Good day, everyone, and welcome to today's Century Casino's Q4 2023 Earnings Call. At this time, all participants are in a listen-only mode. Please note that this call is being recorded. And I will be standing by should you need any assistance. It is now my pleasure to turn the conference over to Peter Hoetzinger. Please go ahead.

Good day, 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. 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 discussion of the risk factors in our SEC filings and encourage you to review these filings. Throughout our call, we refer to several non-GAAP financial measures, including, but not limited to, adjusted EBITDA. Reconciliations of our non-GAAP 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. I will now provide an overview of the fourth quarter 2023 results as well as our view of how this and next year could evolve. After that, my Co-CEO, Erwin Haitzmann, and our CFO, Margaret Stapleton, will join me for a Q&A session. For the quarter, we delivered net revenue of $144 million, an increase of 39% over Q4 of last year. The increase came from the additions of the Nugget in Nevada and Rocky Gap in Maryland, as well as good performances of our Canadian operations, offset by a weaker retail customer, construction disruption at a few properties, and the temporary closures of three casinos in Poland. Adjusted EBITDAR was $25 million, up 17% over last year. Canada grew EBITDAR by 50%, while Poland, obviously, saw a substantial decline. We did, like everyone else in regional casinos, experience market softness during the back half of 2023, especially at the lower end of our customer database and in the retail segment. Coupled with higher costs and expenses across the board, margins suffered quite a bit. We're in a transitional period and also in a transitional process at our company with lots going on at the same time. Our local management teams carry extra burdens with two major construction projects in Missouri as well as the integration of Nugget and Rocky Gap. Remember, we acquired Nugget and Rocky Gap less than a year ago, meaning we're still early in the process of managing everything as one cohesive portfolio. Considering all that, it was a solid operating performance in the fourth quarter and full year of 2023, with strong growth prospects going forward. Looking at segment results for the quarter. Let's start with the Midwest, which includes our Colorado and Missouri operations. Revenue was up 8% year-over-year. EBITDAR was up 5%. In Colorado, the results of our Cripple Creek property were flat year-over-year. The one in Central City was down a bit, caused by major road works on both highways that lead to Central City from the main feeder markets. In Cripple Creek, a competing property opened across the street from our casino right after Christmas. By now, they have their 300 rooms opened as well as some of the F&B outlets. January saw a 17% increase in gaming revenue for the entire Cripple Creek market. We grew by 14%, an early indication that we benefit from the hotel rooms and our proximity to their property. In Missouri, both properties posted revenue and EBITDA growth as well as better operating margins than in Q4 a year ago. A strong and encouraging result, considering construction going on at both locations. The number of trips of our top-tier segment increased meaningfully during the quarter while the overall spend per trip was flat. In Caruthersville, construction of the new land-based hotel and casino is progressing according to budget and schedule. We plan to open in Q4 of this year. The new property will have a total of 74 hotel rooms, 12 gaming tables, and over 600 slot machines, which is a 20% increase in gaming positions compared to the old riverboat and a 50% increase in gaming positions compared to our current interim casino. Most importantly, the new property will provide significant operational efficiencies. It will be much more convenient for our customers and it will increase our catchment area. We're more excited than ever about this permanent move to land based. What we see now as we operate in a small temporary pavilion is very encouraging. The number of trips increased and so did the spend per trip. So we really can't wait until the new facility opens in just about eight months from now. That project is fully funded by VICI at an 8% cap rate. Hence, it does not impact our liquidity position. The hotel construction in Cape Girardeau is also on budget and on time. We're very excited about the grand opening in three weeks from today on April 4. It will be great to see how adding the hotel will transform that property into a full resort destination offering gaming, dining, conferences, concerts, and more. Total project cost is $31 million, and we fund this with cash on hand. As of December 31, we had spent approximately $23 million already. The balance of $8 million will be spent in the first half of this year. Our East segment includes the Mountaineer Casino Resort and Races in West Virginia and the newly acquired Rocky Gap Resort and Golf in Maryland. Because of that new acquisition, revenue of the segment was up 44%, and EBITDAR more than doubled. At Mountaineer, hours of operation for the casino, available hotel rooms, and food outlets are still limited as a result of continued staffing challenges. However, our participation in the J-1 visa program has greatly assisted us in improving our offerings. Slot coining was flat in Q4, and table games continued to be impacted compared to the prior year, which we believe is still due to sports betting in Ohio. You should get a better picture of that going into the first and second quarters of this year as we have just had the anniversary of Ohio sports betting. We plan to further enhance our entertainment offerings throughout the year to further diversify our portfolio, giving our guests more reasons to choose us for their entertainment. As an example, we recently had a very successful MMA boxing event in our ballroom there. Rocky Gap experienced small growth coming from the upper end of the database, offset by declines in the lower tiers. From an age standpoint, the oldest and youngest demographics increased, while the larger portion of the database, which is 40 to 70, decreased a bit. We plan to put a strong focus on player development in the major feeder markets like Baltimore, Pittsburgh, and Washington DC, with the goal to migrate players to higher tiers and grow the overall database. As most of you know, Rocky Gap sits at a beautiful lake in Rocky Gap State Park. But up to now, the property did not have beach access for its customers. Recently, we got approval to develop a nice beach area, and we'll make sure we have it ready for our customers before this summer. It will be another great amenity that will help drive additional FIT and resort travel to the property and will also allow us to increase resort fees. Continuing to the West segment, which includes Nugget Casino in Nevada, the market saw mixed results during the quarter compared to the prior year. Overall, the number of trips to the casino decreased by 30% per trip, with all declines coming from the lower-level customers. The top of the database was very healthy, with theoretical win increasing by 20%. From an age standpoint, the under-50 segment grew, with win increasing by 10%, while the 50-plus demographic decreased by 3%. We're optimistic that the second half of this year will be strong, as most of the transitional extraordinary expenses and project CapEx will be behind us. We have replaced a few key executive team members and some positions left the Nugget right after the sale closed last year, which led to a somewhat challenging initial period. The team now is in great shape and is working on remodeling three restaurants and bars and is also getting ready to upgrade the sportsbook. In addition, a new high-limit slot area will be going in. All of these high ROIC growth projects will be completed this summer. On the marketing side, we expect to go live with new marketing kiosks, along with the new marketing component of our loyalty player tracking system, also before this summer. The Reno-Sparks market is known as a player-friendly value market, so we want that improved flexibility with direct mail campaigns and improved marketing programs. Renovations of the facade and signage are done already, and it really looks great. Also, our entertainment and special events calendar is coming together nicely and points to a very busy summer season. In the Canadian segment, our four properties in Edmonton and Calgary saw revenue growth by 17%, and EBITDAR was up by a very strong 50% in the quarter. All four were up in slot revenue, in table revenue as well as in EBITDAR. Access to our Century Casino and Hotel in Edmonton continues to be impacted by road construction, which will continue through April. The new sports brand launched at that property is driving traffic and F&B sales and also awareness in the community, especially now that the Edmonton Oilers are performing better. So overall, a very promising performance in Canada. To round out our segments, a quick look at Europe at our operations in Poland. The recent national elections triggered unanticipated licensing delays for three of our casinos, which caused quarter results to decrease materially compared to the year before. However, earlier this year, we were awarded all three licenses again, and we reopened one casino in February already. We anticipate reopening the second one next week and the final one, which is the biggest of the three in a new location in the third quarter of this year. So from about August on, we'll have all eight casinos in full operation again. And that should also give M&A discussions a boost. Still, our goal is to sell all Polish operations. With that, let's discuss our balance sheet and liquidity position. Our book value per share is $4. As of December 31, we had $171 million in cash and cash equivalents and $347 million in outstanding debt. Net debt is down to $176 million. As a result, traditional net leverage is 2.7 times, and lease-adjusted net leverage is now 4.9 times. We're okay with our leverage as we don't charge our leverage just based on a one-time snapshot, but rather look at its development over a period of time. The leverage is elevated because of our recent significant acquisitions and investments. It will stay above the long-term range until we have fully integrated the acquisitions and until we have completed our CapEx project later this summer around the third quarter. From then on, it should lower to closer to 2 times traditional and 4 times lease-adjusted next year. Our lease obligations to VICI currently total approximately $15 million per quarter. Once we open a new land-based facility in Caruthersville towards the end of this year, it will go up by approximately $1 million per quarter. So as a rough run rate for next year for 2025, total lease payments to VICI will be around $16 million per quarter. Interest payments on our Term Loan B currently amount to around $10 million per quarter. Please note that we have no near-term debt maturities, as it matures in 2029. We also have additional borrowing capacity of $30 million under our revolver. We can reprice or refinance the 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. As for our CapEx plans for this year, we're planning to invest a total of between $35 million and $40 million into our properties, and that includes normal maintenance and replacement CapEx, as well as improvements at the Nugget and in Canada and finishing the hotel in Cape Girardeau. All of these growth projects will help position our casinos for higher-value customers, and we deliver attractive returns on capital to drive growth in their segments. This elevated CapEx cycle will be completed between now and late summer. What's left then is the big move to land based in Caruthersville, but that is fully funded by VICI. So by late summer, we will see a significant reduction in CapEx as we move forward. Free cash flow should be improving substantially both from revenue growth due to the improved facilities and better customer experience, and from a reduction in CapEx. And perhaps you'll see a first reduction in interest rates by then. Again, we're in a transitory period right now, but we have a clear plan to fully focus on generating cash to deleverage and opportunistically also buy back stock later this year and next. We're fully focused on the projects that we have underway and are really looking forward to the end of this current intense CapEx cycle. In our view, the third quarter of this year will present kind of an inflection point for free cash flow generation, given the rolling off of the CapEx projects. Thinking about our performance in operations this year as we look forward now, mid-January and early February were terrible from a weather standpoint. I think it's well understood across the market. In the span of three to four weeks, most of the regional operators were significantly impacted by weather. So we, as everybody else, started in a January hole, as it was stormy. Let me put it this way. In mid-February, weather was more back to normal, and we see that customer trends over the past two weeks have rebounded to fourth quarter levels. We continue to keep a close eye on consumer spending patterns and general economic conditions for impacts on our casino and resort customers. To share our outlook with you, with all properties being in great shape in 2025, we see us approaching $700 million in revenue in 2025 with EBITDA margins in the 24% to 25% range. Our CapEx in 2025 should come in at approximately $20 million to $25 million. Operationally, we're proactive, assessing every aspect of our properties, striving for cost reductions and enhanced efficiencies. In closing, I want to reiterate our enthusiasm for the second half of this year and for next year. From the third quarter on and certainly in 2025, results and free cash flow should improve significantly for these reasons. In Q3 of this year, we marked the end of our elevated CapEx cycle. By then, the Nugget and Rocky Gap acquisitions will be fully integrated, everything will be operated as one cohesive portfolio. Also in Q3, all casinos in Poland will be up and running again. Then in Q4, we'll open the brand new land-based facility in Caruthersville. And from then on, we'll have no more construction disruption, and all properties and operations across the entire portfolio will be in the best shape. The only other point I'm going to make is that from a guidance perspective, as mentioned earlier, last year, we had softness in the second half. We think that's an opportunity in the second half of this year since that comp is going to be a little easier to meet. And that concludes our prepared remarks. We will now open the call for Q&A. Operator, go ahead, please.

Our first question will come from Jeff Stantial with Stifel. Please proceed.

Hey, good morning, Peter, Erwin, Margaret, thanks for taking our questions. Maybe starting off here on the US business. Peter, you talked about broad-based softening in the low-income consumer, which started midway through 2023. Can you just expand a bit more on how that's trended directionally? Has the low-income consumer worsened, stayed mostly stable? And then for the more mid- to high-worth segments, have you noticed any changes in behavior here sequentially across any of your markets? Thanks.

Okay. This is Erwin. I'll take that question. I think we have to look at it on a market-by-market basis; it differs a little bit. In the East, our customers are visiting our properties as often as before. They spend slightly less per visit. Visitation declined in Rocky Gap and in Mountaineer, and the unique customer count decreased accordingly. For Mountaineer, spend per trip is flat, and for Rocky Gap, it's up. In Missouri, our customers are healthy. They visit more often, and they spend the same as last year. Colorado visitation is also the same. People spend slightly less. The middle and lower tiers drive our business in Colorado. And then the market overall visitation is slightly down. Unique patron count is flat. The younger demographic under 30 years of age increased by 26%, which is interesting, and spend per trip is flat. Overall, we don't think that inflation at this point in time needs to be a major concern for us.

Thanks for the detailed information, Erwin. For my follow-up regarding the Canadian business, it appears that EBITDAR margins increased by nearly 7% from the previous quarter, despite historically having limited seasonality. Peter or Erwin, could you elaborate on what is contributing to this? Were there any one-time benefits this quarter, or is it mainly due to strong cost management? Any insights would be appreciated. Thank you.

Not one time. We think it's strong inclusion. We really have a fantastic management team there. It took a while for Century Mile to catch on, but now it has caught on. We were able to also find a solid customer base there. And we have every reason to believe that this will stay the same or get better, in fact, because, again, going forward, in the Edmonton Casino in a few months, there will be no more impediments due to traffic. And then we're also working on improving both the outside and the insides for the St. Albert Casino. So these are things that will be positive, and we look optimistically into the future in Canada.

Okay. Great. Thanks for that. Erwin, if I could just squeeze one more in quickly. It looks like to me, apples-to-apples CapEx guidance for 2024 was lowered a bit versus the $46 million that was cited in the press release when you reported preliminary Q4 results. Peter or Erwin, can you just talk to this decision a bit more? Are you delaying certain projects that you laid out for us in the Q3 presentation? And if so, what's the overall rationale? Thanks.

We have adjusted our investments a bit, particularly at the Nugget, which has been a learning experience for us. Previously, we planned to open another upscale restaurant, but we've decided to postpone that for now. We believe it is more beneficial to focus on improving our existing restaurants at this time. This process will take some time, and after assessing the results, we will revisit the decision about adding another restaurant.

Okay, great. Perfect. That's all from me. Thanks for all the color.

And our next question will come from Chad Beynon with Macquarie. Please go ahead.

Hi, guys. This is Sam on for Chad. Thank you for taking our question. We know it's still early days, and there's a lot to be determined on how sports betting or iGaming legalization might occur in Alberta. And now it looks like Maryland is a possibility. I was hoping to get your high-level thoughts on your online strategy for those regions? And ultimately, if or when they legalize, if it can be a net positive for your operations in those regions?

I'll take the first part and then hand over to Peter. OSP and iGaming is already legal in Alberta. It's provided by the Alberta Gaming and Liquor Commission, and the casino operators are not participating in that. Peter, would you like to comment on Maryland and our overall strategy, which we'll probably give as we have it now?

Yes. In Maryland, they're discussing legalizing iGaming, and we certainly look forward to that with our license. The approach will be the same as we do in Colorado and in West Virginia. In Nevada, we're providing our license to experience large online game operators. They pay us a percentage of their revenues they generate with our license, and that has a minimum annual guarantee included for us. Outside of Maryland, we also have hopes for Missouri to legalize sports betting, hopefully this year, because, as you know, we have two licenses there, and there's strong interest from the online operators. So that would provide us quite a nice boost to our EBITDAR in Missouri as well. We have no costs associated with these agreements, so everything that we receive goes to the bottom line. We certainly feel it's a net-net positive for us at all the locations where we have that strategy in place already. In West Virginia, as you know, it's not only sports betting but also already iGaming. And we work with two providers there, and they work well for us.

Thank you for the information. I have a follow-up question regarding Poland and its ramp-up for the remainder of the year. Is it possible for you to start achieving the double-digit EBITDA that we saw in 2022 this year? Additionally, regarding M&A, do you plan to initiate discussions right away, or will you wait for the properties to reach full capacity?

I'll address the first question and then pass it over to Peter. The re-licensing of all three casinos was successful. We anticipate that by late 2025, Casinos Poland will return to what we can consider normal operations, which would imply double-digit EBITDA figures in USD. The year 2024 has begun positively, even though Warsaw is still closed. It's premature to make definitive predictions, but things are moving in a favorable direction. Peter, would you like to discuss our plans for selling?

Yes. As we have received only three licenses again, we have now restarted the sales process. We are in the early stages, but we think this year, in the second half, we should have a better chance than before to get a reasonable price for our operations there.

Great. Thanks a lot for the color. Appreciate it.

Thanks, Sam.

And our next question will come from Jordan Bender with Citizens JMP Securities. Please go ahead.

Hi, this is Eric Ross on for Jordan. Thanks for taking our questions. So knowing that Reno has traditionally been a competitive gaming market, I was wondering if you could provide some details on the environment there nearly through the first quarter, and what's the group and convention outlook for the year looking like?

The Reno market is clearly very competitive and we have all experienced some pressure, partly because of the poor weather. A portion of our market is located west of the Rocky Mountains, and any news about potential snow or the lack of it affects us along with all of Reno-Sparks. Looking ahead to 2024, we have an exciting calendar filled with a great lineup of events, including the annual Rib Cook-off, the new Reno festivals, Hot August Nights, and the new Oktoberfest. Our outdoor seating for 8,500 is a significant attraction and stands out as a unique feature at Nugget.

That sounds great. And just a follow-up. With the capital plan discussed, can you give us an update on your thinking about the remaining real estate for the Nugget? Would you ever consider going 100% outgrowth there to help pay down debt? Thanks.

We don't consider that at this point in time. But we have some more time to make a fine decision.

Great. Thank you.

And it appears we have no further questions at this time.

All right. Very good. Thanks, everybody. We appreciate you joining our call today. And we will talk again after the first quarter. Till then, thank you, and goodbye.

And this will conclude today's conference. Thank you for your participation, and you may now disconnect.