CNTY - NASDAQ

Good day, everyone, and welcome to today's Century Casinos, Inc. Q4 2024 earnings call. At this time, all participants are in a listen-only mode. Later, you will 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 and one on your telephone keypad. 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.

Good morning, everyone, and thank you for joining our earnings call. We would like to remind everyone that we will be discussing forward-looking information under the Safe Harbor provisions of the US federal security laws. The company undertakes no obligation to update or revise the forward-looking statements. And actual results may differ from those projected. 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 sections of our website at cncry.com. After our prepared remarks, we will open the call for your questions. My co-CEO, Erwin Haitzmann, and our CFO, Margaret Stefferton, will join me for that. We released fourth quarter and full year 2024 results this morning. On a consolidated basis, our fourth quarter revenue was $137.8 million, down 4% from the prior year's fourth quarter. Our adjusted EBITDA was $21.1 million, down 17%. Looking more closely at the U.S. operations, revenue was down 3% and EBITDA down 8%. Broadly speaking, the underlying customer trends remained stable in the quarter with retail customers as well as low-end customers still being weak. This is mostly due to macroeconomic factors and wallet softness in our markets, as low-end consumers continue to be squeezed by inflationary pressures. We do, however, see the mid and upper tiers performing quite well, with their number of visits as well as the spend per visit up slightly compared to last year. We achieved an important milestone in the fourth quarter with the successful opening of the land-based facility in Caruthersville, Missouri on November 1st. While, unfortunately, we had to close the temporary casino for some time before the new opening, resulting in lost revenue and EBITDA in October, the new casino is off to a great start. In the four months since opening, revenue and EBITDA are up 27% and 32%, respectively, which has exceeded our initial expectations. To be more granular, here is how it has been performing monthly since opening. In November, revenues were up 47%, EBITDA up 64%, December revenues up 23%, EBITDA up 32%. January revenues plus 27%, EBITDA up 29%. In February, with some serious weather issues and one day less compared to last year, revenue up 12%, EBITDA up 12%. And in March, so far, revenue is up by over 20%. We are seeing increases in nearly all demographic segments, with the strongest growth rate coming from the higher end of the database. From a distance standpoint, customer visits increased by 20% from all mileage ranges, but greater percentage gains were seen from 70-plus miles. 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. The new casino offers a total of over 600 fixed gaming positions, which is a 20% increase compared to the older boat and a 50% increase compared to the temporary location. The property is much more convenient for our customers and allows for significantly more efficient operations. We are very happy with the strong and immediate uplift on the revenue side. The full impact on EBITDA will probably take two or three quarters, and we have worked out the initial growing pains and figured out the most efficient staffing levels. Typically, when you open a new property, you're looking at a three to six-month ramp to start creating those efficiencies. You obviously open up, you always overhire a little bit knowing that there'll be turnover. You spend a little bit more on marketing. So further margin improvement is a question of time. And we couldn't be more pleased with the start of the new facility at Caruthersville. Our other property in Missouri, the Century Casino Hotel Cape Girardeau, also had a strong quarter. Revenue was up 11% and EBITDA was up 7%, driven by the new hotel as well as solid food and beverage sales. The new hotel continues to ramp up nicely and definitely expands the reach into new markets, bringing in a new and diverse group of players. Revenue increased 82% from patrons living in states other than Missouri, Illinois, and Kentucky. We're seeing more visits from guests living 75-plus miles from the property as they increased 21% compared to an increase of just 1% from guests living within 75 miles. The hotel is also driving meaningful growth in F&B sales, which is somewhat offset by higher cost of goods sold and staffing costs. The team continues to fine-tune operational expenses to further increase profitability. The hotel is experiencing steady growth in occupancy and revenue, which has continued into this year. Overall, our two Missouri properties couldn't make us happier even though we had serious weather impacts. February still produced the highest revenue in the history of our two Missouri properties. March is off to a great start as well. 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-margin EBITDA to our properties. Continuing with the Midwest segment, let's review the performance of our operations in Colorado. We've experienced significantly different results when comparing the carded revenue showed strong growth of 12% while uncarded revenue decreased by 30%, resulting in a 7% overall revenue decline. In the quarter, heavy construction on Interstate I-70 impacted uncompleted play at our Central City casino significantly more than carded play. And in Cripple Creek, it's possible that is taking some of the casual and private play. Also, we do not yet have any firm data to back that up. Both our properties saw noticeable strong results from the younger demographic. However, much of that was offset by the loss of two-thirds of our sports betting revenue. As you know, we had three sports betting providers using our licenses, but two ceased operations recently, namely Circa and Tipico. The one remaining is Bet365. 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. The Missouri and Colorado segment did a great job in maintaining operating efficiencies, with property-level margins between 35% and 40% during the quarter. The East segment, which includes the Mountaineer Casino in West Virginia and the Rocky Gap Casino Resort in Maryland, had a more challenging quarter. Revenue of the segment was down 7%, EBITDA down 29%. Both properties have a higher portion of their business from lower-end customers, and that lower-end customer produced significantly less trips compared to Q4 of last year. Again, the same picture. The higher end of the database performed well, generating more trips and 1% revenue growth. At Rocky Gap, the revenue decline was purely on the casino side, while gaming revenue was down, all other profit centers like hotel, F&B, and golf were up. Disciplined cost management helped to reduce operating expenses by 18%, and we will continue to focus on the cost structure and on improving revenue performance at Rocky Gap. At Mountaineer, total carded revenue was flat to last year, but uncarded revenue decreased by 10%. And almost all the decline happened during the weekdays. Our volume on weekends was fine, and we're digging deeper to find ways to strengthen midweek play. Moving to the West segment with the Nugget Casino Resort in Nevada, gaming revenue was down 10%. It was impacted by low slot hold. With a normalized slot hold, revenue would have been down 6%. We did see an increase of 5% in local carded play as well as an increase in younger players compared to last year. We reduced total expenses by 12%, mostly through a reduction in staff and overtime work, as well as lower hotel and F&B complementaries. Due to that strict cost discipline, EBITDA at the property increased by 46% year over year. And we've made further changes to the slot floor late last year with initial results looking promising, resulting in double-digit EBITDA growth in January and February. A few words about the small operations in Canada and Europe. In Canada, revenue was down by 7%, EBITDA 17% down. We experienced lower table hold of 15% as compared to 17% last year. And strong FX headwinds also impacted results. In Poland, we reopened a casino in the city of Wroclaw during the fourth quarter. That casino had been closed for almost a year, and is now gaining traction, but the ramp-up is taking longer than expected. Another license for the city of Krakow has not been awarded to us, and we had to take on closing expenses of close to a million in the fourth quarter for our Poland operations. We are still committed to divesting. The sales process has suffered not only from the war in Ukraine but also from the fact that we cannot sell 100% of the Polish company, but only the two-thirds that we own. Most interested parties have wanted 100% ownership, and we started talks with our minority partner, Polish Airport Company, with the goal to agree on something like a drag-along provision. Discussions are progressing, and we'll update you as we know more. Now I will cover a few balance sheet items. The company's cash and cash equivalents at the end of the fourth quarter were $99 million, and the total principal amount of debt outstanding was $340 million, resulting in net debt of $241 million. At the end of the fourth quarter, our net debt to EBITDA ratio was 5.5 times, and it was 6.9 times on a lease-adjusted basis. We have no debt maturities until 2029. We are done with our major CapEx, and with our new land-based facility in Missouri open, all leverage ratios should ramp down throughout this year and next. With the conclusion of an intense capital investment cycle, we've invested €110 million into our properties, of which about €50 million came from VICI for the Missouri land-based development. We spent another €40 million on growth projects throughout our portfolio, which will result in meaningful growth contributions in 2025 and beyond. We also spent €20 million on maintenance CapEx during last year, with the main focus on improving our slot floors. Investments in our property portfolio are evident, and our properties have never looked better. We have no need for significant CapEx this year, so this year and 2025, we expect to spend just €4 million for growth projects, and €14 million in maintenance CapEx. We expect the returns on our investments to gather together with the major reduction in CapEx, it produces a sizable improvement in free cash flow compared to last year. As we look ahead, we are confident in our business prospects moving forward. On the expense and labor side, we will continue to focus on operational discipline and look for ways to become even more efficient. Last year was a transitory period for us, but now we see a clear path forward to higher EBITDA for 2025 and beyond. We are seeing stability in our core gaming business across our card database. The big unknown is how business volumes from retail and low-end customers will develop. But with our significant cash balance and long-dated debt maturities, we have plenty of runway to see through all of our growth initiatives. 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. Net-net, we project significant EBITDA and cash flow improvements in 2025 over last year, reaping the returns from our recent growth capital initiatives. And it's also worth noting that we do not anticipate any new significant competitive supply impacting us this year or next. Alright. That concludes our prepared remarks. We'll now open the call for Q&A. Operator, go ahead, please.

Thank you. At this time, we will open the question and answer session. If you would like to ask a question, you may remove yourself from the queue at any time by pressing pound and one. And our first question today will come from Jordan Bender with Citizens Capital Markets. Morning, everyone. Peter, thanks for all the commentary there.

You kind of talked about the middle to upper end of the database performing pretty well. And that bottom end kind of remains weak, which feels like it's been kind of consistent outlook now. You know? But if I kind of pair that with the leverage outlook that you put in your slides, it does imply the estimates do need to come down for 2025. So is 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 layer in there as well?

No. It's really only that. We're seeing growth in the mid-tiers and absolutely in the upper tiers, but the lower end is the big question mark. And some properties like Rocky Gap, Mountaineer, Central City to a certain degree, they have quite a large portion of their revenue coming from that segment. And others a little bit less. That is the only thing.

Okay. And then switching gears, we'd love to just get your updated thoughts around the 50% ownership of the real estate, the Nugget.

Yeah. There are no news from last time, really.

Okay. Thank you very much.

Next question will come from Ryan Sigal with Craig Hallum.

Hey, staying on the Nugget. So it appears like revenue was down 10% in Q4. The market was up one. Curious, I guess, how your efforts to revitalize the property and then how your conference pipeline has been building over the last couple of months as you look to 2025 and future years.

Certainly. We see the main reason for the decline in casino revenue is the decline in hotel revenue. And there's a strong correlation, obviously, for that. And with regard to post events and then also conference business, we concerning 2025, we think we'll out to 2024. And it certainly looks very good to 2026 and beyond. As you know, the challenge we have here is that most of these conferences and events are not planned only with half a year in advance, but one to three years in advance in short term, we cannot it's probably possible to get any large conferences. But our team has been very successful in getting smaller ones. And as I say, the dynamic looks very good there. Only if it's more with more looking into 2026 and beyond. Having said that, one of the focuses on the one hand in doing everything we can to get more events business. And conferences. And smaller things like weddings or small conferences with two, three hundred people, and everything helps here. But we're also focusing on the local customers. And the first indications are that we are already moving forward by the way, and we could regain some of that local business that has been lost in the past.

Switching over to Alberta. So recently, the Alberta Gaming Commission suspended the 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, given all these trade wars, given the FX headwinds, given everything else, does it make sense to maintain and hold there or it make sense to do something like you're doing in Poland and sell off those assets?

Yeah. I'll take the first part of the question then hand over to Peter. We actually also have the same question course. Will there be a negative impact on us? And the answer to that is we don't expect any meaningful negative impact. Maybe half a percent or percent, but it really is not meaningful. I mean, you certainly, please keep in mind that it's the same for everybody in the market. So there is no competitor that would have any advantage. And at the same time, our product mix is pretty fresh. So in the next like, in the that doesn't take forever, but in the next one to 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 question with regard to if it does it make sense to keep it?

Yeah. Right. As you know, we have sold the real estate already. And we've kept the operations. And it's certainly under consideration. Yeah. It's becoming smaller and smaller in terms of the overall picture, and it's something that we are considering.

Quick clarification for last one here on Caruthersville. Looks like a sub-bullet here that the rent was deferred for one year. Why did that change in the VICI master lease? Thanks.

That has not changed on our side. That has always been the equipment. But maybe I'm not understanding your question correctly.

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 just...

It's always been the case. Yeah.

Yes. That hasn't been the case. Good. Guys. Good luck. Thank you.

And we'll move to our next question. That comes from Jeff Stantial with Stifel.

Great. Good morning, Peter, Erwin, thanks for taking our questions. Maybe starting off on Caruthersville. Peter, you mentioned that the initial four months have exceeded 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 overnights or day trips coming up from Memphis, you know, OpEx savings, you know, even, you know, visitation coming from even further out, just any additional color there. And then we did notice that the quarterly presentation did not mention three to four million, I think, incremental EBITDA after rent. That you've cited in the past, is that still the right way that we should be thinking about return targets for this project? Or do you think perhaps a bit better based on the initial trends that you're seeing? Thanks.

We haven't really been surprised. And in fact, the thought process behind that whole investment was that we wanted to extend our reach. And what Peter referred to is that our expectation has been met. So with the hotel and with the new property, we have a strong tool in hand to be able to actually reach customers that come from further away. And we think we have more potential that we can catch there. With regard to the second part of the question, Peter, do you want to say something with regard to those four million?

Yeah. We see we're still seeing it's the right number, but very likely not in the calendar year of 2025. Because of the, again, the lower end consumer weakness. So internally, we think that that run rate will kick in from this summer to next summer in the twelve months period.

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 normalized earnings power once we get through the back half of these projects or the front half of these projects ramp up. Those targets do still hold, you know, by our estimates, the stock's trading somewhere around a 20% free cash flow yield. Peter, I'm curious how you balance that and potential opportunistic repurchases versus pay down some of your high rate debt taking into account, you know, obviously, the ongoing macro uncertainty that seems to have gotten a little bit worse here in the last week or so.

It is extremely challenging with forecasting. And that's why we've not included a forecast in our latest presentation. You know, we've seen, like, two great weeks, and then we had another, like, ten days that are very weak. It goes up and down. Consumer sentiment is all over the place. It's just really difficult. And that difficulty and that uncertainty also makes us a bit more cautious in how we allocate capital. First and foremost, we would like to try to refi or reprice our term loan because SOFR plus six hundred is not funny. At the same time, paying down some of it would be helpful. And then, obviously, or, again, we can look at the stock as well. But we are a bit hesitant because there's so much uncertainty out there that we really have difficulty in I mean, we run so many different scenarios how this year and next will look. And it's yeah. It's exactly we don't have a clear picture yet.

Great. That's helpful. Thank you for that, Peter. And then if I could just squeeze in one more quick one. I just wanted to double click on one of your comments in the prepared remarks. Where you mentioned that the weakness that you're seeing or some of the declines that you're seeing in non-carded play at Mountaineer really all coming in the midweek period as opposed to the weekend period. Can you just expand on that? Do you have a sense for why that is? Is that maybe easier comps on the weekend side giving staffing constraints that have been resolved in recent quarters? Is it more related to sort of underlying consumer behavior? Just, I'd love to unpack that because I would intuitively think that the weekend period would be a little bit softer just given, you know, the cost of the overnight stays and stuff like that.

I think this is purely customer behavior. And we think for the very simple reason that there is quite a large portion of customers that just do not want to don't have it in their life design that they come to us and visit during the week. Whereas on the weekend, everything's relaxed. They take a room. Most of them drive home again. It's a different situation. So we have been trying and continue to try all kinds of incentives to get more people during the week. For example, if somebody comes on the weekend and plays a certain volume, we give them bonuses if they come the following week during the week. It's successful to a little extent, but not a hundred percent. As I said, we think it's really just a demographic center behavior of the people who are that they tend to focus their spare time on the weekend than going out.

That's great. Thanks for that, Erwin. I'll pass it on. Thank you both.

And as a reminder, if you'd like to ask a question, you may signal by pressing star and one. And we'll take our next question from Chad Beynon with Macquarie Group.

Hi. Good morning. Thanks for taking my question. Wanted to ask about online gaming and sports betting. I know Alberta has been I think it's pushed back till the end of the year, but 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, whether it's Missouri or you know, some progress that we're seeing in Maryland. You just kind of frame out how you're thinking about monetizing the iGaming and sports betting opportunities whether it's, you know, third party, doing it on your own, and how that could help the cash flow. Thanks.

Yeah. I'll answer for Canada and then I hand over to Peter. The short answer for Canada is we just don't know what will be happening. We cannot really 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 our sales, we're very likely it would take a third party like we've done in the past. Peter, with that, I hand over to you, maybe a comment on the US part of that question.

Yeah. And you're right. The AGLC in Alberta has just not moved forward yet with their procedures and rules. If they can't yeah. In Missouri, a lot of demand for our license or licenses. I mean, that's still not a hundred percent defined yet, how many we have. But very, very active, very fluid situation with negotiations with sports betting providers. And as Erwin said, our clear directive is that we have somebody else do it, and we provide the license and get revenue percentage with a minimum guarantee per year for all markets we are in.

Okay. Thank you, both. And then Peter, I know you mentioned that you've 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, you know, maybe even better than expected. I think you mentioned that in Caruthersville. You have some nice momentum in Cape Girardeau. If we think about the previously given 2025 goal, would it be safe to assume that that could be a 2026 goal if the economy stabilizes, meaning you just need a little bit more time for some of these projects to ramp. And maybe a little more time for the consumer to get through some uncertainty in the market.

Yeah. That's exactly, obviously, yeah. It's still a good number, but and as we said, the properties are in great shape. So the product is there. And we just need the low-end consumer to pick up a little bit more. And so, yeah, we think that it has been, like, give or take twelve months. We have to push it out there. In terms of optical is. And for this year, it's as I said, it's just extremely difficult to have we have stretches of couple of weeks, two or three weeks where we think, oh, great. It's everything's clicking. And then there's another week or two where it's so it's really volatile and very hard to forecast at the moment. And that's mostly consumer sentiment.

Okay. Appreciate it. Thank you very much, guys.

Thanks, Chad.

And we'll move next to Mike Krowitz, investor.

Yeah. Hi. I'm a shareholder for the past couple of years. And I've seen the stock go down. You know, very rarely does it go up. The past quarters have been disappointments at best. You know, the Nugget is way down from their typical revenues. Rocky Gap is way down, I see, every month. You know, hundreds of thousands of dollars down. What is the company's endgame? 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 Poland, you know, these Canadian assets, and just focus on, you know, Colorado, Nevada, Mountain View, Rocky Gap, and Missouri, and that's it. And leave all this other nonsense behind over in Poland, these Canadian assets, and the stock price, I don't know if you saw it this morning, but it was down at one point 29% under $2 a share. It was at, like, $1.73. And it just disappointments after disappointments quarter after quarter with this company. Like I said, is it time to bring in a new CEO? One person who can give confidence to the investment community that they can turn this thing around. Because right now, there's no confidence that this company can turn itself around.

With regard to the non-US properties, I think we've said it before and also during this conference call, that divesting of those entities is an option and is under consideration. With regards to your other part of the question, we don't think so. But at the end, others decide. Peter, do you want to add to that?

Yeah. Let's not forget that for a very long time, both Canada and Europe had a very positive impact on EBITDA and cash flow. Now this impact is much lower, and that's why we've taken the decision to divest Poland. We are considering Canada. Yeah. And on top of that, what Erwin said, most of our casinos are depending to a larger extent on the new age consumer. And the fact that the low-end consumer is too weak, that's certainly the reason for that is certainly not within our company. And in terms of the end game, you know, we are a public company. So and don't forget that management is very much aligned with shareholders. Management also 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 the future. Some other people are knocking on our doors as you can imagine with a low share price. That's we are doing what we can, and then we'll see what others say.

Because it just seems like we're just straggling along here. You know, quarter after quarter. Revenue 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. And Poland I heard that was being sold, like, for two years now, and that hasn't been. Nothing has happened with that yet. But I think if this company just focuses on the North American United States assets, and you could and have, you know, marketing towards your Caruthersville property, Missouri, you know, cross-market with the Nugget, you know, and advertise the Nugget at the other properties so you can have cross, you know, promotions to, you know, you're promoting Reno, Nevada, and then Nugget why in Missouri or Colorado and cross-market these properties so everybody in Caruthersville and Missouri knows about the Nugget as one of our properties. You know, the Cripple Creek is one of our properties. The Mountaineer, and just get everybody in their mindset when they think of, you know, Century Casinos, Inc. Oh, we have a property in Reno. Let's we should check it out. To put it more at the forefront of customers all over the or of the other places. And do cross promotions with these other places to draw traffic.

Yes, Mike. I'm hearing that, and thanks a lot for your comments.

Alright. Good luck to you.

Thank you, sir. Operator?

Thank you. We'll take our next question from J.T. Waters, investor.

Hey, guys. Thanks so much for taking my question. I was that the insider zone, something 13, 14% of the company. Just curious your thoughts if management doesn't view stock buybacks at these levels as a good investment. I wonder outside of that, just on a personal level, it probably would be good for investors to see a strong amount of insider buying and just not really a question, just more of a statement. I mean, you know, it just seems if everything going the direction that you guys say it is, and we all hope it is, that would just be a great statement, I think, for the shareholder base. And I'll hang up. Thanks, guys.

Good. Thanks, J.T. Hey. Hey. I have a Chesky. Would just like to say something. We there are it's very generally speaking, there is management that would be very interested in buying back. However, we are pretty much restricted by the insider laws and rules. We have a lot of blackout periods.

Thank you. It appears there are no further questions at this time. I'll turn the conference back to our host for any additional or closing remarks.

Thank you, operator, and thanks everybody. We appreciate you for joining our call today. And we'll talk again in a couple of months. Until then, thank you, and goodbye.