Century Casinos, Inc.

Good day, everyone, and welcome to today's Century Casinos Q1 2025 earnings call. At this time, all participants are in a listen-only mode. Later, you'll have an 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 any 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 everyone that we will be discussing forward-looking information under the safe harbor provisions of the U.S. federal securities laws. The company undertakes no obligation to update or revise the forward-looking statements, and actual results may differ from those projected. Throughout our call, we referred 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 questions from analysts. My co-CEO, Erwin Heitzman, and our Chief Accounting Officer, Tim Wright, will join me for that. We released our first quarter results this morning. Revenues for the quarter were 130.4 million. EBITDA was 20.2 million. During the quarter, our team successfully managed a number of issues, including significantly more weather-impacted days throughout the entire North American portfolio, as well as one less operating day compared to last year, and the lack of two-thirds of the sports betting income in Colorado. Despite these headwinds, we maintained the operating margin consistent with Q1 of last year. To put the weather, leap year, and lower sports betting revenue impacts into perspective, here are the monthly results. January, we generated EBITDA of just 3 million, well below even our most conservative forecasts. February, also impacted by weather as well as the calendar, was a bit better, but still just 6.5 million. Then a rather normal month of March produced a solid 10.5 million EBITDA, up 8% over last year's March. So when you sort of, when you sort through the noise, you see the positive trend here. and we feel good about the normalized run rate with no weather or other negative impacts. Overall, we estimate the impact of EBITDA of weather, leap year, and the partial loss of sports betting revenue in Colorado to be around 2 million this quarter compared to last year Q1. Across all our U.S. properties, carded gaming revenue increased 1%, while uncarded gaming revenue decreased 2.5%. Total visitor volume was down 3%, driven by a reduction in visits from the 50-plus age group, partly offset by a 1% increase from our younger guests. The total number of trips declined by 2%, while the spend per trip increased 4%. For a closer look at each market, let's now start with Missouri. The new Coradosville property produced another set of very good results as it completed its first full quarter with the new casino hotel. Carded gaming revenue grew 12%, uncarded increased by a strong 23%, bringing total gaming revenue up 17% or $2.1 million. compared to Q1 of last year. We saw good results across nearly all demographics, with win from patrons under age 50 increasing 33%, while increasing 8% from patrons over 50. Win from higher end consumers increased 19%, while it grew 9% in the lower consumer groups. Notably, the lowest end group, which has lagged in some markets, increased 18% during the quarter. We are also very excited as we are succeeding in expanding our market with the new casino and hotel. The number of patrons living 75 plus miles from the property increased by 34%. The percentage increase from patrons living within 75 miles was 20%. Altogether, the number of visitors increased 23%. In the six months since opening, revenue in EBITDA are up 25% and 31%, respectively, which has exceeded our initial expectations. In absolute numbers, the new Caradasville has generated 5.8 million more net revenue and almost 3 million more in EBITDA in the first six months of operation. The property is much more convenient for our customers and allows for significantly more efficient operations. We are very happy with the strong and immediate uplift on the revenue side. The full impact on EBITDA will probably take another quarter or two until we have worked out the initial growing pains and figured out the most efficient staffing levels. We are running at a 43% EBITDA margin right now, But we believe further margin improvement is just a question of time. All in all, we couldn't be more pleased with the start of the new facility at Corrado Street. On to our other hotel casino in Missouri, the Century Casino and Hotel in Cape Girardeau. That property, too, saw increased visitation during the quarter. From a rated revenue perspective, the number of patrons increased 5%. The number of trips increased 2%. Theoretically, gaming wind was flat, but actual wind decreased slightly due to lower hold this quarter. The ongoing success of the new hotel continues to drive increased visitation from states and markets outside of our core demographic, which is Missouri and Illinois. We saw strong gains from visitors living 75 plus miles from the property as they increased 13%. compared to an increase of 1% from patrons living within 75 miles. We've also seen large gains in the number of trips from guests under the age of 50 with an increase of 14% compared to a small decrease of 3% from guests age 50 plus. The ADT from comp to hotel guests was a very strong $475. The hotel is also driving meaningful growth in F&B sales, which is somewhat offset by higher costs of goods sold and staff costs. The team continues to fine-tune operational expenses to further increase profitability. The EBITDA margin of that property was 36% in the quarter. For both Missouri properties, we also look forward to sports betting going live in Missouri towards the end of the year. and we are finalizing partnership agreements as we speak, which should deliver incremental high margin EBITDA to our properties. Continuing with the Midwest segment, let's review the performance of our operations in Colorado. In the year over year comparison, please note that we lost two thirds of our sports betting income, which amounts to roughly half a million for the quarter. Both Colorado properties experienced significantly different results when comparing the performance of carded revenue versus un-carded revenue. In Central City, carded revenue grew 7%, while un-carded revenue decreased 36%. And we think that the construction on I-70 impacted Central City's un-carded play significantly more than carded play. Pointing in Central City was up 15%, but a significantly lower hold resulted in stock revenue declining by 9%. Q1 was a transitional quarter for Central City, with multiple cleanup initiatives started and completed. Combined with these effects of adverse weather, EBITDA was disappointing, but we are optimistic about upcoming quarters, and we believe we will reverse negative trends going forward. EBITDA for April shows year-over-year growth already pointing in the right direction. In Cripple Creek, we saw most of the decline coming from uncarded play, and we believe that Chamonix temporarily pulls revenue from the more casual uncarded customers. Despite Chamonix, we continue to hold strong with our high-end customers with win from the upper end patrons increasing by 24%. From an age standpoint, the younger demographic outperformed the older, with revenue from patrons under 60 increasing 10%, compared to a decrease of 12% from patrons over 60. During the quarter, we eliminated table games at both properties and revamped our restaurant concepts.

The expected savings net-net should come close to a million per year.

The East segment, which includes Mountaineer in West Virginia and Rocky Gap in Maryland, had a more challenging quarter. Both properties saw higher-end customers significantly outperform low- to mid-tier customers, with gaining revenue from the upper segment increasing by 10%, offset by a decline in the lower segment. At Rocky Cap, the main reason for the revenue decline was the lower volume on the slot floor. The gaming tables and the hotel did well and showed solid growth compared to last year. The number of trips decreased by 13%. Surely, weather was a big factor here, but the spend per trip increased by 9%. As with most other properties, the high-end segment continues to significantly outperform the low-to-mid segments. Our player development team at the property has revamped database offers at the beginning of April, which has resulted in improvements in coin intrants already. Mountaineer had a more favorable quarter, as gaming revenue increased 1%. Carded revenue was up 3%, uncarded revenue fell 3%. And again, it was the high-end customer producing the strong results with trips increasing 12% and revenue increasing 14%.

But the low to mid-tier segments saw trips decrease 4% and revenue decrease 1%.

Moving on to the West, the Nugget Casino Resort in Sparks, Reno, Nevada. While revenue was down, EBITDA was turned around from a negative last year to a positive 700,000 this quarter. After the 47% EBITDA growth in the fourth quarter of last year, this was the second significant increase in a row. Q1 is typically the most challenging quarter for the Nugget and the entire Reno Sparks market, but the management team's cost-cutting measures proved successful. Interestingly, Nugget is the only property in our portfolio where, in Q1, the lower-end customer performed better than the high-end customer. The main reason for that was the lower groups and convention volume compared to previous years. The trend of increased visits and revenue from patrons under the age of 50 continued from last year. This quarter, the growth was 6% in that segment. Another positive trend is the business we are getting from locals. We got 6% more visits from locals than last year. We expect to see that positive trend to continue as we launched our new Winner's Zone Rewards Program on April 1st. Now a few words about the small operations in Canada and Europe. In Canada, slot coin-in and table drop were flat, but due to lower hold percentages, total revenue decreased by 10%. FX headwinds negatively impacted results as well. Last month, we introduced a new sports buy and launch concept with great initial feedback and results. Overall, Canada is performing all right for us, and Q2 has started out flattish compared to last year. In Poland, the year-over-year comparison is really not meaningful because the number of casinos in operation was not the same. After the Polish capital city of Warsaw, the city of Wroclaw is the second most attractive gaming market in Poland. As you know, we opened a casino there last October and now it's been awarded a second license for that city. That's good news and we plan to open that second casino in Wroclaw in Q4 of this year. We are still committed to divesting our Poland operations. Two newly interested parties have surfaced recently. And discussions with our minority partner are also going well for a potential sale of 100% of the company. Moving on to cover a few balance sheet and capital items. The company's cash and cash equivalents at the end of the fourth quarter were 85 million. The total principal amount of debt outstanding was 340 million, resulting in net debt of 255 million. At the end of the quarter, our net debt to EBITDA ratio was 6.9 times and 7.6 times on a lease-adjusted basis. We expect these ratios to go down towards the end of the year to well below 6 and well below 7, respectively. We have no debt maturities until 2029. And we are very excited to be at the end of our capex cycle. The investments in our portfolio are evident and our properties have never looked better. There's no need for significant capex this year. We expect to spend just $4 million for growth projects and about $14 million in maintenance capex. We also expect the returns on our investments, together with the major reduction in capex, to produce a sizable improvement in free cash flow compared to last year.

As we look ahead,

We are confident in our business prospects moving forward. On the expense and labor side, we continue to focus on operational discipline and look for ways to become more efficient. Last year was a transitory period for us, but now we have a clear path forward to higher EBITDA and cash flow for 2025 and beyond. Considering the severe weather disruptions, combined with one fewer operating days this year compared to last year, and the loss of the sports betting revenue, our results in the first quarter, as well as initial results of April, do reflect upward trends. We have been seeing some improvements in consumer behavior and spending patterns since mid-March, and that trend has continued through April and early May. As mentioned, EBITDA in March was up 8% year-over-year. April looks similar. The initial estimate shows an increase in EBITDA of 5% over last year's April. We are encouraged by these trends in our business, and while we recognize the level of economic uncertainty, we are more confident in the long-term prospects of our company than we were at any point last year. And we are not directly impacted by tariffs, hardly at all. We just don't see that in our business. It's also worth noting that we do not anticipate any significant competitive supply impacting us this year or next. As we feel good about the direction of the business overall, and as we have a solid cash position of around 85 million, we intend to conservatively balance our small CapEx program with returning CapEx to our shareholders, and want to take advantage of the dislocated share price of CNTY on an opportunistic basis. The current environment is a little less certain than it was maybe a quarter ago, so we will be cautious, but we believe CNTY is the best casino investment with the highest growth potential out there. Hence, we plan to buy back stock in the coming weeks. All right, that concludes our prepared remarks. We'll now open the call for Q&A with the analysts. Operator, go ahead, please.

At this time, we'll open the question and answer session. If you would like to ask a question, please press star and one on your telephone keypad now, and you'll be placed into the queue in the order received. You may remove yourself from the queue at any time by pressing pound and one. If we do not get to your questions, please reach out to the company using the investor relations page at cnty.com. Once again, to ask a question, please press star and one on your phone now. And our first question comes from Jeff Stanchel from Stifel. Please go ahead, Jeff.

Good morning. This is Aidan Youngs on for Jeff Stanchel. Thanks for taking our questions. So to start off, have you started to notice any softening in the consumer for your Canadian assets? whether that be from uncertainty related to the trade war or else derivative impact from energy prices starting to come in?

Thanks for asking the question.

I'm not sure I understood you acoustically right. Are you inquiring about the customer behavior of our Alberta customers?

Yes. Okay.

We think that we don't really see any of the reasons that you mentioned as significant. It's more that the lower revenue is not that significant and it's also due to weather and one less gaming day. So we're not concerned.

Got it. Thank you. And to follow up, can you give us an update on some of the growth initiatives at Rocky Gap? Sort of what strategies are currently in place or else being planned to help sort of broaden the encatchment area and attract some more higher net worth overnight guests?

Hello? Hello, did you get that? Hello, Evan? Peter, are you still connected? Yes, yes, I'm still connected. In terms of... Okay.

At Rocky Gap in Maryland, we have completed the renovations in the F&B area, and... We are also ready with a great beach access that investment was finalized late last year. So we feel we have a better product for our hotel and resort guests right now. I'm back again, by the way. Very good, very good. And we've also started to reach into the Baltimore and Washington, D.C. areas with our marketing initiatives.

Maybe, Erwin, you can add more to that. Maybe it was Irwin again. Yeah, it appears that Irwin's line disconnected again. Okay. Yeah, any more to Rocky that you would like to know? No, that's helpful. I'll pass it on for now. Thank you.

And our next question comes from Jordan Bender from Citizens Bank. Please go ahead, Jordan.

Hey, everyone. Good morning. Peter, thanks for all the commentary across your regions, across your properties, and the prepared remarks. I just want to touch on the outlook here. You gave, I guess, year-end leverage targets. about two months ago. Today, those targets moved up. It seems like, you know, since then, trends have gotten better, you know, just based off of some of the March and April commentary. So just curious to kind of hear what has changed over that time, what you're seeing that, you know, maybe the year-end outlook just doesn't look as good as it did two months ago. Thank you.

And back in again, but Peter, please respond to the last sentence here.

The goals haven't really, I mean, we're currently at 6.9 net debt and 7.9 lease adjusted, but that's not where we want to be and we'll end the year significantly lower than that. There's just a lot of Uncertainty out there. And we currently see since mid-March for the last six, seven weeks, we see a nearly positive trend. But it's too short of a timeframe to project that out to the full remainder of 2025. And that's why we are a little bit more cautious. That's really all.

That works. And then in Alberta, they're taking a step forward to legalize online gaming. It seems like they're just about on the finish line there. The casino cross-sell opportunity is probably attractive for some of the companies looking to enter that market. Are you looking for ways to monetize your casino database with any potential partners that might be interested in that? Thank you.

In Canada, that is? Alberta, yes.

Well, the only thing that we potentially could see at the moment is that we partner up with the Alberta Gaming Commission with regard to sharing a database. I wouldn't see any other opportunity in that context.

And in sports betting, Robin? I think mainly in sports betting. Okay, thank you very much.

And our next question comes from Chad Bennion from the Quarry. Please go ahead, Chad.

Good morning. Thanks for taking my question. Peter, it looks like the Missouri results actually came out today for April, and you kind of talked about all the growth in Carothersville and Cape Girardeau. Initially, are we looking more for revenue growth or maintaining those kind of mid or high 30s EBITDA levels? And I guess what I'm getting at is, are you trying to reach out to more of these 75-mile and further out customers, maybe push a little bit more on marketing and promotions at this time just to grow the overall pie? or are you managing to, you know, to a bottom line result in the near term? Thanks.

Yeah, Chad, this is Erwin. Definitely both. We proactively and aggressively want to push the revenue up, and as you correctly said, an interesting segment is the 75-mile customer base. We think we've got more opportunity there, and we are using – database marketing, digital marketing, of course, and it's showing very good results. And at the same time, cross-discipline is still a topic. As Peter also mentioned in his initial remarks, particularly in Carothersville, there will be one or the other more opportunity to to right-size the cost side with the new casino, but that should all be happening within the next one or two quarters. So top and bottom line.

Okay, great. Thank you. And then with the increased interest on the Polish assets, do we still think this could – you know, come to a conclusion in 2025? What's the adjusted timeline based on more interest for these?

Okay. Peter?

As we sit here today, we believe so. But we were wrong already once late last year when we said that we think it's going to happen in 24. We were already, you know, drafting some documents and then the The board of the other side said no.

So it looks like it will happen this year.

Okay. Great.

And then just quickly, lastly, on the share repurchase opportunity, I know you said you're going to kind of dip your toe in, just given the uncertainty in the market. Obviously, there's massive dislocation with your stock and a number of the other stocks in the sector at this time. So quantitatively, can you help us think about, you know, how much you would be willing to or have the capacity to buy back maybe on a quarterly basis?

Thank you.

Peter?

Yeah.

We think we'll start between now and our next session. earnings release in early August. We'll start with a single-digit million-dollar value volume.

Thank you both. Sure.

And our next question comes from Ryan Sigdahl from Craig Hallam. Please go ahead, Ryan.

Hi, Peter Irwin. I want to stay just kind of on the last topic, stock buyback. I think you had been restricted because of the Poland where you were at in that sale process. Presumably you're unrestricted now. But curious, Poland is considering updating rules for its online casino, currently state-run operator. Just some various kind of governance potential changes there. Is that impacting either good or bad in the process?

In Poland, the state is the only entity that is allowed to run iGaming. However, sports betting is open to private companies. We are, with our casino brand, we are currently not offering sports betting, but that's a potential for a buyer and a Some of the companies that have expressed interest in our casinos, they come from the sports betting side, so it will be interesting to see. But the potential changes you are mentioning, they currently have not led to any new or additional significant interest.

Very good. And then just as it relates to both your east properties, is there anything from a self-help standpoint, either on the cost side or you talked a little bit about the growth opportunity, but mainly on the cost side that you can help stabilize those properties before you get a change and stabilization in the end consumer?

Which properties you're asking?

The east. Rocky Gap and Mountaineer.

The east. I'm not sure that I'm understanding the question with regard to self-help.

Is there any optimization you can do on the cost side in either of those properties?

Yeah, yeah, definitely. We are constantly working on that. And I think we've achieved some things, and there's certainly more that's possible.

Very good. Thanks, guys. Good luck. Thank you.

And at this time, there are no additional questions. If you do have any additional questions for the company, they may be sent through the investor relations page at cnty.com. And now I'll turn it back over to Peter for closing remarks.

Thanks, everyone. We appreciate you turning our call today. We'll talk again in early August. Until then, thanks and goodbye.

Thank you for your participation. You may now disconnect.