Q4 2020 Century Casinos Inc Earnings Call

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Okay.

And welcome to century casinos, and Q4, 2000, and 'twenty earnings Conference call.

This call will be recorded at this time, all participants are in a listen only mode.

We will conduct a question and answer session.

I would like to introduce our host for today's call, Mr. Peter and that changes.

Mr Mctaggart and you may begin.

Good morning, everyone and thank you for joining our earnings call.

With me on the call are my co CEO and the chairman of century casinos carbon heitzman, it's weighted to our Chief Financial Officer Margaret Stapleton.

And that's always before we begin we would like to remind you that we will be discussing forward looking information.

Which involves the non self risks and uncertainties that may cause actual results to differ materially from all forward looking statements.

Company undertakes no obligation to update or revise the forward looking statements.

And as we just talked with new information future events or otherwise.

We provide a detailed discussion of the various risk factors and our SEC filings and we encourage you to review these sidings.

In addition, and throughout our call me and such a civil and non-GAAP financial measures, including but not limited to adjusted EBITDA.

Reconciliations of all non-GAAP performance and liquidity measures to the appropriate kit missions.

And our news release and they see some filing day.

And they put in the Investor section of H I N T line those call them.

And I'll provide an overview of the fourth quarter, we sites after that there'll be a question and answer session.

Net operating revenue increased by 26% and it.

Adjusted EBITDA grew by 87% over Q4 of last year.

Over 80% of EBITDA comes from our operations from the U S.

Where four out of five properties posted strong gains in both revenue and EBITDA.

We are pleased with the robust results for the quarter, even though our casinos in Canada and Poland were closed over the busy Christmas holiday season.

And these sclerosis, we estimate our EBITDA and Q4 would have been 20 billion or more than double that of last year.

This great performance is also there is the result of the successful integration of the three casinos you acquired a little over a year ago and.

And the tremendous progress our low code management and operating teams have made since reopened all properties.

Okay.

Since we reopened and tuned it dwarfs the three casinos will be acquired from Colorado from a throttle.

And even to grow EBITDA by a combined 26 per cent compared to the same time last year under the previous ownership.

Net by the way on an annualized basis reduces the acquisition multiple we paid for these operations down to as low as three times.

The trends we saw in the summer continued throughout the fourth quarter increased spend per visit.

And more time spent on device.

With a somewhat reduced capacity and our casino floors and limited amenities for our guests.

Overall visitation to our properties with style and they did all compared to last year.

Being selective with our amenities keeping strong controls on the promotional environment and staying focused on the high marks from Arizona business thinks expense reductions and efficiencies without me and significantly higher operating margins.

And you know this is an industry wide trend and it looks sustainable.

He believes these higher margin and spend continue to be attained throughout 2021.

And we also see more upsides and the oldest and broke ethics feel more comfortable with trailing 12 and casinos and higher numbers.

Let's now look at the performance of each reporting segment, starting with Colorado.

He wasn't fantastic wall and floor properties, and Cripple Creek and Central City.

Net operating revenue was up 20%.

And adjusted EBITDA more than doubled to $3 4 million EBITDA margin jumped from 20% to 36%.

And Colorado, each county has different gaming floor restrictions Cripple Creek, the phone slot choice open and.

Top of the table gained positions on the operation and its interesting.

And Central City. The Casino is currently operating at approximately 65 per cent up the slot machines and topics that type of game decisions.

We see a significant increase in title and device and players are spending more per visit.

Our market share went up in both markets.

But most significantly in cripple Creek from tended to five per cent to 13%.

One of our three sports betting partnerships is already up and running.

Two planned to launch later this year.

All three partnerships payoffs at the same types of revenue with a minimum guaranteed amount per year.

And without any investment of course participation from our side. So it flows straight to the bottom line.

And then a couple of months and my first call.

Casinos will be low to remove the current dollar mix non pay TV and introduce new paper games such as baccarat.

Patent games currently comprise less than 10 per cent of total gaming revenue.

And below the 25 per cent of comparable regional gaming markets.

Indicating some upside for our Colorado operations.

Improved people game offering will appeal to new customer segments for example, with the Asian community and.

And with customers and we're looking forward to capitalize on this opportunity.

Moving on to Missouri.

Which is our most important market in terms of EBITDA and cash flow generation.

About two properties from capture other and Corrado suite about 95% of force slot machines from 58% of other paper King decisions are related to sort of play.

Our results for the quarter were again fantastic compared to Q4 of last year.

And we managed to grow net operating revenue by 3% and adjusted EBITDA by 31 per cent.

We increased the EBITDA margin from 33% to 42%.

The growth was carried by both properties and capture auto and Corrado suite truly good managed to achieve similar growth rates.

Corrado Smeal, even hit the highest slot coin in Q4 and the property's history.

The primary driver for these great results was an increase in the average revenue per player of approximately 40%.

Additionally, handle posts per hour has increased.

Guest appear to be played and slightly faster and spending more with describing the increase and revenue per player.

Overall visitation is down a little but we clearly see the day that the decline comes from work from the low end of the database and play from higher and players remains very strong.

Yes.

Table game revenue, which you see usually is contributing significantly.

And they had the strong slot volumes because case, that's still not allowed to smoke line stood at a gaming table.

We hope that restriction gets lifted soon and that'll be good upside for us and Missouri.

And the possibility of sports betting legislation later this year and next provides additional upside from that market.

Yes.

This quarter and Missouri properties go life with a new mobile app, which creates lots of opportunities to further increase customer loyalty and also save significantly on Barrick made expenses.

The other focuses on increasing customer engagement and provides guests access to all amenities and promotions with food and countless ability and the ability to take advantage of firms and rewards and office.

Next is west Virginia.

Where are the mountaineer casino racetrack and resort and a more challenging quarter EBITDA was down 30%.

But it is not surprising at all because of a temporary smoking ban and more importantly, the curfew and Ohio.

And the choice if Martinez business comes from.

Currently the good news flow almost 94 per cent of the slot machines and 45% of the tape of getting physicians to a play.

Some of the food and beverage outlets are opened with limited hours of operation.

But the convention space remains closed and the hotel is operating with limited capacity.

Because if it's a resort character and mountaineer will greatly benefit from a soft and you know if the COVID-19 situation.

And most of it and pure local casinos.

And it will also benefit when the oldest six the demographics feel more comfortable and again to come out and lots of them from us.

Additionally, the mountain <unk> quarters, other summer quarters, Q2, and two three.

So we think there's good upside ahead.

Sports betting at Mountaineer Racetrack and casino operating partnership with William Hill.

And online Casino gaming is expected to go live next quarter, but the share.

With Rush Street Interactive and also with William Hill.

Yes.

Okay.

Our international operations in Canada, and Europe had a difficult cooler.

Combined day contributed $3 7 billion in EBITDA.

This is down from seven 8 million and Q4 of last year.

The operating on the heavy capacity restrictions from most of the quarter and.

And had to close for the Christmas holiday season, which usually is very busy.

Since then Poland has reopened and mid February.

But from what we hear most likely relates to close again soon.

Candidly still closed.

On a consolidated basis. These international segments, the council and 19% of the company's total consolidated EBITDA.

And it's a reported we are and talks with several parties about a sale of the Polish casinos.

But as of today, we cant predict the outcome of these discussions and negotiations.

Is that a few words about our balance sheet liquidity and outlook.

As of December 31st 2020, we had 63 and 4 million and cash and cash equivalents and.

And $184 6 million and outstanding debt and operating sheep.

Resulting in net debt of $121 2 million.

The outstanding debt, including 100 and seeks to $8 3 billion related to the Macquarie credit agreement.

Pinpoint 2 million of bank debt and Europe and.

And $15 3 million related to a long term net lease for century Downs and Canada.

Net net of $9 3 million and deferred financing costs.

And do not foresee any substantial capex and the short and midterm.

All of our properties are in good shape, you have put all non essential capex projects on hold for now.

On a normalized basis, we invest approximately 3% to 4% of net revenues into our properties.

Overall, our business has been remarkably stable with almost all of our revenue coming from customers, who linked within and wanted to have our strive from our properties.

<unk> successfully executed a strategy peak and our premium local customers and we fully intend to keep the focus and the more efficient high and marching business going forward.

We see continued upside from creating efficiencies and synergies.

And recently Atlanta casinos from Eldorado and.

And as mentioned, we have more sports betting and table game growth coming and Colorado.

We look forward to our casinos and price checks to reopen and Canada.

And to and overall, a very busy summer season in North America.

With that on behalf of the company's management and board I'd like to thank our team members, our guests and our stockholders for their continued low L P and enthusiasm and demand.

Our business is through these challenging times.

Thank you for your attention and we can now start the question and answer session.

Operator go ahead please.

Thank you, ladies and gentlemen at this time and we will conduct a question and answer session. If he would like to ask a question. Please press star one on your phone now and you will be placed and take you and or do everything if.

If you find that your question has been answered you may remove yourself from the queue by pressing the pound can and thank.

Thank you and we are now ready to begin your first question here comes from Jeff Day and peer from Stifel. Please go ahead with your question.

Hey, great. Thanks, Good morning, everyone. Thanks for taking our questions.

And I wanted to start with your operations and the U S. S possible. We've heard from several of your regional peers that that generally things started to pick up sequentially and in January and February is there something you're seeing across any of your U S markets.

Yes, we've seen that with the exception that we have about seven to 10 days in February especially.

And with the best where the harsh winter storms.

And it has some impact.

Because I don't think that urban and that's why do we see some good performance right.

Definitely definitely exactly as you said.

Yeah.

Okay, great. Thanks, and then moving on to the Canada closures and the potential upcoming Poland re closures can you help us frame what the EBITDA burn rate looks like for those assets. That's it's my understanding is it's more limited and Canada comparatively given some government subsidies, but just any parameters around that and help us think about our models would be.

Ed.

I think taking maybe you can elaborate on that day and I'm sorry, yeah.

And then maybe you can give us day numbers and then also in Q2 the effects of the government TARP CPP is definitely a day.

We get and Colorado are in and Canada.

So for Canada.

From a cash perspective.

Burn rate from a cash perspective.

We're burning about 600000, and marmot and cash.

And that is we are getting subsidies back and smile.

Or Poland.

And.

You can pretty much from an EBITDA perspective, Poland and the burn.

That's right it'll be running negative EBITDA.

Yeah.

Yeah.

Poland probably.

We'll be at negative three or 400000 and EBITDA every month.

Okay, Great that's helpful and just to be clear.

And again at a burn rate.

Can you whats what sort of sits below EBITDA, if you're thinking about from a cash perspective.

I'm, just trying to it and it.

You don't have these numbers on that and we can take this offline.

Yeah, I don't really have these numbers right in front of me.

But we can pull them together.

Okay perfect.

Okay. Thank you I appreciate that.

One other quick one if you don't mind, you know last time and Paul and I. Appreciate that you can't elaborate further on and outcome there, but I was wondering if you could just help frame for us how you would think about pricing those assets and and what I mean by that is are you thinking about things on a multiple of 2019, EBITDA or kind of how has the potential buyer handicapping the recovery time line there.

And that's all from me thanks.

Hello, everyone.

And talks about normalized EBITDA, but and again, it's difficult to say what would normalized EBITDA means and not necessarily 2019 numbers.

And.

So yeah, it's a it's probably going to be.

Somewhere.

Somewhere around to 2019 non Muslim based on that the reason the remarkable.

So yeah.

But difficult to say at this stage.

And in Poland has a unique situation and it's extremely difficult for outsiders to enter the market.

And so it's a great place for the incumbents and that means every license that you have there.

<unk> has a pretty high value on day, one and then there'll be other hanes and the license as it is right.

Is it and.

And life of six years.

So it's.

Yeah.

Difficult question.

And because of our company goes and install and penthouses licensees for the last 30 years are also always have some three licensed.

Interest and discussions with the with the.

Potential a bias and.

And we probably shouldn't know malloy balk and in about four to six weeks.

Okay, great. Thanks, that's really helpful and thanks, everyone and really appreciate the color and congrats on the strong quarter.

Thanks Jay.

Okay.

Your next question comes from the line of David Bain from B Riley financial Please state your question.

Great. Thanks, and congratulations on another quarter of margin and I guess, just overall execution.

And just my first one would be broad based as you know we've heard a lot of domestic operator speak to a greater mix of a younger demographic and now with the vaccine rollout that core core older demographic seems to be returning.

What are you seeing that same dynamic and then two if so and we captured maybe a broader demographic other COVID-19 or do you think the demographic will simply rebalance over time and any kind of.

And that's around that would be helpful.

And then do you have any thoughts on that and we know we yeah. We don't really see that that but what you have described David we have all demographics now pretty much the same mistake always been and.

So in the as a percentage distribution of H.

But ultimately get built and we expect this debt as day restrictions.

Aesop or they've explanations.

Progress further that more of the low end players will come back, but that's not necessarily a has an impact on the change and demographics and casinos.

Okay interesting thanks.

And then if we look at the Missouri, and West Virginia acquisitions.

I think you were able to implement some improvements that have had positive impact with little capex.

Just looking at the targets that you may be reviewing today is that the same type of dynamic you look for like small things that you can do immediately to drive margin and Rabbit Hill or should we view the next acquisition a little differently in terms of potential Capex and just.

Try and understand the Missouri West Virginia models, one we should look at going forward.

Yeah.

We think very very similarly.

As we've done before.

So.

No one's free and.

Grass something there.

Monica investment that you would have to put into it.

And it's not going to be.

Huge.

We want to make a difference just by.

Being able to focus much more on that and that operation and then for example.

And that's been able to.

To two creates and itchy effects, but introducing good property to our portfolio and.

And eliminate certain what it did was there plus and other vital smaller operation improvements.

And we'll continue.

And can meet.

Okay, Great and just as my first one kind of fell through there if I could ask one more on and Cripple Creek one of your competitors are spending.

And additional 180 million and kind of a higher and hotel and amenities does that make you change your strategy there.

Table game change and potential.

Potentially you know we look at our former hotel plans for spillover traveler or whatever or are you just going to watch how everything unfolds before making any strategic.

Is there.

And then.

And if I may.

For the moment, we just watch and see we don't we don't see and need to act to react immediately you. Many excuses happening. This is great. It will expand the market day, two and certainly.

And bring more people out to the to Cripple Creek and there's enormous good class already and we think that right now.

And at the operating side, we have line.

And with greenhouse.

Todd upset our edition and number of gas stove and even the sales keep it at the other property.

Well as you know we have.

And land available and and and also we have the plans and the draw that they've had been.

And just rather well and so if one day, we will decide that.

Attractive upsides to the game by building our own Oh.

Okay, and really expanding the hotel room states, we have a week or two radically Q2, so I think at the moment its smelter.

And other priority.

Okay fantastic, Thanks, guys great quarter again.

Okay.

Once again is there any further questions at this time. Please press star one on your phone now. Your next question here comes from Chad Danielle <unk> from Macquarie.

Please state your question.

Good afternoon, and thanks for taking my questions.

Peter I was wondering if you could elaborate maybe just a little bit more on.

The Carruthers Phil.

So I think you said.

Revenue per player was up 40% and the quarter.

And then at the beginning I know you mentioned higher spend per visit and and more time on device do you do you believe that this was an anomaly was it just kind of a N a.

<unk> peak.

During holiday periods and in the fourth quarter or is it something that that's really showing that this property and the customers around there could.

Could continue to play it at higher levels, particularly post reopening win when more people come back to the property. Thanks.

We've seen that that's great performance since our channel niches and sweep reopened those properties and be sure. So it certainly is not a one time thing goes on day, one times and in Q4 and.

And has been happening.

And what have you now.

And I've been and any additional color from you.

And I can only underline what you said we are.

And if we can't say too much but.

I can tell we're really really pleased with and the embassy and cordless window. So in a in them and what they see in Q1.

Okay, Great I appreciate it.

And then given your higher free cash flow you guys have generated $40 million of EBITDA and the back half of 'twenty. Despite some of these restrictions and and closures. How are you thinking about your current lease I know when you originally announced the acquisition you had about two times cover.

<unk> are there opportunities to maybe adjust for that and take advantage of.

The multiples that.

That Reits are paying for this rental stream or are you more focused and just deleveraging your your conventional debt at this point.

Deleveraging is one thing that we focus on and the other day other water.

And when it comes to.

Two ranked and and.

And and lease agreements with reads, we want to address that perhaps in connection with.

With with a new approach at the new M and day situation and new acquisition debt.

Maybe one or two this year.

Be the right time to address it.

And now I'll, just grab and go see some deleveraging and finding another growth.

Quick topics.

And are you still thinking that roughly two times coverage is the right.

And the right metric to use for.

And for new deals or maybe slightly lower but something kind of in that ballpark.

Yeah, and little pocket, and we don't want to go too aggressive I mean, I'd, rather be more aggressive from the cap rates.

You know you know us for quite some time, we have seen and be concerned with the trends that are other.

Low a total amount of rain and.

Because you never know and the next day, you said long term agreements and all you never know, what's coming and mixed refreshes.

Okay, Great I appreciate it congrats on the results and best of luck.

Thanks, Jeff.

And there are no further questions. Thank you I will now hand, the call back over to Mr. Peter singer for closing comments.

Thank you for your interest and century casinos and your participation to color.

For a recording of the call. Please visit the financial results section of our web site at C. N T Y dot com.

With our best wishes local tastes, thanks, again and goodbye.

And can you. This concludes today's conference call. Thank you for your kind of and you may now disconnect.

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