Peter Hoetzinger - Vice Chairman of the Board, Co-CEO & President Erwin Haitzmann - Chairman of the Board, Co-CEO Margaret Stapleton - EVP, Finance.

Robert Majek - CJS Securities David Bain - Aegis Capital Michael Malouf - Craig-Hallum Capital Jayant Ishwar - Singular Research.

Welcome to Century Casinos' Q4 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..

Thank you, Candy. Good morning, everyone, and thank you for joining our earnings conference call. With me on the call are my Co-CEO and the Chairman of Century Casinos, Erwin Haitzmann; as well as 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 we 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 www.cnty.com.

We will now review the Company’s financial results, both for the fourth quarter and the full year and following our prepared remarks, there will be a question-and-answer session. 2016 was a tremendous year for Century Casinos as we generated all-time record revenues and all-time record adjusted EBITDA.

Erwin, Peggy and I are very pleased with these results, but we are even more pleased with the state, shape and condition our company is in today, which the result of a very efficient team effort of great people we have in our offices in Colorado Springs in Vienna and at Casino Property level.

All of them are very talented and engaged, striving for continued improvement at everything we do. Ultimately, that leads to better experiences for our guests, to better results and to increase value for our shareholders and other stake holders such as lenders and the communities we operate in.

For the entire year, net operating revenue increased 4% and adjusted EBITDA increased 13%. In constant currency, the growth rates for the year were even higher, 7% from revenue and 27% adjusted EBITDA growth, an excellent performance. For the quarter, net operating revenue was up 14%.

That's 16% in constant currency, adjusted EBITDA was up 40% or 42% in constant currency, driven by the addition of the new property in St. Albert, Canada and a strong result in Colorado and Poland.

Our strongest segment, Canada, which provides one third of our consolidated revenue and half of our consolidated EBITDA, saw revenues increased by 8% and adjusted EBITDA by 43% in the fourth quarter. Across all Canadian properties, we achieved an impressive EBITDA margin of 35%.

Looking at the Canadian results in more detail, we see that Edmonton, where we completed a major renovation of the gaming floor, the VIP areas and the poker room in November, grew table drop and slots [ph] by mid-single digits, but lower hold percentages, turn revenues slightly negative. The newly acquired casino in St.

Albert contributed positively as planned. We closed that acquisition on October 1 for a net purchase price of CAD$28 million, which is about $21 million in U.S. currency. We continue to learn about this business and we are encouraged with the results we're seeing so far, particularly property in a strategic location.

The integration process has been very smooth and slowly but surely, we are seeing synergy effects being generated by all our Canadian properties supporting each other.

That casino operates 382 slot machines and 11 gaming tables, it also features a restaurant, a bar, a lounge with life entertainment stage and a banquet facility that can accommodate up to 175 guests. The casino is located off of Edmonton's main road and is approximately 11 miles from our Century Casino and Hotel in Edmonton.

In the Calgary market where we have two properties, revenue at Century Casino Calgary was down 6%, partly because of six weeks of roads construction directly in front of our casino, resulting in lower visitation numbers.

At Century Downs Racetrack and Casino however, revenue was up 9% and the EBITDA margin was a very strong 43% even though the slot hold was 10% lower than in the same quarter of last year. We continue to push our royalty program sign ups and to specifically target the markets of North and Northwest Calgary, both of which do not have a casino.

In the U.S., the operations in Colorado also showed a great performance. Revenues were up 11% and adjusted EBITDA was up 38%. Overall, the Colorado operations account for 20% of our consolidated revenues and 18% of our adjusted EBITDA. The economy and consumer sentiment in the greater Denver and Colorado Springs metro areas continue to be strong.

And together with our marketing programs and popular VIP events, that leads to increased visitation and higher spend per visit. At the Century Casino and Hotel in Central City, serving the greater Denver market, slots coin increased by 19% year-over-year as the revenue also showed double-digit increases in the quarter.

In Cripple Creek serving the great Colorado Springs area, where our slot revenue was up 8% at our casino, we plan to convert one of the non-casino buildings that we own into 32-room boutique hotel. Total cost is estimated to be around $6 million and it will take approximately 12 months to build.

The existing 21-room hotel that we have in Cripple Creek increased revenues by 35% and it has a 90% occupancy rate and has won the best of Cripple Creek awards. We believe that more than doubling our hotel capacity will help us stay competitive with higher end players from the Colorado Springs market.

Now over to Europe where our eight casinos in Poland had another fantastic quarter, revenue was up 23% and adjusted EBITDA was up 52%. The Poland operations were responsible for 43% of the company's revenues and for 29% of our adjusted EBITDA. Claiming [ph] at the slots grew by 33%, slot revenue was up 28%.

Table drop was up 26%, table revenue up 20%, driven by a great performance of our flagship property at the Marriott Hotel in Warsaw. We continue to be very disciplined on how we spend our marketing dollars per slot rather focusing primarily on those incentives and reward with our VIP and repeat customers value most.

That was a great round up of the performance of our largest operating segments in Q4 2016. Now, let's take a quick look at our balance sheet. Total assets grew 17% to $280 million because of the St. Albert Casino acquisition. Net debt increased by 8% to $17.2 million.

Our total debt includes $41 million related to our Bank of Montreal credit agreement about $15 million related to Century Downs long term lend lease. Debt to EBITDA ratio sits at 2.2. The book value per share increased to $5.41. Excluding the St.

Albert Casino acquisition, CapEx was $2.6 million in the quarter, mostly for renovations in Edmonton as well as for gaming equipment in Colorado and in Poland. Overall, we are very pleased with our progress. All operating segments are in good shape and still offer potential for further improvement.

Let me now provide you a quick update on our newest project. In September of last year, we have been selected as the successful applicant by Horse Racing Alberta to own, build and operate the horse racing gaming entertainment facility in South Edmonton, which we will call Century Mile.

Century Mile will be a one-mile horse racetrack in multi-level racing and entertainment center which will include a gaming floor with about 600 slot machines as well as F&B outlets. The proposed location is on Edmonton International Airport land, close to the city of Leduc just south of Edmonton, ideally positioned off of Queen Elizabeth II highway.

First draft estimates call for total project cost of approximately CAD$52 million, which equals about $40 million.

Looking at the success of our Century Downs Raceway and Casino in Calgary and understanding the potential of the underserved market of South Edmonton, we are very excited about this opportunity and are working through all open issues as swiftly as possible with all stakeholders in the process that's including but not limited to Alberta Gaming and Liquor Commission, Horse Racing Alberta, and we do count in Edmonton Airport officials as well as the corporate and enterprise associations in Alberta.

The next critical step for this development to happen is the approval from the Alberta Gaming and Liquor Commission. We will of course provide an update as soon as news becomes available.

We're also working on other projects that are not that far elongated but would fit very well into our plan for disciplined investments to continue growing our company in a prudent and accretive way. That's the end of our presentation. I thank you for your attention and we can now start the Q&A session. Candy, go ahead, please..

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

Good morning. On the Apex Casino in the press release, you mentioned $300,000 in net earnings.

What was that on an EBITDA basis and does that number build in the removal of the duplicate corporate cost and management fees that you have talked about? If not, when should we expect those synergies?.

Peggy, can you provide some detail on that? Do you have those numbers with you or whatever?.

Yes, I can. The EBITDA for the quarter was $595,000 and we have all the management fees in there already. So everything is accounted for to that EBITDA..

Got it.

Just to help us take out the accretion from the deal, can you give us the total expected EBITDA contribution from Apex this year with full synergies? Is that about $4 million or so on a full runway [ph]?.

Robert, we're not giving guidance as you know..

Okay..

But we expect some synergies and they should really kick in more from Q2 onwards..

Thank you. That's helpful. And then just on the Palace Hotel, you gave us the project cost of about $6.5 million.

Can you just help us understand the potential earnings of that investment on a return on capital basis?.

Some insight there, Erwin?.

Yes. This is Erwin. We think the hotel should pay for itself between say, five and seven years..

Got it. That's helpful.

And then when is construction expected to start?.

Let's say maybe Q3..

Okay. And then across the business, what was the whole percentage this quarter and in last year's Q4? Just maybe remind us what the normalized whole percentage is supposed to be..

We don't roughly hold percentage across our operations. Really, I don't have to tell you. Do you, Peggy? While you look for that, Robert, in the meantime I can say that for the fourth quarter, in Edmonton which is our largest property, the whole percentages were quite a bit lower than compared to [indiscernible].

For example on the tables, we had a whole percentage of a little bit over 18% last year and 16.7% this year.

That's why we showed slight decreasing revenues in Edmonton whilst if you go by the drop and by declining, revenue should have been up 3.5% to 4% and very similar at Century Downs which is our second strongest performer in the entire group, so those gradual impact..

But between those two deviations, what was the total impact of that?.

In dollar terms?.

Yes..

Or percentages?.

I guess in absolute dollar terms is fine..

At Edmonton, that was about for the quarter about $0.5 million in revenue, more than $0.5 million at Century Downs. It was a little bit less than that. Overall, probably just below CAD$1 million..

Thank you. And then just lastly for me. In Poland, pretty solid revenue growth and margin expansion now.

What's the driving force behind that and just overall, what's your outlook going forward and perhaps any color if you're seeing that trend continue into Q1?.

Yes, I see the trend continue. Please, Erwin? Yes..

Yes, so you see the trend continue. One main reason has been that our main competitor had to close its doors because its license was not extended and that was the casino in Hilton Hotel and we saw a certain number of customers moving over to our property.

Apart from that, I think the second effect is that all the retirements that management has been working on for such a long time really come to fruition now..

What city was that competitor located in?.

In Warsaw..

Got it. Okay, thank you..

[Indiscernible] largest of our properties and we have been the largest in are the largest within the Warsaw market and if the number two is closed, the one would have expected and rightly, so that this new has had positive impact on us..

Thank you. That's perfect, very helpful. That's all for me..

Thanks, Robert..

Your next question comes from the line of David Bain from Aegis Capital. Please state your question..

Thank you. Hi Erwin and Peter. I was hoping to review the timeline for Century Mile. Peter, I know you gave a little bit more detail at the end of the prepared comments.

But it sounds like Alberta Gaming and Liquor approval would be next and I'm assuming that's fairly near term next 30-45 days and I'm hoping you can speak maybe to the timeline from there in terms of permitting, augmenting your credit line.

I guess what I'm trying to nail down is a little detail because I know Century Downs took you about a year to build, but that was a smaller project.

So I'm trying to get a sense if the end of 2018 is right where you anticipate at this point? If that could be conservative or any thoughts on that side of things?.

The short answer, it's maybe the end of '18 or the first half of '19 and it depends on when the approvals are coming and the weather is cooperating in Canada. You know that really is an important factor up there. Unfortunately, that's really all we can say at this time, Dave..

Okay.

And do you expect to put in the market limit of 1,100 slots?.

Not at the beginning and that's also not our call that we can ask for a certain number of slots and for most slots although the Gaming and Liquor Commission brought ultimately their call. And it was based on - previously whenever a casino performs very well, then they have to add more machines to that casino.

So we are hopeful that while we may stop with the lower number that we could reach there..

Okay, great. And then just a final follow-up to Robert's question on hold. I understand win rate was lower, but was that out of the normal range, or is that something that you typically would point out if it were? Maybe both to those answers would be a little helpful..

Yes and yes. It was from a normal range like it was normal last year and it was lower than normal in Q4 '16..

Okay. All right, great. Thank you..

Thank you, Dave..

Thank you..

[Operator Instructions] Your next question comes from the line of Mike Malouf from Craig-Hallum Capital. Please state your question..

Great. Thanks, guys, for taking my question. Just another follow-up call on Century Mile. I think on the last conference call, you sort of pointed out that you might start spending part of that or you start the $50 million project cost starting in the second quarter.

Is that still the expectations?.

That's unlikely. As soon as we get the gaming commission approval, we would start to spend some money on planning obviously on certain things. But that is small change when you completed the entire project. So in Q2, you will not see any meaningful CapEx on that..

Okay.

So the approvals, do you think have been a little bit delayed from what you have expected to get?.

There was never really a schedule, a goal set by the gaming commission by when they will take that to the board for a decision. So we always hope to get it next month, next month, next month. But we never knew any date from them in the first place..

Okay, great. And you mentioned that you do have a couple other projects in your pipeline. I'm wondering if you could just give us a little bit of scope.

Are these projects on the same size as Century Mile? Are they smaller or larger and can you give us any sense of geographic location?.

We're working on two projects or more than two. Complete already, pretty far along. One in North America, one in Europe and they both are smaller than century Mile..

Okay, great. Thanks for the color..

Thanks, Mike..

My apologies. Your next question comes from Jayant Ishwar from Singular Research. Please state your question..

Thank you.

Can you give us some color on the cruise ship business?.

The cruise ship business in the fourth quarter was doing very nice revenues. You know it's a small segment but we increased revenues by 58%, so it fit very well on the revenues.

On the cost side, that was also all proportionally up [indiscernible] cruise ships in the second half of the year and some high cost associated with the openings with staff cost, especially the one that we've opened in China. And that led to lower EBITDA in Q4 compared to Q4 '15. We are talking a difference of about $150,000..

Can you break out the revenue on the EBITDA for that?.

Did we break that out, Peggy? In the presentation? Is it broken out and can we disclose that number?.

We don't have it separately disclosed. I can update the presentation. Is it - for instance the presentation has it; so it's $1.346 million net operating revenue..

Thank you..

There are no further questions at this time. I turn the call back over to the presenters..

Thank you, everybody and thank you for your 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..