last year's third quarter. Gaming revenue was flat compared to last year, but hotel and F&B declined significantly due to fewer group room nights. We've mentioned that in recent investor meetings already. The group and convention volumes are down this year. The reason for it lies two years back, before we took over the operations. Anyway, happy to say that it's looking much better going forward. New top management successfully focused on cost control. Total expenses went down by 9%. We remain focused on operational efficiencies to help offset rising labor costs. Local display was strong in the quarter, up 20% compared to last year. And we also saw a significant uptick in the number of visits from the younger age groups. Nugget has completed its capex program in the casino for this year, but we need to spend between 3 and 4 million on elevators next year, which will be increasing our estimate for total company-wide capex from 12 to 16 million in 2025. A few words about our small operations in Canada and Europe. Canada, we grew EBITDA by 6%, mainly through better cost control. consumer trends appear pretty stable at all four locations we have in Alberta. In Poland, two casinos were still closed during the quarter, one of which is a very important one in the city of Wroclaw, which resulted in a significant drop in revenues. In an apples-to-apples comparison of the undisturbed properties, both revenue and EBITDA grew compared to last year. Anyway, we've reopened that casino in Wroclaw 10 days ago, business volumes are great with that reopening we expect poland to get back to normal levels quite quickly which is between 10 and 12 million in annual ebitda the sales process is also progressing well we hope we're hopeful to get it done within the next couple of months now let's discuss our balance sheet and liquidity position We ended the quarter with $119 million in cash and cash equivalents and $340 million in outstanding debt, resulting in net debt of $221 million. Traditional net leverage is 4.7 times, and least adjusted net leverage is 6.6 times. Of course, the leverage is elevated because of our recent acquisitions and investments. that we have the casinos in Poland and the new land-based facility in Krakow will open, it should ramp down quite quickly as we look to deliver to three times traditional and around five times lease-adjusted for next year. We have no debt maturities until 2029, and we can reprice or refinance our entire term loan at any time without penalty. So as soon as a window opens, we want to act on it and improve our terms.

Turning to CapEx.