Q2 2019 Earnings Call

This call will be recorded.

At this time, all participants are in listen only mode.

Later, we will conduct a question and answer session.

I would now like to introduce your host for today's call Mr., Peter Hoetzinger Mr. Haute singer you may begin.

Thank you Emily.

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

With me on the call My co CEO and the chairman of century casinos urban Heitzman.

So just how executive Vice President of finance markets favorite thing.

Before we begin we'd like to remind you that you're going to be discussing forward looking information, which involves a number of risks and uncertainties that may cause actual results to differ materially from all forward looking statements.

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

And as a result of new information future events or otherwise.

We provided detailed discussion of the various risk factors in our filings and encourage you to review these filings.

In addition throughout our call we refer to several non-GAAP financial measures, including but not limited to adjusted EBITDA.

Considerations upon not get performance and decrease if you mentioned this to the appropriate GAAP measure can be found in our news release and if the T. Farley.

It made it pretty in the Mr. Fix that's all that I see in people <unk> com.

I'll provide a brief review of the company's financial results for the second quarter 2019.

Following their prepared remarks, there will be a key one day session.

Well this was another very cold and very active quarter for us.

Yes, Oh printing revenue was up 32%.

Adjusted EBITDA increased by 44%.

But that includes 900000 in nonrecurring expenses really related to the write down.

Nature with the casino up what the Chinese cruisers to probably see which stopped operating and that's an uncertain future.

Excluding that the what I would call real adjusted EBITDA is 7.6 million for the quarter.

That's actually a 62% higher than last year.

For no Canada remains our strongest segment.

Generating 42% of our consolidated revenue.

In local currency the Canadian operations grew revenues by 49% and adjusted EBITDA up by 23%.

As expected most of that growth came from the newly opened century mile Racetrack and casino in South Africa.

Yeah, I'm very pleased with it finished the performance revenue was 20% higher than their revenue can't read it out at all a very successful venture is balanced with the Calgary.

And that's a very good sign is it in line with our ambition.

<unk> expectations.

As with any new casino takes about a year to reach its potential.

Meaning we have another three quarters or so increasing penetration into great market to get to the full potential of this facility.

It is the same with expense side of the new Casino Hi, extensive initially but after a few quarters you will be able to generate more normal operating budget.

We are also working on creating synergies between our two Canadian Racino operations further broadening the reach of the century, praising or built in Western Canada.

Leveraging the two properties for a doctor of cost and sharing and contracted services.

And by creating a strong a century racing grade for the state of races to other racetracks, well TV networks and advance deposit wagering companies.

The other two casinos to be honest appraised integrates it looked market the century casino and hotel it maybe it's the century casino since all good.

Revenues by 2% and adjusted EBITDA by 3% on a combined basis.

In Calgary I'll keep properties.

Century Downs racetrack and casino and century casino.

[noise] performed even better and generated a combined revenue growth of 10%.

Adjusted EBITDA increased by 27%.

It's now received all approvals necessary floor and started construction all the 20% expansion of the gaming floor at century Downs.

Total capex will be approximately 1.5 million.

And we plan to open that expansion before the end of the year with a new bar and additional slot machines.

In the U.S., our two operations in Colorado increased revenues by 4% and adjusted EBITDA was up 4% this win.

Most properties in Central City, any Cripple Creek.

He's very violent decreased their respective market share.

We maintain a positive outlook and protects the other growth due to solid regional economic conditions.

The strong tourist business.

Okay, great positioning and following our properties have in that market.

[laughter] potent.

Revenue was up 47% local currency.

EBITDA increased more than tenfold.

We had three more casinos in operation compared to Q2 of last year. The growth came from both the slots at the paper games all locations.

Kinda cool, though we expanded the gaming floor talk snakes Corporation.

The casino at the merits of til in Warsaw.

Which was very good it was he found regulus.

In addition, PST granted a license, but it took casino in Warsaw three go lives next month.

In the UK.

Because we know that pops to disappoint.

EBITDA improved to just look compared to last year, but still showed a loss of 600000.

Yeah, and then it's doesn't management change there.

The outlook remains challenging that's beginning business throughout the UK is being hit by tough regulations regarding anti money laundering, social responsibility general data protection.

We have received a few inquiries about the possibility of selling that operation, but it's too early to tell if any of that or we need to anything and if we actually go that route.

Like we took it off balance sheet and liquidity.

Yes, 47 million in cash and cash equivalents and 72 million in outstanding debt.

Total debt to adjusted EBITDA ratio was 2.8.

Why the net debt to adjusted EBITDA ratio was 1.0.

How would that include 62 million related to a bank of Montral credit agreement.

15 million related to the century downs long term land lease and 5 million over in Europe .

The book value per share increased to $6.14.

Okay fix what existing operations during the quarter.

Well, three and a half million or 6.5% of revenues.

It's mainly on century mylans in Poland.

The Big news this quarter LTAC was our announcement about the accretion of three casino operations from Eldorado resorts 407 million.

Well, what I would call him personally decreased 4.1 big decision much deeper.

Did she properties just buying the real estate underlying the casinos for 278 million and leasing it to us and that long term triple net master lease agreements.

The three casinos <unk> casino picture going keep Cheryl told me sorry.

The Lady luck sooner Caracas in Colorado City, Missouri.

And the mountaineer casino racetrack and resorts in new Cumberland, It's the tenure.

You've got three quality assets in strong and stable gaming markets, each enjoying a leading regional positions at each with a long track record of producing solid and growing revenue and EBITDA.

With this acquisition, adding approximately 220 million in net don't present revenue and approximately 26 million in adjusted EBITDA and then it's off the rent expenses to our income statement.

The pre did not stop us the size of our company and underlines the truly transformational nature of this steep.

Well in together with a group of our senior operations manager has just completed another two of the three properties and came back more optimistic than ever.

Great properties Stapling markets.

Great local management teams.

And exciting small and knocks the small opportunities to increase decent volumes and reduced operating expenses.

The transaction is subject to gaming a regulatory approval for it Mr reimbursed with senior.

Well its customary closing conditions and is expected to close in early twenties twinkie.

These three casinos meets all our criteria, yeah midsize operations to target the midmarket local customer.

Yeah, good generating strong and stable cash flows for many years.

Could provide opportunities to drive incremental growth through operational improvements.

Hey, they significantly enhance our scale and presence in North America.

On a pro forma basis.

It has five casinos into U.S. sizing can assign to it the euro.

We can total of 7200 gaming machines.

250 gaming tables, 430 hotel rooms, and three horse race tracks.

Net operating revenue would be around 400 million.

Adjusted EBITDA are around 75 million and adjusted EBITDA around 55.

Going forward, we expect those amounts to grow due to the new century, my racetrack and casino.

Strong business volumes in Poland, and our efforts to expand our printing matching it to realize synergies through cost reductions and rationalizing promotional expenses, it's all existing and new rig class properties.

It finance expense extra with 170 million term loan facility for which we have already has a bank commitments.

This facility will also take out the existing debt to help with BMO.

On a pro forma basis.

We had total debt of 176 million.

Net debt of 111 million.

Resulting in leverage multiples of 3.5 and 2.2, respectively.

Our concern with this type of decision together with a strong operating performance and great relationships with gaming rights.

To provide us off the capacity to pursue further growth opportunities.

Especially as regional gaming trends in North America remained healthy.

Okay that pretty much sums up another very successful and very active basic Walter.

Hi, Thank you for pension and Queen can now stopped the Q and a session.

Emily please.

Ladies and gentlemen at this time, we will conduct a question and answer session. If you would like to ask a question. Please press star one on your phone now you will be placed into the queue any order received.

Do you find that your question has been answered you may remove yourself from the queue by pressing the pound key.

We're now ready to begin.

And our first question comes from the line of Mike Malouf from Craig Hallum. Your line is open.

Great. Thanks for taking my questions, but I'd love to focus in on those three on these three acquisitions on the three casinos that you're acquiring just a little bit. It you said you just wanted to visit the dam and went through some of the operations I'd love to sort of get a real time little bit more color with regards to what you're thinking about your ability to drive them.

Revenues and profitability at those over the next couple of years after you get on.

Ownership. Thanks.

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Yep.

We.

As Peter said, ER and everything that we.

So you know previously seats was confirmed and Morgan confirmed.

Great teams that are working diligently to get is I'd like to keep everybody felt from the minute shut down no need to change anything and I think that.

Uh huh.

Just a course of action to be as I said to meet everything the same and Oh financial models. The C suite chest. So to repeat the same need be to that and then blood testing done by the previous illness before the plane and then actually go out and then when container discussions with her with the Nokia management's there I didn't mention that Oh, you said not all possibilities to too so the increase EBITDA.

He took even if he could send a extensively we're not even in yet so we have to call a slowly and cost us I think it's important holiday for the existing stocks and know that we that we chose to we don't want to come in and a ton of isn't upside down lots of keeps things as they are and then look for other opportunities are certainly that we started discussing indesit started presenting to us in the London, one fits I had the opportunity to have puts about it.

Department heads.

Okay, Great and can you remind us or list a little bit of an update if there's been any change with regards to timing on the closing of these.

No. It just seems like no one else in early 2020.

Early twenties 20, okay, great and then just a follow up on century mile. When you take a look at the.

Margins and expect.

Sort of normal margins can you give us a sense of timing on for something like that and where do you take normal margins shake out.

Okay. So you want to.

Right.

That's true probably kicking in in about a year from now.

And we normally marching.

We do not mean, the same options that can be generated century downs.

It is.

But simply due to the fact that at century downs or the.

The rents that we pay for the for the day and.

Conns Didnt know that you'd be to line and at century My disease, it's off that you'd be tonight, and it's and Peggy can can give more detail on that I think it's because it's a fun it should they use et cetera. It sounds right. Thank you.

That's correct for financing the century downs, where it's not a country Mike.

So where do you think those numbers and the shaken out.

Our netcentric bounced down in the <unk>.

Very high Thirtys, and sometimes even even before the U.S. and at century mile that that would probably be.

Somewhere in the.

High Twentys low thirtys.

Okay.

All right. Thanks for the help.

Thanks.

And that is star one on your telephone keypad, if you would like to ask a question over the phone.

Yeah.

And there are no further questions I will now turn the call back to Mr. Hoetzinger for closing remarks.

Yes, okay. Thank you very much everybody for your interest in century casinos it for your participation to color.

For a recording of the call.

Please visit the financial results section of our website at CMT wide Dot com.

Thank you and goodbye.

This concludes today's conference call. Thank you for attending.