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 will 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 Hotsinger. 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 US Federal Securities Laws. The company undertakes an obligation to update or revise the forward looking statements and actual results may differ from those projected. Throughout our call we refer to several non-GAAP financial measures including but not limited to adjusted EBITDA. Reconciliation of our non-GAAP measures to the appropriate GAAP measures can be found in our New Sunnyses 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 Heizmann 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 through the noise you see the positive trend here and you 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 US 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 spent per trip

increased 4%. For

a closer look at each market let's now start with Missouri. The new Corrado Swim 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 wins from patrons under age 50 increasing by 33% while increasing 8% from patrons over 50. Wins 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 and EBITDA are up 25% and 31% respectively which has exceeded our initial expectations. In absolute numbers the new Corrado Swim 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 Swim. On to our other hotel casino in Missouri, the Central Casino and Hotel in Cape Sherado. 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, the 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 aged 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 cost 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 -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 uncarded revenue. In Central City, carded revenue grew 7%, while uncarded revenue decreased 36%, and we think that the construction on I-70 impacted Central City's uncarded play significantly more than carded play. Point in in Central City was up 15%, but a significantly lower hold resulted in slot 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 -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 wins 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 Mount Tenier in West Virginia and Rocky Gap in Maryland, had a more challenging quarter. Both properties saw higher-end customers significantly outperform -mid-tier customers, with gaining revenue from the upper segment increasing by 10%, offset by a decline in the lower segment. At Rocky Gap, the main reason for the revenue decline was the lower volume on the 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 -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-in trends already. The East segment was the most successful in terms of revenue, but the revenue was not as good as the West segment. Mount Tenier had a more favorable quarter, as gaming revenue increased 1%. Carded revenue was up 3%, and carded 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 -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 bar and lounge concept with great initial feedback and results. Overall, Canada is performing alright for us and Q2 has started out flat-ish compared to last year. In Poland, the -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 has 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 bed and sheets 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 property portfolio are evident and our properties have never looked better. There is 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 spending 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% -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 gross potential out there. Hence, we plan to buy back stock in the coming weeks. All right, that concludes our prepared remarks. We will now open the call for Q&A with the analysts. Operator, go ahead please.

At this time, we will open the question and answer session. If you would like to ask a question, please press star and 1 on your telephone keypad now, and you will be placed into the queue in the order received. You may remove yourself from the queue at any time by pressing pound and 1. 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 1 on your phone now. And our first question comes from Jeff Stanchel from Stiefel. 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 a 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 gross growth initiatives at Rocky Gap? Sort of what strategies are currently in place or else being planned to help sort of broaden the encashment area and attract some more higher net worth overnight

guess? Hello. Did you get that? Hello, 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 also are ready with the 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 compared to last year. I'm back again by the way. Very good, very good. And we've also started to reach into the Baltimore and Washington DC areas with our marketing initiatives. Maybe, Urban, you can add more to that.

Yeah, the... Maybe we lost Urban again.

Yeah, it appears that Erwin's line disconnected again.

Okay. Yeah, any more to Rocky Gap that you would like to know?

No, that's helpful. I'll pass 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 since then, trends have gotten better 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 maybe the year-end outlook just doesn't look as good as it did two months ago. Thank you.

Well, I'm back in again,

but Peter, please respond to the last sentence.

The goals haven't really... We currently have 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. So, it'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.

Okay. That works. And then 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-sale 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, there is? Alberta,

yes.

Alberta.

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.

In sports betting, Robin? I think mainly in sports betting. Okay. Thank you very much.

And our next question comes from Chad Benyon 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 a bottom line result in the near term? Thanks.

Yeah, Chad, this is Robin. Definitely both. We actively 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, where cost 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 right size the cost side with the new casino, but that should be or that should not 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 come to a conclusion in 2025? What's the adjusted timeline based on more interest

for this?

Okay, Peter.

As we sit here today, we believe so, but we were wrong already once last year when we said that we think it's going to happen in 2024. We were already drafting documents and then 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 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 earnings release in early August. We'll start with a single digit million dollar

value volume. Thank you both. That helps. Thank you, Jeff. Sure.

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

Hey, Peter Erwin. 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 some of the companies that have expressed interest in our casinos there 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 in stabilization and then 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 joining our call today. We'll talk again in early August. Until then, thanks and goodbye.

Thank you for your participation. You may now disconnect.