Q3 2019 Earnings Call
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Hi, short the conference I'd, it's quarter three.
Thank you Andrew person last name.
Yes, Rachel are a C H E L.
Last name it Smith.
Semi T H.
Intercompany.
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[noise] and central minus maintenance way.
Operations continue to ramp up and we are pleased with the revenue generated at the property.
We continue to analyze the cost structure, the stocking listen deficiency suspension my the chieftain margins we expect.
In Calgary, Oh, well, but these century downs and century casino.
Dinner I didn't even better revenue growth named a 6% at 3% respectively.
Adjusted EBITDA was up that century casino and slightly down at century downs due to onetime expenses associated with a high profile Chuck Reagan racing event that was hit an all goes in some construction related bashing disruption.
Yeah, very excited about the upcoming opening up the expansion of century downs between increase the gaming fell by about 20% and will open in two weeks.
Total capex is approximately 1 billion.
Remember, we don't have to pay for the slot machines.
We expect to generate at least that same amount incremental EBITDA per year.
In the U.S. two operations in Colorado went down slightly year over year.
As mentioned several times previously, Colorado isn't bad competitive markets and in some quarters you win market share you not as you lose it beat all depending how heavily others are spending on promotions and comping.
We hope that Tomorrow November five retail in online sports betting will be both in in Colorado.
Yeah, I negotiations with various sports betting companies for pop the ships to provide a high quality and competitive offering for customers.
Key points for any such agreements and partnerships include quality and experience of the sports betting partner.
Well as revenue splits annual minimum guarantees to us.
Splits putting operations in Colorado could start as early as into some of next year and he will be well prepared for it.
In Poland revenue was up 28% in local currency EBITDA almost tripled.
The growth came from both the slots entered table games that all locations and the newly expanded gaming floor. It off collection operation the casino at the Marriott Hotel in Warsaw continues to ramp up nicely.
In the UK the casino bar disappoint.
The outlook remains challenging as the gaming business throughout the UK is being hampered by a tough regulations regarding anti money laundering, social responsibility and general data protection.
We have started as strategic review of this investment with all options on the taper and plan to make a decision in Q1 of next year.
No. It quick look at our balance sheet and liquidity with 44 million in cash cash equivalents and 71 million an outstanding debt.
The total debt to adjusted EBITDA ratio is 2.7.
The net debt to adjusted EBITDA ratio is 1.0.
Oh that includes 52 million related to our bank of Montral credit agreement 15 million related to the century Downs long term land lease and 4 million in Europe .
The book value per share increased to $6 a nine cents.
Capex for existing operations during the quarter was 2.1 million or 3.9% of revenues, which includes about half a million for the gaming for expansion it century downs in Calgary.
Let me now give you an update of the L. Roderick position as most of you know in June of this year, we announced the acquisition of three casino operations from Eldorado 407 million and then impressively accretive 4.1 acquisition multiples.
Well that it has become even more exciting because these three operations has continued their strong performance, resulting in a decrease of our purchase material to 3.6, which is really fantastic.
These are three quality assets in strong and stable gaming markets, each enjoying a leading regional position in each with a long track record of producing solid and growing revenue and EBITDA.
With this acquisition, we pretty much doubled the size of our company, which underlines the truly transformational nature of this deal.
The transaction is subject to gaming regulatory approval in Missouri, as well as customary closing conditions and expected to close in late 2019 or very early 2020 .
Throughout the quarter.
Our accounting operations I T and marketing teams have visited all three operations in Mr. In West, Virginia, and number of times to ensure smooth take over.
We're very happy to report that local management, all three properties will come with us and stay in place.
And we have already identified some short term low cost measures to increase business volumes increase operating efficiencies.
Right. So we will rebranded to mislead properties to century casinos, we leave the well established mountain you brand in place.
On a pro forma basis, giving effect to the acquisition as if it had occurred a year ago, we have five casinos in the U.S. five in Canada, and a smaller ones in Europe .
With a total of 7200 gaming machines 270 gaming tables, 430 hotel rooms, and three horse race tracks.
And we generated net operating revenue of 415 million and adjusted EBITDA of 58 million.
These numbers do not include any synergy effects the door and going forward, we expect revenue needed to grow further due to the new century mile ramping up expansion at century Downs and new sports betting revenue in count, Colorado subject to vote to approve tomorrow.
That's already exciting it's more than doubling our revenues and EBITDA. So therefore, it's pretty surprising to me that our stock price is not reacted positively to it yet.
On the road in New York in Chicago later, this week to get the story out.
I hope that will help.
We'll finance the transaction with 170 million term loan facility, which for which we have bank commitment from Macquarie capital.
This facility will also take out the existing debt, we have with BMO right now.
On a pro forma basis, our leverage on traditional net debt is 2.5.
And our lease adjusted net debt leverage is 4.1.
This conservative capitalization together with a strong operating performance and great relationships with gaming rates should provide us ample capacity to pursue further growth opportunities, especially as the regional gaming trends in North America remained healthy.
All right that pretty much sums up another successful and very active very busy quarter for us I. Thank you for attention and we can now start to Q1 day session.
Operator go ahead please.
As a reminder to ask a question you will need to press star one on your telephone to withdraw your question press the pound or hash key please standby, while we compiled acuity roster.
Your first question comes from David Bain with Roth Capital. Your line is open.
Great. Thank you.
Congratulations on the acquisitions again, especially the way they're trending.
I know you mentioned there were some short term low cost measures with the acquisitions could you elaborate on what those are and give us any sort of financial impact or return Hello.
Hello.
Do you hear me.
Hi, here, then I hear anything since Herman.
Okay I'm sorry.
Okay I was just speaking to the.
Hello Hello.
[laughter].
Okay.
Well, maybe around if you if you could help possibly on basically synergies as it relates to the Eldorado acquisition and if you can elaborate on any of these sort of short term low cost measures that you you mentioned in the press release and on the call.
To the impact of properties.
Yes.
Right. So they had wonderful thing so when do instead in Colorado City land in mountaineer, we intend to.
To get some new slot machines. So we identified the lowest performing machines and we intend to replace them with new ones.
In that context it is.
Important to mentioned that in West Virginia.
I wish that you've got a lottery commission pays for 60% of myself machines slot machine purchase.
We haven't dying to fight exact numbers, yet, but there will be by let's say very obvious things to do.
Then in addition to that when we see already some some sanchez and marketing tweaks.
As you know a imperato has been.
Pretty good.
My question I should say in reducing marketing spend and we would like to probably to loosen up slightly.
Not much much like insight you on the into one or the other area.
Okay, and then looking forward and North America acquisition as you know obviously, the the field the opportunity field is growing and you have a lot of dry powder I would call it a particularly in tandem with a partner.
I guess two questions kind of your basic overall thoughts on today's market opportunities and then what are the other one being what's the optimal mix for century in terms of being asset light so to speak in terms of EBITDA generation or mix of properties that you own versus.
Others that you you know have a landlord essentially and if that's religious deal specific or you know any sort of thoughts there and then do you look at real estate monetization of existing properties.
That was kind of a multitenant question [laughter].
Okay.
In the.
But then let's stay terrorism.
And then the reversal updates itself and Peter when you're back on again, please let us know.
I do not intend or two to monetize any uptick seeking real estate we had.
Okay.
Yeah, but have no banks with regard to that that second question with regards to the optimal mix.
As of today, we think that we should we see the two it.
So, let's say opportunity pace. So it is no intention to become that's what we'll have everything financed with a it's a combination of recent operating company. It may well be that we continue to a outright purchase but it will depend on the on well that we are if and when an opportunity comes out that we think is effective.
And took question today's opportunity.
We are monitoring a and then what's out on the market they are but a it at this moment.
That's that's the part number one priority is to.
To be said to focus on their smooth transition to begin way.
And ER and once we have said under the Bank. Then then didn't look more.
Actively again, but.
At the moment there was nothing that was so appealing that we couldn't say no.
Got it okay, thanks, everyone and Peter I'm sure. Thank you as well.
I'm back in thank you.
Okay, that's great. Thanks, Peter.
That's why wouldn't close deals.
Yeah, that's true.
Your next question comes from broad Boyer with Stifel. Your line is open.
Yes, thanks for taking the questions guys. First question is kind of a three part question around century mile. Obviously, you know were another quarter under the ramp there revenues are looking to be heading into right direction. I guess could you give us a sense of how the revenues are.
Ramping there and sort of how you're seeing that market evolves given that you you guys have additional assets in the market you know.
Are you shifting play around are you growing the market are you taking trips from competitors I'm just some flavor around.
The revenue environment, there and then secondarily, obviously the margins were they'll get weaker than than whatever always expecting I guess the question. Now you know is how should we think about the margins ramping from here.
And along those lines are you guys still confident in sort of that you know I think on the low and we were talking about 10 million for for a while they're sort of the the run rate EBITDA number but are you are you still comfortable with that number and what gets you a gives you comfort in that number. Thanks.
[noise] robbing Peter would you like okay.
We are.
As Peter said earlier revenue aside it's a it's already a very good and were happy with the way how it develops or on the on the cost side, Oh, where you think you're working on getting the costs down and it's pretty clear, where we have to get cost down and.
We implemented a south if you thought possible.
Which should show an impact a if I say that cautiously at the very latest in Q1, Oh 2020 , a if not the in Q4 already.
We wish we got to the compared to the overall market, we have oh, yeah, but generally speaking I'm being a bit too.
I want better than the market for it.
Actually I will I would say for that definitely for the two eight among other casinos that we had.
So we.
I think we have you could quit on.
On the market and a strong relationship to our.
Core and we'll take it is too yes.
Specifically with regard to sanction mind, we see a main competitor this with Macquarie.
They stay in a they finished the needed by our.
By the opening of our casino 9000. They are I think back. This is is when if they can and.
We think that going forward that this will continue to be our main competitor.
But we know there's no reason not to be confident then what gives us confidence is a if you look at how we handle century downs or where initially.
First he also was little bit choppy.
But now four years later the number sockets that its you know we are expanding so.
We we have.
Confidence interest in our operating and marketing capabilities.
Okay. That's helpful. And then just around the the deals with Eldorado I know in the past.
When you guys announced the deals you were talking about the potential for some sort of minor capex items potentially I know there's a.
Hotel or adjacent to Caruthersville I think we're talking about just curious if you have any updated thoughts there and then I don't know Peter if you could sort of give us just a flavor for modeling.
You know sort of what you anticipate sort of capex looking like on the other side of the deals closing.
In addition, I start and you'll find deals come in with the second question.
That seems to Peter maybe going again.
Okay.
Yeah, Let me get started aid and sets us apart.
Initially there is there's no deferred capex. So when we think of the process is everything is in good order a except as I said on the on the low low into local Reflow parents are there there's certainly opportunities.
[noise] [noise] Hello, [laughter], sorry for that I don't know where they can it but can you hear me Brett Yes, I can hear your thanks.
Yeah. Good now when we think out to two to the first them more substantial capex measures like.
Like as we mentioned Dal tile across the road in Colorado Springs.
We will evaluate it is more Atms, we in our conversations with management, we we certainly cup. The came to the conclusion that this is not there number one priority we need to focus on that or other things that are more important than oh I think that.
Probably the family will be year or two into into us having taken over before we make any capex. This isn't something larger kind a little bit of replacement capex here in Dallas more Natchez, maybe trends there may be putting a satellite kitchen here are there some operational efficiency improvements.
But nothing nothing yards that does that answer your question.
Ah yes. It does that's that's very helpful.
And then I guess lastly, I'm just around around BAF could you just give us a little bit better sense of sort of what this you know strategic review entails I would imagine given some of the headwinds in the market.
Potentially finding a a a buyer could be pretty difficult in this environment. So I mean is there a scenario that you envision where you could potentially just kinda shuts down and walk away from it or how are you thinking about sort of the path forward there.
You know to the extent of the the operations don't improve here. Thanks.
All right yeah. They the answer is a few years. So we can't imagine everything also just a.
Closing it down obviously they cannot just close the door. So we're now looking at the various avenues that we can go a them because clearly we believe we.
Tend to keep going all the contractual obligations.
But we're in the middle of checking that lines at the same time, we've seen try to asked before they set to try to see whether there's any kind of turned around possible.
But at the moment everything I think I should say this we should we anticipate that we will not have that.
Pain in our income statement and painted sheet fighting for an extended period of time.
Okay very helpful. Thanks for all the color urban.
I have names thank you Brad.
Your next question comes from Michael to live with Craig Hallum. Your line is open.
Great. Thanks, guys for taking my question just want to draw down a little bit more in a century mile.
The cost side running ahead of where we were expecting and you sort of think that we can get some good traction, perhaps maybe even as early as the squad.
In March.
Corridor, where are you taking.
Actually we are we still trying to get to that.
Mid Twentys, EBIT, Oh, 20% to 25% EBITDA in 2020 or are you talking to try to get to that point. It sometime during the year next year.
Well.
Here can you just give us a little bit of sounds fun.
That would be helpful.
Yeah, Yeah, I I'd love to buy but let me because design patients certainly 2020 , but at this point in time I wouldn't want to a promise. It you know we we just have to that's a two to take into a very heavily and and then that caught on getting the the cost had right line at the same time also.
Ramping so further ramping up our marketing approach so.
You have to be able to say today, but.
Let me just be cautious.
Yeah, Yeah, Okay, and how about seasonality can you give us out of some help on the seasonality.
Was down sequentially in September quarter.
How does the fourth quarter typically looking for that.
Or what do you expect them to that.
Property.
Seasonally and as we go out here.
Oh, Yeah generally speaking a they they are not properties are less seasonal than than they might appear there just given typical rather in spite of this translates went just between wait 10 summer, but what has to be said is in a in our properties in Canada.
As opposed to Colorado, Nobody has to try thought the mountain and.
Clearly people in Canada, I used to drive it in and he can it whether it's way. So so they'd always turned out to be less of a of the problem.
We Oh I don't see and we don't really that second seasonality a whole lot.
The rather look at a at these swings are they may depend on how heavily our competitors.
Booking on the marketing side as Peter mentioned earlier quarters, when one or two of the competitors are around the narrative marketing campaign that that may happen in things here and there.
Well just look at the long long term there.
Okay, great that should help.
Certainly.
Yeah.
Your next question comes from John Decree with Union Gaming Your line is open.
Hi, Thanks for all the additional color sandbar.
Just wanted to touch on Poland, I think we've covered the U.S. and Canada and now that.
Morsels ramping and a licensing process has been behind us for a while I think before all that started the margins in Poland, where 14, almost 15% and rebuilding nicely here I was wondering if you could give us a little bit of color on.
If ascertainable again, and what the timeline might be the kind of get back to.
Normal operating margins in Poland.
Alright.
If you said the their operations, it's wonderful to see how when they're coming back and even or even the smaller bunch a it doesnt mean, let me remind all of us in it.
We always get the questions that you keep this small casinos that has to do with the whole licensing the arithmetic.
It is chested contagious to have.
The smaller casinos this way when when when you're going to re licensing me, Dave to say, though it generally.
But.
The I I think week, we continue that both the revenue and the end to end to end. The if it's the fact very well there is only one or one thing that we expect in 2020 that we have to raise the take rates a little bit across the board and they may a slow us down in the ramping up again.
Got it can't in general terms. So we think we can't come back to ER to the EBITDA margins than it used to have.
That's helpful. I appreciate the additional color thanks, everyone.
Hi on means thank you.
[laughter].
Your next question comes from Kenneth.
Yes.
Let's invest Sir your line is open.
Thank you Oh.
My question actually grew up the losses at corporate and other I know you discussed that some of that was a was with bank of England.
Are there any of the losses that are attributable to corporate and other because I notice on the.
Earnings statements that are or put another has been a bit of a drag on the overall picture.
Or Ah.
Ah century, and is there anything that can be done to all them late rather eliminate losses coming from that sector.
Yeah. Thanks for the question.
Some of it has to do with the cost that we have in connection with El Dorado acquisition.
Thank you would you like to go into more detail.
Sure. So most of the <unk> cost running through corporate and other or the losses running to corporate another are related to the Bath <unk> tobacco.
That is rolled up into that segment and then yes of course, we have some additional expenses running through right now related to acquisition.
Okay and.
Do you anticipate.
The first or your of operation of the acquisitions from.
Eldorado Oh.
Moving all things being equal or.
Assuming that the results are the same as they were in 2019 for 2020 do you anticipate a positive of Ah earnings picture.
Okay.
Just a rising out of these newly acquired properties a you're asking.
Yes.
Yes.
And I are you asking whether we think we do the same or more.
Yes, I'm, saying, an all things being equal a things we're no different ER and 2020 versus how there how they work for these casinos employee 19.
Would you anticipate a profitable operation for the for all three.
Yes definitely definitely.
Yes, absolutely Penneast. This is Pete I'm backing into but what we say that on a pro forma basis.
We would expect so full year with with the new the new acquired operations to be expects to generate about 416 million in revenue.
And 58 million in EBITDA.
Okay. Thank you very much.
Thanks.
Your next question comes from Andrew Gordon with CF Gordon Capital. Your line is open.
Hey, good morning, gentlemen.
Just a I apologize if I missed this in trends I mean, I've heard you touched on this but the 50 million a trailing 12 month or adjusted EBITDA on consolidated basis does that attribute.
How much does that attribute to the Eldorado acquired properties.
That's that's the full year.
So three properties and it is approximately half house is that right. Thank you.
Well, thank you very roughly 29 million man.
Oh, well trained anecdotally I believe right.
Got it.
So next question make it quick I, just want get a little clarity on what be a realistic or not leverage number should be on a pro forma basis.
Consensus numbers for 2020, EBITDA, we're I think around 41 million for 2020 and coming into this call and you're now attributing around 30 million.
To the newly acquired properties, so, let's say, it's roughly 70 million or on the.
Well, we updated estimates.
The net leverage I believe is supposed to be around maybe a little over 100 million.
So on a looking forward basis, I think your pro forma net leverage should be maybe 1.5 or better.
And I just wanted to clarify and make sure that you guys agree with that because at least one of your analyst I believe is then.
Looking out.
Trailing basis in attributing three acts net leverage and I just thought though like if you could get all benefit from a little clarity.
Our net debt to on a pro forma basis will be closer to 430 130.
And the EBITDA number that you mentioned.
Could perhaps be a little bit aggressive because as we now know centrally mind is ramping up a bit slower than expected.
No those those would be my my two comments to your calculation.
Okay, all right I'll follow up offline. Thank you.
Hey, Thanks again.
Again, it is star one on your telephone keypad to ask a question. Your next question comes from Patrick Arnold with Energy Management. Your line is open.
Hi.
First I'd like to say congratulations on your acquisitions, our question with more along the lines with.
Participation with the reach and what you might.
When or what might be the disposition of the execs acreage in West Virginia.
Uh huh.
Uh huh.
Yes.
I will do you have any color on that we as you know Patrick we do not only lane, oh that its own or with the old I Beachy.
And so it may be right question that.
But.
So we have no no no plans.
These accounts to that.
Right.
The follow up to that was obviously you guys are are coming into the emergence of the Marcellus and the energy gas sector here.
Did you have any kind of unique marketing plans are thought to try and too.
Encourage them to come to your facility at mountaineer, what I'm looking at here as Austintown north of viewers created kind of a a niche for those guys as well based off of the a.
The large cracker plant, that's going into Manac about 24 miles north they have you guys looked at that at all or part of it.
Yes definitely.
Yeah exactly the sorry.
No I was just saying that that that you asked me that.
That's a little obviously part of all.
Of our marketing that change them to be a.
Formulating those planes, but please go ahead.
No. That's just wanted to they stay the same way. We're excited that this is happening and then most definitely.
We target a it fills a new customers.
Yes, it's a as an influx here well congratulations again.
And thank you for your time on the call.
Thanks, that's it thank you.
There are no further questions at this time I will now turn the call back over to the presenters.
Thanks, everyone for your interest in century casinos and your participation in the core.
So I recording of Nicole Please visit the financial section of our website at sea in Dubai Dot Com.
Thank you goodbye.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.