Greetings, and welcome to Century Casinos' Q2 2022 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 now 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 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 we 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 release and SEC filing available in the Investors section of our Web site, at cnty.com. I'll now provide an overview of the results of the second quarter. After that there will be a Q&A session. Our second quarter results continued the streak of record-breaking performances that we have shown throughout last year. We generated record second quarter revenue and record second quarter adjusted EBITDA. Revenue was up 21%, and adjusted EBITDA grew 18% compared to the second quarter of last year. Basic earnings per share for the quarter were $0.30. We recognized two items that impacted our net earnings attributable to shareholders this quarter. First, due to the prepayment of the Macquarie credit agreement, we wrote off $7.3 million in deferred financing costs to interest expense. And secondly, we released a $10.2 million U.S. valuation allowance resulting in an income tax benefit. Even so, last…

Thank you. Ladies and gentlemen, at this time, we will conduct the question-and-answer session. [Operator Instructions] Our first question is from Jeff Stantial with Stifel. Please go ahead, your line is now open.

Hey, good morning, everyone. Good day, everyone, and congrats, nice set of results here. Starting off, I was just hoping to drill in a bit more into the month-by-month cadence of the quarter. Any notable sequential changes in either directions as you progressed through April through June, either on the top line or with respect to margins, and any color on [indiscernible] helping as well, breaking out U.S. versus Canada versus Poland? Thanks.

Erwin, do we have any data on that, how the quarter progressed? Erwin?

High-level qualitative is fine as well if you don't have the numbers on hand.

I have all the numbers, but the question is how much [indiscernible] shall I go through all of them? Why don't I group them by states, to begin with, and if you would like to know more then we go into the -- into property by property, if that's fine for you?

Yes, by -- by region is fine, and then just -- I was more wondering qualitatively, did the consumer, feel like it picked up, did it drop off, the cost pressures get better or get worse, just more kind of qualitatively how things progressed through the quarter, if that makes sense.

Yes, sure, sure. So, in for or rather, in April, we made $4.1 million in net operating revenue; May, $3.8 million; June, $3.7 million; and in July, north of $4 million. In Missouri, we went from $10.4 million, and that's always taken further of '20 -- and this is of 2022, from $10.4 million in April, $9.6 million in May, and $9 million in June, and again, in July, north of $9 million -- significantly north of $9 million. In West Virginia, $9.9 million, $10.5 million, $9.3 million, and in July around $11 million, and then moving on to Canada, in Canada we made $6.6 million, $6.3 million, and $6.2 million, with July being around $6.4 million. And in Poland, we went from $7.1 million in April, to $8 million in May, $6.6 million in June, and more than $7 million in July. That is for net operating revenue. Is that good enough for you so far?

Yes. Yes, we could leave it there on the top line, really encouraging trends into July, specifically. Moving --

Thank you, Jeff --

Moving on to my follow-up -- yes, thank you, Erwin. Moving on to my follow-up, Peter, I wanted to drill into your comments at the end on potentially staying nimble on your two projects, the [indiscernible] and Caruthersville and the hotel at Cape Girardeau. Could you just talk about kind of where are the pressure points right now from a supply chain perspective, is it labor, is it certain raw materials, kind of what's the -- what are the different pressure points at the moment, and once you do get started, what are some of the things you're exploring to help, call it, hedge further inflationary pressures to the extent things change as over the course of the projects?

Right. The pressure point clearly is the material, both the availability and the price. The two of them -- maybe one, but not necessarily something is not available, it's not available not even for a higher price. And -- but we think that we may have seen the peak of supply chain challenges with regard to price already. And then we see the prices come down already, so we are really going, so to speak, from week-to-week and making an assessment and then sort of look at the time, when is the right time to start. Labor is not the problem, our suppliers would all be ready to go, but the high-cost pressure of the material is where we think [indiscernible], waiting a little bit and going on a week-to-week assessment is then more diligent approach here.

Perfect, that's very helpful, thank you. And then, if I could just squeeze in one more. On the M&A environment at present, does it feel like there's appetite from sellers in the U.S. and if you go back to early COVID, clearly there was a number of assets that that came on sales a direct consequence of some of the pressures going on the market? Would you say that, the collapse that we've seen in the public markets year-to-date has flowed through at all the M&A markets, whether in terms of expectations or the number of sellers at the table or do things feel fairly stable? Thanks.

Just it's fairly stable, I mean all the regional operators do see the same thing, namely that the customer trends are still holding, holding up very, very nicely. So, there are no prior sales out there. Marching -- sorry, multiples also has not come down significantly because the underlying trends are very solid. So, it's a pretty stable environment. There's not too much out there. It's a bit quieter compared to two, three years ago. But we do see two or three very interesting properties out there for us.

Perfect, helpful and encouraging. Thank you both.

Thanks, Jeff.

Thank you. Next question is from the line of Edward Engel with ROTH Capital. Please go ahead. Your line is open.

Hi, thank you for taking my question. You mentioned that Canada has been completely normalized as quickly as some of your other markets did. I guess what kind of timeline are you expecting for that to get to full strength? Because it happened as early as the fall when maybe people get back from vacation or would you kind of expect a slow progression?

I may start -- [Multiple speakers] Sorry, Erwin, go ahead.

No, no. Okay, yes, it's difficult to protect, Peter, I absolutely agree. But our assessment of the situation is that we think there is a very high chance that these markets come back in Q3 and delays of Q4.

Yes, I wanted to ask that typically in the summer months, people in Alberta either tend to go on vacation or stay outdoors as long as they can, because the weather is nice. And then, getting into from September onwards or October onwards, so then it is, so to say high seasons for indoor entertainment activities.

And if I may add to that, they may well be possible that the development of the oil prices as you know, Alberta is oil country that this may in general have a positive effect on the Alberta economy.

Helpful. Thank you. And then, on your reporting, I noticed the corporate expense was down a good chunk during the quarter. Just to confirm, are you netting your share of rental equity income in that line item?

Yes, right.

Yes, we are. It is an equity investment.

And that is just your share of the income. It wouldn't be the cash, the cash proceeds.

That is right, the difference between the cash.

Perfect, okay. Thank you.

Thank you. Our next question is from the line of Jordan Bender with JMP Securities. Please go ahead. Your line is open.

Good morning, thanks for taking my question. I was wondering if you're seeing any impact eight year I guess either Missouri properties from the new expansion down in Arkansas?

We think that we see a little bit of an impact with the customers that are in the overlapping catchment area for both casinos.

Okay, and then it looks like your license for the Hilton in Warsaw comes out next month. Is there any update on the relicensing bid for that Casino?

Not yet, but we expect to hear pretty soon.

Okay, and then sneak one more in here. FX in the quarter seems to have maybe impacted financials, is there anything to call out in either Canada or Poland just based off the FX move?

Can you comment on that?

No, I don't think there's anything to call out at this point.

Okay, thank you.

Thanks, Jordan.

Thank you. Next question is from the line of Chad Beynon with Macquarie. Please go ahead. Your line is open.

Hi, this is Aaron on for Chad. Thanks for taking the question. I wanted to touch on the return of the older demographic. Last quarter, you talked about how they were coming back. Did that trend continue and how close is that demographic to getting back to the pre-pandemic levels? Thanks.

So answering that all across the border, it's pretty -- it continues and it's pretty much back to normal in some areas even like 1%, 2% above for that.

Okay, got it. In your prepared remarks, you also noted that you were able to maintain margins despite facing higher costs and a little looks like volumes remain strong heading into 3Q. So, is it fair to think that margins can be maintained at this 27% range?

Would be our assessment.

Okay, thanks.

Thanks, Aaron.

Thank you. Our next question is from the line of Kenneth [Rovonowitz] [Ph] it is a Private Investor, please go ahead.

Hi, good morning, guys. I've been watching your companies for I guess, seven or eight years. And I see it's growing steadily. And I see your book value is going back up. And the price of the stock is really does not reflect as much I think it should be worth. However, I do have one observation and I would like to ask you what you're doing about it. I noticed that on corporate and other, you consistently show some sort of loss? Can you define what corporate and other is and where those losses come from because they were really, if they weren't there, they would really bump up your earnings quite a bit. Is there something you can do about that? Can you explain what that is?

Margaret, please.

Hi, Kenneth. So, corporate and other doesn't really have revenue streams flowing into it, for the most part. It's your corporate overhead expense, you have to have accounting, you have to have human resources, compliance, executive management, and we do run an extremely lean organization at the top. So, there's not a whole lot that flows through there. You do see interest expense coming out of there as well for our large Macquarie loan.

And does it also include all the costs for the like the stock exchange reporting and auditors and everything?

Auditors, stock exchange, all of those expenses.

I see. Does the running of the ship casinos come from that zone, too?

It is, but that's very a material number. We're down to just one casino on a ship.

Okay. So, I would expect that one hading would be kind of the watch the good word for it. It's the dustbin of unnecessary expenses that go in there. It's just one of those things that you have your accounting, I suppose, right?

That's correct.

Okay. I was happy to see your company doing better. And I'll still be holding your stock. So, thank you very much.

Thank you.

Thank you.

Thank you, Kenneth.

Thank you. And there are no further questions. At this moment, I'll turn it back to Mr. Hoetzinger for any closing remarks. Thank you.

Thank you, everyone for 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. Stay well and goodbye.

Thank you, ladies and gentlemen. That does conclude today's call. We thank you for your participation and ask that you please disconnect your lines. Have a good day.