Q1 2020 Earnings Call
Welcome to the century casinos Q1 2020 earnings conference call. This call will be recorded at this time, all participants alright listen only mode. Later, we will conduct a question answer session I would like to introduce our hosts for today's call Mr., Peter Petzinger, Mr asking or maybe it.
Thank you Ryan good morning, everyone and thank you for joining our earnings call.
With me on the cold or my co CEO and that you have enough century casinos urban Heitzman, it's handheld chief financial Officer Margaret Stapleton.
We hope only few your friends and families are safe and it gets that could take during these challenging times, the cobiz 19 and Dennis.
It was oldest before we begin he would like to remind you definitely be discussing forward looking information. It you launched a number of risks and uncertainties that may cause actual results to differ materially from all forward looking statements.
The company undertakes no obligation to update or revise the forward looking statements, but as a result, this new information future events or otherwise.
He provided detailed discussion if the parents respectively, not wasting findings and encourage you to review these filings.
In addition, Trump or color you refer to certain non-GAAP financial measure.
Moving but not limited to adjusted EBITDA.
The continuation support and not good performance, maybe you can be submissions to the appropriate gets missions can be found in old news release, but since you Friday.
If anything they miss to fix the far websites and see if divided called.
It's not providing what you have to companies and state of school, we'd like what's the current prices then briefly review the financial results for the first quarter can do you think.
Following their prepared remarks that would be a question answer session.
Okay.
Actually it's almost all casino companies, we closed our operations between March 14 in much doesn't seem to comply with great teams you shoot by governments to complain to spread of copies my team.
And if the children's I'll temporary with exception of the could feeling bad UK, which remains committed to coast.
In December of last year Bieber insane negotiations for the top casino.
In much not surprise to me that potential buyer terming that they've been a good negotiations.
Due to the came from say even at the negative outlook. We determine that's the best cost was actually the pizza will probably be wind up the fab casino companies.
Scientists and Terry liquidation <unk> last week, and keep that no more losses from Barclays pick all results.
In addition, I'll start Conservatives on NBC sports, which I meant that the good news and license debut of some of our operations and see parents.
And then 3 million has been written off Nicole though.
Turning to closes.
We are temporary they often totaled approximately 90% of talking about bus.
Except for Poland. The only place we've continued to be paid refused salaries, but if I'm looking for deals.
We recognized you pick that these Ah furloughs isn't all team members and we have tried to mitigate a little bit it seems like a continuing to provide benefits coverage.
We committed to bring benefits all U.S. and Canadian Please go see for pipeline. That's the end of me.
The remaining stuff, including senior management.
Pay cuts and not be should working on budgets negotiating with Mendo spanx. It lets us to manage to catch them on the chart, you shoes and on securing and maintaining our properties and preparing them for reopened.
Oh payroll just down significantly and many variable costs fall away while operations are closed.
Yes, many other expenses like interest in a bit.
<unk> expenses for some of all properties, we just did Texas insurance utility post about the expenses continue to occur even by the operations are closed.
You are currently generating only very limited revenue from all properties.
The net cash helps cool during this time doing patients often be sustained if it's close to 8 million per month.
It is improving food that service and rent payments.
What can we do too low what that number filled and preserve cash.
Before I recently been able to negotiate the solar frame for the land that's actually might not what amount took me too much lie.
Did you grow this up for one year in this interest free.
Yes amendment, the mass can easily be cheap to waste a minimum capex requirements what twentytwenty.
Good to come next year, it sounds to me the wrong convenient though.
Not opposed to good modifications of that not could be like passion range would be for rent gets rule out the topics for future discussions I'm teaching.
As you know that was similar federal and state relief programs in place and U.S. transmitters in Canada.
The specific rules that speed evolving, but unfortunately, they're pretty certain that at this stage even up to 25 I guess these programs that you two sites revenue language, so actually see leverage.
Okay, and then cheap has no near term maturities.
Into compliance all our debt obligations as of March 31.
Do you expect it to be the case for the second quarter.
Yes. It could 30, we had 55 serum began in cash.
Again, I want to catch opinions case, they meet again, including food that indirect service.
Oh, all casinos, we need approximately 90 ninem too we opened operations and commercial jumped kitchens, it's the properties.
Talking about reopening.
Basically on Monday, we announced the reopening of all casinos in Europe into Poland.
We opened only casinos on Monday morning.
The patient was good and the centerpiece sensing and a health and safety requirements in seem to pose any real difficulties.
Okay, you're very understandable situation.
Happy to be able to enjoy real gaming entertainment the game after two months of closure.
Before the closures, Poland constituted approximately 10% with Rolla total consolidated pizza.
Invested she now.
Covenant House depict it may 14th horse racing, maybe seen with most prestigious it out.
This announcement forces Opex in the park area and started training and thought mountain you facility already.
The first racist can do it for may 31st.
If you hold seek racist a week old without inside.
This would be ready Kusile, Kevin Mitchell, what's spending handle.
And I, just learning to catch been at that property.
Our goal of course invested she is also opened already Andy stickier than ever.
According to the laser based information available, we expect to be able to open the gaming floor Neil right it should be.
Misery.
Should be allowed to me opened all two casinos in a couple of weeks or did you based on information currently available.
It would be very good news for us because mysteries, our most important markets assumption you could put generation.
As for the reopening of all casinos in Colorado.
We currently anticipate too early to mid June.
And in order to other Canada.
80000, you you can it basically going horse race to see spending some revenue already.
And we also opened their restaurants, but some of our Canadian properties next week.
It has already been approved and should generate that only it's going to be revenue, but that's an increase the betting action on horse races.
Casino operations Edmonton came three would probably start sometime in the second topic of true.
So can you need a tightening in the official guidelines regarding their reopenings, we decided not to restrictions.
The various approaches and requirements laid out by the governments and regulators you'd likely include things like the use of infrared devices to check ingredient guests for fuel.
It used to habits of gaming restaurant and entertainment spaces, social sequencing and slot machines, they became seemed to restaurants.
The provision abuse of Slops face masks enhancing besides those.
The opinions disinfection of high touch sensors at short into things.
Limited restaurant opening hours for keeping restaurants, a about fixed close and other measures to account for varying levels of demand.
This into all of that you know a planning over the last weeks and you could comfortably with these requirements.
Most of all revenues since then so since from slot machines.
It's actually relatively easy to deploy social distancing itself, we shouldn't have yes.
Well towards I'm, not very often that greater than 50 doesn't you can see anyway. It's if all of this johnson take enough slot machines.
Oh geographic diversity and all locations in hyper local markets, we play a role in our recovery, especially in the early stages, where we can expect some pent up demand.
We're gonna dice being into gaming industry for on 40 years and has operated casinos in the U.S. internationally through a number of trending sometimes including 911.
From Boston to thousands into financial crisis, or well 10 years ago.
Each time.
Because you know interest she has recovered the onetime came back even stronger.
Actually into hyperlocal getting in markets, where we play.
All casinos predominately rely on the very locally and very loyal customer base.
And as such our operations should ramp up that the quicker rate than because who knows at this nation resorts.
Although because he knows our locus places urban and suburban locations within my boss the choice if all pieces coming from customers to live within 45 minutes from office services.
Okay. Because you know says that get your group meeting and convention business and very few of our cost the most he's ending currently but yet to be skus.
Maybe should be offset a comparatively inexpensive gaming experience once that is often see the for the pretty economic under difficult times.
So from everything we can see and from what the industry consultants are forecasting Nokia gaming she brings up considerably faster than to assist in Michigan.
Reopenings you'd probably be delisted from an entity prospectus and he probably beats and get more pure game. This comes to the facility you said you should be.
On top of that don't forget most of our custom nothing in local markets I people will not be active workforce, keeping with pensions fixed income.
Lastly, also pit the seamless check from the government.
And finally, if they win center openings of casinos already indication for example in South Dakota.
Hi, good morning, and country or reasons to be optimistic.
I'm sure you also reports that the opening weekend to about 15% to 20% higher than it typically beacon in spite of social defensive restrictions.
A couple of days ago, when assessments casino bresnan consultant.
You got reports so for long line around the business.
[noise], including my prepared remarks, here's a brief overview of our performance in Q1.
First thoughts for the first quarter frenzy, 20, really we're studying contracts.
January February Rep grape nuts, we integrate month.
So Bob started very strong and do go on pace to generate approximately 205 million in revenue and 20, beginning to just keep it that's what they call them.
Okay. That's been all time records significantly higher than out for costs and higher than consensus estimates.
Then came temporary closure seemed much we ended the quarter with the 87.7 million in revenue was 9.6 million in each adjusted EBITDA.
Decreases over last year's first of all of 92% and 44% respectively.
The gross up until <unk> notch will substantially and it goes well phase.
Collapse that was up 20%.
Canada was up 19%.
And also that three new properties, we acquired from corner from Eldorado performed exceptionally doing combined getting beat up almost 25% higher compared to last year I'm going to ride ownership.
We really look forward to ramping up to these kinds of response as soon as possible after the opening.
So on behalf of the company's management that boy I'd like to think our team members. Okay to know stockholders for their continued loyalty and patience during these difficult times.
She managed to properly position all pieces for the reopens the new normal.
Thank you for your attention and we can now starts securing day fish.
Operator go ahead please.
Ladies and gentlemen at this time, we will conduct the question answer session. If you like pass. Your question. Please press star one on your phone now annually Tyson into Q and the order received she found that your question I faster you name. It makes yourself from the Q I pressing the packing we're now ready to begin and your first question comes.
From the line of David Bain with Roth capital.
Great. Thank you Peter when in Margaret how did you guys are well.
As we reopened our there are some permanent or structural changes that you've identified that could allow for better flow through or additional concepts like a carry you know a more profitably generated revenue and can that carry forward to 2021 and if so can you speak to the most significant differences is as you open.
Target that.
So I wouldn't look he like to stop there.
Right Hi, David.
We haven't done then they would have not done any structural changes or thoughts on the fact that we used to time in Poland. In a you know they married casino, we choose to Pcs or casinos Poland.
Poland.
Two competing with anything to being a week doing a in the air conditioning, which really needed it and that's just try to chop soy to kind of came in handy we want to say since he gets the time to company can be too that then.
No way liquid form or temperatures that to some my thing.
Two.
To give you didn't experience targets, but other than that we didn't do anything structurally. However, we are like we like many other companies has once again, we felt I always try to cheese and Oh, we definitely more than ever.
We focus on the then you pay us a a fantastic players and they didn't he tends to.
Sure sequel to keeping the fact that we have capacity limitations you know like you know the most of all casinos.
We again like I guess, we felt we split digitization.
We should they can bring some cost savings some their marketing side.
And I guess, he said that the main things that we have done or from the itself out. Most of this is truly than most of it we will have to pay that human T. Like develops a we all are ready to act quickly or basically done they they basis, depending on what did they always choice Dixons Linda will ask from us.
So that way to convict squeaky.
Got it Okay, and then as a follow up cannot can you break down sort of the larger pieces.
The 19.8 million reopening cost is somebody earmarked as cage capital I mean, just if you can give us what those larger buckets are that'd be helpful. And then just assuming the reopenings are on schedule on the schedule that you gave us in the prepared remarks, it sounds like cash in June should still be 20 to 23 million.
As cash flow begins to to generate again as it is a kind of a fair estimate.
Thank you please.
Yes.
So David the 19.8 million is is mostly cage cash and then some some just some operating cash you know just based on the way cash flows for Penn gaming taxes and things like that.
And yes, you're correct, we should be in the $20 million to $23 million range.
Okay.
Great. Thanks, so much in and congrats on a the January February results is particularly with the acquisitions. Thanks so much.
<unk>.
And we have another question. The next question comes on a Chad Beynon from Macquarie. Please state your question.
Good morning, Thanks for taking my question.
Good to hear that you're well firstly on a normalized level of revenues to to reach breakeven EBITDA I.
Understanding that your properties of different cost structures and tax rates is there kind of is a range of what you need to get to to get these properties to to break even one through open. Thanks.
Oh man on the property by property basis.
That level is a fall well go to 5% Oh sorry.
Pre cobot 19 revenues.
Okay perfect. Thank you.
And then just back on the the liquidity situation. So can you just kind of help us get comfortable with the cushion that you have here, if it's 20 million of cage cash.
You know you're at 50 million at the end of April that just leaves you. A couple of months you know did did you or or you're exploring other sources of liquidity to maybe give you a little bit more cushion or you just comfortable with I guess, the timeline of openings and.
Cash flow that you're projecting.
In the near term thank you.
We.
We Oh, we have.
Plans <unk> GAAP across all the sites, we have Oh proposals terms sheets on the paper for additional credit lines.
We are also.
Ongoing discussions with so reaching.
Uh huh.
Other thinks that they are that they can do to me.
Plus up into the Capex requirement that they wait.
And.
Well no of course also also seeing that.
Capital markets open should they want to do anything.
And we also it's you know, we also oh, 100% free and clear menu with all properties in Colorado for example, or something in Canada. So we could be if we wanted to.
Or do something with that because this business.
Okay makes sense, thanks, Peter best of luck.
That's true.
And our next question comes on line of a Fred <unk> friends are you set your question.
Yeah. Thanks for taking the questions guys. So first I was just around the monthly cash outflow number 8 million could you tell us how much of that is just pure opex relative to the everything else.
[noise] you have to steady.
[noise], Brad as you know, it's a little bit difficult to just come up with pure Opex you know in this situation.
Yeah.
You know, where we're dealing with you know paying the cash flows mostly related to.
Loan repayments and Beachy.
And into you know.
Insurance payments things like that.
Yes.
Right, Beachy, and and and the interest and principal on the Mic Gordon on those two together, it's about a three to half million already.
Sure.
Okay. That's helpful.
And then just second question is around Capex I assume you guys are embedding some incremental rollback there in light of what we're experiencing how are you thinking about kind of capex for for the remainder of the year at this point.
Just just really is a minimum Irving Ah, yes, yeah do like its little if it all necessary.
Okay.
We don't know casinos in the in cats are great shape as you know just a in the fourth quarter Weve opened an expansion at century Downs.
So yeah, yeah, yeah, yeah. So we've got this back to the minimum and become hit any things that I really necessary retinal.
Okay, and then I I realize it's it's a very very short window, but can you provide any additional color around you know what you've seen in Poland, Thus far and I think more importantly.
Have you seen any yeah, you know bifurcation in customer behavior with regard to slots relative to tables any any color there would be helpful. Thanks.
Absolutely should be that's fine if I respond to that question. Please.
Yeah, well first of all we opened in the night from a from Sunday Monday, because we at midnight from somebody's amount because a lot to open and three minutes out the opening across the eight casinos in Poland. We had already a 100 case in there.
Although that is Clinton and you should I must be dad would take.
And does it put that there is I suppose if yesterday's obviously this is a very early on ER has been produced a against the backdrop for us not being able to market. It's already you know with a strong marketing restrictions in Poland. So it's really the smell a that that was going there and ER, but.
I think I could say everything's very good we're not far away from after two days already been not far away from mechanical breakeven.
And from from the custom US just so well there's little <unk>, how do the cost of mosquito talented employees. He I think they'd police Oh, you still to wearing the mass comparing the GAAP says they have school or Moscow, She's they can okay, kitchenware and the cost him as the only have two wells.
They are then masks.
Again everybody's a used they used to their spend now because it sounds like because then it was on that because seems like you have to where the boss.
And with we got to the paper since launch. So there is no though too much of the sheets to a because a as you may remember due to the parties gaming Hill, we can only happen makes him a 77 zero slot machines casino license. So these there's lots that we had that's been going places already its assets.
The sent to appeal for pre koby signs in the first Tonight and the David a a ramping up and let us know because of the seat reduction that we're having but overall the assessment of a fast tend to fall management salaries are there any posted its never really excited about the it there.
If the business that could see in the first phase.
Perfect. Thanks for all the color guys and good luck on getting things back on line here.
Thank you.
And we do have more question for next question comes from John degree from Union Gaming. Please state your question.
Hi, everyone.
Two questions one I wanted to ask a little bit more about the 8 million dollar cash per month, and probably getting a little granular, but with Poland reopened and some racing in Canada and West Virginia should we think about the actual cash net outflow going forward.
From here being something less than 8 million out there's a little bit of revenue back in the system.
We should can.
Can you quantify I guess picky.
Let me to only rights.
[music].
The 8 million if everything was still close.
Yes, yes, yes, oh, okay, okay that that's helpful.
And then we think.
[music].
Go ahead around I'm sorry.
That does not to say that basically a Poland. We think is the easy they since the carrying it they've already probably in a week from though.
And then next month kicking in we'd see holiday how deeply.
Coming on.
Got it very good okay.
In Canada.
With the volatility and kind of sharp drop in oil prices.
Has that or do you expect that to have any impact on your business. When it reopens and then any comments you could provide on that kind of continued ramp of of your new property in Edmonton would be helpful.
In in order to.
We also have another business from retired people. So they are not a fix it.
Oil situation and also a don't forget the recent decision on the expansion of the Trans Mountain Valley pipeline that.
Oh, yeah, the everybody's enthusiastic about it and should the.
Sure.
You need to it.
Strong recovery on top of that no offsetting race introduction provinces corporate fixed rate. The thing is the newest a corporate fixed rate of old provinces in Canada. It person. So they are doing lots of things to stimulate the economy, and we actually see pretty encouraging signs.
In terms of a ramping up century mine.
Back to urban please.
But it's just too little too early to say you know it would be speculation they have to open and see how its going.
The properties in better shape everything spine Oh, the either they said they have once weekend stuff Oh, the racing again, we already but but it's not the second they'd be spending time about.
How quickly can ramp.
For January and February yet at century mile Deaf, you've seen kind of continued.
Growth or or margin improvement over the fourth quarter before cove it at at Sentry mile.
We have but but it's been pretty codell. So those two months the testing they have been weather impacted by weather and again, it's not really representative of a because she over the whole ya.
Fair enough. Thank you everybody.
That's true.
And when do you have more questions. This next question comes from the line of Ana well Mark from Santini Research. Please state your question.
Hi, Thanks for taking my question I was just wondering if you guys see any opportunities to make acquisitions coming out of the current covert environment.
Mm hmm knee, receiving it'll be probably surely not all main focus right now.
Yeah. It's it's it's it's too early and device yeah.
I think ends up being brought to us. So we we are aware of what's happening out there have you seen some opportunities or stopped right now it's definitely most so no problem in focus.
Okay, and just a follow up on that is is there any sort of environment when you'll feel comfortable starting to look more into those opportunities.
I think after the summer pasta off because some of the.
Hi.
Good shape. This is Steve if you need to we'd be with the reopening so clearly.
Through the amounts of June.
That we feel very busy times a day.
Great. Thanks, so much for the information.
Thank you.
We do have another question on line. This comes from the line of hack Silberman from W. investments. Please state your question.
Hi, there you or.
Are there any states are provinces that are talking about.
Temporarily reducing gaming taxes in order to help the casinos.
Well when do they are they just wonder if there is discussion about it in Colorado.
And Oh and Conversely, there is also in.
And did it thought they'd shorted anything short in certain areas. So silly discussion about it.
I'm, sorry, Colorado in where.
And the into Canada.
In Alberta got it Yeah I'm sorry second question, you said I am getting casinos back to 35% of pre Copel get revenue on a property level would be breakeven I assume that's that property level breakeven and you then not talk about.
Theres the corporate expense.
That's correct gifts and I said, 35%.
[noise], 35%.
Yes, that's on the problem <unk> property never.
Got it.
And then last question I know that different different states are discussing or you know requirements in terms of social gifting thing and stuff.
At your peak, whatever Friday, or Saturday night, what kind of utilization you typically have for your slots.
Ed at your entry get from facilities.
<unk>.
I would say.
Clean depending on circumstances between 4500, 60%.
I asked to do so actually we are.
Yeah go ahead.
Oh. Please go ahead no. Please.
I wanted to say that has to do with California said that we always try to make sure that we have enough product available on the preliminary outlook.
Our customers so always can choose into on the close to pay machine just because its feel are really not there. The one day when people back to play.
So with if they if they peak if they peak level was 45% to 60%.
Requiring that you only have 50% of your machines operating in order to separate people shouldn't be that big of a stretch for you guys.
That's very quick exactly that's how we see this way.
Okay. That's all I got thank you.
At this time there no other there no further questions I'll now turn back over time.
Thank you and thanks, everybody for your interest in century casinos and your participation decor.
For a recording of the core PTC their financial results section of our website that you have to buy dot com.
Yes, our best wishes, okay, Thanks, again and goodbye.
This concludes todays conference call. Thank you for it.