Q3 2024 Century Casinos Inc Earnings Call
Yeah.
Speaker Change: Good day, everyone and welcome to today's century casinos Q3 2024 earnings call.
Speaker Change: At this time all participants are in a listen only mode.
Speaker Change: Later, you will have the opportunity to ask questions. During the question and answer session.
Speaker Change: May registered to ask a question at any time by pressing the star and one on your telephone keypad.
Speaker Change: Please note this call is being recorded and I'll be standing by if you should need assistance.
Speaker Change: It is now my pleasure to turn the conference over to Peter Holt singer.
Speaker Change: Go ahead Sir.
Peter Holtsinger: Good morning, everyone and thank you for joining our earnings call.
Peter Holtsinger: We would like to remind you that you will be discussing forward looking information.
Peter Holtsinger: Which involves risks and uncertainties that may cause actual results to differ from our forward looking statements.
Peter Holtsinger: The company undertakes no obligation to update or revise the forward looking statements.
Peter Holtsinger: As a result of new information future events or otherwise.
Peter Holtsinger: Can you provide a discussion of the risk factors in our SEC filings.
Speaker Change: Courage you to review these filings.
Speaker Change: Throughout the call, we refer to several non-GAAP financial measures, including but not limited to adjusted EBITDAR.
Speaker Change: 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 <unk> com.
Speaker Change: After our prepared remarks, we will open the call for your questions My co CEO, Eric Eichmann, and CFO Mark with <unk>.
Speaker Change: Joining me for that.
Speaker Change: Our first quarter results were released this morning.
Speaker Change: We delivered net revenue of 156 million.
Speaker Change: Decrease of 3% compared to Q3 of last year.
Speaker Change: Adjusted EBITDAR was $32 9 million.
Speaker Change: Down just 1%.
Speaker Change: Consolidated EBITDA margin increased from 26 26 to 21, 1%.
Speaker Change: The main reason for the small revenue decline was the temporary closure of one of our casinos in Poland.
Speaker Change: I'm happy to report that in the meantime, 10 days ago that casino has successfully reopened.
Speaker Change: And just back to normal run rate of around 10 to 12 million in annual EBITDAR.
Speaker Change: And we had another important opening recently.
Speaker Change: Last Friday on November 1st opens that Brent you land based casino entertaining Colorado, Missouri.
Speaker Change: It was a fantastic opening weekend there.
Speaker Change: About it a little later.
Speaker Change: So all of the al portfolio.
Speaker Change: The underlying customer trends remained stable in the third quarter.
Speaker Change: I'm sure you have heard the same from all gaming P S and from other consumer discretionary businesses, the retail customer as well as the low end customers are still relatively weak steeper at least.
Speaker Change: We see that more or less in all our markets.
Speaker Change: Well rated play was flat.
Speaker Change: Greatest playbooks down throughout our portfolio.
Speaker Change: We believe this is mostly due to macro economics and do all that softness in all markets.
Speaker Change: So take a little deeper into the quarter, let's look at segment results.
Speaker Change: With the East, which includes the mountain resort in West, Virginia, and the Rocky Gap Casino resort in Maryland.
Speaker Change: Revenue if that segment was up 7%.
Speaker Change: EBITDAR up 5%.
Speaker Change: At both properties the low end consumer produced less trips with the spend per trip pretty flat.
Speaker Change: The immediate uplift yourself. The database also came less often but the spend per trip increased versus last year.
Speaker Change: Yeah.
Speaker Change: The performance itself the whole dataset, Moncton, you and Rocky gap.
Speaker Change: Improving.
Speaker Change: Cash rooms increased while comp rooms went down.
Speaker Change: We did put a bit more marketing dollars to work to drive revenue and get more brand exposure.
Speaker Change: Alton you into Ohio, and Pennsylvania feeder markets and for Rocky gap in the D C and Baltimore Metro areas.
Speaker Change: Continuing to the Midwest with Misorient, Colorado.
Speaker Change: Revenue for the segment was essentially flat EBITDA was down 5%.
Speaker Change: He is a respectable result, considering the disruption we experienced at Carrabba's mill.
Speaker Change: From the development of the new land based facility.
Speaker Change: As mentioned the new property opened last Friday.
Speaker Change: With a total of 74 hotel rooms, and over 660 gaming positions, which is a 20% increase in gaming positions compared to the old riverboat and a 50% increase compared to the temporary location.
Speaker Change: And I can tell you I'm gonna stay up it was a fantastic opening weekend.
Speaker Change: Right from the get go on the very first day, the new facility set an all time record for coining and daily revenue.
Speaker Change: Even though we did not have all slots in operation yet.
Speaker Change: The entire team in Missouri, and all of US are really excited about the bright prospects the new property office.
Speaker Change: They provide significant operational efficiencies.
Speaker Change: It's much more convenient for our customers and increases our catchment area.
Speaker Change: The new property transitions, they corrado scale operation from an older the bolt and small temporary location to a modern style land based facility adding.
Speaker Change: Adding significantly enhance non gaming amenities expanded gaming options and convenient parking for our guests.
Speaker Change: We expect the strong opdivo uptake stuff without extension ceded on the revenue side fairly soon.
Speaker Change: The impact on EBITDA will probably take a quarter or two.
Speaker Change: If you worked out the initial growing pains and figured out the most efficient staffing levels.
Speaker Change: Oh, the other property in Missouri and keeps you also had positive revenue trend and Nicola up 7% driven.
Speaker Change: Driven by the new hotel as well as food and beverage space.
Speaker Change: I don't think we opened earlier this year is ramping up nicely.
Speaker Change: You see a steady incline in occupancy and revenue and that contingency to Q4 with a strong start in October.
Speaker Change: Additionally, we have been seeing a lot of motto Nice states recently, which is a nice surprise.
Speaker Change: The hotel is also driving meaningful growth in F&B phase.
Speaker Change: Set the higher cooks and staff costs.
Speaker Change: The team continues to fine tune the operational expenses to further increase profitability.
Speaker Change: Those efforts show during the quarter, so gradual improvement with higher revenue and lower expenses month after month.
Speaker Change: Do you expect it to continue into Q4.
Speaker Change: Yeah.
Speaker Change: In Colorado, our property in Cripple Creek continues to benefit from the New 300 room hotel that opens directly across the street from US early this year.
Speaker Change: <unk> was up paper drop was up and F&B revenue was up as well.
Speaker Change: Or because theres, a higher volume of them use it doesn't towns.
Speaker Change: All of that was partly offset by a lower slot hold this quarter.
Speaker Change: The loss of some of our sports betting revenue.
Speaker Change: As you know we had three sports betting provide us using our licenses in Colorado too.
Speaker Change: <unk> ceased operations recently named Mr kind of typical.
Speaker Change: The one remaining is 365.
Speaker Change: Overall, the Missourian, Colorado segment did a great job in maintaining operating efficiencies with some property level margins of 39% during the quarter.
Speaker Change: Okay.
Speaker Change: Next is the west segment with the Nugget Casino resort in Reno, Nevada.
Speaker Change: I'll stay quite disappointing first half of the year Tanaka showed good sequential growth.
Speaker Change: Sequentially revenue was up 40% and EBITDA doubled compared to Q2.
Speaker Change: Still a bit behind last year's third quarter.
Speaker Change: Gaming revenue was flat compared to last year, but hotel and S&P declined significantly due to fewer group room nights.
Speaker Change: You just mentioned that in recent investor meetings already the group and convention volumes are down this year.
Speaker Change: The reason for his life two years back before we took over the operations.
Speaker Change: And we are happy to say that its looking much better going forward.
Speaker Change: New top management successfully focused on cost control.
Speaker Change: Total expenses went down by 9%.
Speaker Change: We remain focused on operational efficiencies.
Speaker Change: Offset rising labor costs.
Speaker Change: Yeah.
Speaker Change: Local display was strong in the quarter up 20% compared to last year.
Speaker Change: We also saw a significant uptick in the number of visits from the younger age groups.
Speaker Change: And architects completed its Capex program in the casino for this year.
Speaker Change: But we need to spend between three and 4 million on elevated next year, which.
Speaker Change: Which will be increasing our estimate for total company wide capex from trails to $60 million in 2025.
Speaker Change: Okay.
Speaker Change: A few words about our small operations in Canada and Europe.
Speaker Change: Canada grew EBITDAR by 6%.
Speaker Change: Mainly through better cost control.
Speaker Change: Consumer trends appear pretty stable. It's also a location sweeteners in North Dakota.
Speaker Change: In Poland.
Speaker Change: Two casinos most did close during the quarter.
Speaker Change: One of which is a very important one in the city of what's left which was started in a significant drop in revenues.
Speaker Change: And in Episepalous comparison of the undisturbed properties.
Speaker Change: With revenue and EBITDAR grew compared to last year.
Speaker Change: Anyway, if reopened that casino and what's left 10 days ago.
Speaker Change: Business volumes are great.
Speaker Change: We started reopening.
Speaker Change: We expect Poland to get back to normal levels quite quickly, which is between 10 and 12 million in annual EBITDAR.
Speaker Change: Yeah.
Speaker Change: The same process is also progressing well.
Speaker Change: We hope it would be helpful to get it done within the next couple of months.
Speaker Change: Yeah.
Speaker Change: Now, let's discuss our balance sheet and liquidity position.
Speaker Change: We ended the quarter with $119 million in cash and cash equivalents and.
Speaker Change: And $340 million of outstanding debt.
Speaker Change: Resulting in net debt of 221 million.
Speaker Change: Dish traditional net leverage is four seven times and lease adjusted net leverage is six six times.
Speaker Change: Of course, the leverage is elevated because of our recent acquisitions and investments.
Speaker Change: Now that we have two casinos in Poland and the new land based facility in Colorado, We'll open.
Speaker Change: It should ramp down quite quickly.
Speaker Change: We look to Delever to three times traditional end around five times lease adjusted for next year.
Speaker Change: We have no debt maturities until 2029, and we can reprice, our refinance our entire some realm today any time without penalty.
Speaker Change: So as soon as the window opens we want to act on it and improve our terms.
Speaker Change: Turning to Capex.
Speaker Change: During the quarter, we remained committed to investing in the offering new amenities to our guests in order to drive future incremental visitation as well as Spain.
Speaker Change: As of today, we are pretty much done with it.
Speaker Change: Just 2 million to go in Canada in Colorado.
Speaker Change: Total capex for this year.
Speaker Change: For this year will amount to around 38 million.
Speaker Change: For next year do you expect it to come down sharply to about 16 million.
Speaker Change: Setting the stage for a substantial increase in free cash flow.
Speaker Change: But that significant cash flow growth is not only driven.
Speaker Change: But a reduction in capex.
Speaker Change: The most recent casino openings in Poland at Carrabba's, Sweden.
Speaker Change: And the new spirit of optimism at the nugget in Reno and contribute significantly to much better results in 2025 and in 'twenty four.
Speaker Change: The presentation posted on our website that shows you the bridge from negative cash flow this year.
Speaker Change: The positive cash generation in 'twenty five.
Speaker Change: As we look ahead.
Speaker Change: We are confident in our business prospects moving forward.
Speaker Change: On the expense and labor side, we'll continue to focus on operational discipline.
Speaker Change: And look for ways to become even more efficient.
Speaker Change: As we've said in our last earnings call.
Speaker Change: This is a transitory period for us, but we see a clear path forward to generating cash and to Delever significantly.
Speaker Change: In addition on an opportunistic basis, we also plan to buy back stock.
Speaker Change: All right that concludes our prepared remarks, we'll now open the call for Q&A.
Speaker Change: Caller go ahead please.
Speaker Change: Okay.
Speaker Change: At this time.
Speaker Change: We will open the question and answer session.
Speaker Change: If you would like to ask a question. Please press star and one on your telephone keypad and you'll be placed into the queue in the order received.
Speaker Change: You may remove yourself from the queue at any time by pressing pound and one.
Speaker Change: Once again to ask a question. Please press star and one on your phone now.
Speaker Change: Okay.
Speaker Change: And our first question comes from Jordan Bender of citizens J M P.
Jordan Bender: Good morning, everyone. Thanks for taking my question I wanted to start in Poland. Peter can you just kind of help us understand what those two licenses are they outstanding where they deny.
Speaker Change: Or should we expect them to come back I guess I want to start there.
Speaker Change: You say you want to answer the airport.
Speaker Change: Yeah.
Speaker Change: We had.
Speaker Change: A few licenses that.
Speaker Change: The expire out and and.
Speaker Change: The officials in charge did not stop the re licensed re licensing processing time, and that's why we had to close some of the casinos earlier this year.
Speaker Change: And.
Speaker Change: Oh excellent late last year.
Speaker Change:
Speaker Change: The important license is really important I mean, they're the ones that generate significant revenue and EBITDA for us.
Speaker Change: <unk> has been granted a gain to us.
Speaker Change: And the last one of those was mostly one enrolled sloughing, we open debt 10 days ago.
Speaker Change: We did not get realized since for two smaller ones.
Speaker Change: And that does not have any meaningful impact on the underlying EBITA.
Speaker Change: Hum.
Speaker Change: Is it $10 million to $12 million run rate, so for all intents and purposes.
Speaker Change: Collyn. This is back to normal with that opening that we had 10 days ago.
Speaker Change: Okay perfect.
Speaker Change: And then if I can follow up on that.
Speaker Change: Does the closing or the that the lack of re licensing at those two properties changed the mindset at all of.
Speaker Change: You know your willingness to sell those properties or can you just kind of update.
Speaker Change: On where you stand with that process.
Speaker Change: No not at all he did over the years.
Speaker Change: The casinos, Poland has a has always.
Speaker Change: Had between six and eight licensees sometimes.
Speaker Change: You you don't get a small ones a small one and sometimes.
Speaker Change: You're getting back from our competitors, so that theres always a little bit of the fluctuation.
Speaker Change: But the core operations are fully intact.
Speaker Change: And.
Speaker Change: That there is no change in our plans to sell and there's also no change from the.
Speaker Change: From the investors that are interested in buying.
Speaker Change: So why.
Speaker Change: One or two small licensees more or less.
Speaker Change: No change.
Speaker Change: Great and congrats on opening the property last week. Thank you very much.
Speaker Change: GQ.
Speaker Change: Our next question comes from.
Speaker Change: Jeff Stanfill of Stifel.
Jeff Stanfill: Hey, good morning, Peter Erwin and thanks for taking our questions.
Jeff Stanfill: Maybe starting off here on the Nugget casino encouraging performance there during the quarter, Peter or <unk> could you just add some color on the month by month performance at the property through Q3, and I guess into October.
Speaker Change: If you look further out into 2025 and what are some of the operational levers still left here that you can pull to help drive further sequential improvement in trying to close that gap to we'll call. It 2019 type profitability levels.
Speaker Change: Yeah. Thanks, Good question, Stan I'll take that I think well. This is a good question to ask because what are in the third quarter. What we saw is that.
Speaker Change: The negative impact was basically coming almost a 100% from the from the assessments, namely from July August and September, they're really getting stronger and stronger and in a year over year, the super encouraging and we see the same trained are continuing into October. So we think that we own.
Speaker Change: Really on a vehicle to take there and as Peter said to everybody is that they're optimistic.
Speaker Change: Concerning the concerning the next year or years.
Speaker Change: We think there is sustained there's still there's still some operation efficiencies to be found and there is still opportunity with regard to according revenue a slate in.
Speaker Change: In particular, we are fine tuning the selection of of concepts that we're doing and it candidly if they made some good progress there already and we also put a lot of focus on getting more group business.
Speaker Change: Also as Peter said earlier, the they are the only difficulty with the core business is that most of that is planned to three years ahead.
Speaker Change: We only have a certain portion of the market that is attaining our with our ice snow fell less than six months, but the last call me after them.
Speaker Change: Great. That's helpful. Thank you for for all that color are women and then for my follow up turning to the to your Canadian assets. It looks like revenues were down year on year. After a handful of quarters of some really strong growth Peter or what can you just expand a bit on what's driving that and more broadly. If you think about sort of post COVID-19 performance on that Mark.
Speaker Change: Relative to your U S assets do you anticipate from some mean reversion and consumers than similar to what we've seen last year or two in U S. Regional markets, just any thoughts there would be great and that's all from us.
Speaker Change: Sure.
Speaker Change: The decrease in net operating revenue is basically due to one casino near me century downs, whether it decreases are rounded numbers now about 1 million less than net operating revenue.
Speaker Change: That is two reasons. The first one is that are around 300000 of stay at that that way. It can be attributed to the fact that in 'twenty 'twenty. Four we did not have a large event, which was called to chalk leg on the racing last time will help US also in 'twenty three and we had it for three years in a row, but it turned out not to be.
Speaker Change: They are not to be profitable and the muscle we decided not to do with entertainment as I hinted for salt life's we lost some revenue it certainly had a very good impact on EBITA.
Speaker Change: And the remaining 700000 direct you to the fact that our competitor they Ace Airport casino, which is the closest casino that opened early in 'twenty three.
Speaker Change: And while it had a smaller impact for us in Q3 23.
Speaker Change: Had a strong negative impact on us in Q3 'twenty four.
Speaker Change: Having said that we feel that now the market has stabilized and the market shares have stabilized and they don't expect any further deterioration rather than the opposite I think is positive and that we basically can come back.
Speaker Change: Tomorrow.
Speaker Change: We took out to the readiness of the other casinos in Pennsylvania, Kristi Ah, we increase the MLR and they are in the flat rolled casino asthma by half a million enthralled small decreases in Atlanta, Claudia and Bloodhound at Kay in century casino St. All that Indian St treated mice.
Speaker Change: On the EBIT side, it's all I ever whilst our revenues overall decreasing by $650000 EBITA increased by 180000. So the operational efficiencies are kicked in and and we're not unhappy at all with the numbers.
Speaker Change: With regard to the trains are we think are there.
Speaker Change: We think it's a from here on out and it will only be calling on the tennis, Hey, Mike Hey, Maggie positive upwards.
Speaker Change: Sure.
Speaker Change: Great.
Speaker Change: Very helpful. Thank you and I'll pass it on.
Speaker Change: Yeah.
Speaker Change: Right.
Speaker Change: Our next question comes from Chad Beynon from Macquarie Group.
Speaker Change: Okay.
Chad Beynon: Hi, Good morning, Irwin and Peter and congrats on the Carruthers Ville opening.
Chad Beynon: Wanted to start with the illustrative guidance for 2025 in your Investor deck.
Chad Beynon: So as we think about the EBITDA bridge from 24 to 25.
Chad Beynon: Obviously most of this will come from.
Speaker Change: From the Carruthers Vale opening in and.
Speaker Change: Cape Girardeau ramp and then I guess.
Speaker Change: Reno improvement, but has anything changed in terms of how youre thinking about this $150 million of EBITDAR.
Speaker Change: You mentioned some comments in terms of a ramp of the margin in Carruthers Ville. So should we think about you know more of this growth to come in the back half of 2025 or should it be linear thank you.
Speaker Change: So why don't you take that piece.
Speaker Change: Oh, thanks for the question.
Speaker Change: As with most of them.
Speaker Change: Property opening center and it was a solid.
Speaker Change: So all intensive purposes. This was.
Speaker Change: As a new opening in Colorado, Yes, it will take a little bit of time too.
Speaker Change: For us to see the full potential also on the EBITDA line.
Speaker Change:
Speaker Change: In terms of Phe and did not get it.
Speaker Change: It's a bit more.
Speaker Change: Immediate but the.
Speaker Change: Generally speaking, it's probably modest second half from the second cool Dong of 25.
Speaker Change:
Speaker Change: That we'll see that run rate.
Speaker Change: Okay.
Speaker Change: Okay perfect. Thank you and then you mentioned share repurchases could be something that continue to come in just as.
Speaker Change: Ah you're past the Capex cycle, you have more capacity.
Speaker Change: To execute on this and the stock remains at.
Speaker Change: At low levels.
Speaker Change: What's the I guess, what's the total availability in terms of repurchases and how should we think about when you could start to execute a little bit more on on that strategy. Thank you.
Speaker Change: Pizza.
Speaker Change: Yeah, we are we will.
Speaker Change: We are not.
Speaker Change: This closing any absolute dollar amounts.
Speaker Change: From.
Speaker Change: From that Ah patient presentation.
Speaker Change: You'll see that we expect to generate free cash of between 25 to 30 million next year.
Speaker Change: Top of that Oh.
Speaker Change: Over 100 million on our balance sheet.
Speaker Change: We do however needs about roughly 40 between 40 and $45 million off of the cash in the casinos. So the real available cash is.
Speaker Change: If we include next year appropriate some between.
Speaker Change: Between.
Speaker Change: Somewhere around 80 or so.
Speaker Change:
Speaker Change: We will not use all of it.
Speaker Change: But a good portion of it and we will split that.
Speaker Change: For.
Speaker Change: Debt pay down.
Speaker Change: And stock buyback jumps of timing.
Speaker Change: It's it's a put at Newsweek as it sits and.
Speaker Change: It probably stopped Ethan.
Speaker Change: Either late this year early next.
Speaker Change: Okay. Thanks, Peter do you have it what's the existing.
Speaker Change: Basket out there right now for repurchases for availability.
Speaker Change: There's an existing.
Speaker Change: That that has also had $15 million.
Speaker Change: That can of course be changed.
Speaker Change: Yeah.
Speaker Change: Awesome.
Speaker Change: Thank you both appreciate it.
Speaker Change: Thanks, Jeff.
Speaker Change: As a reminder, if you would like to ask a question. Please press star and one on your phone now.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Yes.
Speaker Change: It doesn't seem to be any further questions.
Speaker Change: And it appears that we have no further questions at this time I will now turn the program back to our presenters for closing remarks.
Speaker Change: Yeah.
Speaker Change: Thanks, everybody. We appreciate you joining our call today.
Speaker Change: Again early next year.
Speaker Change: Until then thank you and goodbye.
Speaker Change: Okay.
Speaker Change: Thank you. This does conclude today's century casinos Q3 2024 earnings call.
Speaker Change: You for your participation you may disconnect at any time.
Speaker Change: The House has ended this call goodbye.