Q1 2021 Century Casinos Inc Earnings Call
Ladies and gentlemen.
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Pardon me, ladies and gentlemen, we apologize for the technical delay, we're now ready to begin and welcome to the century casinos and Q1 2021 earnings conference call. This call is being recorded at this time for all participants are in a listen only mode.
Later, we will conduct a question and answer session I would like to introduce our host for today's call Mr. Peter Hot sector. Mr. Hudson you may begin.
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Yeah.
Hello.
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Good.
Good morning, everybody and thank you for joining our earnings call.
With me on the call by my co CEO and the chairman of century casinos, Erwin Heitzman and it's been as our Chief Financial Officer Margaret Stapleton.
As always before we begin who would like to remind you that you need to be discussing forward looking information, which in Washington, and I, both 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 as a result of new information future events or otherwise.
We provide a detailed discussion of the various risk factors and <unk>.
And encourage you to review these filings.
In addition throughout our call refer to several non-GAAP financial measures.
And but not limited to adjusted EBITDA.
Insinuations that Paul and non-GAAP performance indicate it diminishes the appropriate GAAP measures can be found at all and new cities and <unk> and mainly pretty and the intersection of our website at CMT Vitals com.
Yeah.
I will now provide an overview of the first quarter results and after that there will be a Q&A session.
Yeah.
Adjusted EBITDA for the quarter was $14 7 million.
And increase of 53% over the first quarter of last year.
The EBITDA for Q1 2019.
Our results were driven almost exclusively for our properties and the U S. Because our casinos and Canada were closed for the entire quarter and in Poland about close for most of the quarter.
Without these closures we estimate our adjusted EBITDA would have been around 22 million.
So yes, it was a great quarter January and February and we've got good margin was exceptional and.
And it's great to see that strength continuing into April and early may.
As most other local and regional casinos, we are benefiting from pent up demand.
Well actually I'm not sure if we can call it that because that strong demand has been around since June for almost a year now.
But anyway, we are benefiting from strong demand from easing restrictions from the vaccine rollout, which is driving the older demographic back to day casinos.
From strengthening consumer confidence.
From the preference for our close to home entertainment and from the fiscal stimulus.
All of that test improved visitation is going to spending glamorous and dollar casinos and.
And together with our disciplined and efficient operating spreadsheet.
Contributed to this great results across our portfolio.
We are confident we can keep delivering strong performances throughout the rest of the year.
Especially when looking at the very important 60, plus day Mcclaskey segment.
Net liquidity 60, plus year Old Testament, only started to return and then you recently.
Indicating more upside ahead.
You've seen some growth from this democratic and match, but many of us and cautious and remained on the sidelines that is changing and as COVID-19 vaccination and continue to rollout and restrictions lift we expect visitation to improve further as the year progresses.
We've also benefited from new player sign ups.
Especially at our three new properties and Mr. Qi net Missouri venue.
When you sign up for a 30% higher than in Q4, 2020.
And the work for these new players was even more impressive.
It was 41% higher compared to the first quarter of 2019.
This inflexible and new play out and he is providing us the great opportunity to grow out database.
And thank you for a high value players and convert them to loyal regular visitors.
The strong revenue trajectory, coupled with a substantially reduced fixed cost base should translate to continued meaningful EBIT levels well ahead of 2019 benchmarks.
Okay.
Other than the positive revenue trends and the Big question is whether the high operating margins are sustainable.
For the third quarter and a role we have been able to achieve high operating margins and yes. We do believe that will continue to be attainable.
Our operating margins depend on high revenues and a disciplined approach to operating costs and expenses.
We believe we will see sustained margin improvement relative to 2019 levers.
Through more efficient marketing practices.
Labor costs, and the elimination of certain March and dilutive amenities.
Savings come from many areas, including but not limited to promotions direct mail advertising outside hotel comps and cost of goods sold especially and S&P.
Should competing operators get more aggressive with promotional activity or even stopped bringing back margin dilutive for non gaming amenities that had been scraped during COVID-19.
And that could happen.
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This is something we have to watch out for but at this point, we haven't seen any significant impact and any of our markets even as other entertainment options. Las Vegas. For example have started to come back quite strongly.
This is encouraging and has continued into April and early may.
So.
But clearly revenue trends have the biggest impact on the weighted those margins will stay up for a cool down a little bit.
And that makes us feel good as we expect a significant amount of true pent up demand from the 60 plus year old demographic as mentioned.
The play levels of that demographic are kicking in as we speak and support and boost regional gaming revenue.
And most importantly, the EBITDA flow through should continue to be strong as the marketing spend behind these player base is pretty limited.
Okay.
Let's now look at the first quarter performance of each reporting segment, starting with Colorado.
Yeah.
It was a fantastic all day for our properties and Cripple Creek and Central City with both casinos clearly outpacing even pre COVID-19 levels.
Net operating revenue was up 40% over 2020.
And it was up 17% over 2019 in spite of capacity restrictions throughout the quarter.
Adjusted EBITDA was up for forward over 2020 and it was up 62% over 2019.
The EBITDA matching jumped to a first quarter record of 33%.
And Colorado, each county has different gaming flow restrictions and <unk>.
Cripple Creek, the food slot floor and about half of the table game positions for open during the quarter.
And Central City Casino was operating approximately two thirds of the slot machines and have looked at table game positions.
Our market share went up in both markets Inc.
And the Creek from pinpoint seeks to 23 per cent and in Central City from 27 point for 238%.
We anticipate continued strong performances from the summer months and.
For the upsides from two more sports betting launches and we see growth and table game revenue from new games and higher limits.
So far only one out of three and sports betting partnerships is up and running the other two plan to launch later this year.
All three partnerships pay as a percentage of revenue with a minimum guaranteed amount per year and.
That's without any investment or cost, but he said patients from our side.
So it flow straight to the bottom line.
Yeah.
Moving on to Missouri.
Which is our most important market in terms of EBITDA and cash flow generation.
And two properties, Inc. Keeps your other and Corrado scale.
And also machines are in operation, but only 54% of October gained positions are available for play.
Yeah.
And the results for the quarter, there again fantastic net operating revenue was up 44% for about 2020 and.
And he was up 27% over 2019.
Adjusted EBITDA was up two and a half times about 2020 and he was up 77% over 2019.
The EBITDA margin jumped to a first quarter rate cut off and listen to this 49, 7%.
Truly remarkable.
It keeps your other slot revenue and the cool and was the highest quarterly slot revenue and that pulp with its history.
The month of March was a record setting months for the property and several areas.
Slot revenue and total revenue for both monthly records.
March also had the highest monthly guest count C at the property since reopening and tune.
If it would be cash revenue was at its highest monthly total since reopening and seeing only minimal increases and comps.
Paper crop and revenue has a lot of upside still as we were operating at reduced capacity and with restrictions such as no eating and drinking or smoking and gaming tables.
We continue to get very good customer feedback for the new mobile it focuses on increasing customer engagement and provides guests access to all amenities and promotions.
Full account and visibility.
And the ability to take advantage of rewards and offers.
And for us that means lots of opportunities to further increase customer loyalty and also save significantly from Barrick made expenses.
Okay.
And the not too distant future, Missouri could legalize online sports gaming and.
And I gaming, which could bring additional revenue and EBIT the upside for us and debt markets.
Yeah.
Extra space for Ciena.
Operate the mountaineer casino racetrack and resort.
Adjusted EBITDA doubled compared to Q1, 2020.
But it was down 25 per cent compared to 2019 and.
And it is not surprising because of a temporary smoking ban and the curfew and Ohio, where the maturity of Mountaineers business comes from.
Currently the gaming floor office about 94 per cent of the slot machines and 47% of pay per gained positions for plate.
Some of the F&B outlets are open with limited hours of operation.
Convention space remains closed until tennis operating with limited capacity.
And because of its a resort destination character.
Montney and usually draws quite the and all of its business from customers and staying for a night or two it was difficult and the last 12 months.
But now, especially since March we see a strong uptick in business day trip and easiest direct and Inc. Two more people getting them explanations and feeding commvault labor getting out of the house for short trips overnight stays.
So we started to see first indications that the regional destination business is returning.
Well 10 reservations had increased to the highest level and more than a year and.
In fact preliminary numbers for April for EBITDA exceeding 2019 numbers.
It is early days still but we may see a great come back off net property as the year progresses.
And our online casino gaming has gone life in April and partnership with Rush Street into active and William Hill.
Yeah.
Yeah.
Internationally.
Our operations in Poland were closed for most of the quarter.
Operated for a couple of weeks and March only.
And the very latest news, we got this morning points for an opening in early June.
Mark the cash burn is about a million.
As already reported we are in talks with several parties about the sale of the Polish casinos.
And as of today, we can't predict the outcome of these negotiations and it takes time.
We are pretty certain that we will hit and more precise update for you and our next earnings call.
And in Canada.
If a close for the entire quarter.
We currently anticipate reopening sometime next month.
And in mid June, but that's you could pick and.
Speculation at this point and time.
Hospitalizations, and VIX and nation rollout as a percentage of the population and the key factors for reopening.
Explanation distributions is gaining ground, it's a about a 30% now it's at.
And he's the first dose.
Matson Cashman day is about 1.4 million weighted were closed.
Once we are allowed to reopen.
And we expect to realize labor efficiencies with limiting amenities to actual customer demands.
It should result in increased EBITDA margin.
Additionally, the potential licensing for online sports betting and Canada could provide significant upside for us and the province of Alberta moving.
And for out of 28 licenses.
That concludes the roundup of operations and now a few words about our balance sheet liquidity and outlook.
As of the end of March we had 66 million in cash and cash equivalents and $184 4 million and outstanding debt and off balance sheet.
Resulting in net debt of $118 4 million.
The outstanding debt included 160 <unk>.
7.9 million related to the Macquarie credit agreement.
$9 9 million of bank debt and Europe.
$15 5 million related to long term land lease for century Downs and Canada.
And that's a net of $8 9 million and deferred financing costs.
We are going ahead with the select capex projects, mostly new slot product.
Other than that all of our properties are in good shape and do not need any substantial investment.
Overall, our business has been remarkably strong.
With almost all of our revenue coming from customers, who live within and I wanted to half hour drive from our properties we have.
Successfully executed a strategy built and our premium local customers.
Going forward, we will stay firmly committed to our operating strategy.
Driving increased EBITDA and as a result of continued operating discipline and a tight focus on the right customer.
Even as other gaming entertainment options, particularly Vegas, and starting to come back you believe high notch and so will be sustainable and the regional and local casino markets and our performance is in April and early may seem to indicate that.
In terms of our online business, we continue to be excited by the opportunity presented by sports betting and gaming.
And he's a highly promotional and competitive landscape.
And that's both spending and I came and already generating positive cash flows for us.
If you need a partnership with circa sports William Hill.
And 365 Rush Street, and typical and the right approach right now it gives us guaranteed income without investment and also lets us know and a lot about the online business.
Long term however.
We will consider entering the online space and our own brand, thereby enhancing the multi channel relationship with other customers.
With revenue streams from land based casinos racetrack, and Gracie house on and off track betting as well as sports betting the I gaming.
We are developing into a truly multichannel and north American gaming company.
And we are as we speak.
Seriously looking at a handful of possible acquisition opportunities.
All in the U S.
For the broaden our footprint and leverage our successful operating model.
We said, we look forward to other casinos and race tracks reopening and Poland, and Canada and to a busy summer season in North America as the pandemic the pandemic hopefully subsides.
On behalf of the company's management and board and that.
And thank our team members and guests and our stockholders for their continued loyalty and enthusiasm as we manage our business during these challenging times.
And thank you for your attention and we can now start the Q&A session.
Operator go ahead please.
Thank you ladies and gentlemen at this time, we will conduct a question and answer session.
He would like to ask a question. Please press star one on your phone channel and you will be placed in the queue and the order received if you find that your question has been hands free you may remove yourself from the queue by pressing the pound key.
Alrighty.
And our first question comes from David Bain from B Riley.
Please go ahead your line is open.
Great. Thank you and congratulations on the reopening performance of day and clearly for turns there and you know first I was hoping you could help us understand the current M&A environment. You know specifically have you know given that the strong reopening here.
<unk> seen prices tightening or are they in line with what you've been reviewing previously you know product or supply tightened or is it the same number of acquirers with any kind of overall view as to what's going on out there would be really helpful.
Yeah.
Yeah. Thanks, Dave.
Uh huh.
Compare to.
About a year ago, yeah, certainly fewer properties on the market.
Oh, but.
Surely.
At least between half 1001 thousand are out there that are of interest to us and.
Very well fits into our portfolio.
In terms of and <unk>.
And and price levels.
And it's very difficult if not unlike Canada the ticket.
It is done on the same terms that we've done a little over a year ago, where we actually paid a was at around four times and so well.
Bob.
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But.
But all we know could we could we go in with our people and with our teams when they do the diligence and and.
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Come up with an EBIT number and the EBITDA that we think we can do with that property and based on that we apply a market for that works for us.
And because looking at.
Current non mouse or last year's numbers, especially these days is just extremely difficult. So we try to stay away from that and and come up with our own.
Estimates and and apply mark their books. So the landscape is a little bit smaller than it was a year ago, but still very attractive targets out there.
Okay Awesome and.
And I was going to be short and I'm, hoping I can ask a brief third as well, but I think it'll be short anyway. I know, it's early days and he antidotes on the table Max that lift and new games, and Colorado under Amendment and 77.
Yes. It is.
And then.
We have we take a cautious approach we have said, though it makes them a better high from the solar and on the first day of opening what we saw action are going are going up to 500.
Overall, we have to feed and it will take a little while until.
And until that market, Okay, hi, and developed not only to outpace that in general and Colorado.
We with the exceptional for feedback from KBC and that no. Other new games has been added anywhere and at least not yet.
So it's like you say, it's early days and I think and mountain to the exercise and we'd be able to to get to say something more definitive.
Okay, great and the final and promise Canada reopens.
Are there any different dynamics to think about versus you know your strong U S reopening them and us.
And we don't know capacity restrictions out of the gate and things like that but you know our drivers generally align from both non structural margin and and then overall reopening them similar to the U S or is there anything else that we should think about and in Canada.
Cause that reopens.
I think here, we really see.
She went to.
The U S openings kind of mirror.
We will again be cost is going to with the.
The site offerings are everything other than the non cash non gaming.
Offerings are and and you got a cost and EBIT took conscious.
We think that day, we definitely do really pent up demand and we would hope that as well.
And if and when were permitted told them that we can produce it.
Interesting numbers right from the get go.
And just as I had mentioned is.
And as much of a hindrance and easily can easily limitation and the slot machines.
And it may we have seen in some markets and even if we had a few restrictions.
Yeah, we can still produce a fantastic numbers simply because two people's opinions on that and more.
Awesome, Okay. Thanks, so much guidance.
Okay.
Thank you. Our next question comes from Chad Beynon from Macquarie. Please state your question.
Hi, good afternoon, and thanks for taking my question and congrats on a nice quarterly results.
Uh huh.
I know you mentioned that Poland is kind of an influx here that the talks are still ongoing Ah you mentioned that the properties due to open actually this week. After we start to swell I guess first question should we expect it to demand comes back quickly can you remind us in terms of what.
Restrictions would be when that opens up and then once it's it's open and kind of running normally should that propel the are the discussions that youre, having in terms of divesting the property. Thank you.
And when you shifted the unusual is Chad and.
And that was Appleton.
And neither are midnight. So are they told US that we are looking at will most likely be allowed to open tomorrow, but then this morning, they changed it and.
And we postponed it for another four weeks. So it is early true now.
And once we are allowed to reopen.
We do expect that especially in the casinos.
Casinos outside of Warsaw.
And which are truly a local and regional casinos that day.
And there will be a lot of pent up demand and that will translate into the revenue and EBITDA right away from the get go.
And the casinos and Warsaw have traditionally also drawn from international business travelers.
And that's that's about between 20 and 30% of all.
The business there and in the Warsaw casinos and that May not come back as quickly as the low cost business.
I mean would you like to it.
Yeah, Yeah I mean.
And I don't agree with what you say and we take out so the question for which restrictions we expect it's hard to say and we really don't know may be that we just couldn't be an obligation to wearing masks, but we don't.
If we hit the cash then we would say nothing other than that but it's speculation and we don't know.
Great. Thank you and then just on a potential change and your and your online strategy is this something that would come with a lot of additional costs you know, whether it's technology or you know if you decided to pivot to this strategy would you would you use third party.
Companies to kind of help with the <unk>.
Sales the marketing and the technology all of that limiting your expenses, but just connecting from a BDC standpoint, and getting those revenues. Thank you.
And this is Kevin.
And going in we will definitely start with third party partners and and mode to the model and such a fashion that we keep ourselves flexible and possibly as we are as we become more comfortable and get a lighter and and in that space that we might replace.
And state by state various services and take them in house, but that would be does it tend to be a revenue and EBIT that we then.
Great. Thank you very much.
Okay. Thank you and our next question comes from Jeff <unk> from Stifel.
And you state your question.
Great. Thanks, Good morning, everyone and thanks for taking our questions and congrats really nice quarter.
Wanted to start on your your Missouri properties results coming out of the market just continues to be truly truly incredible those two assets are run rating about 60 million of EBITDA, which if my if my math is right here is over double what they were generating before you acquired them margin quite a big role and he decided close to 50% for top line has also been impressive. So I guess my question.
Is this if you think about you know some other short term tailwind versus the long term structural changes that you've made for the business for the year.
And how and reaction to COVID-19, as well as you know actually took those assets over from from prior ownership.
Do you know how do you see those assets sort of I guess quote unquote normalizing out over the course of the year and into 2020, one 'twenty 'twenty two policies.
This is a and we think they are pretty normal knowledge. We don't think that there is much more normalization going on with we got to the numbers, we're very optimistic that we can keep and MSA.
And now.
Okay, well, that's that's incredible and great. Thanks, Thanks for that and then for my follow up you talked to a number of players sign ups during the quarter.
And he goes up 30% versus 2019, if memory serves I was hoping and unpack that a bit and pay for any overarching characteristics for these new buyers coming into the database do they tend to skew much younger what part for the gaming floor and the broader casinos do they gravitate to just anything to help understand that new player base would be great.
I would say good day.
The other 50 per cent of the purchasing power of our visitors. So so so the.
Affluent customers demographics pretty much the same as we asleep and hedges.
Florida and habits.
And more slots and then if that is something that indication.
Okay, Great and then and you know along those lines just how are those fair you know I think that was during the quarter or just how does that how does that progression for the quarter played out and and how is that kind of pieced into into April and in early March just in terms of new sign ups still seeing similar levels and strike versus 2019.
And you mean ethylene, Doug and me right, yes, and seeing strength.
Okay perfect. That's great. Thanks for thanks for all the color and congrats again and really strong quarter guys.
Thanks, Jeff.
Yeah.
Thank you and that concludes our questions at this time I'll now turn the call back over for closing remarks from Pizza hut singer.
Excellent. Thank you thanks, everybody for your interest and century casinos and your participation and the color.
For a recording of the call. Please visit the financial results section of our website at sea and T Y Dot com.
We have for our best wishes for curtailed, thanks, again and goodbye.
And this concludes today's conference call. Thank you for attending.
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Okay.