Q4 2019 Earnings Call
Welcome to century casinos Q4, 2019 earnings conference call. This call will be recorded at this time all participants are in listen only mode.
We will conduct a question answer session.
I would like to introduce your host for today's call Mr., Peter Hoetzinger Mr. Hu singer you may begin.
Good morning, everyone and thank you for joining our earnings score.
With me on the call on my co CEO and chairman of century casinos Herman Hudson It depends how chief financial Officer Mockridge paper.
Before we begin we would like to remind you that we'd be discussing forward looking information.
<unk> launch the number of risks and uncertainties that may cause actual results could differ materially from all forward looking statements.
The company undertakes no obligation to update or revise the forward looking statements, but is it was the result of new information future events or otherwise.
We did provide a t. pit discussion of various risk factors you know its and she findings and expect you to review these findings.
In addition to talk to our core we refer to several non-GAAP financial measures.
Moving but not limited to adjusted EBITDA.
Reconciliations of all known good performance in degree could be mission is to be appropriate get measures can be found in our news release inefficiency, finding all of which already made it means the investor section of our websites, that's yet to vital to come.
I'm not provide a brief review of the Companys financial results for the fourth quarter 2019.
Following these prepared remarks, there will be a question that sufficient.
In Q4, the big story for US supposed to completion of the locks just couldn't actually the company's history. The acquisition of three casino operations. Mr. Reinvested <unk> from is the Rod resorts 407 million.
Presenting at 3.5, you beat the market here.
You got Threeq, what do you see if it's in strong and Staples gaming markets.
Each enjoying a leading leading regional precision impeach with a long track record producing solid revenue and growing EBITDA.
Well the encouraging initial results in a couple of minutes.
This acquisition, it's doubled the size, our company, which truly underlines the jungle, that's a truly transformational in nature if the.
We're very happy to report that locally managements. It's all three properties chose to stay and become part of the great century Casino casinos people 3500 culprit does.
You cannot keeping us credits to the senior management teams. It's all three properties. If in first class drink all steps of keeps transaction from initial due diligence or do ways from closing and integration into the centric Brent.
Thank you for that.
The Big story for every one of these days are used to Corona virus Cobiz 19.
We are carefully monitoring the situation post close by a baby 19 endemic.
Well for the entire situation is unpredictable well management teams have to pay out to control that they can't control.
Our casinos that falling and promoting the recommendations from the U.S. centers for disease control It prevention.
Which include everyday actions to prevent the spread it's not response strictly vyvanse is.
Such as washing your hands off limits open to all though.
Awaiting touching your eyes, no wasn't mouth with unwashed hands.
Operating income for sneezed with the tissue cleaning and disinfecting secret Dick touched object in surfaces and of course, staying home when you're sick.
We also putting an extra if slipped into straightforward and realistic gift messaging and this step stepped up employee training to ensure a strict compliance not policies and procedures.
Yeah in constant communication with our employees to reinforce our Sanitization safety procedures, both guest facing a bankruptcy areas.
Yes, anytime soon I traffic public areas at an increased frequency.
Proper procedures are posted an Olympic of housework areas.
To date Cobiz 19 has noticed any significant impact on all U.S. So Canadian markets.
The marketing Poland, that's been weakening by about 10%.
As most of you know our customer base is very diversified between North America.
Oh casinos are located casinos urban and suburban locations.
The vast majority of our business from customers, who lives within an hour from all facilities outside of markets frequented by tourists.
How about casinos have nearly cheaper meeting in convention business and very few of our customers if any pro but actually visit us.
He's sympathy picked difficulties 19 on our business.
But this we all know this situation continues to change.
Okay with that let's move onto the response of the fourth quarter.
Net operating revenue was up 49% and.
Adjusted EBITDA was up 69%.
Boosted by the three new casinos, which contributed for three weeks in December.
We wrote off the entire I missed any box UK, which led to a net loss for the gold and the year.
Talking about boss.
We recently entered into an exclusivity and confidentiality agreement with a potential buyer.
Should know more about the outcome in one or two months from now.
In Canada, the egg Edmonton segment showed a 58% revenue increase.
Mostly because of the New addition of century, my racetrack and casino.
Have you thought it was up 6% only became because some century mine.
Simply put it Steve cost too much to generate the revenue.
Getting to EBITDA much into a more nobody's ever its entry my is certainly the goal for this year.
The Calgary market, it's quite the opposite.
Revenue was flat, but EBITDA was up 10%.
The expansion at century Downs open did last November and already contributed strongly to EBITA Justice we had planned it.
Oh operations in Poland had a great quarter to revenue was up 14% in EBITDA was up 48%.
The Colorado segments had slipped revenue at flat EBITDA.
Let me I'm very excited about sports betting going life in about two months, maybe three sports betting licenses available.
And have already entered into one agreement with <unk> sports, although plus make us more agreements with sports betting companies our remarks.
It's a menu of all completed those if he could provide the licenses no investment.
You get a percentage of the revenue with annual minimum guarantee.
Overall, it would be a meaningful increase to the Colorado EBITA for sure.
The second of West Virginia.
The newly acquired Mountaineer Casino race tricked into restored contributed 8.7 billion in revenue and 1.3 million EBITA did three weeks of December.
And in Missouri, the casinos in Cape share with doing carotid added 7.4 million in revenue and 2.6 million EBITDA doing good three weeks then.
We can't stress enough how excited to be I would say acquisition. If these three operations.
Not only did they come it's a very attractive 3.5 itamar deeper.
I also performing great even better than expected.
Revenue is up significantly at all to be casinos for the first two months of this year.
Maybe a confidence that we can decrease EBITA margins, even older walk into rather good.
We had that meets the rebranding the two mystery properties to century casinos.
We leave the well established now can you get brand in place.
Lots of things that's been going on at least three properties since we took them over in December.
Integration into our reporting marketing database and I T systems has gone very smoothly.
And the number of operational improvements have already been implemented.
Suggesting replacement of about 5% looks the worst performing slot machines with new products.
And the reconfiguration of the gaming floor layouts, which have shown immediate positive effects.
Moving now focused on further optimizing marketing spend and planning a kevin the around the promotions, which drives the most excitement for our customers at the most efficient cost.
On a pro forma basis.
Giving effect to make decisions they see if it had occurred at the beginning of 2019.
Yeah, five casino casinos in the U.S. sites in Canada, and Asia, and Europe with a total of 7200 gaming machines.
25 gaming tables, 430 hotel rooms, and three horse race tracks.
We generated pro forma net operating revenue of 423 million.
And 54 million in EBITDA off the old rent expenses.
These numbers do not include any synergy effects it or.
And going forward, we expect revenue and EBITDA to grow further.
Due to the recent expansion and century downs.
Sports betting in Colorado.
It's actually my the ramping up in and eliminating the losses in the UK.
On a pro forma basis or leverage phone traditional net that's these 2.5.
And our lease adjusted net debt leverage is 4.1.
Maintenance Capex in 2019 on a pro forma basis, including the new properties was about 10 million.
Well it brocksmith it wouldn't have percentage of revenues.
Tom from maybe 11 million the Diego.
Oh, well maintained its base requires minimal leverage doesn't maintenance capex to sustain current levels of revenue profitability.
Certainly helps the deal closed the gaming commission pace for 100% of slot machine Capex can divest Virginia Gaming Commission pace for 50% of so she can fix.
[noise] right before we go.
Okay.
Yeah, the current and very encouraging revenue trends for the first two months if this year.
As Wendy mentioned, Poland is down about 10%.
Colorado is up mid single digits.
It's the GGR is up mid single digits.
The Edmonton segment is up double digits.
Always Calgary.
Absolutely.
But did she says well.
The first two days of much come from these strengths that's everything points to a good start to their first quarter.
With that thank you for attention and we can I will start to Q1 day session.
Let's go ahead please.
Thank you ladies and gentleman at this time, we will conduct a question answer session. If you'd like to ask your question. Please press star one on your phone now.
For the Q any order received.
If you want to your question has been answered near mid yourself from my first in the pound Keith.
Not ready to begin.
Our first question comes from David King with Roth capital.
Please state your question.
Okay, great. Thank you I guess the first question I have is kind of given everything that's going on I'm does this make the opportunities out there time to negotiate acquisition you know is.
Does this put things on hold or does it actually makes things you know more.
More lubricated for you.
If you will are saying is that the rates are still open with respect to deals you're looking at isn't the case or have you been in touch with them a fleet.
Hi, Dave Yes, yes retail open.
Although although like that funding is that's not so that's not so certain.
And.
Uh huh.
You know the targets out there when.
Publicly listed companies they.
The film consider thing to be say less of course at this point in time to do so prices.
But we are looking at Oh, what prompted this has been looking for quite sometime.
And.
Giving given giving it a little bit of time I think come sometime.
You'll see us a active again, we don't we don't want to rush anything just just because of the comment though macro situation that we look to trigger any.
Any actions from us something today from.
Okay got it and then Peter also I'm, just looking at the public revenue and some of the numbers that you cited through March congratulations by the way, especially with regard to the new domestic portfolio I'm, hoping to get an idea of EBITDA flow through is that kind of close to.
The same revenue growth should we look at that or does that expand and and get refine through the year. How do we look at the kind of the flow through as as you've increased revenue at the properties.
Uh huh.
If the cost and expense structure stays roughly the same as it has something changed in February in other words, if there's nothing.
Coming because if this virus situation.
In the.
The the easiest Oh should grow by.
Little bit more than the revenue gross.
That's okay.
Are you confident for now that you can even improved from the it rather than logic.
Okay, and and then just.
Last one just a follow up on your Corona virus comments, so outside of some permanent Poland you haven't seen any.
Impacts the offerings or give us a local they don't have a lotta.
Flying but century mile that as a portion of its picture base that comes from the Edmonton Airport, correct or or you're not seeing any any sort of impact there.
Correct.
At the moment, we don't see anything it sometimes so casegoods.
Okay fantastic, Thanks, Peter Thanks or whatever.
[music].
Thank you.
And again, please press star one if you'd like to ask a question.
Next question is from which had been on with Macquarie. Please go ahead.
Hi, good morning, Thanks for taking my question.
One or two or just ask one more on a on a kind of iris.
And all the color that you gave a so far it's been very helpful. But within I guess, the close regions, where you have properties are you aware of any other measures that the local you know county or city has made in terms of like school closures or any other things.
That could potentially you know scare your patrons from from coming or do you feel like at this point the regions, where you operate I guess the.
The hype is a little less than than what we're seeing in some of the major cities. Thanks.
Well this is Phil I think at this point, we don't see anything that's you know that can change.
Okay, Colorado has some schools closed.
As of today humans.
Okay, and then a common question that we're getting from investors. This week is just around any leverage covenants, obviously youre that leverage is lower than most of your peers, but are there any any covenants or any provisions within your.
Within your debt documents that we need to be aware of.
Yes, very covenant lite, but picking can you go into a little bit of Teton.
I agree Peter we're just we're covenant Lite and we would we would not expect to trigger any covenant issues at this point in time.
Okay and then the last one just with respect your comment on you know some of the ER the items that you've done since the closing of the Eldorado properties, you said you're replacing.
Yeah, some of the lower performing machines is this something that.
You started already I mean could we start to see the benefits and you know as early as late in the first quarter second quarter is this something that's already.
Then put into place just kinda help us with with the timing of you know maybe some of these these revenue synergies.
I mean, it's.
This is Jim.
Definitely pocket puts and takes all right. So I'd number well slot machines that the that's it.
Hey down the tool and some we compete for instance, if he made its way so yes movies he.
Because I didn't hear the patients taking thing she doesn't make him to let the Tata that's callable.
Okay. Thank you very much guys best of luck.
That's true.
Our next question is from Richard Smith, a private Investor Your line is open.
Yeah.
Morning, considering the considerable drop in your share price would the company consider buying back shares.
At this time or in the future.
Hi, Thanks for the question.
That is almost a consideration or at the same time, we will look at our cash needs to improve the existing operation operations, and we look cool well well they just out there too.
Improve our stock price, but this is one consideration that we have but says.
Nothing.
I think that's it I mean do like immediately because.
We have stated finalizing all.
Immediate capex plans are for for the.
Properties that we just a quiet.
So don't expect anything immediate thing to have.
Okay.
The company does have ample cash to buy back shares if you can.
The next month I don't know couple of months, if you have to with the stock dropped something into the terms or something.
Oh, Yeah, we have thought about 51 million cash on hand and lines of credit or so.
Fees the share buyback or.
A very important or can't fix things typically if in the on all watch and Oh, yes, we have to cash.
Okay. Thank you very much thank you.
Q.
Our next question is from Steve Casco, Archie and Associates. Please state your question.
Hey, guys. Thanks for taking my question.
Oh, just real quick you kinda just addressed this but I just think the market is not understanding the strength of your balance sheet and just if you could reiterate that because obviously the stock at this price doesn't make a lot of sensor.
I'm, just wanting to the to kind of reiterate that.
[music].
Yeah. Thanks, Steve.
And we have thinks it yeah, one of the strongest spend and sheets the gaming industry.
2.5 net debt to.
So you could the leverage is it's really pretty healthy, but you know at the same time, it's all being through a to various crises.
So to use a window in and I founded the company 92, you know everything we said the wrote Casino is the name has has gone through the roof in terms of stock price and.
Then we hit over the last younger Oh.
Almost two years with various situations well many of our smaller competitors or highly leveraged compared to this.
Oh, he's not survive, we're still here with a balance sheet, that's almost stronger than ever and you will find those continuing going forward on anymore more conservative way compared to two Minneapolis.
Okay. Thank you.
Yeah. Thanks.
Our next question is from Brent Boyer with Stifel.
He's ask your question.
Yeah. Thanks for taking the questions guys and sorry, if you've already answered these ed trouble getting on the line [noise] first question Peter for you I noticed you called out in the release that you know thus far I'm outside of Poland, you Hadnt seen much of an impact.
From the virus on the business could you just kinda give us a sense of you know does that comment relate to you know up until say yesterday was that up till some other point of time, just any context around that would be helpful.
Yes, Brad this up until yesterday.
Don't see any oh really pick in a in Colorado in Reston, Virginia in Missouri and also in Canada.
Yeah, and and we also don't see any.
And then.
[noise] measurements like like closure of any if anything's into states other than Colorado, a certain schools as well.
Closed.
<unk>.
Poland is it different.
Yeah, but then again so far it's a it's around 10% that that hes being for a couple of weeks, though that's pretty sleeper hit that number.
Okay. That's helpful. And then I mean, obviously you know relative to you know the Albert and oil market in oil prices have been sort of relatively low for a while now but obviously, there's been a little bit of shock to the system in the last couple of days could you remind us just you know what do you believe to be your relative exposure.
To the oil patch in Alberta is at this point from sort of a customer sourcing perspective, I know over the years, you sort of kind of helped US you know frame the the segments of the demand pool in Alberta, any any color you could provide there.
Yeah, that's that's a little bit of already for the for the chemical segment or I mean, the companys.
During the last one crisis about five years ago they have.
If a downsize.
They say they have rightsized. So there's no talk of any like a mutually ill say anything at all or a but we are monitoring the situation.
On the flip side of me instead as you know gas prices has a big correlation with regional gaming revenue and ER.
And with our new strength in the U.S. regional markets, Yes, I think a lot of tool to offset or possibly weak economy in order to up though with.
No gas pricing is helping us in a in the U.S. regional gaming markets.
Okay. That's helpful and then I mean, it's if we look at your your Polish operation today.
You know I I realize it's a smaller percentage of the overall business and then it was prior to the Eldorado deal.
But you know it it's a nice little business you know it's doing you know the recent headwinds aside somewhere in the neighborhood of you know 10, or so million dollars of EBITDA I think it's still you know relatively ignored by North American investors. They just don't really have a good feel for that market. How committed are you to owning that bill.
And as long term and I mean is that something where you could potentially look I mean, I know, there's a couple opportunistic buyers out there potentially do you think that's a business that you could look to eventually.
Unwind at some point in kind of redeploy that liquidity elsewhere.
[noise] constantly oh.
Considering various various options and a with Poland as you said its a.
And lastly business producing solid numbers, we only had to heat up a lot of doubt I guess it go and Thats that has been some kind of a negative sixtyl cuddy filling on some U.S. investors because created some uncertainty even so it was only one time moving.
Into so do you use three of those Polish gaming.
The.
<unk>.
The value off of that investment.
Yes.
I used to be question because of the.
Yeah license a.
Lifetime of a license the question is or how much can you really really gets the issue if you put it on the markets.
So.
Oh, we actually we have not decided yet so probably a very happy to own it and degenerates really good revenue and EBITDA for us.
And cash flow, because we're getting the dividends out of the countries.
Right. Okay, and then lastly, I don't know if you commented on this at all but just from a housekeeping perspective did you did you mention at all what you think capex could look like for this year.
Which sets that are in 2019 on a pro forma basis, including the new properties. It was a in a 10 million down from 11 in 2018.
And Uh huh.
Pass it over to urban Dove into we expect it to go a little bit higher because of some things that we implement that these properties.
Yeah, I'm wondering if that's something you haven't had at the moment.
It's mostly on now we are holding off on one capex for the next few weeks someone thinks it I know that's something that's material.
Nothing to do you think so depending on how quickly they can't go back into multimode.
Maybe if we can pick.
The total Capex thing so we stay on the Coast Society Peanuts brand name in external thing.
Well because like you said because these are due to the anyway they maintained.
I think maybe properties.
Okay. Thanks, guys appreciate the color.
Thanks, Brett.
Our next question is from Jamie Jaco with <unk>.
Please state your question.
Hi, guys good morning.
So when I may have missed it but did you guys provided any commentary or updated outlook in terms of when you're thinking get the full run rate on the I'm a century mile property.
No no we have not that's not keeping the.
[noise] that number or it's just that's ramping up slower than expected. The revenue is a is okay are stuck on the cost side to be a booking and savvy to squeeze it the number Cynthia.
Trying to get a they meet them option too bad should be.
Anymore from from Europe in terms of timing when do we think we can get there.
<unk>.
HM.
Yeah, I mean in lung cancer stem.
When people see that guns and were confident that we get it yeah.
Did I tried to say and we see knowledge I mean, that's how quickly we call it a bit on this topic to me.
Got it I think you guys had previously said your thoughts I like a second quarter you could have you know you could be approaching that run rate.
I guess, yeah would you say I mean, obviously with the virus and all the uncertainties do you think the I mean first of all do you think the run rate of nine or $10 million is realistic at this point in time I you no longer term and <unk>.
Would you expect I don't know to exit the year at the very least well on that run rate.
Just given kind of the uncertainties.
Can you say anything.
Tim Duncan.
No no no I'm extremely proud to not really well. Thank you. Thank you.
[noise] understood and what about just someone asked me about the flow through on the upside, but what about on the downside you said, Poland was was down 10% how do we think about the.
You know the flow through to EBITDA.
No I mean same with the same with the upside for the on the on the.
Well, the EBIT decided it's a little bit higher.
Well.
Okay.
And I guess, just lastly, a comment I do just given kind of where your stock prices and and the cash generation and one of the believes that this will pass over time or the virus I think it would be you know rather than.
You know I get it there's exciting opportunities out there, but just given where your stock is I think.
You know we feel strongly that you guys should be looking at buying back in on stock you know and a normalized 25% plus type of free cash for yield as opposed to you know, making further acquisitions I'll leave it at that.
HM.
Thanks, Jamie.
Yes.
There are no further questions at this time I'll turn the call back to Mr. Hu thing or for any closing remarks.
Yes, I would like to thank everybody for for your interest in century casinos and for your participation to car.
A recording of the core recently C. diff, an exercise section of our website at <unk> and T Y Dot com good bye.
This concludes today's conference call. Thank you for attending.
[music].