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

Robert Majek - CJS Securities Mike Malouf - Craig-Hallum Capital.

Welcome to Century Casinos’ Q2, 2017 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, Phyllis. Good morning, everyone, and thank you for joining our earnings 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 cnty.com.

We will now provide a brief review of the company’s financial results for the second quarter of 2017 and following our prepared remarks there will be a Q&A session. The second quarter reflected good revenue performances from our top three operating segments. In local currency, Canada was up 11%, Poland was up 4% and Colorado was up 3%.

We are happy with the underlying strength and stability of our geographically diverse portfolio of Casino assets. There was a decline in earnings and margins in the quarter, but that was mainly because of onetime cost and expenses.

In Poland, we have onetime expenses associated with two close casinos and with the opening of our new casino at the Hilton Hotel in Warsaw. And we incurred onetime cost because of the acquisition of Saw Close Casino Ltd. Bath, United Kingdom. I'll provide more details about that later in the call.

Canada remains our strongest segment, generating 38% of our consolidated revenue and 54% of consolidated EBITDA. Looking at the Canadian results in more detail, our largest property, the Century Casino and Hotel in Edmonton offering 822 gaming machines and 35 gaming tables had revenues declined by 2%. Table game revenue was flat, so was slot coin in.

Only the lower hotel and S&B revenues were the reason for that small decline. The EBITDA margin decreased slightly from 37% to 36%. Overall, that property continues its solid performance. Century Casino St. Albert also located in the great Edmonton area had a steady quarter. The EBITDA margin there sits at 32%.

During the quarter, we replaced the carpet on the gaming floor and added 29 gaming machines. In the Calgary market, our Century Downs Racetrack and Casino increased net operating revenue by 3%. Slot machine coining was up 4% and EBITDA grew by 11%. We added 40 new slot machines during the quarter.

We also invested in the infrastructure necessary to host thoroughbred races. This coming weekend we will host the World Driving Championship event and from September on we will have major live thoroughbred racing events which typically draw larger audiences and drive more revenue.

The results of our other property in that market, the Century Casino Calgary has been characterized by quite a lot of changes throughout the organization. As reported last quarter, we brought in a new Chairman, a new Chief, a new Chef and certain other new departments heads and we executed new responsibilities and processes.

Looking ahead, we're excited about the new leadership and the positive changes that will come from it. Let's hope that performance in July of this year is already an indication for these positive changes because preliminary results for July show a double-digit revenue increase and the day with an all-time record table games dropped interim result.

The U.S. operations in Colorado contributed 21% of our consolidated revenue and 23% of our consolidated EBITDA. They showed a solid performance with revenues up 3% and adjusted EBITDA flat mainly because of staff cost increases.

We continue to see a positive retail economic outlook and anticipate continued growth due to strong focus on customer service, player development and consistent and firm [ph] promotions. Our Casinos in Poland generated 38% of the company's total revenue.

This quarter revenues were up 5% but the drop at the gaming tables and the coin in at the slot machines were up over 20% each so business volumes continue to be very strong for us in Poland. We achieved this growth even though we had less casinos in operation compared to last year as the licenses at two locations expired.

We already reapplied and we already have been ranked first in these kind of procedures, but the actual licenses have not been issued yet. We anticipate these two casinos to be operational again before the end of the year. The bottom line in Poland was lower this quarter because of one-time reasons and it is important to clarify those.

Firstly, we carried extraordinary cost and expenses associated with the two closed casinos of approximately $300,000 and secondly, we had approximately $225,000 in onetime expenses for the preparation and the opening of the new casino we opened at the Hilton Hotel in Warsaw in June.

So, adjusted for these onetime expenses, the bottom-line of our Poland segment would have been higher now compared to Q2 of last year. Warsaw the capital of Poland is the country's most important gaming market and our new casino at the Hilton has the largest gaming floor in all of Poland.

Due to legal restrictions in Poland for casino marketing and advertising any new casino there takes a bit longer than normal to reach its full potential. So, we don't expect to see the real earnings power of that location before the end of this year, but from then on, it's really moved the needle for our Polish segment.

Now a quick look at our balance sheet. Total assets grew to $224 million. Net debt is $16 million total debt is $55 million. Our total debt includes $39 million related to our Bank of Montreal Credit Agreement and $15 million related to Century Downs long-term lend lease. The total to adjusted EBITDA ratio sits at 2.1.

Book value per share increased to $5.72.

In the second quarter, we spent $1.8 million on CapEx that amount includes 175,000 for gaming equipments for new ship casino that we opened during the quarter, 225,000 for the corporate infrastructure at Century Downs, 667,000 for lease hold improvements and surveillance equipment at several locations in Poland, and a total of 350,000 spent on the new Century Mile and past UK projects.

I will now provide a quick update on these two, our newest projects. The most exciting growth opportunity is the Century Mile race casino project in Canada.

It's been selected and approved by Horse Racing Alberta and by the Alberta Gaming and Liquor Commission to own, build and operate a horse racing and gaming entertainment facility in South Edmonton, which we will call Century Mile.

That's already started the development, stripping and grading as in food process with a budget of approximately $45 million and we plan to open at the end of next year.

To be a multi-level building with a footprint of 48,000 square-feet initially accommodating 550 slot machines, restaurants, bars at daily and off-trade betting parlor and a grand spend plus convenient parking for all the 1,700 cars.

For comparison that building will be 50% larger and the footprint will be almost twice the size of our Century Downs facility in Calgary. This would be the only one-mile race track in Western Canada and will offer a minimum of 100 race days per year and the casino will be open 364 days. We are thrilled about this project for these three reasons.

Firstly, its location, we are on Edmonton International Airport land, part of Queen Elizabeth II highway, the second busiest highway in Western Canada right next to an Ivanovo Cambridge Regional Shopping Mall, the golf-course and the class of hotels and restaurants all in the south of Edmonton which they don’t have any casino.

In fact, the nearest casino will be about 20 miles to the north. Secondly this project came about due to the fact that they exist in race track and casino Northlands Park will close next year because of the land lease with the city of Edmonton coming to an end.

This mean that our existing casino in the northeast of the city Century Casino and Hotel Edmonton which is the largest property in our entire portfolio will greatly benefit because its closest competitor will fall away completely.

And thirdly, we look at the success that we are having with Century Downs in Calgary which we opened about two years ago and which generates almost 30% EBITDA return on investments. Even though we brought new gaming machine capacity to that market in fact it increased the number of machines in the Calgary market by over 500.

Now this new project in Edmonton Century Mile will be bigger, better in a comparatively even better location and will not bring any new capacity to the market because the existing race driving casino will close reopen [ph].

So, for these reasons we believe that our ambition to generate over 25% EBITDA return of that investment has a really good chance of success. Over in Europe, we had acquired a casino underdevelopment in the UK in the City of Bath, one and a half hours west of London.

In June, we purchased 100% ownership of Saw Close Casino Limited the company that has the exclusive license for a casino in that market.

It also has a 30-year lease agreement with the landlord off a multi-level mixed leisure development that includes a 147-room hotel and various restaurants in the center of the city directly opposite the very popular Royal Theater.

The acquisition price was just $766,000, in addition we will invest approximately $6.4 million for design and sit out of the 15,000 square-feet casino space which will accommodate 18-gaming tables, as well as around 60 gaming machines and life gaming terminals.

The entire city of Bath is a UNESCO World heritage side and gets about 5 million tourist every year. Even more important the immediate catchment area includes close to 200,000 people and we are the only casino in that area.

We plan to open in the first half of next year and expect again an EBITDA return on our investment of at least 25% once the property has fully ramped up.

We believe this project is another example of our successful track record of finding great opportunities in the well-regulated markets worldwide to the reasonable cost and investment that with the high earnings potential for our company.

A handful of new additional projects and opportunities are on our table right now, some greenfield development opportunities, some acquisitions all in objective markets with high return on investment potentials.

It is too early for detail disclosures, but looking at our track record of adding new casinos you could expect to one or two new until the next 12 months to 18 months. Finally, a brief outlook for the current to third quarter, what we can see so far is that business volumes have increased quite strongly.

July highlights from the individual properties include the following. The third highest slot machine claiming ever as well as record revenues for life racing and betting at Century Mile in Calgary, increases in table game slot as well as slot machine coin in at Century Casino in Edmonton, a 32% increase in table games revenue at our new casino in St.

Albert, an all-time record day for table gains drop in revenue and the overall at 29% increase in table games volume at Century Casino, Calgary. [Audio Gap] new record monthly EBITDA for that property. On a consolidated basis, preliminary results for July showed double-digit revenue growth and also a very nice increase in operating margins.

Again, the preliminary indication for July for adjusted EBITDA growth in that month is north of 20%. All right, that’s the end of our presentation. And thank you for your attention. And we can now start the question-and-answer session. Operator, go ahead please. .

Ladies and gentlemen, we will be now begin the question-and-answer session [Operator Instructions]. We are now ready to begin. Our first question comes from the line of Robert Majek with CJS Securities. Please state your question. .

Good morning. Just looking on whole at a 11% EBITDA margin, it came in a bit lower than what we were expecting and it’s been in the kind of the 14% to 16% range for few quarters now.

Can you just kind of walk me through what was behind the cost increase there, perhaps there were some onetime items in that figure?.

Yes, we had about $300,000 of onetime cost that aren’t in that figure and the reason for that amount is because we had some staff and especially rent and other costs for the two casinos that are closed.

But we kept the agreements, and we kept the premises because as I have mentioned we reapplied for those licenses and when you reapply you need to show premises and that’s why we kept this intake and that’s where the $300,000 number comes from. .

And then you used to have a location in [indiscernible] and the license was left to expire.

I guess what’s changed there that makes it a better market to re-enter now?.

Erwin, can you come on that, I think that one we change in operations is that right?.

Yeah. Right, right, right. It’s not so much that the market change, it is always the question of the license, and we got a better location there. So, we have applied to the better location and as Peter said, we’re just waiting now to get that license. .

We have been ranked first in the process already, but between the end of the process and the actual issuance of the license, there is some -- the Polish authorities take some time and we don't know exactly how long that could be one or two months or it could be four, five months.

And the other one which is even stronger is [indiscernible] that is also being -- it is also closed now and the same situation we expect to be open before the end of the year..

And in addition of those two locations there is also one more license that you're betting on, was the country wide casino cap increased or was that another expiring license from someone else?.

Neither nor, it was just a license that nobody thought they I had been interested in before..

Got it, okay.

And if you win all three of these, what are the likely start up renovation costs that we should expect?.

With regard to [indiscernible] that could be a matter of one or two months and with regard to the games could be new one we would take a little longer..

And cost Erwin, investment?.

Costing and [indiscernible] not very high, games be a few hundred thousand..

Thank you.

And just lastly from me, can you just give us a table game whole percentage of this quarter and last year's second quarter?.

We have stood [ph] by property..

That will be fine, why don’t you give us….

Well I have to take a [indiscernible] actually, are we releasing those numbers for each property?.

We have those by segment in the presentation, so for Canada if you look at page 13 it's got flatten table year-over-year..

Our next question comes from the line of Mike Malouf with Craig-Hallum Capital..

Great. Thanks guys for taking my questions. If I could just may be look out a little bit in Poland and you have some onetime costs here and you're ramping obviously the new Hilton location.

As you look into 2018 and as you get past some of these, where do you think the adjusted EBITDA percentage numbers can check out? I mean are we still taking a look at potentially at the sort of 2017 to 2018 or even higher percentages?.

Yeah, I think we've said the high teens it's very unlikely to go into the 20s because of the gaming tags being at 55%..

Right.

But sort of 18% target next year is -- that's a reasonable call to shoot for right?.

We believe so, yeah. And revenue should also grow quite strongly with these two casinos coming online again and revenue ramping up..

Right, they should be up over 10% I would imagine..

That 10% relative to what, relative to the total revenues do you mean?.

When you look at the net operating revenue for 2018 after you get all these things opened you should get a 10% growth next year I would imagine in Poland?.

We would hope that this would be on the conservative side..

Correct. Okay, got it. All right and that helps a lot.

And then with regards to G&A, G&A was a little bit higher than what we were looking for, can you talk a little bit about that, was there some one time, was that sort of double accounting, some of the onetime items you talked about?.

If you're discussing G&A related to Poland it's salary costs, we've had an increase in salary costs due to the tips issue that we had..

Okay. All right that's for salaries..

Okay..

Okay. All right, thanks guys. Appreciate the help..

And at this time there are no further questions. I will now turn it back to the moderator. .

Great, thank you operator, and thanks everybody 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..