Q4 2024 Century Casinos Inc Earnings Call
David
Speaker Change: Good day, everyone, and welcome to today's Century Casinos Q4 2024 earnings call. At this time, all participants are in a listen-only mode.
Speaker Change: Please note this call is being recorded, and I will be standing by if you should need any assistance. It is now my pleasure to turn the conference over to Peter Hoetzinger. Please go ahead.
Peter Hoetzinger: Good morning, everyone, and thank you for joining our early score.
Speaker Change: We would like to remind everyone that we will be discussing forward-looking information under the safe harbor provisions of the U.S. Federal Security Laws.
Speaker Change: The company undertakes no obligation to update or revise the forward-looking statements, and actual results may differ from those projected.
Speaker Change: Throughout our call, we referred to several non-GAAP financial measures, including but not limited to adjusted EBITAR.
Speaker Change: Reconciliation of our non-gape measures to the appropriate GAAP measures can be found in our news releases and SEC guidelines, available in the investor section of our website at cmdv.com.
Speaker Change: After our prepared remarks, you will open the call for your questions. My co-CEO, Erwin Haitzmann and our CSO Margaret Staferton will join me for that.
Speaker Change: We released 4th quarter in full here, 2024 results this morning.
Speaker Change: On a consolidated basis, our fourth quarter revenue was 137.8 million, down 4% from the prior year's fourth quarter
Our trusted EBITAR was 21.1 million, down 17%.
Speaker Change: This is mostly due to macroeconomic factors and wallet softness in our markets [inaudible]
As low-end consumers continue to be squeezed by inflationary pressures
Speaker Change: We do however see the mid and upper tiers performing quite well, with their number of visits as well as the spaint per visit up slightly compared to last year.
Speaker Change: While unfortunately we had to close the temporary casino for some time before the new opening, resulting in lost revenue in EBITDA in October .
The new Casino is off to a great start.
Speaker Change: In the four months since opening, Revenue and EBITAR are up 27% and 32% respectively, which has exceeded our initial expectations.
Speaker Change: To be more granular, here is how it has been performing monthly since opening.
In November , revenues were up 47%, EBITDA up 64% [inaudible]
December , revenues up 23, EBITAR, up 32%.
January , revenues last 27%, EGTA up 29%
Speaker Change: February , with some serious weather issues and one day less compared to last year, revenue up 12% EBITAR up 12%
Speaker Change: and in March, so far, revenues are up by over 20%.
Speaker Change: We are seeing increases in nearly all demographic segments with the strongest growth rate coming from the higher end of the database.
Speaker Change: From a distance standpoint, customer visits increased by 20% from all mileage ranges.
At greater percentage gains were seen from 70 plus miles.
Speaker Change: That's a promising sign that the new casino is drawing more customers from further away, expanding our overall catchment area, just as we planned it.
Speaker Change: The new casino offers a total of over 630 gaming positions.
Speaker Change: which is a 20% increase compared to the older boat and the 50% increase compared to the temporary location.
Speaker Change: The property is much more convenient for our customers and allows for significantly more efficient operations.
Speaker Change: Typically, when you open a new property, you're looking at the three to six month ramp to start creating those efficiencies.
Speaker Change: So further margin improvement is a question of time and it couldn't be more pleased with the start of the new facility at Corridor Street.
Speaker Change: Driven by the New Hotel, as well as solid food and beverage sales [inaudible]
Speaker Change: The new hotel continues to ramp up nicely and definitely expands the reach into new markets.
Bringing in new and diverse group of players.
Speaker Change: Revenue increased 82% from patrons living in states other than Missouri, Illinois, Kentucky.
Speaker Change: You are seeing more visits from guests living 75 plus miles from the property, as the interest is 21%, compared to an increase of just 1% from guests living within 75 miles.
Speaker Change: which is somewhat offset by higher cost of goods sold and staffing costs.
Speaker Change: The team continues to fight you on operational expenses to further increase profitability.
Speaker Change: The hotel has experienced steady growth in occupancy and revenue, which has continued into this year.
Speaker Change: Overall our two mystery properties couldn't make us happier, even though we had serious weather impacts.
Speaker Change: February still produced the highest revenue in the history of our Tumisui properties.
It marches off to a great start as well.
Speaker Change: We also look forward to sports betting going live in Missouri, towards the end of the year.
And we are finalizing partnership agreements as we speak.
Which will deliver incremental high-matching EBITAR to our properties
Continuing with the meat-based segment .
Let's review the performance of our operations in Colorado.
Speaker Change: The experience significantly different results when comparing the performance of cardid revenue versus uncardid revenue
Speaker Change: Cardid revenue showed strong growth of 12%, while uncarded revenue decreased by 30%, resulting in a 7% overall revenue decline.
Speaker Change: In the quarter, Heavy Construction on Interstate I-70, Impacted on Cardiff Play at our Central City, the Sigma Significantly More Than Cardiff Play.
Speaker Change: And in Creep a Creep, it's possible that Chamonix is taking some of the casual uncounted play.
Speaker Change: Also, we do not yet have any firm data to back that up.
Speaker Change: Both our properties are noticeable strong results from the younger customer base.
Speaker Change: 5. The match of that was off set by the loss of two thirds of our sports betting revenue.
Speaker Change: As you know, we had three sports betting providers using our licenses.
The two ceased operations recently, the Misurka and Typical [inaudible]
The one remaining is BET365.
Speaker Change: In Cripple Creek, we are putting the finishing touches on the construction of a new main entrance, directly facing Chamonix. It is wider, more convenient and more inviting than the small doors we had before, so ready to bring in more business.
With top of the level margins between 35 and 40% during the corner.
Speaker Change: The East segments, which includes the Mountaineer Casino in West Virginia and the Rocky Gate Casinos in Maryland.
Speaker Change: Again, the same picture, the higher end of the database performs well, generating more trips and 1% revenue growth.
Speaker Change: At Rocky Gap, the revenue decline was purely on the casino site, while gaming revenue was down, all other profit centers like Hotel, F&D, and Golf were up.
Speaker Change: Disciplined cost management helped to reduce operating expenses by 18%, and it will continue to focus on the cost structure and on improving revenue performance a drop you get.
at Mountaineer
Speaker Change: and almost all the decline happened during the weekdays. Our volume on weekends were fine.
Speaker Change: And we are digging deeper to find ways to strengthen mid-week play.
Speaker Change: Moving to the rest segment with the nugget seen resort in Nevada
Speaker Change: Gaming Revenue was down 10%, it was impacted by low-slot hold. With a normal life-slot hold, Revenue would have been down 6%.
Speaker Change: We did see an increase of 5% in local card play as well as an increase in younger players from there to last year.
Speaker Change: Mostly to a reduction in staff and overtime work, as well as lower hotel and F&D complementaries.
Speaker Change: And we've made further changes to the slot for the late last year with initial results looking promising.
resulting in double digit EBITDA growth in January and February [inaudible]
Speaker Change: A few words about the smaller operations in Canada and Europe .
In Canada, Erwin was down by 7%, EB-DAR 17% down [inaudible]
Speaker Change: Poland reopened the casino in the city of Wroclaw during the 4th quarter. That casino had been closed for almost a year and is now gaining traction, but the ramp
We are still committed to divesting of Poland's operations.
Speaker Change: The sales process has suffered not only from the war in the Ukraine, but also from the fact that we cannot sell 100% of the Polish company, but only the two-thirds that we own.
Speaker Change: Most interested parties have wanted 100% ownership and we started talks with our minority partner.
Speaker Change: The Polish Airport Company, with a goal to agree on something like a drag-along provision.
Speaker Change: Discussions are progressing, and we'll update you as we know more.
Now I cover a few bellensheet and capital items.
Speaker Change: Company's cash and cash equivalence at the end of the fourth quarter were 99 million.
Speaker Change: And the total principal amount of debt outstanding was 340 million, resulting in net debt of 241 million
Speaker Change: At the end of the fourth quarter, our net debt to EBITDA ratio was 5.5 times [inaudible]
And it was 6.9 times on a leaf-adjusted basis.
We have no debt maturity until 2020-9.
Speaker Change: We are done with our major cap expense, and with our new land-based facility in Missouri open, all leverage ratios should ramp down throughout this year and next.
Speaker Change: With the conclusion of an intense capital investment cycle, we have invested 110 million into our properties.
Speaker Change: Of which about 50 million came from Bicci for the Missouri Land Based Development.
Speaker Change: which will result in meaningful growth contributions in 2025 and beyond.
Speaker Change: We also spend 20 million on maintenance cab bags during last year, with the main focus on
Speaker Change: Investments in our property portfolio are evident, and our properties have never looked better.
Speaker Change: So, this year in 2025, we expect to spend just 4 million for growth projects and 14 million in maintenance capitals.
Speaker Change: Leaks back their returns on our investments to get together with the major reduction cat-backs in producing decisive improvement in free cash flow compared to last year.
Speaker Change: As we look ahead, we are confident in our business prospects moving forward. On the expense and labour side, we will continue to focus on operational discipline and look for ways to become even more efficient.
Speaker Change: Last year was a transitory period for us, but now we see a clear path forward to higher Ibitar for 2025 and Beynon.
Speaker Change: We are seeing stability in our core gaming business across our current database.
But with our significant cash balance and long dated debt maturities
Speaker Change: The plenty of runway to see through all of our growth initiatives.
Speaker Change: Except for some unfavorable winter weather in Q1 of this year, most of this year will face easier comps with no renovation disruption compared to last year.
Speaker Change: NetNet re-projects significant EBITDA and cashflow improvements in 2025 over last year, ripping the returns from our recent growth capital initiatives.
Speaker Change: And it's also worth noting that we do not anticipate any new significant competitive supply impacting us this year or next.
Speaker Change: Alright, that concludes our prepared remarks. We'll now open the call for Q&A. Operator Go ahead, please.
Speaker Change: Thank you. At this time, we will open the question and answer session. 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: And our first question today will come from Jordan Bender with Citizens Capital Markets.
Jordan Bender: Martin Everyone. Peter, thanks for all the commentary there. You've kind of talked about the middle to upper and the database performing pretty well and that bottom end kind of remains weak, which feels like it's been kind of consistent outlook now. If I kind of pair that with the leverage outlook that you put in your slides, it does imply the estimates.
Jordan Bender: I do need to come down for 2025, so it's the main driver of the lower estimates or the weaker outlook, primarily just that lower end of the database or is there anything else that you would kind of later in there as well.
Peter
No, it's really...
Speaker Change: Is the big question back then? Some properties like rocket-gate, mountaineer?
Speaker Change: And Central City to a certain degree, they have quite a large portion of their revenue coming from that segment and
Speaker Change: Okay, and then switching gears would love to just get your updated thoughts around the 50% ownership of the real estate they now get.
Yeah, go ahead.
Okay, thank you very much.
Speaker Change: Next question, we'll come from Ryan Sigdall with Craig Kellham.
Hey, uh, stay on the nugget. So...
Ryan Sigdal: Appears like Revenue was down 10% in Q4, the market was up 1, curious I guess how your efforts to revitalize the property and then how your conference pipeline has been building over the last couple months as you looked at 25 and few triers.
Certainly.
Ryan Sigdal: and there's a strong correlation, obviously, for that. And with regard to both events and then also conference business, we concerning 25, we think we'll out to 24.
Ryan Sigdal: I'm not planned only with half a year in advance, but one, two, three years in advance. So in short, we cannot, is probably possible to get any large countries. But our team has been very successful in getting smaller ones. And as I say, the dynamic looks very good there. Only it's more looking into 26 and beyond.
Ryan Sigdal: One of the, so we focus on the one hand in doing everything we can to get more event business.
Ryan Sigdal: and smaller things like weddings or small conferences with two, three hundred people in everything helped here.
Ryan Sigdal: But we're also focusing on the local customers and the first indications are that we are already moving forward by the island we could regain some of the local business that has been lost in the past.
Speaker Change: Switching over to Alberta. So, recently, the Alberta Gaming Commission suspended the purchase of gaming machines from US-based manufacturers. Do you expect that to have a meaningful impact on your casino operations and or your CAPEX plans that you laid out? And then kind of second part of that question.
Speaker Change: Given all these trade wars, given the FX headwinds, given everything else, does it make sense to maintain and hold there or does it make sense to do something like you're doing in Poland and sell off those assets?
Speaker Change: in the next leg. I hope that doesn't take forever, but in the next one, two, three years, we don't see anything that would be of a meaningful impact. Peter, why don't you answer the second part of the second question with regard to it? Does it make sense to keep it?
It's certainly, it's certainly under consideration. It's
Speaker Change: It's becoming smaller and smaller in terms of the overall picture and it's something that we are considering
Speaker Change: Quick clarification for the last one here on Kuru Thursville looks like a sub bullet here that the rent was deferred for one year. Why did that change in the VG? Messed release? Thanks.
Speaker Change: That has not changed on our side. That has always been the equipment, but maybe I'm not understanding the question correctly.
Speaker Change: I was just comparing the Q3 deck to the Q4 one and there's now a sub bullet that says the rent was deferred so maybe it's always been the case and it's always been the case, yeah it hasn't.
Yes, they're not in the case.
Good, thanks guys, take good luck [inaudible]
Thank you.
Speaker Change: And we'll move to our next question that comes from Jeff Stanchel with Steeple.
Good morning Peter, Erwin, thanks for taking our questions.
Speaker Change: your internal expectations. Can you just expand a bit more on what specifically has surprised you to the upside, whether that's better penetration of some of that white space over the border in Tennessee, maybe more overnight or day trips coming up from Memphis, you know, effects, savings, you know, even, you know, visitation coming from even further out just
So it's...
Speaker Change: We think that that runways will kick in from this summer to next summer in the 12-month period.
Speaker Change: That's helpful. Thank you both for that color. And then turning over to capital allocation. If the targets that you previously put out in your presentation for sort of normalize earnings power once we get through the backup of these projects, or the front half in these projects ramp up, if those targets do still hold, you know, by our estimates, the stocks trading somewhere around a 20%.
Speaker Change: macro uncertainty that the teams have gotten a little bit worse here in the last week or so.
Mm-hmm. Kita?
It is extremely challenging with forecasting.
Speaker Change: And that's why we've not included a forecast in our latest presentation.
Speaker Change: First and foremost, we would like to try to refile or retrieve our term loan because so for the Flixander is not funny.
Speaker Change: At the same time, paying down some of it would be helpful. And then, obviously, academically, we can look at the stock as well.
Speaker Change: Yeah, it's it's unclear. We don't we don't have a you don't have a big trade.
Speaker Change: In non-corded play at Mountaineer is really all coming in the midway period as opposed to the weekend period. Can you just expand?
Speaker Change: Intuitively, we would think that the weekend period would be a little bit softer just given the cost of the overnight stays and stuff like that.
Speaker Change: It's successful to a little extent, but not 100%. And as I said, we think it's really, it's just the demographics and the behavior of the people that they tend to focus their spare time on the weekend and going out.
Speaker Change: That's great. Thanks for that Erwin. I'll pass it on to you both.
Good.
Speaker Change: And as a reminder, if you'd like to ask a question, you may signal by pressing star one at this time.
Speaker Change: And we'll take our next question from Chad Bannon with Macquarie Group.
Hi, good morning. Thanks for taking my question.
Speaker Change: You know, that will be Greenlit wanted to have you guys kind of remind us in terms of what your strategy is in that market and then thinking across some of your other markets.
Speaker Change: Whether it's Missouri or some progress that we're seeing in Maryland, can you just frame out how you're thinking about monetizing the eye gaming and sports betting opportunities.
Speaker Change: whether it's, you know, third party doing it on your own and how that could, you know, help the cash flow. Thanks.
Speaker Change: I'll answer for Kenneth and then I'll hand over to Peter. The short answer for Kenneth is...
Speaker Change: We just don't know what will be happening. There is much talk, but nothing is definitive yet on how and when. So we can't really make any decisions. What we can say is that if it comes, it is very unlikely that with ourselves, we very likely will take a first pass, it will be done in the past.
We start, we start, we start.
Speaker Change: procedures and rules. It's different in Missouri, a lot of demand for our license or licensees. That's still not 100% defined yet, how many we have?
Speaker Change: negotiations with what's been in providers. And the servant said our clear direction is that we have somebody else to it and we provide the license and get [inaudible]
All markets we are in [inaudible]
Speaker Change: Okay, thank you both. And then, Peter, I know you mentioned that you pulled any guidance from the slide deck that you had laid out in 2024. But from what I'm gathering from the call, it sounds like the projects are going...
Would it be safe to...
in the market.
That's exactly how we see it.
Speak up a little bit more.
Speaker Change: And so, yeah, we think that it has been like...
Speaker Change: Schreib, Givertake, Twelfth Manz, who is the push-out there.
to forecast at the moment, and that's mostly consumer sentiment.
Okay, appreciate it. Thank you very much, guys.
Thanks, Chad
And once again, it's star one to ask a question.
and we'll move next to Mike Crowitz Investor.
Mike Krawietz: Hi, I'm a shareholder for the past couple of years and I've seen this stock go down very rarely, does it go up?
Mike Krawietz: The past quarters have been disappointments at the past. The nugget is weighed down from their typical revenues.
Mike Krawietz: Rocky Cap is way down. I see every month, you know, hundreds of thousands of dollars down. What is the company's end game?
Speaker Change: And I'm wondering, is it time to bring in a new CEO , one person who knows the North American gaming market, who can be focused on these North American assets?
And get rid of Paul Land!
Speaker Change: You know, he's Canadian assets and just focus on Colorado Nevada.
Mountain Ear, Rocky Cab, and Missouri, and that's it.
Speaker Change: And leave all this other nonsense behind over in Poland, these Canadian assets, and for the stock price, I don't know if you saw it this morning, but it was down at $1.29% under $2 a share.
Army
Speaker Change: with regard to your other part of the question, we don't take so, but at the end, others have
Peter Hoetzinger: Peter Trudeau, would you like to add to that?
Peter Hoetzinger: Yeah, let's not forget that for a very long time, both Canada and Europe had a very positive impact on EBITDA in Casinos.
Yeah, and on top of that was Erwin Haitz [inaudible]
The reason for that is certainly not within our company of it.
Peter Hoetzinger: It's very much aligned with with shareholders management owns close to 15% of the company, so our interests are aligned. And being a public company, of course
Anything is possible in terms of...
Peter Hoetzinger: In the future, some other people are knocking on our doors, as you can imagine, with a low share price.
So...
Let's...
I don't know what else to say.
Speaker Change: It just seems like we're just struggling along here, you know, quarter after quarter, this is down, but you know, Missouri is looking good. You've been talking about buying back stock for the past two years, but it hasn't happened.
Speaker Change: But I think if this company just focuses on the North American United States assets
Speaker Change: and you could have, you know, marketing towards your Carothersville property, Missouri, you know, cross market with the Nuggett.
Speaker Change: You know, you're promoting Reno, Nevada, and then nugget why in Missouri or Colorado and cross market these properties so everybody in Carothersville and Missouri knows about the nugget is one of our properties. So, please, please.
You know, the cripple creek is one of our properties of our properties.
and Do Cross Promotions with these other places.
Mike Krawietz: Yes, but we have that and thanks a lot for your comments.
Uh huh. Alright, good luck to you.
Thank you, sir.
Speaker Change: Operator Thank you. We'll take our next question from J.T. Waters Investor.
Speaker Change: Hey guys, so much for taking my question. I realized that the insider's own 13-14% of the company is curious your thoughts. Management doesn't view like buybacks at these levels as a good investment.
Speaker Change: I wonder outside of that, just on the personal level, it probably would be good for investors to see a strong kind of inside or buying and it's not really a question, just more of a statement. I mean, so it just seems, if everything...
Speaker Change: Go in the direction that you guys say it is, and we'll hope it is. That would just be a great statement, I think, for the dis-shareholder base. And I'll hang out. Thanks, guys.
Yeah, thanks, Chetty. I would just like to say something.
Speaker Change: There are very generous speaking, there is management that puts a very interested in buying back. However, we are pretty much restricted by the insider laws and rules and we have a lot of blackout periods.
Operator.
Speaker Change: Thank you. There are no further questions at this time. I'll turn the conference back to our host for any additional or closing remarks.
Speaker Change: Thank you, Operator, and thanks, everybody. We appreciate you for joining our call today. And we talk again in a couple of months. Until then, thank you and goodbye.