Welcome to the Century Casinos Q2 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.

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. 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 will now provide an overview of the company's status quo and review the financial results for the second quarter of 2020. After the temporary closure of properties in mid-March, we took immediate steps to reduce operating costs and to ensure that our company preserved its financial flexibility to manage through the shutdown. We reduced expenses throughout the company, temporarily laid off and furloughed approximately 90% of our team members, except for Poland, where all employees continued to be paid reduced salaries based on local employment laws. We continued to pay benefits to our US and Canadian employees, including part-time employees, and senior executive management agreed to voluntary pay cuts. When the first reopening scenarios emerged, the focus from day one has been the health and safety of our employees and guests. Erwin, Peggy, and I thank all of our team members for their hard work to get our properties reopened in just a matter of days, dealing with many new procedures, especially regarding safety, social distancing, and extra sanitation. Their competence, enthusiasm, and friendliness have created an atmosphere and feeling of safety and comfort, which is very much appreciated by all our guests. We have used the time during the closures to build upon the progress we started last year when we closed the acquisition of three properties from Eldorado, to improve on controlling expenses and realizing efficiencies in marketing, staffing, and G&A. We are off to a very strong start and while the pandemic is not behind us, we remain focused on maintaining a disciplined approach throughout our business, avoiding unnecessary costs and ensuring efficient practices do not creep back in. We fully intend to keep the focus on a more efficient, higher-margin business in place after this crisis is over. The first casinos we reopened were the ones in Europe, in Poland on May 18. The casinos in the smaller cities around the country, which draw mostly from locals, are doing very well, actually a bit better than during the same time last year. However, the results of two larger casinos in the capital city of Warsaw are softer because of the lack of tourists and business travelers. Overall, we're down about 25% compared to last year. As you know, Poland contributes about 10% of our total consolidated EBITDA. Most importantly, however, the operation is already cash flow positive. Next in line to open were the two Missouri properties on June 1. Missouri is our most important market in terms of cash flow generation, and the reopening was a success and still is. Even though we have only half of the table game positions and about 80% of the slots in operation, results are record-breaking. In June, with limited competition from Illinois, Cape share was up over 40% on revenues and more than doubled adjusted EBITDA, which was an absolute record for that property. Caruthersville saw an 8% increase in revenues and a 40% boost in adjusted EBITDA, which is a huge success and tremendous achievement by our management team. The month of July, with competition from Illinois up and running continues with results significantly stronger than last year. Cape G nearly doubled EBITDA, while Caruthersville is up about 30%. So, it goes without saying that this market has very quickly turned cash flow positive for us. Then, on June 5, we reopened our Mountaineer resort in West Virginia to huge crowds forming long lines around the building. Approximately half of our gaming positions and hotel rooms are open. In June, revenue was up 7% and adjusted EBITDA was up 57% compared to June of last year. July is a little softer and down compared to last year, mostly due to the newly introduced temporary smoking ban in Virginia. Fortunately, last week, we were allowed to introduce Slim Plexiglass barriers between slot machines, which lets us increase the number of available slots from the current 500 to over 800. That should have a positive impact right away. In the middle of June, our two Colorado properties reopened without table games, but almost all slots in operation in Cripple Creek and about two-thirds in Central City. Even though we had fewer slots operational, and for only half of the month, adjusted EBITDA in June was at a combined 51% year-over-year, which is truly remarkable. And July is even better. Revenue and adjusted EBITDA almost doubled compared to last year. In July, our Cripple Creek property recorded its highest gaming revenue and EBITDA in over 10 years. And of course, the properties are producing positive cash flow. Circa Sports, one of our sports betting partners, has started its online offering already, producing some revenue share for us. Also, in the middle of June, we reopened our Swiss Casinos and two racetrack casinos in Canada, in Edmonton and Calgary. Table games remain closed, and we were only allowed to open with 28% of the slot machines. Adjusted EBITDA for June was only down by 31% compared to June of last year. In July, we could increase the slots available for play to 50%, and live horse racing resumed with up to 200 spectators in attendance. Live racing has been particularly strong at the new Century Mile Racetrack and Casino. July produced a couple of days with record wagering handle. The results across all our Canadian properties are great, as adjusted EBITDA for July is higher than in July of last year. So, I'm happy to report that our Canada segment is cash flow positive already. Now, let's look behind the strong performances and discuss what drives the revenue and how we manage the expense side of our businesses. Our geographic diversity and our locations in hyper-local markets certainly play a big role. All our casinos predominantly rely on a very local and very loyal customer base. As such, our operations ramped up at a quicker rate than destination resort casinos. Our casinos have negligible meeting and convention business and very few of our customers travel by air to visit us. In addition, we offer a comparatively inexpensive gaming experience, one that is still affordable in economically difficult times. The number of visitors has not yet fully recovered to pre-COVID levels, but the average length of play, as well as spend per visit has been very encouraging. As the current situation limits us from an amenities perspective, we see more of a pure gamer: a high-quality customer that comes to our facilities. Since the reopening of our casinos, we have adjusted the levels of services and staffing in line with the guidelines put forth by health and political authorities. With limited seating in our restaurants, we have not reopened our poker rooms, smaller hotels, showrooms, banquet rooms, or spa retail facilities. Being selective with our amenities, keeping strong controls on the promotional environment, and staying focused on the high-margin areas of our business results in expense reductions and new efficiencies, which means we're operating at significantly higher margins. All this led to record consolidated results for the month of June alone. Revenue was $32.5 million, which is up 82% year-over-year, and adjusted EBITDA was a record $10.8 million for the month, up more than fourfold. We achieved this with most casinos not even open the entire month and by far not at full capacity. Even more importantly, the preliminary July numbers show that the strong performance continues, with revenue of $30 million expected to generate adjusted EBITDA of about $7.4 million, almost three times the EBITDA of July last year. In a true like-for-like comparison, comparing the July results to the pre-COVID months of January and February, which already included the three properties acquired from Eldorado, we are also doing better. Please understand that when we give you these year-to-year comparisons, we want to provide some color about the trends on the performance of the most recent month. However, we are not providing guidance. As of June 30, we had $52 million in cash, and net debt was $152 million. Last week, we paid our $10 million revolver down to zero. As you have seen from our recent news release, we just announced the sale of the casino operation at Century Calgary, one of our smaller Canadian properties, for about US$7 million net. Last year which was a strong year, this casino operation generated approximately US$600,000 in adjusted EBITDA. Since we continue to own the real estate, we receive approximately US$350,000 per year in rent income from the buyer of the casino operation, so the actual annual cash flow we are selling is only around $250,000. Additionally, we receive a percentage of their revenue above a certain threshold for the next few years. We have already received 100% of the purchase price as a non-refundable deposit. We keep operating the Century Sports operation, which is a sports bar with bowling and entertainment facilities, which last year generated US$600,000 in EBITDA. So, as you can imagine, we are very happy with the transaction. The sales price is substantial, and it immediately strengthens our liquidity position. As a result of the revolver pay down and the Calgary sale, as of August 5, we had approximately $48 million in cash and net debt of only $147 million. We do not foresee any substantial CapEx in the short and midterm. All our properties are in good shape, and we've put all larger and nonessential CapEx projects on hold for now. 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 enthusiasm as we manage our businesses through these challenging times. I thank you for your attention, and we can now start the question-and-answer session. Operator, go ahead please.

[Operator Instructions] Our first question is from Chad Beynon with Macquarie. Your line is open.

Thanks. Good morning. This is Jordan Bender on for Chad. Hope all is well. What are you seeing with retail sports betting? And how should we think about your opportunity with iGaming and sports betting in your markets with the legalized product?

Jordan, we have sports betting licenses for our Colorado properties. We have entered into two agreements: one with Circa Sports, which we just launched their app recently, and another agreement with Bet 365 that will launch later. With one more license available, we have interest from a handful of providers and we're negotiating that deal as we speak. In the other markets, in West Virginia, we have sports betting and iGaming already legalized. We are partnering with William Hill, and they've told us that before the end of this year, we will go live with both sports betting and iGaming. In Missouri, it has not been legalized yet, but I think there's a strong indication that it will get legalized soon, and we look forward to working with William Hill in Missouri.

Okay. And then you obviously added a few solid assets at the end of 2019, and you announced this move up in Canada earlier in the week, last week. Do you think you've rightsized your portfolio at this time? Are you still working on getting rid of some of your non-core assets?

No, I think we are happy with our portfolio. We have two very strong-performing racinos up there, one in Edmonton, one in Calgary, and the other casinos are in very good locations in strong areas. I don’t see any significant changes as of today.

Okay. And if I can get one more here. Can you update us on the Colorado max bet limit that's coming up on the ballot here in November? I mean, do you guys have any thoughts around what that could possibly do for the business? Obviously, if that were to pass, that would be something positive for the company.

Yeah, but it's tough to say. It's too early to determine, and we don't have any official guidance that we can give regarding that. Erwin, would you like to comment further?

No, I think it's exactly what you said.

Okay. Thank you, guys. I will pass it off.

Thanks, Jordan.

[Operator Instructions] Your next question is from Brad Boyer with Stifel. Your line is open.

Hey. Good morning, guys. Thanks for all the additional color on the quarter, very helpful. My first question is just around the preliminary July metrics that you guys presented. How are you thinking about those numbers in the context of sort of a go-forward basis? Obviously, you know, there's a lot of moving parts right now. You're obviously getting the benefit of some favorable revenue mix and some operating efficiencies, but at the same time, you're operating with limited capacity. So, how are you thinking about what those numbers might look like a couple of months down the road? Do you think that some of the margin performance that you're producing today is sustainable, or do you expect margins to compress a little as more of the business comes back online? Just any color you can provide around that?

Yeah. I think for the short term, like the next one or two months, we don't see any significant change. Assuming the situation regarding COVID gets better, then our competitors and we will most likely open some of the other amenities. That will likely mean that overall and absolute revenue will grow but as these other amenities have lower operating margins, you will see higher revenue on one side, but the operating margins may not be as high as they currently are. With regards to the promotional environment, I think everybody is observing to see if all remain conservative and relatively quiet or if someone jumps out and starts aggressive campaigning, which we don't see at the moment. That's my first take on it. Erwin, would you like to add to that?

Yeah, I agree with what you said and I would like to add. We have a little bit of runway regarding measures that we can take on the floor. To give you one example, we have received approval in West Virginia to allow part of our floor to be smoking again. As of today, we will have 118 slot machines in a smoking area. That is something that will help. At the same time, we are still working on getting more slot machines open all across Canada. So hopefully, we can increase the percentage of slots actually being operational.

Okay, that's all very helpful. And then, you know, I guess, obviously, just, you know, would you guys being a little bit closer to Poland and I know, you know, over the last couple of months, Peter, you provided some good perspective on that market. Could you just give us an update on where things stand regarding business getting back to what you could consider 'normal' in Poland? I know the pacing of COVID recovery and what have you may be a little different in Europe. Just any color around that and sort of how that plays into getting Warsaw back on track?

Most of the travel restrictions are gone now, and tourism has started to come back. But obviously, as we enter the summer months, July and August to mid-September is always a slower period of time in Poland because many ports close for vacation, and business tourism isn't in full swing yet. However, it is getting better; hotels are achieving higher occupancy week-by-week now, which helps us.

Okay. And then last one, just could you give us a little bit of an update on where your appetite stands for growing the portfolio at this point? I mean, there are some US-based assets that are being publicly shopped at the moment. Just any thoughts around your desire to continue to grow the portfolio at this point?

Yes, we are watching that very closely and trying to position ourselves right to possibly look at it very, very seriously, towards the end of this year and next. As you've seen, we are trying to look at our liquidity position and see where we can position ourselves to make a move if an opportunity arises that is good for us. That's certainly something that we are considering.

Perfect. Thanks, Peter.

We have no further questions. I turn the call back to the moderator for concluding remarks.

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

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