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

Mike Malouf - Craig-Hallum Capital Group David Bain - Roth Capital.

Welcome to Century Casinos' Q3, 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..

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 third quarter of 2017 and following our prepared remarks there will be a question-and-answer session.

The third quarter results reflect excellent performances from our all operating segments and Canada demonstrated the earnings power of our international portfolio of casino assets. Net operating revenue was up 19% and adjusted EBITDA was up 20%.

During the quarter we released the valuation allowance on our US differed tax assets, resulting in a tax benefit of $5.1million.

We analyzed the likelihood of future realization of the differed tax assets and based on this analysis, we concluded that the operations in the US, has attained a sustained level of profitability sufficient to reduce the valuation allowance.

As a result, net earnings and earnings per share for the quarter got throughput [ph] to $7.6 million and $0.30 respectively. Overall, Canada remained our strongest segment, 37% of our consolidated revenue and 53% of our consolidated adjusted EBITDA. All our Canadian operations posted increases in both revenue and EBITDA.

Looking at the Canadian results in more detail, our largest property Century Casino & Hotel-Edmonton, offering 822 gaming machines and 35 gaming tables showed a revenue increase of 2%, EBIT grew by 17%, EBITDA margin jumped from 32% to 36%. Century Casino St. Albert also located in the great Edmonton area had a very good quarter too.

The EBITDA margin increased to 34%. We're starting to see substantial synergy effect between these two properties in the great Edmonton market, planned and we made the acquisition a year ago. In the Calgary market, our essential our Century balance rate for casino increased net operating revenue by 9%, slot coining was up 20% and EBITDA grew by 2%.

The reason for the lower EBITDA growth is the additional expense caused by the set up works for thoroughbred racing during the quarter. Actually, we started thoroughbred racing in September and it is very successful for us. It draws large audiences; it drives more revenue, on the gaming floor, in the restaurants and at the betting shops.

The result of our other property in that market essential Casino Calgary, are also very encouraging. Revenue increased by 22%, EBITDA almost got throughput. As reported last quarter, we brought a new Gym, a new Chief, and certain other new department heads and we executed new responsibilities and processes.

And these changes are now showing first and very promising results. During the quarter, we serviced a bowling length to improve the entertainment value for public bowling and the quality for lead bowlers. We also relocated the back [indiscernible] and created a new enhanced atmosphere for the table games and installed larger TV screens.

Currently we are finishing construction and installation of or our new family entertainment center, it includes 18 holes of mini-golf adventure, our Skate games [ph] and three separate Thai rooms all of which slated to open before the Christmas holidays. Overall, we are excited about the gaming market and the economy in Alberta.

The rest of it is for Calgary in Edmonton as the conference part of Canada put it in an article published on October 17. According to their research, Calgary and Edmonton are forecasted to be the fastest growing metropolitan areas in Canada this year.

This economy has been getting stronger, thanks to rebound in drilling and increases in oil production. For 2018, the CBC estimates complete growth at over 2% for the economies of Calgary and Edmonton. The operations in Colorado contributed 22% of our consolidated revenue and 28% of our consolidated EBITDA.

This showed a solid performance with revenues up 10% and adjusted EBITDA 19% and both properties gaining share in their respective markets. In fact, the Century Casino & Hotel in Cripple Creek, serving mainly Colorado Springs market achieved the EBITDA performance in ten years.

The Century City property catering to the greater Denver area increased revenues by 8% primarily driven by a new acquired and newly developed high limit players proving our market investment policies have been well spent earlier in the year.

We continue to see a positive regional economic output in Colorado and anticipate continued growth due to strong focus on customer service, player development and consistent in fund promotions. Over in Europe, our casinos in Poland generated 30% of the company's total and 16% of the EBITDA.

This quarter the Poland revenue was up 8%, slot machine revenue was up 33% but the lower whole percentage on the table games 19% this quarter versus 23% of last year reduced the overall revenue growth to 8%. We achieved this revenue growth even though we had less casinos in operations compared to last year as the license of the two locations expired.

We already reapplied, and we already have been ranked first in these kind of procedures, plus also in a third one [indiscernible] of the process of the ministry of finance have making these license effective has not concluded yet. We anticipate these three additional casinos to be operational for us within six months from now.

The reason for the slight decline in EBITDA in this quarter in Poland, simply is the affect that we current staff and other cost and the expenses of the two closed casinos in the anticipation of us winning these licenses again.

So, adjusted for these expenses, the EBITDA for our Poland segment would have been higher by over $0.5 million dollars or up by around 10% compared to Q3 of last year. Our new casino in Poland the Hilton Hotel in Warsaw is performing very well. Revenues stand steadily since opening in early June.

They increased from June to July by 40%, from July to August by been 9% and from August to September by another 43%. And in the cruise ship casinos and management complex also a very small segment within our casino portfolio, increased revenues by 20% and EBITDA by 81%. Now, a quick look at our balance sheet, total assets grew by 11% to $241 million.

We managed to reduce net debt about to $14 million. Our total debt of $58 million includes $37.9 million related to our Bank of Montreal Credit agreement; $50.6 million related to the Century Downs long-term lend lease and $2.7 million for the new project in Bath in United Kingdom. The total debt to adjusted EBITDA ratios sits at 2.2.

Book value per share increased to $6.14. During the quarter, we spent $1 million on CapEx for the existing operations that's about 2.4% of revenues. In additions we spent 1.1 million on the new Century Mile project. And let me now give you a quick update on our new projects that are under development.

The most exciting one is the Century Mile race track and casino project in Edmonton in Canada. As most of you know, we have 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 name Century Mile.

We have already started the $48 million development and we told at the meeting we plan to open it the end of next year. The filling design is complete, stripping and grading is in full progress and facility alterations permits, underground surface works and is already being approved.

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 stand plus convenient parking for over 1,700 cars.

For comparison, that building will be 50% larger and the footprint will be almost twice the size of our successful Century Downs facility in Calgary. This would be the only one-mile race track in Western Canada. The location couldn't be better.

we are on Edmonton International Airport land, right off of Queen Elizabeth II highway, the second busiest highway in Western Canada next to a Regional Shopping Mall, a golf-course, class of hotels and restaurants all in the south of Edmonton which doesn't have any casino. In fact, the nearest casino will be 20 miles to the north.

The existing race track and casino Northlands Park will close when we open which means that our existing casino in the northeast of Edmonton, will be greatly benefit because its closest competitor will fall away, and it also means that our new casino will not bring additional capacity to that market.

Therefore, we believe that our ambition to generate the EBITDA return of over 25% on the $48 million investment as 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.

We purchased 100% ownership of Saw Close Casino Limited the company that has the exclusive license for casino in that market. It also has a 30-year lease agreement with the landlord off a multi-level mixed leisure development including a 147-room hotel and various restaurants in the center of the city opposite the very popular Royal Theater.

The acquisition price was just $766,000, in addition we will invest approximately $6.7 million for design and sit out of the 15,000 square-feet casino space which will accommodate 18-gaming tables, as well as around 50 gaming machines and live gaming terminals.

The entire city of Bath is a UNESCO World heritage side and draws about 5 million tourists 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 also there an EBITDA return on our investment of at least 25% once the property has fully ramped up. And then in August we announced that, together with the owner of the Hamilton Princess Hotel & Beach Club in Hamilton, Bermuda, we had submitted an application for a casino at that hotel.

We believe ours was the only license application fulfilling all criteria. The casino will feature approximately 200 slot machines, 17 live table games, plus electronic table games in the high mid area in [indiscernible].

After a successful public hearing at the end of September, the Bermudan government will issue a provisional casino license at the next step in the application process.

The conditions of that provision and the casino license must be agreed upon with the Bermudan government and we have now extended the time from on when it will be competed or if it will be completed at all.

We entered into a long-term management agreement with one of the hotel, to manage the operations of the casino against a management fee, if the license is awarded and we will provide a $5 million loan for the purchase of casino equipments if the license is awarded.

In total for the Century Mile project, the Bath, UK project and the project in Bermuda, we had to combine the investment process of approximately $62 million. We are presuming a number of financing provisions for that and when we have financing plans in place, we will inform the marketers.

Finally, a brief outlook and selected highlights for the current fourth quarter, what we can see so far is that business volumes keep increasing. Now, throughout Canada, our operations seem to continue to regain strength.

At Century Downs Racetrack and Casino, the coining and the slot machines as well as the S&P revenues for the month of October was the second highest in the history of that property. The [indiscernible] revenue run all-time record in October.

At Century Casino & Hotel Edmonton, the EBITDA margin in October was 39% really impressive, and in Poland, the drop at the gaming tables in October at our new Hilton Hotel Casino in Warsaw, has continued to grow. From September to October, it was up another 20%. All right, that's the end of our presentation and thank you for your attention.

And, we can now start the Q&A session. Go ahead please..

[Operator Instructions] And your first question comes from Mike Malouf with Craig-Hallum Capital Group. Please go ahead..

Hi, thanks for taking my questions. Well done this quarter. I wonder if you could just - can just talk a little bit more about Poland.

When you take a look at the new large casino that's ramping there and then when you take a look at the ones that are sort of waiting for approval and the third one that you've just won, what kind of size are we talking about with regards to those casinos?.

Hi, this is Erwin. Warsaw historically was our second big casino that was before the Hilton came in. So, Warsaw was number two, in both revenue and EBITDA, behind the Marriott casino. If and when it's open again now, we expect it to be number the behind the two Warsaw properties.

Kraków at Dwór Kościuszko portfolio will be mid-size let's say and [indiscernible] is a smaller casino in a smaller town..

Okay, and then in the last quarter I think you kind of highlighted a lower whole percentage in Poland, I think it was 17% and then this quarter was 19%. Where do you expect that to bounce back and have you seen hold percentages like this last for such a long period of time? Thanks..

This, the hold percentage is not there again so by nature is subject to volatility. In this last quarter, for example we had one large player who contributed significantly and then had an impact on the hold as well.

So, you're expected that there is a range where the whole percentage would go up and bound, particularly when you look at it on a quarter-by-quarter basis. Over the year it's clearly your basic percentage and we can think of leveling out..

Okay and that the key hoping on Poland.

But, when you take a look at late 2018 after we get some of these other - after everything's ramped up, and you open up some of these other, two or three? Where do you expect, where could you hope to have that EBITDA margin reach, because obviously we've been kind of pursuing the September quarter down at the low point, where can that go to over the next couple of years?.

I wouldn't want to predict..

Michael, we had it at the very high teens already, before we started order, on the Hilton Casino and we had to reapply for those licenses. So, I mean that's an indication of where it can be because of high teens. We've said previously that to go like mid 20s and up is not possible because of their gaming tax.

Gaming tax issues is very high in Poland, 65% of revenue and that's why we can't really jump into the mid 20s or higher..

But theoretically could get 20% of everything is kind of humming on all sonar's right?.

That's a goal that we will see, yeah..

Okay, thanks a lot for taking my questions..

[Operator Instructions] Your next question comes from David Bain with Roth Capital. Please go ahead..

Hey, thank you. Just a follow-up on the Poland margins, I believe I heard you say that an extra 500,000 was of the added expenses that you mentioned on the call. So, it looks like you are up 200 basis points sequentially normalized.

Did those expenses bleed into 4Q and then also on top of that is, is the Marriott up to for margin extraction or is it still a little bit of kind of one-time marketing going on in that facility to get it ramped up?.

I think you the need the new one at the Hilton..

I'm sorry, yes..

As long as we don't have to take these licenses in hand and we can open, yes, we have some extra related costs and expenses because as we've said, we keep the staff and we have other expenses like lease payments as well. Now, we expect those licenses any week, but I think we met those costs..

And Erwin, in terms of additional or extra marketing or promotional expenses at the Hilton, are we at the run rate that will like to continue or is that - is the M&A closing [ph] going on right now?.

No, with the run rate the main reason being that we can't really do a whole lot due to the restrictions in marketing in Poland..

Okay, and then overall in Canada, can have much better than we had but, it looks like Calgary had the largest outside variance versus our estimate.

You spoke a little bit about the thoroughbred racing addition, maybe if you can give us a little bit of sense as to what type of player that's bringing in if there's mixed shift there in the calendar for thoroughbred going forward there.

And then when you at the Century Mile development, is there a key take away from that with the future mix that we should think about when we are modeling Century Mile..

Yeah, the customers, the people who come to [indiscernible] spend more both in betting on the horses as well as in the casinos and also in F&B. It's the kinds - the type of players come to the race and hang around, has few drinks at the bar, which is different from the kind of standard for players.

Take your way from a tension mind, if you may know we'll be bigger, better, totally state of the art, it is a fantastic property, we're going through the revised plans. I think it will really, really good and we'll be as Peter said, would be really surprised if we could not hit that 25% margin..

Awesome, okay, thank you very much..

And, there are no further questions at this time. And, I'll turn the call back over to the presenters..

Great, thank you. Thanks everybody for your interest in Century Casino 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..