Peter Hoetzinger - Vice Chairman of the Board Co-Chief Executive Officer and President Erwin Haitzmann - Chairman of the Board Co-Chief Executive Officer Margaret Stapleton - Executive Vice President, Finance.

Robert Majek - CJS Securities Alex Fuhrman - Craig-Hallum Capital Debra Fiakas - Singular Research.

Welcome to Century Casinos Q1 2016 earnings conference call. This call will be recorded. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session. I would like to introduce our host for today's call, Mr. Peter Hoetzinger. Mr. Hoetzinger, you may begin..

Good morning, everyone, and thank you for joining Century Casinos first quarter 2016 conference call. Earlier this morning, we released our financial results for the quarter.

If you don't have the copy of the announcement, and you'd like one sent to you, please visit the Investor Relations section of our website or contact us by sending an email to info@cnty.com. On the call with us today are my Co-CEO, and the Chairman of Century Casinos, Erwin Haitzmann; and our Executive Vice President of Finance, Margaret Stapleton.

Before we begin, we would like to remind you that we will be discussing forward-looking information, which involves a number of risks and uncertainties that may cause actual results to differ materially from our forward-looking statements.

The company undertakes no obligation to update or revise the forward-looking statements, whether as a result of new information, future events or otherwise. We provide a detailed discussion of the various risk factors in our SEC filings and encourage you to review these filings.

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

Reconciliations of our non-GAAP performance and liquidity measures to the appropriate GAAP measures can be found in our news release and in the filing from this morning, available in the Investor section of our website at cnty.com. With that, let me present our prepared remarks, and then we'll open up the call for Q&A session.

Results of the quarter were once again impacted by strong U.S. dollar. Net operating revenue, as reported under GAAP, grew by 7%, factoring in the unfavorable foreign currency impact versus the first quarter of last year of $2 million. The real revenue growth in constant currency was 14%. Adjusted EBITDA grew, again, in constant currency, by 28%.

This marked the sixth consecutive quarter with both revenue and EBITDA growth. Consolidated earnings operations were up 61%, reflecting the underlying strength and stability of our geographically diverse portfolio of casino assets. Canada continues to be our strongest market.

It generated half of our total consolidated EBITDA; followed by Poland, where we got 24% of our adjusted EBITDA from; and Colorado, which generated 21% of total adjusted EBITDA. Our balance sheet continues to be in very good shape.

Net debt decreased from $15.8 million a year ago to just $8 million now, and that number even include $15.6 million related to long-term land and capital leases at Century Downs in Canada. Net cash provided by operating activities increased 27%.

Regular property CapEx was $900,000 or 2.8% of revenue, spent mainly on gaming equipment for ship casinos, casino renovations at the Edmonton Casino and new slots for Century Casino, Cripple Creek and Casinos Poland. Our debt to adjusted EBITDA ratio is still at only 1.6x, one of the lowest in the North American casino industry.

Book value per share increased from $4.73 to $5.24. In Colorado, the solid run of both casinos continued. The economy and the consumer sentiment in the Greater Denver and Colorado Springs Metro areas continues to be strong. Coupled with our effective marketing program, this led to a continued revenue and EBITDA growth of 4% and 2%, respectively.

While Century Casino & Hotel in Cripple Creek led by the numbers, our property in Central City has been named best casino in Denver for the fourth time in the last five years. CityVoter.com tabulated the votes of over a two month period in 145 diverse business categories with over 82,000 voters across the Denver metropolitan region.

We won the Best Casino in Denver title, competing against 23 other casino properties in the Blackhawk and Central City markets like Monarch, Ameristar and Isle of Capri. Century Casino enjoys an outstanding reputation for its hospitality and guest service.

The property in Central City offers 500 of the latest and most popular slot machines, a restaurant, a deli, twenty-six beautifully appointed boutique style hotel rooms and suites, a 500 car covered parking garage directly adjacent to the casino action provides easy accessibility from the Central City Parkway into town from I-70.

The casino will feature the best casino title in all marketing activities, and we have a lot of promotions leading up to its 10 anniversary in the third quarter. In Canada, the Canada segment show revenue growth of 61% in local currency, while adjusted EBITDA was up 29%.

The Century Casino & Hotel in Edmonton had a very good quarter on the gaming tables with revenue up 7%. Slot revenue was up 1%. EBITDA margin 38%. A substantial renovation of the floor space is currently underway. I was there last week and was impressed with the progress.

We will expand the gaming floor, relocate the 24-hour poker room, enhance the high limit VIP area, create a new bar and also expand the casino restaurant. The new design will be ready for the fourth quarter, which traditionally has been the busiest for Edmonton. Revenue at the Century Casino in Calgary was flat year-over-year.

Whilst revenue at the blackjack and baccarat tables was up, slots had a little less play due to the addition of our own Century Downs casino to the market in April of last year. EBITDA margin at Century Casino Calgary was 23% for the quarter.

The great success of our newest property, the Century Downs Racetrack and Casino in north of Calgary continues. Revenue increased over the last quarter and the EBITDA margin was 44%. We began live horse racing on February 14 and have experienced increasing customer volumes every weekend since then.

We continue to push our loyalty program sign-ups and we also continue to specifically target the markets of north and northwest Calgary, both of which do not have a casino. And finally, over to Europe, to our 66% owned subsidiary Casinos Poland Limited.

As reported in March, the Supreme Administration Court of Poland ruled in early March that Casinos Poland, acting as a taxpayer, must calculate, collect and pass on to the Polish Tax Authorities personal income tax on all tips received by employees from casino customers.

We have still not received the written ruling from the court, and therefore we have not been in a position to record the proper additional expense related to this ruling. We are evaluating changes to payroll on a go-forward basis, but no changes can be and will be made until after their written verdict is received and analyzed.

This is frustrating for us, as it is for you. So far, we believe that the contingent liability we had established is sufficient to cover the open tax periods relating to personal income tax through the end of Q1, if the Polish IRS were to continue with the tax audits.

Until a written verdict is received, we cannot estimate the probability of additional employment tax obligations being assessed based on the decision relating to personal income tax. However, based on the information available as of March 31, 2016, the goodwill of Casinos Poland will not be impaired.

If that information changes, based on the written verdict, we will revaluate the goodwill situation. Our Poland business is fundamentally very strong. We should get the written details of the ruling in the second quarter, which will then allow us to determine the real impact going forward. In Q1, Casinos Poland had a mixed quarter.

It operates 505 machines and 81 tables at nine locations throughout the country. Slot revenue showed continued strong growth with coin-in up 50% and revenue up 40%. The increase in slot revenue was broad-based.

It's pretty much all of our locations and it was due to better slot product on the floor, due to the new player loyalty program and also due to the closing of the last league of slot arcades a few months ago. On the gaming tables, there was real growth in money wager.

Drop was up over 2%, at a much lower whole percentage compared to last year, resulted in a 30% decline in table game revenue. The overall EBITDA margin increased slightly to 14%. We work hard to keep Casinos Poland growing and to keep operating margins close to where they are today, despite of the higher compensation expenses going forward.

That completes the presentation of the results for Q1. Overall, we are quite pleased with our progress. All operating segments are in good shape and still offer potential for further improvement. Let me also mention that the second quarter started out really well for us. The month of April generated strong double-digit growth over April of last year.

This is a true apples-to-apples comparison, because last April already included the casino at the new Calgary racetrack, opened April 1 last year. We look forward to the opening of additional cruise ship casinos in the second quarter and to further advance the company through organic growth as well as through the acquisition of additional properties.

Thank you for your attention. And we can now start the Q&A session. Operator, go ahead please..

[Operator Instructions] Your first question comes from the line of Robert Majek of CJS Securities..

Peter, in Poland, revenue was down year-over-year in local currency, despite some benefit from the ban of non-casino slot arcades.

I was hoping you could give us a little more color on the market dynamics you're seeing there?.

Slot revenue is really very, very strong, 50% last year coining growth, that's really phenomenal. And also, we had little growth on the gaming tables, but the whole percentage was a little, it was little bit -- was quite potentially lower than last year.

Erwin, would you like to add also the situation of the live gaming tables, so I think we have made pretty good progress, because we are not so dependant any more on one player, right..

Exactly. In the past, probably, six, seven, eight years, most of our result cost gaming revenues have been influenced and impacted by one senior player. We now see that its we could broaden our base and are not dependant on this particular player any longer, whether he comes, whether he wins or loses, so that is very encouraging going forward..

And on previous calls, you've discussed the potential expansion into Southeast Asia.

Can you update us on your efforts there?.

We are getting much, much closer, but we are not yet ready to disclose any firm deals. But we are getting very close and we believe that within this current or the next quarter, we should be able to announce something. I'm very hopeful about that..

And on the taxation of tips in Poland. I know you haven't gotten a written ruling yet. It can't be specific.

But can you help us just very roughly quantify the range of potential impact on your results going forward in any way?.

I cannot. And I hand you over to Peggy, but I fear she's also not be able to do anything. And the reason really is that our legal and our auditing partners, they all say we have to wait.

Peggy, can you explain in more detail?.

There is just so many moving factors related to this legal opinions that we really can't quantify it. This is actually an employee's tax, but it will impact our payroll going forward in some manner. And that's about all we can say..

I think that the verbal ruling was very unprecise.

Isn't that right word?.

Yes..

So we really need the written ruling to make any detailed analysis. As I said, it's really frustrating for us..

Last one from me on Century Bets! Can you discuss the increase in expenses? I'm trying to kind of gauge how much of it was perhaps one-time in nature? And maybe if you could just give us an idea of how soon you'll return to profitability there?.

Very much all of it was a one-time thing. It had to do with the correct set up in Canada. Peggy is it fair to say, or Erwin, that from now we budget profitability every single quarter.

Is it correct?.

Yes..

Yes. That's correct to say, absolutely..

Our next question comes from Alex Fuhrman of Craig-Hallum Capital..

Just looking at Canada, as you start to lap the launch of Century Downs and Century Bets!, what should we think about as a normalized growth rate for Canada in Q2 and looking into the back half of the year?.

Erwin can you say something?.

You are looking for percentage figure, right, for all over Canada?.

Yes or however you think it make sense to just think about, because, obviously, given such a huge growth in Canada in 2015, I would imagine that will moderate pretty quickly here?.

Well, not necessarily. Let me say something rather qualitatively than quantitatively. In Century Downs, we just have, obviously, one full year behind us. And we feel that the potential has not been reached yet, and we can get more out of this operation, and as we continue to grow. So we don't think that we're leveled out there by means yet.

And we're looking from various angles on how to further expand and really everything we do is very encouraging. With Century Bets!, as I think we mentioned before, there we don't see really a whole lot of growth at this point in time, but it will be profitable and will contribute.

With regard to Edmonton, the upgrades that Peter has been describing before, we think will be really good and really helpful. The poker room will be nice. The high limit will be nice. It will have a private room that would be really nice.

We are spending about $2 million in making this really sparkling and then good and great customer experience and will be totally competitive with that. We expand also -- we do something to the entrance area, which in effect brings the showroom closer to the casino entrance. We're gaining some space there. So that's all really exciting.

I was also there last week together with Peter. We went through the details once more. We're excited. We think it's really good. And when it comes to the Calgary Casino, the first one we had, the Calgary Casino, then in April we see that in fact, by until March, we always have a few percent decrease in both coining and slot revenue.

And as Peter correctly said, due to the [indiscernible] Century Downs, we now see that, in fact, we probably too very likely have mutually beneficial marketing effects there. So we see when we're running here marketing campaign for Century Downs, it also profits the Calgary Casino, the Century Casino Calgary.

So this is for the first time I think that we really see the advantage of having the brand name in one of the same market. And that's really great and encouraging. And then live game, it's volatile.

In addition, Calgary with the baccarat, we also, if we look at it from a larger picture, we see it's growing, growing, growing, so all of that looks very good..

Our next question comes from the line of Robert Maltbie of Singular Research..

This is Debra in for Robert. You have two new casino operations that you're going into on ships. I just wondered if you could give us some metrics on in terms of tables or machines for each of those ships..

Debra, it's very similar to the existing ones that we have Mein Schiff number 5 and Thomson Discovery. And they won't really move the needle very much, a handful of tables and I think 10 or 20 slots. So we have nice addition to segment, but nothing to write on that part..

And also, you didn't mention your interest in Argentina in your opening remarks. And I wondered if you could provide us with a bit of an update on you're viewing that particular market. There has been a great deal of change in the political and economic development scene there..

That's apparently from growth in international financial market say all for the better. However, internally, within the country the situation looks a little bit different. The currency and the free currency exchange now has resulted in pretty much all goods being more expensive for the local population. They have less spending power than before.

I think overall it's really for a better of the country what's being done, but in the short-term, the spending power of the local population is suffering. And we also see that in the casino now. Now, we have a small stake there, as you know, and then option to increase. That option runs for another 1.5 year.

So there's no pressure really on us to make a decision. And our management fee is mostly it's a fixed payment and not dependent on the results too much. So no real impact on our overall results and we have a wait and see approach because of that time horizon with the contract that we have to possibly increase and not decrease our stake there..

And then my last question is in regard to cost pressures. And just in looking at the numbers quickly, it looked like perhaps your experience in some cost pressures perhaps particularly in Canada. And I wondered if you could comment on what you are seeing in terms of labor costs or material costs and so forth..

The cost pressure is mainly on the salary side. You may possibly have a follow-up, the new growth government has the ambition to raise, step-by-step over the next few years to minimum wage. And one such wage has taken place recently of, say, simply everything -- all hourly wages has been raised by $1. That impacts us, but so far we can still adjust it.

In the other areas of cost, however, we rather see the opposite. Due the fact that the economy of Alberta has been suffering a little bit due to the, let's say, taxations in oil price. Construction is now cheaper, so now is a good time do the renovation that we are doing, and in fact, it goes the other way..

I will now return the call to Mr. Peter Hoetzinger for concluding remarks. End of Q&A.

Thank you, everybody, and thank you for you interest in Century Casinos and your participation in the call. For a recording of the call, please visit the financial results section of our website at cnty.com. Goodbye..

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