Welcome to the Century Casinos Q1 2020 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, Ron. 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 Chief Financial Officer, Margaret Stapleton. We hope all of you, your friends, and families are safe and in good health during these challenging times of the COVID-19 pandemic. As always, 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'll 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 earnings release and SEC filings available in the Investors section of our website at cnty.com. I'll now provide an overview of the company's status quo in light of the current crisis and then briefly review the financial results for the first quarter of 2020. Following the prepared remarks, there will be a question-and-answer session. As with almost all casino companies, we closed our operations between March 14 and March 17 to comply with quarantines issued by governments to contain the spread of COVID-19. All of the closures are temporary, with the exception of the Casino in Bath, U.K. which remains permanently closed. In December of last year, we were in sale negotiations for the Bath Casino. However, in March, not surprisingly, the potential buyer terminated the negotiations. Due to the canceled sale and the negative outlook, we determined that the best course of action would be to voluntarily wind up the Bath Casino Company. We signed a voluntary liquidation resolution last week and with that, no more losses from Bath will impact our results. In addition, after conservative analysis, it was determined that the goodwill and license value of some of our operations is impaired and $33 million have been written off in the quarter. During the closures, we have temporarily laid off and furloughed approximately 90% of our team members except for Poland where all employees will continue to be paid reduced salaries based on local employment laws. We recognize the impact that these furloughs have on our team members and we have tried to mitigate a little bit of this impact by continuing to provide benefits coverage. We committed to paying benefits to all our U.S. and Canadian employees, inclusive of part-timers through the end of May. The remaining staff, including senior management, have taken pay cuts and are officially working on budgets, negotiating with vendors, banks and lessors to manage the cash front, on HR issues and on securing and maintaining our properties and preparing them for reopening. Our payroll is down significantly and many variable costs fell away while operations are closed. We have many other expenses like interest in our debt, rent and lease expenses for some of our properties. Real estate taxes, insurance, utility costs and other expenses continue to occur even while operations are closed. We are currently generating only very limited revenue from our properties and the net cash outflow during the time the operations are fully suspended is close to $8 million per month, that is including full debt service and rent payments. What can we do to lower that number further and preserve cash? We've recently been able to negotiate the deferral of rent for the land at Century Mile at Edmonton for the month of May, June and July. The deferral is up for one year and is interest-free. We've amended the master lease with VICI to raise the minimum CapEx requirements for 2020 and convert it for next year. That helps us with around $2 million. Other possible modifications of that master Lease like partial rent relief or rent deferrals are also topics for future discussions with VICI. As you know, there are several Federal and State relief programs in place in the U.S. as well as in Canada. The specific rules are still evolving, but unfortunately we are pretty certain that at this stage, we will not qualify for any of these programs, either due to size, revenue levels, or existing leverage. Our balance sheet has no near-term maturities and we are in full compliance with all our debt obligations as of March 31 and also expect that to be the case for the second quarter. As of April 30, we had $65 million in cash. Again, our monthly cash burn is close to $8 million, including debts and rent service. Our casinos need approximately $19 million to reopen operations and cover short-term cash needs at the properties. Talking about reopening, two days ago on Monday, we announced the reopening of our casinos in Europe, in Poland. We opened all eight casinos on Monday morning. Visitation was good and the social distancing and health and safety requirements didn't seem to pose any real difficulties. Our guests were very understanding of the situation and very happy to be able to enjoy real gaming entertainment again after two months of closure. Before the closures, Poland contributed approximately 10% of our total consolidated EBITDA. In West Virginia, the governor announced that effective May 14, horse racing may resume with no spectators allowed. Following this announcement, horses began training at our Mountaineer facility. The first race is scheduled for May 31. We will hold three races per week, all without on-site visitors. This will be very good for pari-mutuel horse betting handle and will help lower the cash burn at that property. Our golf course in West Virginia is also open already and is busier than ever. According to the latest information available, we expect to be able to open the gaming floor at Mountaineer on Friday, June 5. In Missouri, we should be allowed to reopen our two casinos in a couple of weeks in early June based on information currently available. That will be very good news for us because Missouri is our most important market in terms of EBITDA generation. As for the reopening of our casinos in Colorado, we are currently anticipating early-to-mid-June. And in Alberta, Canada, ADW Internet betting on horse races is generating some revenue already and we will also open the restaurants at some of our Canadian properties next week. That has already been approved and should generate not only food and beverage revenue but also increase the betting action on horse races. Casino operations in Edmonton and Calgary will probably start sometime in the second half of June. So, clearly, the timing and the official guidelines regarding the reopenings will differ by jurisdictions. And the various approaches and requirements laid out by the governments and regulators will likely include things like the use of infrared devices to check employees and guests for fever, reduced levels of gaming, restaurant and entertainment spaces, social distancing in slot machines, table games and the restaurants, the provision and use of gloves, face masks and hand sanitizers, continuous disinfection of high-touch surfaces at shorter intervals, limited restaurant opening hours or keeping restaurants closed and other measures to account for varying levels of demand. We've been through all of that in our planning over the last weeks and we feel comfortable with these requirements. Most of our revenues stem from slot machines and it's actually relatively easy to deploy social distancing in the slot machine areas. Our slots, for us, are not often at greater than 50% occupancy anyway, as we've always chosen to have enough slot machines. Our achievements in diversity and our locations in hyper local markets will play a role in our recovery, especially in the early stages where we can expect some pent-up demand. Moving into us being in the gaming industry for around 40 years and have operated casinos in the U.S. and internationally through a number of challenging times, including 9/11, the growth combat in 2000 and the financial crisis 10 years ago. Each time, the casino industry has recovered and over time has come back even stronger, especially in the hyper local gaming markets where we play. All our casinos predominantly rely on a very local and very loyal customer base. As such, our operations should ramp up at a quicker rate than casinos at destination resorts. All our customers are locals in urban and suburban locations with the vast majority of our business coming from customers who live within 45 minutes from our facilities. Our casinos have negligible meeting and convention business and very few of our customers aim to travel by air to reach us. In addition, we offer a comparatively inexpensive gaming experience, one that is often still affordable in economically difficult times. So, from everything we can see and from what industry consultants are forecasting, local gaming should ramp up considerably faster than destination gaming. The reopenings will probably be limited from an amenity perspective and we will probably see a more pure gamer that comes to the facilities, at least initially. On top of that, don't forget most of our customers in the local markets are people who are not in the active workforce, people with pensions with fixed income plus, they also get the stimulus check from the government. And finally, if the recent reopenings of casinos are any indication, for example, in South Dakota, Oklahoma in Indian country we have all reasons to be optimistic. I'm sure you all saw the reports that their opening weekend was about 15% to 20% higher than the typical weekend in spite of social distancing restrictions. Also, a couple of days ago, when Southland Casino, West Memphis opened, we got reports of a long line around the building. In concluding my prepared remarks, here's a brief overview of our performance in Q1. Our results for the first quarter of 2020 really for us is a study in contrast. January and February were great months, really great months. Also, March started very strong and we were on pace to generate approximately $105 million in revenue and $20 million in adjusted EBITDA for the quarter. Both would have been all-time records, significantly higher than our own forecast and higher than consensus estimates. Then came the temporary closures in mid-March and we ended the quarter with $87.7 million in revenues and $9.6 million in adjusted EBITDA increases over last year's first quarter of 92% and 44%, respectively. The growth up until mid-March was substantial and it was broad based. Colorado's EBITDA was up 20%, Canada was up 19% and also the three new properties we acquired from Eldorado performed exceptionally well. Combined, the EBITDA was 25% higher compared to last year with the Eldorado ownership. We really look forward to ramping up to these kinds of results as soon as possible after reopening. So on behalf of the Company's management and Board, I'd like to thank our team members, our guests and our stockholders for their continued loyalty and patience during these difficult times as we manage to properly position our businesses for the reopenings in the new normal. I thank you for your attention and we can now start the Q&A session. Operator, go ahead please.

Ladies and gentlemen, at this time, we will conduct a question-and-answer session. [Operator Instructions] And your first question comes from the line of David Bain with ROTH Capital.

Great, thank you, Peter, Erwin and Margaret. Hope you guys are well. As we reopen, are there some permanent or structural changes that you've identified that could allow for better flow-through or additional concepts that could carry more profitably generated revenue and can that carry forward to 2021? And if so, can you speak to the most significant differences as you open and target that?

Erwin, would you like to start that?

All right. Hi, David. We haven't done any structural changes apart from the fact that we used the time in Poland in our Marriott Casino, which is the busiest casino in all of Poland to completely revamp it, including redoing an air conditioner, which really needed it. And that was quite a job. So it kind of came in handy, if you want to say, and we used the time to completely redo that. And now we are well equipped for all temperatures that some might bring to give a pleasant experience to our guests. But other than that, we didn't do anything structural. However, we, like many other companies, have once again rethought our strategies and we definitely, more than ever, will focus on the value players, on the upper end of the players. And that in itself probably is a good thing given the fact that we will have capacity limitations in all likelihood in most of our casinos. We, again, like others, will further push for digitization which should again bring some cost savings on the marketing side and, I guess, these are the main things that we have done so far. Most of this is fluid and most of it we will have to play by ear and see how it develops. We are all ready to adapt quickly basically on a day-to-day basis depending on what the various jurisdictions will ask from us, so that we're able to react quickly.

Got it, okay. And then as a follow-up, can you break down sort of the larger pieces of the $19.8 million reopening costs? Is some of that earmarked as cached capital? I mean, just -- if you can give us what the larger buckets are, that would be helpful. And then just assuming the reopenings are on schedule or on the schedule that you gave us in the prepared remarks, it sounds like cash in June should still be $22 million, $23 million as cash flow begins to generate again. Is that kind of a fair estimate?

Margaret, please?

Yes. So, David, that $19.8 million is mostly cash and then some -- just some operating cash just based on the way cash flows for paying gaming taxes and things like that. And, yes, you're correct; we should be in the $22 million, $23 million range.

Okay, great. Thanks so much and congrats on the January, February results, particularly with the acquisitions. Thanks so much.

Okay.

And we do have another question. The next question comes from the line of Chad Beynon from Macquarie. Please state your question.

Good morning, thanks for taking my questions. Good to hear that you're well. Firstly on a normalized level of revenues to reach breakeven EBITDA, understanding that your properties have different cost structures and tax rates, is there kind of a range of what you need to get to, to get these properties to breakeven once they're open? Thanks.

On a property -- our property basis, that level is about 35% of pre-COVID-19 revenues.

Okay, perfect. Thank you. And then just back on the liquidity situation. So, can you just kind of help us get comfortable with the cushion that you have here? If it's $20 million of cash, you're at $50 million at the end of April. That just leaves you a couple of months. Did you or are you exploring other sources of liquidity to maybe give you a little bit more cushion or are you just comfortable with, I guess, the timeline of openings and cash flow that you're projecting in the near term? Thank you.

We -- yes, we have plans in the upper draws, so to say. We have proposals, term sheets on the table for additional credit lines. We are also in ongoing discussions with VICI about other things that they can do to help us other than the CapEx requirement. But we are, of course, also seeing that the capital markets are open, should we want to do anything. And we also -- as you know, we also own 100% free and clear, many of our properties in Colorado, for example, also in Canada. So we could, if we wanted to do something with that real estate as well.

Okay, makes sense. Thanks, Peter. Best of luck.

Thank you.

And our next question comes from the line of Brad Boyer from Stifel. Please state your questions.

Yes, thanks for taking the questions, guys. First, was just around the monthly cash outflow number of $8 million. Could you tell us how much of that is just pure OpEx relative to everything else?

Do you have that, Peggy?

Brad, it's a little bit difficult to just come up with pure OpEx in this situation. We're dealing with paying -- the cash flow is mostly related to loan repayments and VICI and insurance payments, things like that.

Okay.

Yes, so, Brad, VICI and the interest and principal on the Macquarie loan, those two together is about $3.5 million already.

Okay, that's helpful. And then just second question is around CapEx. I assume you guys are embedding some incremental roll-back there in light of what we're -- how are you thinking about kind of CapEx for the remainder of the year at this point?

Just really it is a minimum, Erwin. Yes? Would you like to comment?

Yes, it's a little necessary.

We've redone our casinos in Girardeau are in great shape, as you know and just in the fourth quarter, we've opened an expansion at Century Downs. So, yes, we have cut it back to the minimum and we don't have anything that is really necessary right now.

Okay. And then I realize it's a very, very short window. But could you provide any additional color around what you've seen in Poland thus far? And I think more importantly, have you seen any bifurcation in customer behavior with regard to slots relative to tables? Any color there would be helpful. Thanks.

Absolutely. Peter, it's fine if I respond to the question? Now, first of all, we opened in the night from Sunday to Monday because at midnight from Sunday to Monday we were allowed to open and three minutes after opening across the eight casinos in Poland, we had already a hundred guests in there although that's quite an unusual time of the day, I would say. And the results for the first day is obviously, this is very early on, have been produced against the backdrop of us not being able to market it all. You know, we have strong marketing restrictions in Poland. So it's really word of mouth that was going there. And -- but I think I could say everything looks very good. We are not far away from -- after two days, already, we're not far away from a cash flow breakeven. And from the customers, how do your customers feel, how do the employees feel? I think the employees are all used to wearing masks, and wearing the gloves if they have to, or masks or shields they can wear. The customers only have to wear their masks. But again everybody is used to that by now, because it's not, obviously, not only the casinos where you have to wear masks. And with regard to the favorites in slot. There is not too much of a shift, because as you may remember, due to the Polish gaming law, we can only have a maximum of 70 slot machines per casino license. So these slots that we have been very well placed, they were already at 60% playoff pre-COVID times in the first two nights and the tables are ramping up a little slower because of the seat reduction that we're having. But overall, the assessment of us and of our management there is very positive. They're really excited about the business that we could see in the first days.

Perfect, thanks for all the color, guys and good luck on getting things back online here.

Thank you.

Thanks, Brad.

And we do have more questions. Our next question comes from John DeCree from Union Gaming. Please state your question.

Hi, everyone. Two questions. One, I wanted to ask a little bit more about the $8 million cash need per month and probably getting a little granular but with Poland reopened and some racing in Canada and West Virginia, should we think about the actual cash net outflow going forward from here being something less than $8 million, now that there is a little bit of revenue back in the system?

We should but can you quantify that, Peggy?

Probably too early, right? The $8 million if everything was still closed?

Yes, yes.

Yes.

Good, very good. Okay. In Canada, with the volatility and kind of sharp drop in oil prices, has that or do you expect that to have any impact on your business when it reopens? And then any comments you can provide on the kind of continued ramp of your new property in Edmonton would be helpful.

In Alberta, we also have a lot of business from retired people. So they are not affected by the oil situation and also don't forget the recent decision on the expansion of the Trans Mountain oil pipeline that, up there, everybody's enthusiastic about it and it should lead to a very strong recovery. On top of that, now after the recent reduction in the provinces' corporate tax rate, Alberta has the lowest corporate tax rate of all provinces in Canada, 8%. So they are doing a lot of things to stimulate the economy and we actually see pretty encouraging signs. In terms of ramping up of Century Mile, back to Erwin, please.

It's just a little too early to say. You know, it would be speculation. We have to open and see how it's going. The property is in perfect shape, everything's fine or the ancillaries are there, once we can start the racing again. We are ready, but I would not speculate at this point in time about how quickly we can ramp.

For January and February at Century Mile, have you seen continued growth or margin improvement over the fourth quarter before COVID at Century Mile?

We have, but it's been pretty cold there so those two months certainly have been weather impacted by weather and again, it's not really representative of what we see over the whole year.

Got it. Fair enough. Thank you, everybody.

Thanks, John.

And we do have more questions. The next question comes from the line of Hana Wilmart from Centennial Research. Please proceed to state your question.

Hi, thanks for taking my question. I was just wondering if you guys see any opportunities to make acquisitions coming out of the current COVID environment.

We see it a little bit but it's surely not our main focus right now. Yes, it's too early, and whilst we are -- I think things are being brought to us, so we are aware of what's happening out there; we see some opportunities. But right now, it's definitely not our main focus.

Okay, and just to follow-up on that. Is there any sort of environment when you'll feel comfortable starting to look more into those opportunities?

I think after the summer. After the summer, if we are in good shape as we believe we will be with the reopenings occurring throughout the month of June; that will be a very decent time for considering those opportunities.

Great, thanks so much for the information.

Thank you.

And we do have another question online. This comes from the line of Alex Silverman from AWM Investment. Please state your question.

Hi, there. Are there any states or provinces that are talking about temporarily reducing gaming taxes in order to help the casinos?

So indeed, Erwin?

Yes, there is discussion about it in Colorado and conversely, there is also in Alberta.

I'm sorry, Colorado and where?

In Alberta, Canada.

And Alberta; got it. Second question; you said getting casinos back to 35% of pre-COVID revenue on a property level would be breakeven. I assume that's property level breakeven and you -- then on top of that there is the corporate expense?

That's correct. Yes. And I said 35%.

35%?

Yes. And that's on a property level.

Got it. And then last question; I know that different states are discussing, you know, requirements in terms of social distancing, and such; at your peak, whatever, Friday or Saturday night -- what kind of utilization do you typically have for your slots at your different facilities?

Erwin?

I would say it will -- depending on the circumstances between 45% and 60%. As to get an effect, it will -- yes, go ahead.

No, please go ahead. No, please.

I wanted to say that has to do with our policy that we always try to make sure that we have enough product available on the floor so that our customers always can choose and are not forced to play a machine just because it's full or it's not the one they really would like to play.

So, if a peak -- if a key level is 45% to 60%, requiring that you only have 50% of your machines operating in order to separate people shouldn't be that big of a stretch for you guys?

That's very correct, exactly that's how we see this one.

Okay, that's all I've got. Thank you.

At this time, there are no further questions. I'll now turn it back over to our host.

Thank you. 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. You have our best wishes for good health. Thanks again, and goodbye.

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