Good day, everyone, and welcome to the Century Casinos Q4 2022 Earnings Call. Please note, today's call will be recorded. It is now my pleasure to turn today's call over to Peter Hoetzinger. Please go ahead.

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, we would like to remind you that we will be discussing forward-looking information, which involves several 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 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 releases and SEC filings available in the Investors section of our website at cnty.com. And I'll provide an overview of the results of the fourth quarter and full year 2022. For the year 2022, we had an all-time record with net operating revenues up 11% and adjusted EBITDA up 6% over 2021. We achieved these record results even though our Caruthersville riverboat casino in Missouri was severely impacted by weather throughout the fourth quarter. We had to close in November and then could reopen with restricted capacity only. That did cost us about $2 million in EBITDA compared to Q4 of '21. The dangerously low water levels required us to become creative and act quickly, and we did. With the approval of the Missouri Gaming Commission just before the Christmas holidays, we moved all operations to a temporary land-based building. We typically do not like to call out weather, but in addition to the issues we had in Caruthersville, severe storms and freezing temperatures in mid-December, it had quite an impact at our other properties as well that negatively impacted Q4 results. However, as the weather broke, demand returned, and we ended the quarter on a high note with strong performances, not only at Caruthersville, but across the entire portfolio between Christmas and New Year's, and that has continued into January and February. The regional gaming customer is showing little sign of slowing down, and many macro indicators such as unemployment and wage growth are growing to a somewhat healthy environment. Outside of weather, we see underlying demand trends remaining solid heading into Q2 and Q3 of this year. On the expense side of the business, our teams are managing the overall cost structure while dealing with inflationary pressures that still exist. Wage inflation has largely normalized, but the utility situation remains elevated. The promotional environment across all our markets remains relatively stable. It is quite disciplined, and we continue to envision a very rational marketing approach for all of us. Now I'll review each segment in a little bit more detail. In Colorado, we finished the year with flat revenues in the fourth quarter. EBITDA was impacted by higher labor and utility costs compared to last year. We held our market share steady. The overall number of visits was down in October and November. But it turned around in December, and that positive trend continues into Q1 of this year, especially from the higher ADT segment. It was a similar picture in West Virginia. Our Mountaineer Casino, Racetrack, and Resort had a difficult start to the quarter. The number of trips to the casino was down, especially midweek. But business came back over the holidays and is currently flat year-over-year. We are still experiencing staffing challenges at Mountaineer, resulting in limitations to hours of operation and availability of hotel rooms. In Missouri, we saw more trips and revenue from all age groups, distance ranges, and ADT segments across the database. Spend to trade was even compared to the prior year. I mentioned the dangerously low water level situation at Caruthersville already, but we also had a significant winter weather impact in December, which is typically one of the biggest times of the year. Right after that, business rebounded strongly with an all-time record for daily call-ins at our Cape Girardeau property on New Year's Eve. That trend has continued into the current quarter. Currently, we are up around 3% compared to Q1 of last year at both of our Missouri properties. Let me add more color to our growth projects there. Construction of the new land-based hotel and casino development in Caruthersville is progressing according to schedule. We plan to open in Q4 of next year. The new property will have a total of 74 hotel rooms; 12 gaming tables at over 600 slot machines, which is a 20% increase in gaming positions compared to the old riverboat. Most importantly, it will provide significant operational efficiencies. It will be much more convenient for our customers, and it will increase our catchment area. At Central Casino Cape Girardeau, the larger of our 2 Missouri casinos, construction of the 69 room 6-story hotel building is well on track for opening around this time next year. That development will transform the property to a full resort destination offering gaming, dining, conferences, concerts, events, and more. Moving now to Canada. All 4 properties showed nice gains in the quarter, and that continued into January and February. On top of that, we got very good news from the regulatory front last week. Effective April 1 of this year, the Alberta Gaming Commission is increasing the operators' portion from slot revenues by 2% to help promote overall growth in gaming proceeds by enabling operators to reinvest in their facilities. While this is a temporary measure valid for 2 years for now, we do expect a significant increase in our results from next quarter on. Our casinos in Poland continued their solid performance. Revenue was up 11%. As our results in Poland are consistently strong, it may as well wait for another license excited to kickstart the sales process. We don't have any time pressure. That timing is not an issue for us. As you know, we have an excellent management team there in place, and there is no need for any investment or CapEx from our side. It's quite the opposite. Cash is flowing from Poland to us. A quick look at our balance sheet and liquidity shows that we have $102 million in cash and cash equivalents, plus the $100 million, which we keep in escrow for the closing of the Market OpCo transaction once Nevada licensing is complete. Outstanding debt totaled $350 million, which includes $347 million under the Goldman Sachs credit agreement, of which $100 million is in escrow for the market. Our 2 pending acquisitions are progressing as planned. We had our hearing at the Nevada Gaming Control Board the day before yesterday. I’m happy to report that all went well. The Board unanimously recommended approval to the Nevada Gaming Commission of our application to acquire the market casino resort operations. Our application must still be approved by the Gaming Commission in Nevada at its meeting on March 23. If approved, we plan to close the market acquisition in the first week of April, less than 4 weeks from today. We are finalizing our plans for initial investments and upgrades, and I'm more excited than ever about the potential for improvements. The immediate focus will be on the gaming floor as well as on raising the potential for synergy effects across all operational departments. And that gives a full-service resort destination with over 1,300 hotel rooms and suites, a casino with 850 slots and 29 tables, 6 restaurants, several indoor and outdoor entertainment venues, as well as one of the largest meeting areas in the market. Its location on IAD provides unmatched exposure in the Reno Sparks area, and we plan on taking full advantage of that with a new attractive facade and signage. In Maryland, we expect to close the Rocky Gap acquisition a couple of months after the market transaction, probably in June or July. Simultaneously, with the closing of the transaction, VICI properties will take over their real estate assets, and we will amend our existing master lease with VICI to add the Rocky Gap property. Rocky Gap is a full-service resort less than 2 hours from the Baltimore and Washington D.C. Metro areas and includes an 18-hole golf course designed by Jack Nicklaus, a 5,000 square feet event center, several meeting spaces, a spa, and various outdoor activities. The property consists of over 25,000 square feet of gaming floor, 630 slot machines, 16 table games, 198 hotel rooms, and F&B venues. With the Nugget and Rocky Gap acquisitions, we will oversee a U.S. portfolio that reaches from East to West. On a pro forma basis, after considering the 2 acquisitions, we expect to generate over 80% of our EBITDA in the U.S. What is also important to note is the fact that these 2 acquisitions will improve our leverage ratios. Our current total debt-to-EBITDA ratio is 4.8 times, and that will reduce to 3.5 times. Our current net debt-to-EBITDA goes from 3.5 times down to 3.1 times. The lease-adjusted net leverage remains flat at 4.7 times. As for the discussion about the most advantageous mix of HoldCo’s and OpCo’s with operators being very aggressive with rent coverage, we will be at a quite healthy and conservative rent coverage of 3.1 times across our portfolio. And that's already pro forma for the 2 pending acquisitions. With that, we feel very comfortable, and we'll continue working with real estate investors on a case-by-case basis to support our growth. As we move further into 2023, the economic uncertainty that persists today makes it difficult to predict where consumer trends are headed. We are mainly watching 2 economic factors that we believe are tightly correlated to the behavior of our core customers. and that have the biggest impact on our business volumes, which are the labor market and housing. A slight shift in gas prices or interest rates doesn't seem to affect our customers that much. We are cautiously optimistic about the positive trends we saw in January and February across all our markets. In closing, as we look back on 2022, it was another transformative year for Century. We posted record results and signed agreements to acquire another $180 million of revenues and over $50 million of EBITDA. Looking ahead, we are excited about the Nugget and Rocky Gap acquisitions as well as the positive regulatory change in Alberta this year regarding our 2 Missouri growth projects coming online next year. Furthermore, we believe there are additional opportunities to drive organic growth in our land-based operations. There are clearly some macro risks still. These growth drivers should help to more than offset potential consumer pressures. 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. Thank you for your attention. We can now start the Q&A session.

We will take our first question from Jeff Stantial.

This is Jackson Gibb on for Jeff Stantial. I noticed that you quantified the Caruthersville build disruption as a $2 million hit to EBITDA. I was wondering if you could, in a similar way, quantify the impact of weather in the fourth quarter on your results.

Erwin, we don't have a number for that, do we?

It's a bit harder. It's hard to say. I mean, I hesitate to say some would be too speculative.

Then thinking about margins, those 2 impacts, weather and the disruption of Caruthersville clearly affected margins. But throughout the portfolio, it looks like they came in a little bit. I was wondering if once these temporary pressures roll off, how are you thinking about margins into 2023? And what kind of represents a reasonable run rate for the business moving forward?

If we examine the expense side, the primary contributors to the increased expenses were elevated utility costs and higher property insurance. Additionally, there have been significant salary increases, along with rising maintenance and operational supply costs. We believe that these expenses will stabilize and may even decrease slightly, although predicting the future is challenging. Our evaluation suggests that we may have reached the peak of these price increases, and we don't anticipate any significant further salary increases. We also hope that insurance and utility costs will not rise further. However, the margin really depends on how effectively we can boost our net operating revenues.

Our next question comes from Chad Beynon. Your line is open.

Peter, Erwin, I wanted to ask about the Missouri growth projects. Has anything changed in terms of the cost or the scope of these projects? And then also how do you view the return profile once fully ramped?

Nothing has changed with regard to the cost. We are on budget, within budget, so that looks good. And Peggy, do you have the latest we did on the return percentage return and additional invested capital? Or the Kepty hotel mentioned earlier?

I don't have those right in front of me now.

We have said that we expect a 10% to 15% return at Cape Girardeau and 15% to 20% at Caruthersville in Missouri, and that has not changed. These are significant upgrades and improvements, especially in Caruthersville. It's really a game changer because we'll have a number of hotel rooms. We'll have all these previous issues resolved, and first-time visitors who have not come back to Caruthersville will then come back. It will have a significant impact, I believe.

And then with respect to the Nugget, I guess a couple of questions on that. Congrats on the progress in terms of closing that. Obviously, we're all well aware of the weather impact there. That's not affecting your numbers at this point. But when you take control of the property, you talked about some upgrades, the gaming floor and synergies and the like. Should there be some disruption, meaning should we assume kind of a low positive impact for the second quarter kind of when you take control and then we'll start to see the benefits? Or will there be less disruption as you look to make some of these changes once you control the property?

Erwin?

I don't believe we are experiencing any disruption, especially not in the second quarter. Changes to the gaming floor regarding the slot mix aren't disruptive to our operations. Installing new slots doesn't disrupt our services. The only time we might manage disruption is if and when we alter the floor layout, expand the space, or make significant changes. If we do make those changes, we will plan carefully to minimize any disruptions. Fortunately, one advantage of the Nugget is that we have ample square footage, giving us plenty of space to work with.

And just one last one on the Nugget. When we think about the TTM multiple, even with some of this maybe weather disruption, are we still kind of sub-6 from an OpCo standpoint in terms of what you guys will be paying for the asset?

Well, if we’re taking the 2022 numbers, then we are a bit higher than 6. But the 2022 numbers were not only negatively impacted by weather in Q4. There were also events that had a material impact on the 2022 numbers.

Yes. Four shows were canceled. One had an accident at home, and the other two groups postponed into next year. One was afraid of COVID. The other we don't know why. That was really unfortunate, and all of these cancellations came too short to be able for the market management to find a replacement. It was really one very unlucky year, and we don't think that this will repeat itself.

And our next question comes from Jordan Bender.

Great. Peter, you called out a pretty positive outlook for the second and third quarter of this year. Can you maybe break that down between the drivers of that? Are they the macro factors you called out? And then is it fair to assume that in the second and third quarter, you should be up year-over-year on a same-store basis?

Yes, Jordan. That's what we expected. That's what it looks like right now, and it's pretty much across the board, yes. Flattish in West Virginia. Up in Missouri. Up in Colorado.

Up in Poland. Up in Canada.

That's right, yes.

Okay. Good to hear. And then just following up in Caruthersville. Looks like gaming positions have increased pretty meaningfully with the move to land. Can we maybe get an update on the performance of the temporary facility and how consumers are viewing that? And maybe what should we expect this year from that?

To give you some flavor, after talking to our general manager there, after we moved from the boat to the temporary facility, he said he has not seen one single customer who has been unhappy about the boat not being there anymore. People are really happy about it. It's a wonderful, nice, little facility. It's not such that we're going to build, of course. That will be brand new, and it will take much better. But what was possible has a very good feel for both the table games and the slot machine side, and it is very well accepted. We're really happy that, despite the difficult growth circumstances, we were able to get the approval for that move.

We will take our next question from Edward Engel. Your line is open.

As some of these acquisitions close throughout the year and then you just start generating substantial free cash flow, where does this free cash flow get focused to? Are you still open on the M&A front? Does it just go completely to de-leveraging? Are there other CapEx projects across the portfolio? Just kind of wondering how that capital application shifts as these acquisitions close.

We see a mix of certain things. Deleveraging is one. Yes, we want to become active again on the M&A front. Probably, once we close the Rocky Gap acquisition in the summertime, we may also want to give a little bit back to our shareholders. So it will be a combination of all those things, depending on how busy the M&A situation will get in Q3 and Q4.

And then you're helpful in giving the pro forma net leverage once these things close. Just wondering, do you have a target net leverage you have in mind in a steady-state environment, I guess, non-M&A environment?

Lease adjusted around 4 times, 4.5 times is where we feel very comfortable.

It appears we have no questions at this time.

Well, we appreciate everybody joining our call today. For a recording of the call, please visit the financial results section of our website at cnty.com. And if you have any follow-up questions, please feel free to reach out to us. Thank you.

Thank you, ladies and gentlemen. This concludes today's program. You may now disconnect.