Good day, everyone, and welcome to the Century Casinos Q2 2024 Earnings Call. Please note this meeting is being recorded. It is now my pleasure to turn the conference over to Peter Hoetzinger. Please go ahead.

Good morning, everyone, and thank you for joining our earnings call. 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. Before we get started, we would like to remind you that we'll 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 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 Investors section of our website at cnty.com. Our 2024 second quarter results were released this morning. We delivered net revenue of $146 million, an increase of 7% over Q2 of last year. The increase came from the addition of Rocky Gap in Maryland, as well as a good performance in Canada, offset by construction disruption, the poor performance of the Nugget in Reno, and the temporary closure of two casinos in Poland. Adjusted EBITDAR was $27 million, down 6% from last year. That is disappointing, but the results were also impacted by one-time transitory issues, namely the construction disruption at some U.S. properties and the temporary closure in Poland. As you have surely seen and heard from our gaming peers and from other consumer discretionary businesses, the retail customer as well as the customers from the lower end of the database are still relatively weak. Non-rated play was down 10% throughout our portfolio. We believe this is mostly due to macroeconomics and wallet softness in our markets. We would anticipate as inflation comes down and a relieving credit market is coming, this will begin to shift back to entertainment spending versus necessary spending. To dig a little deeper into the quarter, we've seen months that are not as strong as others. April was pretty bad. In fact, April was responsible for all of the quarterly year-over-year EBITDAR decline. May was up almost 20%. June was down just a little, close to flat. Looking at segment results. We start with the Midwest, which includes Missouri and Colorado. Revenue for that segment was up 4%. EBITDAR was down 5%. With the disruption we experienced at Caruthersville in Missouri from the development of the new land-based facility, the team delivered another strong quarter. I'm happy to report that construction is progressing on budget and ahead of schedule, preparing for a soft opening in mid-November. The new property will have a total of 74 hotel rooms and over 660 gaming positions, which is a 20% increase compared to the old riverboat and a 50% increase compared to our current temporary location. Our new facility will transition the Caruthersville operation from an old riverboat and small temporary locations to a modern-style land-based facility, adding significantly enhanced non-gaming amenities, expanded gaming options, and convenient parking for our guests. It will provide significant operational efficiencies and will increase our catchment area. We expect a strong uplift in the overall performance from that property, both in revenue and EBITDAR. Cape Girardeau saw a positive revenue trend based on an increased player count and a higher visitation rate. The hotel we opened at the beginning of the quarter continues to ramp. The number of occupied room nights increased sequentially throughout the quarter with an average daily rate higher than budgeted. The team is in the process of fine-tuning operational expenses for the hotel and food and beverage operations to further increase profitability. In Colorado, our property in Cripple Creek continues to benefit from the new 300-room hotel that opened directly across the street from us earlier this year. Coining was up, table drop was up, and food and beverage revenue was also up significantly, all because of a higher volume of visitors in town. Central City, on the other hand, suffered a bit from the hotel renovation work, which we finished in June and from a lower spend per trip. Our East segment includes the Mountaineer Casino Resort in West Virginia and the newly acquired Rocky Gap Casino Resort in Maryland. Because of that new acquisition, revenue for the segment was up 60%. EBITDAR almost doubled. At Mountaineer, the low end of the database produced fewer trips as well as lower spend per trip. In addition, slot hold was down year-over-year. The good news is that staffing is no longer a significant challenge; we managed to keep all amenities open without labor limitations. Results at Rocky Gap have been impacted by a reduced number of trips as well as a noticeable decrease in unrated play. We believe this is a combination of metro and local economics as well as the continued growth of iGaming in Pennsylvania and West Virginia. However, we do see the first benefits from our efforts to attract previously untapped feeder markets such as the DC metro area. The property has also successfully captured data from our winners' circle database, which increased by 16% year-over-year. As the economy improves, that will present great upside potential. Continuing to the West segment, which includes the Nugget Casino Resort in Reno, Nevada, the market was the disappointment of the quarter. There's no way around it. We knew we had to deal with disruptions from renovation and refurbishment works on and around the gaming floor, but we did not forecast a 23% revenue decline. Yes, the hold on slots and tables was significantly lower compared to last year, but that would only explain a small portion of that decline. We've made some tough decisions. The market has undergone a leadership change, and we are implementing rightsizing and cost-cutting initiatives to enhance performance. We've appointed Eric Rose as Senior VP and General Manager of the property. Eric is a 32-year veteran in gaming and hospitality and previously served as our VP of Operations in Colorado. His career began in Nevada and includes leadership roles in sales and marketing as well as General Manager. Throughout his career, Eric has proven himself as a leader dedicated to delivering outstanding hospitality paired with exceptional financial discipline in highly competitive casino markets. With the appointment of Eric Rose to the Nugget's top leadership role, we are finalizing the transition and integration of that property and setting it up for future success. We've also upgraded the property with more than 120 new slot machines, a high-limit room, refreshments for two restaurants, a repaint of the exterior, as well as exterior and interior signage and display packages. Most of the transitional extraordinary expenses, as well as most capital expenditures and the disruption that comes with them, are behind us now. The entertainment and special events calendar for the next 12 months looks great. All of that makes us optimistic that next year we'll see substantial improvement and showcase the market's full potential. Moving to Canada, revenue in Canada grew by 5%, and EBITDAR was up 7%. All of our operations in Alberta delivered solid performance in line with our expectations. During the quarter, we saw strength from our core customer segment and continued stability in retail play across the Edmonton and Calgary regions. In Poland, two casinos were still closed during the quarter, one of which is a very important one in the city of Roslov, which resulted in a significant drop in revenues. That casino in Roslov has been re-licensed already and will be up and running again in October. As indicated in our last earnings call, after the reopening, we expect to return to normal levels quite quickly, which revolves around $12 million in annual EBITDAR. The sales process is also progressing well. There is new momentum, with additional parties having expressed serious interest over the last couple of months. With that, let's discuss our balance sheet and liquidity position. We ended the quarter with $123 million in cash and cash equivalents and $342 million in outstanding debt, resulting in net debt of $219 million. The main reason for the decrease in our cash position versus the end of last year is the cash payments of $12 million for tax on our Canada real estate sales, a $4 million one-time principal paydown of debt, as well as a $34 million investment in property and equipment. Traditional net leverage is 4.6x, and lease-adjusted net leverage is 6.5x. The leverage is elevated because of our recent acquisitions and investments. We expect to remain above the long-term range until we have the casinos in Poland and the land-based facility in Caruthersville open. But from then on, it should ramp down quite quickly as we look to deliver to about 3x traditional and less than 5x lease adjusted for next year. We have no debt maturities until 2029, and we have additional borrowing capacity of $30 million under our revolver. We can reprice or refinance our entire term loan at any time without penalty, and as soon as the winter opens, we plan to act on it and improve our terms. Turning to capital expenditures, during the quarter, we remained committed to strategically investing and offering new amenities to our guests at our existing locations to drive future incremental visitation and spend. I'm glad to report that we are nearing the end of our elevated CapEx program as we complete several projects in the second half of this year for approximately $13 million. We expect these to be solid investments over the medium and long term and look forward to moving beyond the disruption challenges the properties have dealt with. For next year, we expect total CapEx to decline sharply to about $12 million, setting the stage for a substantial increase in free cash flow. We'll see that increase in cash flow from the casino opening in Poland in October and the Caruthersville opening in mid-November onwards. Cash flow will improve substantially from revenue growth due to the enhanced facilities, as well as from the major reduction in CapEx. The presentation posted on our website today shows you the bridge from negative cash flow this year to the positive cash generation of $1 per share in 2025. Shifting to our outlook for the remainder of this year and next, given the performance in the first half of this year, we are now projecting 2024 revenues of $602 million and adjusted EBITDAR in the range of $105 million to $115 million. For 2025, we see revenues between $650 million and $675 million and adjusted EBITDAR between $150 million and $160 million. As we look ahead, we are confident in our business prospects moving forward. On the expense and labor side, we will focus on operational discipline and continue to seek ways to become more efficient, especially at the Nugget. Again, we are still in a transitory period, but we have a clear plan to focus on generating cash to deleverage and opportunistically also buy back stock later this year and next. I want to reiterate our enthusiasm, especially for next year. We see results and free cash flow improving significantly as we have the Polish casinos and Caruthersville opening in just a few months. That concludes our prepared remarks. We'll now open the call for Q&A. Operator, go ahead, please.

I will take our first question from Jeff Stantial at Stifel. Please go ahead.

Hey, good morning, everyone. Thanks for taking our questions. Maybe starting off here on the revisions to 2024 and 2025 revenue and margin expectations, Peter, that you just walked through towards the end. Can you just spend a minute sort of walking through some of the changes to the assumptions? It sounds like based on your commentary that the Nugget Casino and some of the stabilization work there is the primary driver. But if you can just walk through each of the drivers and maybe how much they contributed to the revenue revision, that would be helpful as well. Thanks.

Thanks, Chad. Peter, can you say something about that? Or would you like me to try?

Yes, it's mostly market in Poland, but the others as well. And with that back to you, Erwin.

Yes. I mean, we don't have it property by property in terms of margin improvement. I don't know if you would like it to go through it property by property, or what exactly are you looking for?

I think a rank order of which properties are lagging your expectations and how that contributes to the forecast revisions would be great. And if not, we could also follow up offline.

Okay. Now let's start like that Alberta is performing exceptionally well, and we are totally happy with it. We expect that to continue both for the remainder of this year as well as for next year. In Poland, which you can see in the numbers, we're also very comfortable. Let me just give you one number here. If we're looking at same-store sales comparison of the EBITDAR of Marriott Hilton and the Lodge Casino for Q2, if you only take those three casinos and compare Q2 of '24 with Q2 of '23, EBITDAR is up by 71%. As I say, you don't see that because some of the casinos are closed. But once we're open again, and like Peter said, we expect it to contribute $12 million in EBITDAR again like it did in the past. Moving maybe from East to West geographically at the Rocky Gap, we did a few things that we think are very beneficial for the coming quarters and for next year. One of them is that we have introduced a beach. We got the permission to use part of the lake in front of our hotel, and with a few cabanas, that just rounds up the product of the hotel casino resort very well. In Rocky Gap, we are mainly waiting for a cutting interest rate and for a change in the economic consumer attitude. The reason why we were hurt in Rocky Gap mainly is that we lost the revenue mainly in our uncarded play, and the uncarded players typically come from a reach of about 20 miles or so. You have to know that the average household income of the area there is about half of the average household income of Maryland. And that's something that I'm sure you've heard before from others that in the lower end of the database, this is where we are typically suffering. Mountaineer, it's a similar picture. The erosion came from the higher market and also from the mid-tier and below. When it comes to Cape Girardeau and Caruthersville, we had increases in revenue of 6.7% in Cape Girardeau and 0.4% in Caruthersville despite the fact that we are still in this very tight and small interim casino, just waiting to open a new one. We see that with the hotel that we opened in Cape Girardeau with the one that we will open in Caruthersville, we will be able to expand our reach, and that will certainly be beneficial for the numbers. So we are convinced to see in the second half of '24 as well as in '25. As far as Cripple Creek is concerned, on the tourist side, we think that that's the most difficult one with regard to upside as it stands. We're the only ones that drive the market here in Central City. There is nobody really that is helping the traffic there. But we think that due to the fact that we have the prime position together with our parking garage in the center of Central City, this will be a market where we will be able to hold a stable $4 million to $5 million in EBITDAR. Coming from Cripple Creek on the other hand, the effect of the new 300-room hotel, as Peter mentioned, has been positive. So, we have a very positive spillover effect, and we think that will continue for the foreseeable future, which leads us back to the Nugget, where I think it's really this is the place where we have made and will continue to make the most significant changes. We believe there is still a lot of upside in the detail, and we are fully motivated, together with the new GM Eric Rose, to put that into action from now on, hopefully seeing results soon. One thing to note is that when you look at the Nugget second quarter, the main reason for the significant reduction in revenues is that last year, we had significantly more conventions and exhibitions booked. Our group sales in '24 were significantly less than last year. Now with conventions and exhibitions, this is not something that you can plan or work on for the running year or the next year because most of the conventions and exhibitions are planned two, three years ahead. So the weak calendar of this year was not a result of our work because when we came in, the plans were already in place for '26, '27 or so on. So we were forced to deal with what we inherited, so to speak. Is that something like an overview that is helpful for you?

That was extremely helpful and thorough. Thank you, Erwin, for all of that color. If I could just ask one more question, maybe for Peter with this one. I heard your commentary towards the end regarding some potential opportunistic buybacks as CapEx rolls off and we get into the back half and early 2025. At the same time, there are rumors — we'll see how credible — but there are rumors of potential large-scale M&A among some of your competitors, should those materialize, that would likely result in some potential divestitures to satisfy antitrust. I guess, how do you think about balancing continued balance sheet improvement and getting to the point where you could be opportunistic if something came along versus taking advantage of some of the dislocation in the stock as we're staring at 230 today? Any color there would be great. Thank you.

Go ahead, Peter.

Yes. I mean we don't — it's pretty simple for us at this stage, depending on the stock valuation. But if it's around the area where it is these days, then we simply do not see any better casino investment out there for us than CNTY. Our focus clearly for the next 12 to 18 months is to concentrate on what we have, generate as much cash as we can, and then decide whether we use that cash for stock buyback, deleveraging, or a combination thereof. At these levels, we don't see any better investment than our own stock.

Next question comes from Chad Beynon with Macquarie. Please go ahead.

Hi. Good morning. Thanks for all that commentary. You mentioned that April was, I think, responsible for most, if not all, of the EBITDA decline, which would tell us that maybe there was a little bit of an anomaly. It sounds like you have measures in place to address certain issues. But maybe getting back to the core of the business. Is that unrated decline weakening? When do we start to face easier comparisons with that? I think you talked about June looking better. We're seeing some of the July numbers that seem pretty stable. So is that unrated business weakening, which could hurt some near-term margins in the third quarter? Or do you think the worst is behind us, and most of that was felt in April? Thank you.

I think it's fair to say we think that the worst is behind us. However, we are equally awaiting the first reduction in interest rates, which — subsequently, hopefully will change consumer sentiment.

Okay thanks. So, you think that could be a catalyst for that consumer?

Yes, we think so. Because on the higher end, we're doing fine. It's not so concerned with that. But on the lower end, where people are even saving on food costs, that's the area where the improvement in sentiment is needed.

Okay, thanks. And as we think about the portfolio as it stands, given the revised guidance, has anything changed in terms of urgency or view on potentially divesting something in the portfolio? Or do you still think that the current portfolio makes the most sense when you kind of come out of this and start driving free cash flow in '25?

Yes. Peter, why don't you take that?

Yes, Chad, as we have said, we are in the process of selling our Polish operations, and we'll then reassess. But certainly, we have some operations that are today a bit problematic with the initiatives going on to improve, and depending on the outcome in the next six months or so, we will reassess our portfolio. I don't want to exclude anything.

Okay. And Poland could be, given the strength of the same-store results and some of the renewals, could that be something in the next six to 12 months?

Yes.

Our next question is from Jordan with Citizens JMP, please go ahead.

Hey, good morning, everyone. I want to continue that last conversation. For the Polish assets, I think the lease duration term sits the longest that they can go as we sit today. Have you seen any uptick in terms of interest? I know it's been maybe for sale for a couple of years now, but with that duration, have you seen more potential buyers kind of enter the picture now that we're hitting that sweet spot with the leases?

Peter?

Yes, we have, Jordan. It is a result of what you just said. The lease terms are pretty favorable right now. It is also because, as Erwin said, the results of the casinos that have been opened last year and are open this year, this April-to-April comparison is very favorable. Other interested parties have finally realized that the ROI in Ukraine just doesn't have an impact on players or suppliers or employees. All of these factors together have resulted in almost a handful of new parties that came to the table recently.

Got it. Thank you. And then you kind of mentioned that you could be losing some customers to iGaming states. This is a totally different direction for the company you're currently ongoing. But could you see yourself potentially like white-labeling some form of online gaming platform, very low cost, just to capture some of those players around the edges, whether in West Virginia or even sports betting in Colorado, just to again, capture some of those players that you think you might be losing?

Peter, you want to go?

That's something that we are considering every now and then, and it's certainly in the cards, yes.

We will now hear from J.T. Waters, Private Investor. Please proceed.

Hey, good morning, everyone. Thanks for taking my call. I think it was Peter, you mentioned the convention business at the Nugget that's forward-looking two to three years out and that we kind of had a gulf there with nothing, which hurt the results. Can you give us any kind of outlook as since it is so forward-looking, what does that look like for the—really for the next two to three years as far as bookings go? And then I have a follow-up question.

It was me, Erwin, who said that. At the moment, it's too early to give you an outlook. I can say it looks favorable, but we wouldn't be able to provide numbers at this point in time.

Okay. Great. And then just commentary on the — go ahead, sorry.

Yes, I want to add, in addition to the convention and exhibition business, another driving factor is also the concerts that we are having either in our outdoor venue with 8,555 seats and also indoors in winter with 2,000 to 2,500 seats maximum. We are very actively working on having a significantly more comprehensive content schedule of concerts, and some of that is happening already for the remainder of the year and also more next year, a reason for that being because these are events that can be planned with a much shorter lead time.

Great. Thank you. And then just I have two questions, and I'll just listen. So just if you can give kind of a commentary on the Reno market as a whole. Obviously, we weren't pleased with our quarter at the Nugget. But what does the market look like in Reno as a whole? And then also just an overview question. I've been a shareholder, gosh, of and on really since you guys became public, believe it or not. I still have a hard time. If you can just kind of speak to your ethos of what we are good at, right? Do you guys look for undervalued properties where we can put some CapEx into it and improve it? Or kind of give me just what does Century Casinos is good at, if you will? And I'll listen. Thank you, guys.

Okay. I'll answer the first question, and I'll hand over the second to Peter. The Reno market is highly competitive with very experienced operators. It has to be seen not only as the 500,000 people that live in Greater Reno, but also in the catchment area, mainly from Northern California, Sacramento, and San Francisco. Quite recently, the hotel market has been really weak, and I think probably our colleagues would also attribute that to the current economic situation. Peter, maybe you want to take the second question.

Yes. Thanks for the second question. Over many years, we have started mostly with developing our casinos from the ground up. We did this in Colorado and Canada, smaller properties sold. As we move into larger units and bigger markets, we have focused on trying to find value acquisitions, properties that are a bit neglected by current ownership, and then we try to improve them. We started that process in 2019 when we bought three casinos from Eldorado, which is now Caesars. That was exactly what we were looking for. Those three properties were slightly missing the love and attention from ownership because previous ownership had bigger fish to fry. We took them over, and there was success from day one; all three properties increased revenue and EBITDAR under our operation, even though Eldorado was at that time considered to be very, very good operators. It was an excellent success that we had to close due to COVID. After opening, it was an even greater success. We are striving to do similar things with the Nugget and Rocky Gap recently. We still think those two properties have the same upside potential. The problem is that as you may know, in order to acquire the Nugget, we took out the Term Loan B, and we did that a few weeks before Russia invaded Ukraine. Interest rates went up, and that not only hurt our interest expense but also, as Erwin mentioned, a good portion of our customers is suffering from high interest rates. It was a bit of a double problem for us, both at the Nugget and Rocky Gap. In any case, we still believe in the potential of these properties. It will take us a bit longer to create the same success story we had from 2019 with the other three properties in Missouri and West Virginia.

Thank you. We show no further questions at this time. I will turn the call back to management for closing remarks.

All right. Thanks, everybody. We appreciate you joining our call today. We will talk again after the third quarter. Until then, thank you, and goodbye.

This does conclude today's program. Thank you for your participation. You may disconnect at any time.