Q1 2024 Century Casinos Inc Earnings Call
Operator: Good day everyone and welcome to today's Century Casinos Q1 2020 earnings call. At this time, all participants are in a listen-only mode. Later, you will have the opportunity to ask questions during the questions and answers session. You may register to ask a question at any time by pressing the star 1 on your telephone keypad, and you may withdraw yourself from the queue by pressing the star 2. Please note this call is being recorded, and I will be standing by if you need any assistance. It is now my pleasure to turn the conference over to Mr. Peter Hoetzinger. Please go ahead.
Good day, everyone and welcome to century casinos Q1, 'twenty 'twenty for earnings calls.
Operator: At this time all participants are in a listen only mode.
Operator: Mode later, you'll have the opportunity to ask questions. During the question and answer session. You May Register to ask a question at any time by pressing the star one on your telephone keypad and you may reach all yourself from the queue by pressing star two.
Peter Hoetzinger: Please note this call is being recorded and I'll be standing by if you should need any assistance. It is now my pleasure to turn the conference over to Mr. Peter Hot singer. Please go ahead.
Peter Hoetzinger: Good morning, everyone, and thank you for joining our earnings call. We would like to remind you that we will be discussing forward-looking information, which involves risks and uncertainties that may cause actual results to differ from our forward-looking statements. The company undertakes no obligation to update or revise the forward-looking statements, whether as a result of new information, future events, or otherwise. We provide a discussion of the risk factors in our SEC filings and encourage you to review these filings.
Peter Hoetzinger: Good morning, everyone and thank you for joining our earnings call or.
Peter Hoetzinger: We would like to remind you that we may discuss.
Peter Hoetzinger: Forward looking information.
Peter Hoetzinger: Which involves risks and uncertainties that may cause actual results to get stuff from all forward looking statements.
Peter Hoetzinger: The company undertakes no obligation to update or revise the forward looking statements, but as a result of new information future events or otherwise.
Peter Hoetzinger: They provide a discussion of the risk factors in our SEC.
Peter Hoetzinger: Filings and encourage you to review these filings.
Peter Hoetzinger: Throughout our call, we refer to several non-GAAP financial measures, including but not limited to adjusted EBITDA. Reconciliations of our non-GAAP measures to the appropriate GAAP measures can be found in our news releases and SEC filings, available in the Investor section of our website at cnty.com. I'll now provide an overview of the first quarter 2024 results, as well as our outlook for this and next year. After that, my co-CEO, Erwin Haitzmann, and our CFO, Margaret Stapleton, will join me for a Q&A session.
Peter Hoetzinger: Our callers.
Peter Hoetzinger: We refer to several non-GAAP financial measures, including but not limited to adjusted EBITDAR.
Peter Hoetzinger: Reconciliations of all non-GAAP measures to the appropriate kit, that's just cant consolidate all news releases and SEC filings available in the Investor section of our website at C. N T Y dot com.
Speaker Change: And I'll provide an overview of the first quarter 'twenty 'twenty four and such.
Peter Hoetzinger: It is our outlook for decent next year.
Speaker Change: After that my co CEO urban high to spend it all this year. So my bad statement either jointly flakes, you Bill day session.
Peter Hoetzinger: Yes.
Peter Hoetzinger: For the quarter, we delivered net revenue of $136 million, an increase of 25% over Q1 of last year. The increase came from the additions of the Nugget in Nevada and Rocky Gap in Maryland, as well as good performances by our Canadian operations. However, this was offset by extremely bad weather, a weaker retail customer, construction disruption at a few properties, and the temporary closures of three casinos in Poland. Adjusted EBITDAR was $21 million, down 18% from last year. The U.S. operations were flat, and Canada was up.
Peter Hoetzinger: For the quarter.
Peter Hoetzinger: We delivered net revenue of 136 million and.
Peter Hoetzinger: An increase of 25% over Q1 of last year.
Peter Hoetzinger: The increase came from the addition, something knock in Nevada, and Rocky gap in Maryland as.
Peter Hoetzinger: Well its good performance each of our Canadian operations.
Peter Hoetzinger: Offset by extremely bad weather.
Peter Hoetzinger: A weak retail customer construction disruption at a few properties.
Peter Hoetzinger: And the temporary closures of three casinos in Poland.
Peter Hoetzinger: Yeah.
Peter Hoetzinger: Adjusted EBITDAR was 21 million down 18% from last year.
Peter Hoetzinger: The U S operations were flat and Canada was up.
Peter Hoetzinger: Poland and the corporate segment were down, so it was a rather challenging start to the new year. Well, we knew our performance was compared to a strong first quarter of 23. The results were also impacted by severe winter weather.
Peter Hoetzinger: Poland at the corporate segment were down.
Peter Hoetzinger: So it also rado churning kidneys stopped for the new year.
Peter Hoetzinger: We knew our performance was comping to a strong first quarter of 'twenty three.
Peter Hoetzinger: The results were also impacted by severe winter weather.
Peter Hoetzinger: As you have heard from others in regional casinos, January was essentially wiped out because of weather. And because most of our casinos are located outside of major cities in tourist destinations, such as Rocky Cap, Mountaineer, Central City, or Cripple Creek, and also Corrado's Mill, our customers need to drive half an hour, an hour or more outside of city lights and urban streets. You can imagine the dramatic impact winter storms with unsafe driving conditions have on recitation.
Peter Hoetzinger: As you have heard from other senior regional casinos.
Peter Hoetzinger: January was essentially wiped out because of labor.
Peter Hoetzinger: And because most of our casino and located outside of major cities destination areas, such as Rocky gap.
Peter Hoetzinger: EMEA.
Peter Hoetzinger: The C D in Cripple Creek, Colorado C R.
Peter Hoetzinger: Our customers need to drive half an hour an hour or more outside of city lights and Goldman streets.
Peter Hoetzinger: You can't even mentioned the dramatic impact winter storms, it's unsafe driving because they should have elicitation.
Peter Hoetzinger: In addition to the January weather, we faced several other transitory issues as well. Three of our casinos in Poland were closed for some or all of the quarter; two reopened towards the end of the quarter, and the third one, the largest of the three, will reopen in Q3. So from about August onwards, we will have all eight casinos in full operation again. Also, our increased spend on capital projects throughout our properties caused construction disruption at most of our casinos.
Peter Hoetzinger: In addition to the change in every way that we face several other transitory issues as well.
Peter Hoetzinger: Three of our casinos in Poland were closed for some or all of the quarter.
Peter Hoetzinger: Two we opened towards the end of slick water and the third one is the largest of the three will reopen in Q3.
Peter Hoetzinger: So from about August on you can have one eight casinos in full operation again.
Peter Hoetzinger: Yeah.
Peter Hoetzinger: Also our increased spend on capital projects throughout our properties cost construction disruption at most of our casinos.
Peter Hoetzinger: And finally, remember, we acquired Nugget and RockyCat just about 12 months ago, meaning we are still early in the process of managing everything as one cohesive portfolio. But to really get a good picture of what was going on in the quarter,
Peter Hoetzinger: And finally remember me o'clock Nuggets, and Rocky gap, just about 12 months ago, meaning we are still early in the process of managing everything as one cohesive portfolio.
Peter Hoetzinger: But to really get a good picture about what's going on in the quarter.
Peter Hoetzinger: We need to take the weather impact in January out of the equation and look at February and March. And what we see is that beyond January, volumes from our core customers actually grew. In addition, operating margins in February and March were better than in Q4 of last year, and they were very close to the margin in Q3 of last year, which is typically a very good quarter. So there's no worsening trend or anything like that. I mean, all of the substantial declines that happened happened in January. February and March for Quentin Ulmer.
Peter Hoetzinger: You need to take the weather impact in January out of the equation and took into February and March.
Peter Hoetzinger: And what we see you said beyond January gaming.
Peter Hoetzinger: Gaming volumes from our core customers actually grew.
Peter Hoetzinger: In addition, operating margins in February and March were better than in Q4 of last year.
Peter Hoetzinger: And they were very close to get matched Q3 of last year, which is typically a very good quarter.
Peter Hoetzinger: So there's no worsening trend or anything like that.
Peter Hoetzinger: All of the substantial declines detected happened in January.
Peter Hoetzinger: February and March requesting Omer.
Peter Hoetzinger: In fact, March showed signs of real strength at our properties. Take Nevada, for example. The slot revenue in the Reno Sparks market was down 3%, while slot revenue at our Nugget crew was 9%. In Colorado, Central City and Blackhawk were up 3%. Our casino was up 7%. In Cripple Creek, the market was up 2%; we were up 6%. And while Missouri's lot revenue was down 1% in March, we were up 2%. Very encouraging signs as we move into the second quarter.
Peter Hoetzinger: March showed signs of real strength at our properties.
Peter Hoetzinger: Take Nevada, the slot revenue in their reading of Sparks market was down 3% and slot revenue at our market grew 9%.
Peter Hoetzinger: In Colorado Central she didn't pet coke were up 3%.
Peter Hoetzinger: Our casino was up 7%.
Peter Hoetzinger: The Cripple Creek market was up 2% even up 6%.
Peter Hoetzinger: And I'm just curious slot revenue was down 1% in March.
Peter Hoetzinger: Up 2%.
Peter Hoetzinger: Encouraging signs as we moved into the second quarter.
Peter Hoetzinger: Looking at the segment results for Q1, we start with the Midwest, which includes our Colorado and Missouri operations. Revenue for the segment was flat year-over-year. EPTAR was down 9%. That's not bad at all, considering the January weather, as well as construction disruption at both Missouri properties. And also considering that Cripple Creek was totally closed for two full days in March because of the heavy snowstorm.
Peter Hoetzinger: Looking at the segment results for Q1, we start with the Midwest.
Peter Hoetzinger: <unk>, Colorado, Missouri operations.
Peter Hoetzinger: Revenue of the segment was flat year over year.
Peter Hoetzinger: EBITDA was down 9%, that's not bad at all considering that generally a rider as well as construction disruption at both of these three properties.
Peter Hoetzinger: And also considering that Cripple Creek was totally closed for two full days in March because of the heavy snowstorm.
Peter Hoetzinger: In Cripple Creek, a competing property opened directly across the street from us with 300 hotel rooms, which certainly increases the market. And, as anticipated, we continue to benefit from our proximity to their location. As mentioned, in March, we outgrew the market, and April is up double digits as well. In Missouri, revenue from rated play was up six percent. Both the number of trips, as well as the amount spent per trip, increased. However, retail play was softer, mostly because of the weather in January and disruption from the construction of both properties.
Peter Hoetzinger: In Cripple Creek, a competing property opened directly across the street from US with 300 hotel rooms.
Peter Hoetzinger: It's starting to increase as the market and as anticipated we continue to benefit from our proximity to their location.
Peter Hoetzinger: As mentioned in March we outgrew the market.
Peter Hoetzinger: And April is up double teacher just wait.
Peter Hoetzinger: In Missouri.
Peter Hoetzinger: Revenue from rated play was up 6%.
Peter Hoetzinger: The number of trips as well as the spend per trip increased.
Peter Hoetzinger: Retail play was softer.
Peter Hoetzinger: Mostly because of the better it generally disruption from construction at both properties.
Peter Hoetzinger: Yes.
Peter Hoetzinger: But in March, Cape Girardeau bounced back and set a new all-time record for table game revenue, the highest since inception. And I'm happy to report that the strong performance continued into April, which posted the third highest table game revenue in debt properties history. Last month, on April 4th, we opened our new hotel, The Riverview, at Century Casino Cape Girardeau. The hotel transforms the property into a full resort destination offering gaming, dining, conferences, concerts, events, and more, and it's off to a great start, better than we expected. The total project cost was $31 million.
Peter Hoetzinger: I think March keeps you out of bounce back and setting new all time record for tape. It away every table game revenue was the highest since inception.
Peter Hoetzinger: And I'm happy to report that the strong performance continued into April.
Peter Hoetzinger: Each posted the third highest table games revenue and that purpose is history.
Peter Hoetzinger: Last month on April 4th we opened a new hotel they really love you at century casino capture of though.
Peter Hoetzinger: They'll turn transforms the property into a full resort destination.
Peter Hoetzinger: <unk> gaming Dialling consensus concepts events it more.
Peter Hoetzinger: And it's off to a great start better than we expected.
Peter Hoetzinger: Total project costs were 31 million, we funded that with cash on hand.
Peter Hoetzinger: We funded that with cash on hand. In Corvadosville, the construction of the new permanent land-based casino hotel is progressing according to budget and schedule. We plan to open it at the end of this year. That new property will have a total of 74 hotel rooms, 12 gaming tables, and over 6,000 slot machines, which is a 20% increase in gaming positions compared to the old Riverboat and a 50% increase in gaming positions compared to our current interim casino.
Peter Hoetzinger: Hey, Corrado spill construction of the new permanent land based casino hotel is progressing according to budget and schedule.
Peter Hoetzinger: We plan to open at the end of this year.
Peter Hoetzinger: The new property, we now have a total of 74 hotel rooms, 12 scaling papers and over 600 slot machines.
Peter Hoetzinger: Which is a 20% increase in gaming positions compared to the old remit boat and a 50% increase in gaming positions compared to our current interim casino.
Peter Hoetzinger: The way we think about it is this: it's a significantly enhanced facility, moving from an old riverboat in a small temporary location on the dry side of the levee. A brand new land-based casino with a hotel, convenient parking, and convenient food and beverage amenities, and a much better environment overall. The new property will also provide significant operational efficiencies. It will be much more convenient for our customers, and it will certainly increase our catchment area. We expect a good uplift in the overall performance of that property. Boats revenue and EBITDA. The project is fully funded by Vichy at an 8% cap ratio.
Peter Hoetzinger: The way to think about it is this <unk>.
Peter Hoetzinger: It's a significantly enhanced facility moving from an older adults and the small temporary location to the dry docks the Lady.
Peter Hoetzinger: It's brand new land based casino with a hotel convenient parking and convenient food and beverage amenities and.
Peter Hoetzinger: A much better environment overall.
Peter Hoetzinger: The new property will provide significant operational efficiencies.
Peter Hoetzinger: Would be much more convenient for our customers and it will certainly increase our catchment area.
Peter Hoetzinger: We expect a good at least on the overall performance from that toxicity.
Peter Hoetzinger: Revenue and EBITDA.
Peter Hoetzinger: The project is fully funded by Vinci at an 8% cap rate.
Peter Hoetzinger: Okay.
Peter Hoetzinger: Our East segment includes the Mountaineer Casino Resort in West Virginia and the newly acquired Rocky Gap Casino Resort in Maryland. Because of the new acquisition, revenue of the segment was up 44%, and EBITDA was up 23%. In January, both properties suffered a lot due to the bad weather and unsafe driving conditions, as they are both destination resorts, with many customers having to drive two or three hours to get to our customers. So not surprisingly, the number of trips declined significantly, but the spend per trip was up a bit at Mount Pioneer. Available hotel rooms, hours of operation for the casino, and food outlets are still limited as a result of continued staffing challenges.
Peter Hoetzinger: Our East segment includes the mountaineer casino, resulting basket shinya and the newly acquired Rocky Gap Casino resort in Maryland.
Peter Hoetzinger: Because of this new acquisition revenue for the segment was up 44% EBITA was up 23%.
Peter Hoetzinger: And Shanghai, both properties suffered a lot under the bad weather and unsafe driving conditions.
Peter Hoetzinger: They are posted nationwide. So that's with many customers helping to drive two or three hours to get small casinos.
Peter Hoetzinger: So not surprisingly the number of trips declined significantly.
Peter Hoetzinger: The spend per trip us up a bit.
Peter Hoetzinger: At mountaineer.
Peter Hoetzinger: And mainly the hotel rooms also corporation for Casino and food outlets are still limited as a result of continued staffing challenges.
Peter Hoetzinger: However, things will get much better next month in June, with many J-1 visa holders returning and allowing us to improve and expand our... We will enhance our entertainment offerings throughout the year to further diversify our portfolio, giving our guests more reasons to choose us for their entertainment. Rocky Gap enters its busy season now in early May. We anticipate rebounding travel and the capture of pent-up travel demands throughout the summer. Great amenities such as our newly constructed swimming beach, in addition to continued enhancements of menus in SLB, will allow the property to maximize wallet share.
Speaker Change: Hi, Beth will get much better next month in June with many <unk> visa holders, returning and allowing us to improve and expand our offerings.
Peter Hoetzinger: We will enhance our entertainment offerings throughout the year to further diversify our portfolio.
Peter Hoetzinger: Small reasons to choose us for the entertainment.
Peter Hoetzinger: Rocky gap enters its pizza season now in early May.
Peter Hoetzinger: We anticipate rebounding traveling kept just pent up travel demand throughout the summer.
Peter Hoetzinger: Great amenities, such as a newly constructed Semic Beach. In addition to continued enhancements of menus and F&B and allow the property to make some nice wallet share.
Peter Hoetzinger: Within renewed marketing efforts in the major feeder markets, Pittsburgh, Baltimore, and the D.C. metro area, we expect to attract more affluent customers and grow the overall database. Continuing to the west segment, which includes the United Casino Resort in Reno, Sparks, Nevada, I got some mixed results during the quarter compared to the prior year. Average spent increased by 4%, but trips during the quarter decreased by 8%.
Peter Hoetzinger: We see renewed marketing efforts at the major feeder markets, Pittsburg, Baltimore and D C Metro area.
Peter Hoetzinger: Back to attract more affluent customers and grow the overall database.
Peter Hoetzinger: Continuing to the West segment.
Peter Hoetzinger: Not that the casino resorts in Reno Sparks, Nevada.
Peter Hoetzinger: And that gets a mixture SGR inject water compared to prior year.
Peter Hoetzinger: Average spend per trip increase by 4%.
Peter Hoetzinger: Trips during the quarter decreased by 8%.
Peter Hoetzinger: Performance from the high-end segment was strong, increasing by 18%, but the low to mid-tier segment decreased 6%. Our management team is working on refreshing restaurants and bars and upgrading the sportsbook. In three weeks, a high-limit VIP slots area will open. We are optimistic that the second half of this year will be strong, and most of the transitional extraordinary expenses as well as most project capex and the disruption that comes with it will be behind us. For properties, entertainment, and special events. The calendar looks great.
Peter Hoetzinger: Performance from the high end segment was strong increasing by 18%.
Peter Hoetzinger: But the low to meet your segment decreased 6%.
Peter Hoetzinger: Our management team is working on refreshing restaurants, and bars and upgrading the sports book and your three weeks the high limit VIP slots area will open.
Peter Hoetzinger: We are optimistic that the second half of this year will be strong and most of that transitional extraordinary extraordinary expenses I said, its most project capex and the disruption that comes with it will be behind us.
Peter Hoetzinger: The properties Entertainment and special events calendar looks great, we see strong bookings and all of that points to a very busy summer season for the Nuggets.
Peter Hoetzinger: We see strong bookings, and all of that points to a very busy summer season for the Nuggets. The Canadian segment of four properties in Edmonton and Calgary continued their great performance of last year also into this quarter. Revenue grew by 11%, and EBITDA was up 13%.
Peter Hoetzinger: Okay.
Peter Hoetzinger: The Canadian segment.
Peter Hoetzinger: Our properties in Edmonton Calgary continues that great performance of last year, all seem to this quarter.
Peter Hoetzinger: Revenue grew by 11% and EBITDA was up 13%.
Peter Hoetzinger: All four properties were up in revenue as well as EBITDA, so it was overall a very promising start into 2024 for Canada. In Poland, as mentioned, three casinos were closed for some or all of the quarter, which resulted in a significant drop in revenues.
Peter Hoetzinger: All four properties were up in revenue as well as EBITDA. So it is overall a very promising start into 2020 for Canada.
Peter Hoetzinger: In Poland as mentioned three casinos were closed for some or all of the quarter, which resulted in a significant drop in revenues.
Peter Hoetzinger: At Casinos Poland, we were able to renew the licenses for all three cities, and we reopened two of the three casinos a few weeks ago. The third and largest one will open at the new location in Q3. After its final reopening, results are expected to get back to normal levels quite quickly, and normal levels are around 11, 12 million in EBITDA. With that, let's discuss our balance sheet and liquidity position. As of March 31st, we had $137 million in cash and cash equivalents and $342 million in outstanding debt.
Peter Hoetzinger: Casinos, Poland was able to renew the license is for all three cities.
Peter Hoetzinger: Yes, we opened two of the three casinos few weeks ago.
Peter Hoetzinger: So there's not just one.
Peter Hoetzinger: We will open at the new location rough stats in Q3.
Peter Hoetzinger: After the final to be opening.
Peter Hoetzinger: Besides I expect it to get back to normal levels quite quickly.
Peter Hoetzinger: The 11th I round, 11 12 million at EBITDA.
Peter Hoetzinger: Net debt is $205 million. The main reasons for the decrease in our cash position are the cash payments of approximately $12 million for taxes on our Canadian real estate sale, a $4 million one-time principal paydown of debt, as well as approximately $18 million in property and equipment purchases. Traditional net leverage is 3.5 times, and this adjusted net leverage is 4.3.
Peter Hoetzinger: We said, let's discuss our balance sheet and liquidity position.
Peter Hoetzinger: It's just March 31st we had 137 million in cash and cash equivalents and 342 million in outstanding debt.
Peter Hoetzinger: Net debt is $205 million.
Peter Hoetzinger: The main reasons for the decrease in our cash position at the cash payments of approximately 12 million for Texas and our Canadian real estate.
Peter Hoetzinger: <unk>.
Peter Hoetzinger: 4 million, one time principal pay down of debt.
Peter Hoetzinger: This amount is approximately 18 million in property and equipment purchases.
Peter Hoetzinger: Traditional net net leverage is three five times.
Peter Hoetzinger: And these adjusted net leverage is four three times.
Peter Hoetzinger: We are okay with our leverage. As we don't judge our leverage just based on a one-time snapshot but rather look at its development over time. The leverage is elevated because of our recent significant acquisitions and investments. It will stay above the long-term range until we have fully integrated the acquisitions and until we have completed our CAPEX projects later this summer. Iraq Q3.
Peter Hoetzinger: We are okay with our leverage.
Peter Hoetzinger: As we don't touch our leverage just based on a one time snapshot, but rather look at its development over time.
Peter Hoetzinger: The leverage is elevated.
Peter Hoetzinger: Most of our recent significant acreage systems into best snakes.
Peter Hoetzinger: To stay up as the long term range until we have fully integrated acquisitions <unk> completed our capex projects later December.
Peter Hoetzinger: From then on, it should lower down to closer to two times traditional and four times these adjusted for next year. Our lease applications to VG currently total approximately $16 million per quarter. Once we open the permanent land-based facility in Corvadosville towards the end of the year, it will go up by one million per quarter. So as a rough run rate for next year, for 25. The total lease payment to Ricci will be around $16 million per quarter.
Peter Hoetzinger: Q3 for <unk>.
Peter Hoetzinger: It should lower down to closer to two times traditional and four times. These adjusted for next year.
Peter Hoetzinger: Our lease applications to Vinci currently totaled approximately 15 million per quarter.
Peter Hoetzinger: Once you open the permanent land based facility in Colorado, Sweden Plucks gained over the year.
Peter Hoetzinger: Go up by 1 billion per quarter.
Peter Hoetzinger: So as a rough run rate for next year for 25.
Peter Hoetzinger: Total lease payment to reach even to be around 16 million per quarter.
Peter Hoetzinger: Interest payments on our Terminal B currently amount to $10 million per quarter. Please note that we have no debt maturities until 29, and we have additional borrowing capacity of $30 million under our rules. And we can reprice or refinance the entire term loan at any time without penalty.
Peter Hoetzinger: Yeah.
Peter Hoetzinger: Interest payments on our term loan B currently amounts to 10 million per quarter.
Peter Hoetzinger: Please note that we have no debt maturities until 'twenty nine.
Peter Hoetzinger: If additional borrowing capacity of $30 million.
Peter Hoetzinger: And we can reprice to refinance the entire term loan at any time without penalty.
Peter Hoetzinger: So, as soon as the window opens, we want to act on it and improve our terms. Turning to CapEx. We are nearing the end of our 40 million CapEx program, and we are finishing several construction projects that we expect to generate a 25% plus EBITDA return and will complete an elevated Cadillac cycle for the company. The new hotel at Cape Girardeau in Missouri opened a month ago and so far exceeds our initial expectations with higher cash ADR than budgeted.
Peter Hoetzinger: So as soon as the window opens we want to activate and to improve our tests.
Peter Hoetzinger: Turning to Capex.
Peter Hoetzinger: We are nearing the end of our 40 million Capex program.
Peter Hoetzinger: As we are finishing several construction projects that we expect to generate 25% plus EBITDA return.
Peter Hoetzinger: And we will complete an elevated capex cycle for the company.
Peter Hoetzinger: The new hotel at Cape Shadowing Mystery opened a months ago, and so far exceeds our initial expectations with higher cash ADR than contradict.
Peter Hoetzinger: Thirdly, we are upgrading many of our S&P outlets throughout our portfolio in the U.S. and Canada. We are also refreshing and updating our hotel products. Currently, we are renovating rooms at Mountaineer in West Virginia, as well as at our Colorado property.
Peter Hoetzinger: Currently we are upgrading minutes off F&B outlets throughout our portfolio in the U S and Canada. We also.
Peter Hoetzinger: So refreshing and updating our hotel product.
Peter Hoetzinger: I'll tell you we are renovating rooms at mountaineer in West, Virginia, as well as our.
Peter Hoetzinger: Colorado properties.
Peter Hoetzinger: And at the market, we are upgrading restaurants and bars, as well as the sportsbook. We are putting in a new high-limit VIP slot area, and we are improving our VIP hotel suite. Beyond upgrading our property amenities, we're also getting closer to completing our permanent land-based project in Corvadosville. All of these projects will enhance the competitiveness and appeal of our properties.
Peter Hoetzinger: Now to Nokia upgrading restaurants in Pos as well as the sports book, we are putting in a new high limit VIP slot area and we are improving our V. P Hotel suites.
Peter Hoetzinger: Beyond upgrading our property amenities.
Peter Hoetzinger: Getting closer to completing our permanent land based project in Colorado suite.
Peter Hoetzinger: All of these projects will enhance the competitiveness and appeal of our properties.
Peter Hoetzinger: We position them for higher-value customers and will deliver attractive returns on capital to drive growth in their segments. So as we report this quarter, we are moving closer to the step-down in capex spend and a substantial increase in free cash flow. We're about four to five months away from that.
Peter Hoetzinger: Precision time for higher value customers and will deliver attractive returns on capital to drive growth in those segments.
Peter Hoetzinger: So as we report this quarter, we are moving closer to the step down in Capex spend and a substantial increase in free cash flow.
Speaker Change: Yes about four to five months away from that.
Peter Hoetzinger: By late summer, we see a significant reduction in CapEx as we move forward. Free cash flow will be improving substantially, both from revenue growth due to improved facilities and a better customer experience and from a reduction in the cap, and all casinos in Poland will be up and running by the end as well, which will lead to a significant positive change in terms of cash generation. Whilst you can expect to burn $30 million this year, you should generate about that amount in positive cash next year.
Peter Hoetzinger: By late summer, we see significant reduction in Capex as we move forward.
Peter Hoetzinger: Free cash flow will be improving substantially.
Peter Hoetzinger: Both from revenue growth due to new facilities, and the better customer experience and from a reduction in capex and our casinos in Poland would be up and running by the end as well.
Peter Hoetzinger: This will lead to a significant positive change in terms of cash generation.
Speaker Change: You can't expect to put on 30 million this year.
Peter Hoetzinger: You should generate about that amount at positive cash next year.
Peter Hoetzinger: A presentation posted on our website shows you the bridge from the negative to the positive cash generation from this year to next. Again, we are in a transitory period right now, but we have a clear plan to fully focus on generating cash to de-leverage and opportunistically buy back stock later this year and next. We are fully focused on the projects that we have underway and are looking forward to the end of the current intense CapEx cycle. Having said all that, we continue to see a softer retail customer. That trend is not worsening, but it's still soft. The retail customer is more economically sensitive to inflation and other changes in the economy.
Peter Hoetzinger: A presentation posted on our website shows you the bridge from the negative to positive cash generation from this year to next.
Peter Hoetzinger: Again, we are in a transitory period right now, but we have a clear plan to fully focus on generating cash to deleverage and Opportunistically also buyback stock later this year next.
Peter Hoetzinger: We are fully focused on the projects that we have underway and I looking forward to the end of the current intense kept exactly.
Peter Hoetzinger: Having said all that we continue to see yourself the retail customer that trend is not worsening, but it's been soft.
Peter Hoetzinger: And we can customize more economically sensitive to inflation other changes in the economy.
Peter Hoetzinger: It's those customers that still seem to be more cautious about how they are spending their discretionary dollars. Looking ahead, we remain encouraged by the continued strength in play from our core customers and the strong initial performance of our new hotel at Century Casinos Cape Girardeau, as well as the impact our current CAPEX program will have on our operations. Our positive outlook for the second half of this year and into 2025 remains unchanged, with all properties being in great shape in 25.
Peter Hoetzinger: Those customers that still seem to be more cautious about how they are spending that discretionary dollars.
Peter Hoetzinger: Looking ahead, we remain encouraged by the continued strength in play from our core customers.
Peter Hoetzinger: And to strong initial performance of our new hotel at century casinos escape Shadow.
Peter Hoetzinger: As well as the impact our current Capex program will have on our operations.
Peter Hoetzinger: Our positive outlook for the second half of this year and into 25 remains unchanged.
Peter Hoetzinger: All properties being in great shape and 25.
Peter Hoetzinger: We see us approaching $700 million in revenue, with a 24% EBITDA margin. Our capex in 2025 should come in at approximately $20 to $25 million, almost all of which will be regular maintenance cashback. In closing, I'd like to reiterate our enthusiasm for the second half of this year and for next. From the third quarter on, and certainly next year, results in free cash flow should improve significantly for these reasons. We'll be at the end of our elevated capex cycle, and Nugget and Rocky Gap will be fully integrated. All the casinos in Poland will be up and running.
Peter Hoetzinger: We see us approaching 700 million in revenue.
Peter Hoetzinger: We had 24% EBITA margin.
Peter Hoetzinger: Our capex in 'twenty five should come in at approximately 20 to 25 million.
Peter Hoetzinger: Almost all of which would be regular maintenance capex.
Peter Hoetzinger: In closing I'd like to reiterate our enthusiasm for the second half squishy and for next.
Peter Hoetzinger: From the third quarter on and certainly next year results in free cash flow should improve significantly.
Peter Hoetzinger: For these reasons.
Peter Hoetzinger: We'd be at the end of our elevated capex cycle.
Peter Hoetzinger: And Rocky gap will be fully integrated.
Peter Hoetzinger: Our casinos in Poland buildup in drilling you'd have said new permanent land based facility in Colorado Spring.
Peter Hoetzinger: We'll have the new permanent land-based facility in Corvadosville, and there'll be no more construction disruption. And the only other point I'm going to make is that, from a guidance perspective, Last year we had softness in the second half, so we think that's an opportunity in the second half of this year. That comp is going to be a little easier for me.
Peter Hoetzinger: Theres been no more construction disruption.
Peter Hoetzinger: And the only other point I'm going to make is that from a guidance perspective.
Peter Hoetzinger: Last year, we had softness in the second half. So we think that's an opportunity in the second half of this year.
Peter Hoetzinger: Since that comp is going to be a little easier to meet.
Speaker Change: All right that concludes the Coca was our prepared remarks, we'll now open up the call for Q&A. Operator go ahead. Please.
Peter Hoetzinger: All right, that includes. That concludes our prepared remarks. We now open up the call for Q&A. Operator, go ahead, please.
Operator: At this time, if you would like to ask a question, please press star and 1. You may remove yourself from the queue at any time by pressing star 2. And once again, that is star 1 to ask a question. We will take our first question from Justin Tilley, Mr. Fritz Steiff-Sieffel. Please go ahead.
Speaker Change: At this time, if he would like to ask a question. Please press star and one you may remove yourself from the queue at any time by pressing star two.
Justin Tilley: And once again that is.
Justin Tilley: Wanted to ask a question.
Justin Tilley: We will take our first question from Justin <unk>.
Justin Tilley: Thanks Stifel. Please go ahead.
Justin Tilley: Hey, great. Thanks. Good morning, everybody.
Justin Tilley: Hey, great. Thanks, Good morning, everybody. Thanks for taking my questions.
Unknown Executive: Thanks. Thanks for taking our questions. He's starting off on the acquired Rocky Gap property. If we just look at the East results during Q1 and sort of contrast that against some of the data reported by the Maryland regulator, it seems to me that, you know, even after the weather wrapped up, there's perhaps still some underperformance relative to, you know, what that asset did under legacy ownership, and even more so relative to sort of trends during Q4.
Justin Tilley: Starting off on the acquired Rocky gap.
Unknown Executive: Property.
Unknown Executive: If we just look at the east results during Q1 and sort of contrast that against some of the data reported by the Maryland regulator. It it seems to me that even after the weather wrapped up.
Unknown Executive: There's perhaps still some underperformance relative to you what that asset did under legacy ownership are they.
Unknown Executive: Even more so relative to the sort of trends during Q4, I guess first of all my correct.
Unknown Executive: First off, am I correct in that analysis? And second off, I guess, what do you attribute that to, and sort of what do you see as the roadmap for ramping that property back up to kind of how you underwrote it? Thanks.
Unknown Executive: That analysis and second off I guess, what do you what do you attribute that to and sort of what do you see as the road map.
Unknown Executive: On ramping that property back up to kind of how you underwrote it. Thanks.
Erwin Haitzmann: Thank you, Jeff. A great question. Let me answer that. I think a very important aspect when looking at the Maryland statistics is that they are really not giving you the typical and correct picture. If you look at the map, we are in the very west of Maryland, and you have to keep in mind that almost 60% of our customers are coming from the southwest. So it is those customers and those areas that we really have to look at in order to get a good insight into the comparisons.
Speaker Change: Thank you Chad Great question.
Erwin Haitzmann: Let me answer that I think in the end it very important aspects when looking at the Maryland statistics is that they are really not giving you the typically in the correct picture.
Erwin Haitzmann: Q2, if you look at the map we are at the very least of Maryland, and you have to keep in mind that that's almost 60% of our customers are coming from the south Western Pennsylvania area.
Erwin Haitzmann: It is a it is.
Erwin Haitzmann: Those customers in those states really have to look at in order to get a good insight into the comparisons and when doing that we see that ER reached N. P. S. In AR in that area also have seen weakness and that in particular for Maryland.
Erwin Haitzmann: And when doing that, we see that our regional peers in that area also have seen weakness. And in particular, for Maryland, in addition to the weakness caused by weather, we also had in Q1 integration challenges in connection with the replacement of a slot accounting and loyalty system. But that's behind us as well. And that same comment, and that's maybe for another question, with regard to geography, would also refer to West Virginia, because about two-thirds of our customers are coming from Ohio and not from West Virginia.
Erwin Haitzmann: In addition to the weakness caused by later, we also had in Q1 integration challenges.
Erwin Haitzmann: In connection with the replacement of the slot accounting and Nike system.
Erwin Haitzmann: But that's behind this is wade.
Erwin Haitzmann: And that same comment and Thats, maybe fly for another question with regard to the to the geography would also to Lister ciena because about two sets of customers are coming from Ohio, and not from West Virginia.
Erwin Haitzmann: The roadmap going forward is that we hopefully get through or are through the integration challenges at Rocky Gap. We are diligently working on analyzing the customer behavior and the marketing data. We see good progress already, and with the good changes that Peter mentioned before with the swimming beach and the improvements of the restaurant, we feel very positive that we're on the right track.
Erwin Haitzmann: Our roadmap going forward is that we are we hopefully get to the Oh actually the integration challenges.
Speaker Change: I'll kick it.
Erwin Haitzmann: Diligently working on analyzing the customer behavior, and ER and the marketing data.
Erwin Haitzmann: We see good progress already and with the Ah.
Speaker Change: Could you change this is Peter.
Erwin Haitzmann: I mentioned before with the swimming.
Erwin Haitzmann: <unk> Beach and the improvement of the.
Erwin Haitzmann: Based on our Wifi data are positive.
Erwin Haitzmann: On the right track.
Erwin Haitzmann: Great, that's very helpful. Thank you, Erwin. And then for my follow up, Peter, it sounds like in the prepared remarks, you know, if I if I heard you correctly, it's from a consumer, unlike consumer behavior perspective, it's a lot more of the same, some hesitation from the lower income and the retail customer, but that that core mid to high worth player, you know, kind of trends there remain somewhat unchanged, I guess, in that, in that lighter under that context, my question is, Have you changed at all, or do you have plans to change at all your promotional strategy in some of the offers you're putting out to your database, or is it really more a function of sort of targeted CapEx and some of the improvements you laid out on the call as kind of the key drivers?
Speaker Change: Great. That's very helpful color. Thank you and then for my follow up.
Erwin Haitzmann: Peter It sounds like in the prepared remarks, if I if I heard you correctly from a consumer unlike consumer behavior perspective, it's a lot more of the same.
Erwin Haitzmann: <unk> from the lower income in the retail customer, but that core mid to high worth player.
Erwin Haitzmann: Kevin there remain somewhat unchanged I guess.
Erwin Haitzmann: That in that lighter under that context of my question is.
Erwin Haitzmann: Have you changed at all or do you know do you have plans to change at all your promotional strategy.
Erwin Haitzmann: The offers you're you're putting you out to.
Erwin Haitzmann: To your database or is it really more a function of some sort of targeted capex and some of the improvements you you laid out on the call that's kind of the key drivers. Thanks.
Erwin Haitzmann: Okay, if Peter is fine with you, then I'll also respond to this question. Whenever we take over a new casino, we analyze what the previous operator has been doing, and then we compare that with our approach. And typically, we see what we think is an opportunity, and we then start a hopefully intelligent trial and error chain, trying out various new approaches in marketing with small subgroups of the various subdivisions of our customers to test them for whether they work or not.
Speaker Change: Okay and PD. It's time for you then I know, it's always come to this place.
Erwin Haitzmann: Yes.
Erwin Haitzmann: But whenever we can we take care of a new casino, we analyze what the previous operator had been doing and then we compare that with our approach and are typically we see what we think is opportunity and we then.
Erwin Haitzmann: Scott.
Erwin Haitzmann: Hopefully intelligent trial and error chain.
Erwin Haitzmann: Drying out the areas new approaches in marketing with small subgroups of subdivisions of the customers and then for Wednesday broken out and this optimization process.
Erwin Haitzmann: And this optimization process works, but obviously, that may take a little while. So not always are the first things we try successful, but as I say, with the chain of hopefully better and better approaches, we are then able to optimize what has been the strategy before into our modified new strategy.
Erwin Haitzmann: But obviously that may take a little while so not always.
Speaker Change: Yeah on the first.
Erwin Haitzmann: So we try.
Erwin Haitzmann: Successful that are associated with it with a chain of hopefully.
Erwin Haitzmann: The purchased Sweden.
Erwin Haitzmann: April to optimize blood.
Erwin Haitzmann: What has been the strategy before.
Erwin Haitzmann: Modified.
Erwin Haitzmann: T.
Erwin Haitzmann: Yeah.
Erwin Haitzmann: Great. Thank you, Erwin. That's perfect. You have very helpful callers. Thank you very much.
Speaker Change: Great. Thank you kind of growth you are right.
Speaker Change: Yeah, Okay, that's part of it.
Speaker Change: Yeah very helpful color. Thank you very much I'll pass it on.
Erwin Haitzmann: Sure.
Erwin Haitzmann: And we will take our next question from Jordan Bender with citizens JMP. Please go ahead.
Unknown Executive: Good morning, everyone. I want to stick with...
Speaker Change: Good morning to everyone I wanted to stick with the consumer question.
Speaker Change: Arena or you've kind of talked about the high end consumer doing well where that lower and even mid is starting to maybe weekend.
Speaker Change: Stay weak.
Unknown Executive: That's similar at least on the mid the middle end of the database that similar commentary we're hearing from some of your competitors in the south part of the state is that is that middle end customer.
Speaker Change: Weakening more is a continuing into April or just any color on that would be great. Thank you.
Erwin Haitzmann: This is Erwin again. I think what we see at the beginning of Q2 is that, in particular, the market we see increases in local play, and it really has to be seen from a distance. We have to differentiate also with regard to radius. In addition to the local market, we obviously try to reach into the Sacramento area, the greater Sacramento area, let's say. So these customers that are traveling from further away are typically weekend customers, and there we see less of a decline.
Unknown Executive: I just had one again and I think what we see in the beginning of Q2 is that in our in particular didn't markedly see increases in local play.
Erwin Haitzmann: And.
Erwin Haitzmann: He has to be seen as seen from it we have to differentiate also with regard to radius.
Erwin Haitzmann: In addition to the locals market.
Erwin Haitzmann: We obviously try to reach into the Sacramento area of greater Sacramento area, Let's say so these customers traveling from further late Atypically weekend customers and that we.
Erwin Haitzmann: And in fact, when somebody is making the effort of, when we're able to attract somebody who comes from further away, they typically, their spend is higher anyway. With regard to the retail play, which is typically also within say a 25-50 mile radius, we continue to see weakness, and we just have to observe how it's continuing.
Erwin Haitzmann: We see less of a weakening and in fact, when somebody's taking their photos.
Erwin Haitzmann: When we're able to attract somebody who comes from further away. They typically are their spend is higher anyway.
Erwin Haitzmann: With regard to the retail play.
Erwin Haitzmann: Which is typically also.
Erwin Haitzmann: Within say 25 50 mile radius, we continued to see weakness and we just have to upsell how it's continuing.
Unknown Executive: Great, I actually want to stick with Reno, you know, I wanted the 50% option on the land at the nugget. You look at your balance sheet, and you're in the end of this CapEx cycle, and you look at your lease adjusted leverage and kind of where that sits today. You know, can you just kind of update us on what kind of makes sense here in terms of, you know, would you look to acquire the remaining land, or would you look to utilize your REIT landlord to kind of bring cash to the balance sheet? Thank you. Absolutely not.
Erwin Haitzmann: Great.
Speaker Change: So I wanted to stick with with Reno.
Unknown Executive: The 50% option on the land at the Nugget as you look your balance sheet nearing the end of this capex cycle in York year lease adjusted leverage and kind of where that sits today.
Unknown Executive: Can you just kind of update US you know what kind of makes sense here in terms of would you look to acquire the remaining land or would you look to utilize your REIT landlord to kind of bring cash on the balance sheet. Thank you.
Peter Hoetzinger: Absolutely. Peter, would you like to take that question? Yeah, Jordan, uh...
Speaker Change: Absolutely Peter would you like to take the question.
Peter Hoetzinger: Yes sure.
Peter Hoetzinger: As we sit here today, we still have some years to go on that to make the final decision. But currently, the best investment into casinos is most likely our own stock, and that would probably come before exercising that option. Now, as we move closer to the expiration of the option in a little bit less than three years, that may change, but as I said, we have some time to make that decision.
Peter Hoetzinger: As we sit here today, we still have some years to go on that to make their final decision but.
Peter Hoetzinger: But currently it's the best investment into.
Peter Hoetzinger: Casinos is most likely my most likely own stock and.
Peter Hoetzinger: And that would probably come before.
Peter Hoetzinger: Before exercising that option as we move closer to that to the exploration of the auction.
Peter Hoetzinger: In less than three years.
Peter Hoetzinger: Change, but this.
Peter Hoetzinger: This is that we have some time to make that decision.
Speaker Change: Great. Thanks, Peter.
Operator: And once again, ladies and gentlemen, that is star number one to ask a question. We will now take our next question from Chad Beynon with Macquarie. Please go ahead.
Peter Hoetzinger: And once again, ladies and gentlemen that is star one to ask a question. We will now take our next question from Jed <unk> with Macquarie. Please go ahead.
Chad C. Beynon: Hi, good morning. Thanks for taking my question. Peter, Erwin, I wanted to start with the Riverview opening. Can you please provide, I know you said that everything's on track with the 25% return and things have gone well, but can you provide any more metrics in terms of, you know, maybe what you're seeing in terms of new signups, hotel rates? Obviously, it's early, and the summer is probably going to be a bigger seasonal peak period, but any additional color in terms of progressing towards that return would be helpful. Thank you.
Chad C. Beynon: Hi, Good morning, Thanks for taking my question Peter.
Chad C. Beynon: Peter I wanted to start with the Riverview opening can you provide I know you said that everything's on track with the 25% return and things have gone well, but can you provide any more metrics in terms of you know maybe what youre seeing in terms of a new sign ups hotel rates.
Chad C. Beynon:
Chad C. Beynon: Obviously, it's early in the summer is probably going to be a bigger seasonally peak period, but any additional color in terms of progressing towards that return would be helpful. Thank you.
Peter Hoetzinger: Yeah, good question. Chad, it's a bit early really to say anything meaningful and of substance. All we can give you is impressions that the customers that come and stay at the hotel are super excited, and they love it, and they love the completion of the whole product, that finally, now Cape Girardeau has everything that's necessary for a little country resort, and that's all super positive. We get nothing but great feedback. It's high quality.
Speaker Change: Yeah, [laughter], Chad, it's a bit early really to say anything meaningful in the substance Oh, we could give you his impressions that the customers did come and stay till Taylor Super excited and they love it and they left the completion of tailored products that finally now keeps Cape Girardeau has everything that's necessary.
Peter Hoetzinger: Little country resort and that's all Super positive, we get nothing but great feedback.
Peter Hoetzinger: I think we have the highest quality, without a doubt, the highest quality possibility to spend the night, both from the hotel room quality as well as from all the other things that you can do in the evening before you go to bed and in the morning when you get up. But I think for now it's too early.
Peter Hoetzinger: It's high quality I think led to the highest quality without doubt the highest quality.
Peter Hoetzinger: Possibilities to spend the night.
Peter Hoetzinger: Both from the hotel loan quality as well as from organic things that you can do in the evening before you go to bed in the morning, when you get up.
Peter Hoetzinger: Pat.
Peter Hoetzinger: I think for now because it's too early.
Chad C. Beynon: Okay, thank you. And then regarding Poland, you said that when all of the properties are open, you'll be back to that 11 or 12 million. So does that kind of imply that maybe the same store, you know, revenue per position or revenue per property in terms of what opening is doing what it had been, maybe FX adjusted pre COVID? Again, some additional help in terms of getting back to that 11 to 12 would be helpful. Thank you.
Speaker Change: Okay. Thank you.
Chad C. Beynon: And then regarding Poland you said.
Chad C. Beynon: Then.
Chad C. Beynon: All of the properties are open you'll be back to that 11 or $12 million. So does that kind of imply that maybe the same store.
Chad C. Beynon: Revenue per position or revenue per property in terms of what the opening is doing what it would it had been maybe FX adjusted pre COVID-19.
Chad C. Beynon: Again, some additional help in terms of getting back to that 11% to 12 would be helpful. Thank you.
Unknown Executive: Definitely, Samster sales are up significantly.
Chad C. Beynon: Dave can you just same store sales are up significantly.
Unknown Executive: Okay, so there's nothing that, with respect to what's going on in that region, visitation has been fine and improving?
Unknown Executive: Okay. So there's nothing that with respect to what's going on in that region.
Unknown Executive: Visitation has been been fine and improving.
Unknown Executive: No, no, it's been totally fine. When you say what's going on in that region, that doesn't affect our business at all, certainly not negatively. If it affects it at all, then positively, because over the course of the past, since Ukraine, a number of Ukrainian business people have permanently moved into Poland, and many of them into Warsaw. And so we now have additional affluent customers that are potential visitors to our restaurants. But business is completely solid, so we feel very strongly that we can come back to those $11-12 million in EBITDA.
Unknown Executive: No no it's been totally fine and then Nick when you say, what's going on in deadweight this doesn't affect our business at all.
Unknown Executive: Negatively if it affected our then positively because.
Unknown Executive: Over the course of the past.
Speaker Change: Let's see.
Unknown Executive: Since that since day Ukraine.
Unknown Executive: And number of Ukraine business people.
Unknown Executive: Natalie moved into Poland, and many of them into Warsaw, and so we now have additional excellent customers that are potentially.
Unknown Executive: This is a valid basis.
Unknown Executive: But business is completely solid so we feel very strongly that we can okay.
Unknown Executive: Thanks to those 11 $12 million in EBITDA.
Unknown Executive: Okay, good to hear. Thank you very much. Sure.
Speaker Change: Okay. Good to hear thank you very much.
Unknown Executive: Sure.
Operator: And it appears that we have no further questions at this time. I will now turn the program back over to our presenters for any additional or closing remarks.
Speaker Change: And it appears that we have no further questions. At this time I will now turn the program back over to our presenters for any additional or closing remarks.
Peter Hoetzinger: Well, thank you, everybody. We appreciate you joining our call today. We will talk again after the second quarter. Until then, thank you very much, and goodbye. This does conclude today's program. Thank you.
Speaker Change: Well. Thank you everybody. We appreciate you joining our call today, we will talk again after the second quarter.
Speaker Change: Until then thank you very much and goodbye.
Operator: This does conclude today's program. Thank you for your participation. You may disconnect at any time.
Peter Hoetzinger: This does conclude today's program. Thank you for your participation.
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