Participants

Peter Hoetzinger; President, Co-Chief Executive Officer, Vice Chairman of the Board; Century Casinos Inc

Erwin Haitzmann; Chairman of the Board, Co-Chief Executive Officer; Century Casinos Inc

Jordan Bender; Analyst; Citizens JMP

Jeffrey Stantial; Analyst; Stifel Financial Corp.

Chad Beynon; Analyst; Macquarie Group

Presentation

Operator

Good day, everyone and welcome to today's Century Casinos Q3 2024 earnings call.
(Operator Instructions) Please note this call is being recorded and I will be standing by if you should need assistance.
It is now my pleasure to turn the conference over to Peter Hoetzinger. Please go ahead, sir.

Peter Hoetzinger

Good morning, everyone and thank you for joining our earnings call. We would like to remind you that we will be discussing forward-looking information which involves risks and uncertainties that may cause actual results to differ from our forward-looking statements, 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 discussion of the risk factors in our SEC filings and encourage you to review these filings throughout the call.
We refer to several non-GAAP financial measures including but not limited to adjusted EBITDAR 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 section of our website at cnty.com.
After our prepared remarks, we will open the call for your questions. My co-CEO Erwin Haitzmann, and our CFO Margaret Stapleton will join me for that.
Our first quarter results were released this morning. We delivered net revenue of $156 million. A small decrease of 3% compared to Q3 of last year, adjusted EBITDAR was $32.9 million down just 1% consolidated EBITDAR margin increased from 20.6% to 21.1%.
The main reason for the small revenue decline was the temporary closure of one of our casinos in Poland. I'm happy to report that in the meantime, 10 days ago, that casino has successfully reopened and Poland is back to normal run rate of around $10 million to $12 million in annual EBITDAR.
And we had another important opening recently last Friday on November 1, we've opened the brand new land-based casino and hotel in Carville, Missouri.
It was a fantastic opening weekend there more about it a little later throughout our portfolio. The underlying customer trends remain stable in the third-quarter.
I'm sure you have heard the same from our gaming peers and from other consumer discretionary businesses, the retail customer, as well as the low end customers are still relatively weak and stable, at least we see that more or less in all our markets.
While rated play was flat non-rated play was down throughout our portfolio. We believe this is mostly due to macroeconomics and wallet softness in our markets, to dig a little deeper into the quarter. Let's look at segment results starting with the East, which includes the Mountaineer Casino Resort in West Virginia and the Rocky Gap Casino Resort in Maryland.
Revenue of that segment was up 7%, EBITDAR up 5% at both properties. The low end consumer produce less trips with the spend per trip pretty flat.
The immediate and upper levels of the database also came less often but the spend per trip increased. Versus last year, the performances of the hotels at Mountaineer and Rocky Gap have been improving cash rooms increased while comp rooms went down, we did put a bit more marketing dollars to work to drive revenue and get more brand exposure for mountaineer and New Ohio and Pennsylvania feeder markets and for Rocky Gap in the DC and Baltimore metro areas.
Competing to the Midwest with Missouri and Colorado, revenue of the segment was essentially flat, EBITDAR was down 5%. That is a respectable result considering the disruption we experienced at Carville from the development of the new land-based facility.
As mentioned, the new property opened last Friday with a total of 74 hotel rooms and over 660 gaming positions, which is a 20% increase in gaming positions compared to the old river boat and a 50% increase compared to the temporary location.
And I can tell you I was there. It was a fantastic opening weekend. Right from the get-go on the very first day. The new facility set an all-time record for coin in and daily revenue even though we did not have all slots in operation yet.
The entire team in Missouri and all of us are really excited about the bright prospects. The new property offers, it provides significant operational efficiencies. It's much more convenient for our customers and increases our catchment area.
The new property transitions the Carville operation from an old riverboat and small temporary location to a modern style land-based facility, adding significantly enhanced non-game amenities, expanded gaming options and convenient parking for our guests.
We expect a strong uplift of results and should see that on the revenue side fairly soon, the impact on EBITDAR will probably take a quarter or two until we have worked out the initial growing pains and figured out the most efficient stuff in levels. A lot of property in Missouri in Cape Girardeau also a positive revenue trend in the quarter up 7% driven by the new hotel as well as food and beverage sales.
The hotel we opened earlier this year is ramping up nicely. You see a steady incline in occupancy and revenue and that continues to Q4 with a strong start in October.
Additionally, we have been seeing a lot of multi-night stays recently which is a nice surprise.
The hotel is also driving meaningful growth in F&B sales offset by higher costs and staff costs. The team continues to finetune operational expenses to further increase profitability.
Those efforts show during the quarter, we saw gradual improvements with higher revenue and lower expenses month after month, we expected to continue into Q4. In Colorado, our property in Cripple Creek continues to benefit from the new 300 room hotel that opens directly across the street from us early this year.
Coin in was up. Table drop was up and the F&B revenue was up as well. All because there's a higher volume of visitors in town. All of that was partly offset by a lower slot disorder and the loss of some of our sports betting revenue.
As you know, we have three sports betting providers using our licenses in Colorado, but two ceased operations recently, namely Circa and Tipico.
The one remaining is bet365, overall the Missouri and Colorado segment did a great job in maintaining operating efficiencies with some property level margins at 39% during the quarter.
Next is the West segment with the Nugget Casino Resort in Reno, Nevada. After a quite disappointing first-half of the year, the Nugget showed good sequential growth. Sequentially revenue was up 40% and EBITDAR doubled compared to Q2. That's still a bit behind last year's third-quarter.
Gaming revenue was flat compared to last year. But Hotel and F&B declined significantly due to fewer group room nights. You've mentioned that in recent investor meetings already, the group and convention volumes are down this year. The reason for it lies two years back before we took over the operations.
Anyway, happy to say that it's looking much better going forward. New top management successfully focused on cost control, total expenses went down by 9%. We remain focused on operational efficiencies to help offset rising labor costs.
Locust play was strong in the quarter up 20% compared to last year. And we also saw a significant uptick in the number of visits from the younger age groups.
The Nugget has completed its CapEx program in the casino for this year, but we need to spend between $3 million and $4 million on elevators next year which will be increasing our estimate for total companywide CapEx from $12 million to $16 million in 2025.
A few words about our small operations in Canada and Europe in Canada, we could EBITDAR by 6% mainly through better cost control. Consumer trends appear pretty stable at all four locations we have in Alberta, in Poland, two casinos were still close during the quarter.
One of which is a very important one in the city of Roslov, which resulted in a significant drop in revenues in an [every step] comparison of the undisturbed properties, both revenue and EBITDAR grew compared to last year.
Anyway, we've reopened that casino in Roslov 10 days ago. The business are great with that reopening. We expect Poland to get back to normal levels quite quickly, which is between $10 million and $12 million in annual EBITDAR. The sales process is also progressing. Well, we hope to get it done within the next couple of months.
Now, let's discuss our balance sheet and liquidity position. We ended the quarter with $119 million in cash and cash equivalents and $340 million in outstanding debt resulting in net debt of $221 million. Traditional net leverage is 4.7 times at least adjusted. Net leverage is 6.6 times. Of course, the leverage is elevated because of our recent acquisitions and investments.
Now that we have the casinos in Poland and the new land-based facility in Colorado will open, it should ramp down quite quickly as we look to t level to 3 times traditional and around 9 times, please adjust it for next year.
We have no debt maturities until 2029, and we can reprice or refinance our entire term loan at any time without penalty. So as soon as the window opens, we want to act on it and improve our terms.
Turning to CapEx, during the quarter, we remained committed to investing and offering new amenities to our guests in order to drive future incremental visitation as well as [spank], as of today, we are pretty much done with it. Just $2 million to go in Canada and Colorado total CapEx for this year.
So for this year will amount to around $38 million for next year. We expect it to come down sharply to about $16 million.
Setting the stage for a substantial increase in free cash flow but that significant cash flow growth is not only driven but the reduction in CapEx.
The most recent casino openings in Poland and Caruthersville and the new spirit of optimism at the Nugget in Reno will contribute significantly to much better results in 2025 than in '24.
The presentation posted on our website shows you the bridge from negative cash for this year to the positive cash generation in '25.
As we look ahead, we are confident in our business projects 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, as we've said in our last earnings call this year is a transitory period for us, but we see a clear path forward to generating cash and to deliver significantly. In addition, on an optimistic basis, we also plan to buy back stock.
All right. That concludes our prepared remarks. We'll now open the call for Q&A. Paul, go ahead please.

Question and Answer Session

Operator

(Operator Instructions)
Jordan Bender, Citizens JMP.

Jordan Bender

Good morning, everyone. Thanks for taking my question. I want to start in Poland, Peter, can you just kind of help us understand what those two licenses are? Are they outstanding where they deny? Or should we expect them to come back? I guess I want to start there.

Operator

Peter, if you want to answer.

Peter Hoetzinger

Yeah, Paul. Yeah, we had a few licenses that, that expired and, and the, the officials in charge did not start the relic relicensing process in time and that's why we had to close some of the casinos earlier this year or actually late last year. The important license is really important. I mean that the ones that generate significant revenue for us, have been granted again to us. And the last one of those was, was the one in Roslev and we opened it 10 days ago.
We did not get relicensed for two smaller ones. And that does not have any meaningful impact on the, on the EBITDAR, as I said, $10 million to $12 million run rate. So for all intents and purposes, Poland is back to normal with that opening that we had 10 days ago.

Jordan Bender

Okay, perfect. And then if I can follow up on that, does the closing or the, the, the lack of relicensing of those two properties change the mindset at all of you know, your willingness to sell those properties or can you just kind of update us on where you stand with that process?

Peter Hoetzinger

No, not at all over the years. The casinos Poland has always had between six and eight licenses. Sometimes you don't get a small ones, a small one and sometimes you get it back from a competitor so that there's always a little bit of a fluctuation. But the core operations are fully intact and that there's no change in our plans to sell and there's also no change from the from the investors that are interested in buying because of one or two small licenses, more or less. No change.

Jordan Bender

Great. And congrats on opening the property last week. Thank you very much.

Peter Hoetzinger

Thank you.

Operator

Jeffrey Stantial, Stifel.

Jeffrey Stantial

Hey, good morning Peter, Erwin. Thanks for taking our questions. Maybe starting off here on the Nugget casino encouraging performance there during the quarter. Peter or Erwin. Could you just add some color on the month by month performance at the property through Q3 and I guess, into October and as you look further out into 2025 and beyond, what are some of the operational levers still left here that you can pull to help drive further sequential improvement and try to close that GAAP to, we'll call it 2019 tight profitability levels.

Erwin Haitzmann

Yeah, thanks. Good question. I'll take that. I think what this is a good question to ask because what in the third quarter, what we saw is that the negative impact was basically coming almost 100% from the 1st month, maybe from July, August and September were really getting stronger and stronger and in a year of the year were super encouraging and we see the same trend continuing into October. So we, we think that we're really on a very good track there.
And as Peter said, everybody is very, very optimistic concerning the next year or years. We think there is still there is still some operational efficiencies to be found and there is still opportunity with regard to a growing revenue as well. In particular, we are fine tuning the selection of concerts that we're doing.
And again, we've made some good progress there already. And we also put a lot of focus on getting more group business. Also, as Peter said earlier, the only difficulty with the group business is that most of that is planned 23 years ahead. So, we only have a certain portion of the market that is planning with the horizon of say less than six months, but we're, we're strongly after them.

Jeffrey Stantial

Great. That's helpful. Thank you for all that color Erwin and then for my follow up turning to the to your Canadian assets. It looks like revenues were down year on year after a handful of quarters of some really strong growth, Peter, Erwin, can you just expand a bit on what's driving that and more broadly as you think about sort of post COVID performance in that market relative to your US assets.
Do you anticipate some mean reversion in consumers then similar to what we've seen the last year or two in us, regional markets? Just any thoughts there would be great and that's all from us. Thanks.

Erwin Haitzmann

Sure. The decrease in net operating revenue is basically due to one casino in the century downs where the decrease is around the numbers now, about $1 million less in net operating revenue. That is two reasons. The first one is that around $300,000 of net are to be with it to the fact that in 2024, we did not have a large event, which was called Chuckwagon racing. Last time we had, it was in '23 we had it for three years in a road, but it turned out not to be profitable anymore.
So we decided not to do it in the 2024. So, whilst we lost some revenue, it certainly had a very good impact on EBITDAR and the remaining $700,000 were due to the fact that our competitor, the Ace Airport Casino, which is the, the closest casino that opened earlier in '23. While it had a smaller impact to us in Q3, '23 had a stronger negative impact on us in Q3 '24. Having said that we feel that now the market has stabilized and the market shares have stabilized and we don't expect any further deterioration rather than the opposite.
I think it's very well possible that we can come back there a little bit more with regard to the revenues of the other casinos in case you're interested. We increased the [nor] in the in the Fort Road casino in by $0.5million. And we had small decreases of $100,000 in central casino, Saint Albert and Century Mile.
On the EBITDAR side, however, whilst revenues overall we were decreasing by $650,000 EBITDAR increased by $180,000.
So, the operational efficiencies kicked in and we're not unhappy at all with the numbers, with regard to the trends. We think, it's from here on out. Again, it will only be going on a -- shall I say, mildly positive upwards.

Jeffrey Stantial

Great. That's very helpful. Thank you. And I'll pass it on.

Operator

Chad Beynon, Macquarie Group.

Chad Beynon

Hi, good morning, Erwin and Peter, Congrats on the Crothersville opening wanted to start with the illustrative guidance for 2025 in your investor deck. So as we think about the EBITDAR Bridge from '24 to '25 obviously, most of this, you know, will come from the Crothersville opening and Cape Gerardo Ramp and then I guess, Reno Improvement, but has anything changed in terms of how you're thinking about this $150 million EBITDAR. You mentioned some comments in terms of a ramp of the margin in Crothersville.
So, should we think about, you know, more of this growth to come in the back half of 2025, or should it be linear? Thank you.

Erwin Haitzmann

Peter, can you take that, please.

Peter Hoetzinger

Yes, thanks for the question. As with most property openings and it was for all intents and purposes. This was a new opening at Carville. Yes. It, it will take a little bit of time to for us to see the full potential also on the EBITDAR line. In terms of, [pitchy] and the Nugget, it's a bit more immediate but generally speaking, it's probably more the second half or from the second quarter of '25. That, will see that run rate.

Chad Beynon

Okay, perfect. Thank you. And then you mentioned share purchases could be something that continue to come in just as you're past the CapEx cycle, you have more capacity to execute on this in the stock remains at low levels. What's the, I guess what's the total availability in terms of repurchases? And how should we think about when you could start to execute a little bit more on that strategy? Thank you.

Erwin Haitzmann

Peter.

Peter Hoetzinger

Yeah, we will be not disclosing any absolute dollar amount. But from that page in the presentation, you see that, that we expect to generate a free cash of between $25 million and $30 million next year. On top of that, we have over $100 million on, on our balance sheet. We do however need about roughly $40 million between $45 million of the cash in the casinos.
So, the real available cash is, if we include next year, probably somewhere, between, somewhere around 80 or so, we will not use all of it, but a good portion of it and, and we'll split that, for a debt pay down and stop by back in terms of timing. It's opportunistic as we have said, and we'll probably start, either late this year or early next.

Chad Beynon

Okay, thanks, Peter. Do you have, what's the existing, basket out there right now for purchases for availability?

Peter Hoetzinger

Yeah, an existing board resolution that has also $15 million, but that can of course be changed.

Chad Beynon

Awesome. Thank you both. Appreciate it.

Peter Hoetzinger

Thanks, Chad.

Operator

(Operator Instructions)
And it appears that we have no further questions at this time. I will now turn the program back to our presenters for closing remarks.

Peter Hoetzinger

Thanks everybody. We appreciate you joining our call today. We'll talk again early next year until then. Thank you, and goodbye.

Operator

Thank you. This does conclude today's Century Casinos Q3 2024 earnings call. Thank you for your participation. You may disconnect at any time.