Good day, everyone and welcome to today's Century Casinos' Third Quarter 2022 Earnings Call. At this time, all participants are in a listen-only mode. Later you'll have the opportunity to ask questions during the question-and-answer session. [Operator instructions] Please note, today's call will be recorded. And it is now my pleasure to turn the 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, 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 website, at cnty.com. I will now provide an overview of the results of the third quarter, and after that there will be a Q&A session. Our third quarter results were up against the record performance of last year, which was sued by listed COVID restrictions and lots of pent-up demand. Thus, while on a sequential basis, revenues were up. Compared to last year, revenue and adjusted EBITDA were down 4% and 15% respectively. A large part of the decline is due to the extremely dry weather conditions affecting the water level of the Mississippi River. Low water level issues at our Colorado, St. Missouri operation started in August and triggered additional expenses for [indiscernible] and caused serious issues for access the steepness of the access bridges and to transition from the barge to the…

[Operator instructions] And we will take our first question from Jeff Stadel. Please go ahead. Your line is open.

Great, thanks. Good morning, Peter, Irwin, thanks for taking our questions. I wanted to start with some of the commentary in the prepared remarks on the lower worth demographic that it sounds like softened a bit more recently in the quarter. You talked about the impact across the broader North American portfolio. Is there differences in terms of how much you're noticing that asset by asset? And then can you just talk about the timing there? When did you start to notice some softening there and has anything changed, with the October trends?

Erwin, can you give some color?

Yeah, we do see some difference is not exactly the same everywhere. That softening started in the third quarter and in the meantime for the fourth quarter, we are already doing things to try to mitigate. To give you an example in -- for example in Mountaineer we increased the number of hotel room giveaways for the weekend. We count more. We have customers, but we clearly see that they're worth comps also in that in the upper range of the lower bracket. And also we are doing a car giveaway, something that we haven't done before, and indications are that this is very well received from the -- what we see from the October numbers.

Okay, great. That's helpful, thank you. Then moving to Missouri, so the budgets for both projects came up a decent bit. Can you just frame where you're seeing the most cost pressures and if you think the revised budget should prove ultimately to be the right number, and then just how are you thinking about the return profile now with the total budgets picking up a bit?

They went up about 10% and 11% and it came from pretty much all sides. But we are extremely confident now this whole, and we have also -- we have that in writing. We have agreements with our contractors and developers that in terms of return Cape Girardeau hotel return between the low teams and Girardeau around 15, that's where we are, where we see it coming.

Great. That's, that's helpful, thank you, Peter. And then if I could just squeeze in one more on the disruption with the low water levels in Caruthersville. Peter, you gave some context for how to think about the impact to revenues at the property. Could you provide similar way to think about the cost impacts? You talked about some higher operating, but just any way for us to quantify and think about how impactful that was during the quarter and maybe any thoughts on how impactful it should improve in Q4 as well? Thanks.

We, don't have an exact number on the plus side. Do we have, It's like more than half, is that what we believe? Right?

Yeah, yeah. In that range. Yeah.

Great. Understood. Very helpful. Thank you both. I'll pass it on.

And we'll move next with Chad Beynon. Please go ahead here. Your line is open.

Hi, good morning. Thanks for taking my question. Wanted to ask I guess kind of a medium or long term question. You guys have been successful in your currently in process of building the portfolio. Where do you think -- where do you think the portfolio can get to in the next couple years? Or I guess asked another way, are there still opportunities out there and given your arrangements with your REIT partners, should we continue to expect, maybe one acquisition per year to kind of build the free cash flow levels where you start to get even greater scale? Thanks.

We do see quite a number of interesting properties out there that would fit very well into our portfolio assets. In that range of say $15 million to $50 million in EBITDA. There are not many -- not too many buyers out there because it's way too small for the larger groups and we believe we are a very good niche. Yes, we do have a very good part in VICI, but let me also say that other property or real estate investors are also knocking on our doors. So there is we believe for the next two, three, four years a great deal of M&A activity ahead of us. Whether it be once a year or two every year, we look at it a little bit on an opportunity basis, but that's plenty of opportunity out there.

Great. Thanks Peter. And related to that, how are you thinking about the optimal debt leverage or least adjusted leverage particularly during times like this when interest rates have risen?

At the moment, I think we are at the leverage level that is okay. But as we said, we are in the process of selling our Poland assets. We can use that to pay down that if you believe that's the right move. We also do own Colorado assets. We own the Canadian assets. Not to say that as any need to do anything with those, but we could if you wanted to. Currently our net debt to adjusted EBITDA is 3.4 and lease adjusted net leverage if you use an eight multiplier is 5.5. And we believe with the projects that we have on hand in Missouri and also market and graphic cap we will be able to bring that ratio down and we feel quite confident with that.

Sounds great. Thank you very much, Peter. Best of luck.

Thank you. We will move next with Jordan Bender. Please go ahead.

Great, thanks. Thanks for taking my question. So in Poland, in local currency, it actually looked like your margin was one of the best and maybe the last six or so years. I was just kind of wondering, what's kind of driving that strength and looking forward should we expect, I guess, a low double-digit margin within that segment?

I think we can -- we see no signs that these numbers would not be sustainable. We think they are sustainable and everything points to us being able to keep those numbers, and we also see potential to increase them further. It's hard to pinpoint the reasons down to one. It's a multitude of reasons. I think overall what can be said is finally the very strong locally management that to have all their efforts came to fruition and just show better than -- it's just a year where we could compete even better than before with our all those local competitors. So really we're really happy with the team and as we said, we think this can continue and go further up.

Great. And then turning to Canada, kind of a similar question, coming out of COVID, I guess margins were choppy, just kind of given, COVID reopening and then re-closing and reopening again. As we think about, I guess the business in '23, I guess where should we think about margin levels maybe being sustainable or where should they be trending as we think out into next year?

Some color, I would say in very general terms, we should be able to sustain the current margins and in various properties for good reason, be able to increase them. For example, in Missouri as we talked about the changes there and the improvements to the properties that should improve and increase our margins relatives to '22 back to old levels. In Colorado, probably it's we'll so to speak, margined out. We are doing very well already there, but I think again, we consider this to be very sustainable again. Excellent management there. And in Mountaineer we're working hard on crawling up step by step. It's harder in Mountaineer because the gaming tax is very high. So this cannot be compared to a low text environment. But again, we feel solid with a very solid base and we should be able to increase there as well.

Okay. And just to follow-up on that, just to confirm, you historically have done low 30% EBITDA margin. You think getting back to that level is achievable over the next couple years in Canada?

Yeah, I think that's not unrealistic to assume.

Okay, great. Thank you.

In Canada, one thing that works for us is that energy worker oil prices are high and with a certain time delay that always is then reflected in for this economy.

Okay. Thank you.

[Operator instructions] We will move next with Edward Engel. Please go ahead. Your line is open.

Hi. Thanks for taking my question. Just wanted to follow up on that last one, just regarding margins and I guess cost inflation just on the overall cost inflation side, whether it's utilities or labor, I guess what are -- what have you kind of seen over the past couple months? It looks like generally OpEx across your properties with flattish Q-on-Q minus, maybe Canada just kind of want to wonder what you're seeing in terms of increases in OpEx?

OpEx did increase definitely. So far also across the board, I think our management has been very skilful in findings ways through this by trying to find even further ways to save in other areas. With regard to starting speed, I mentioned it can be challenging, not here, for example. But again, this don't go on forever and we were able to operate well even on say higher sell rate, but slightly lower staffing levels.

Thank you. We will move next with Daniel Honk [ph]. Please go ahead.

Hi, Thanks for taking the question. Just a quick one on the Caruthersville and Cape Girardeau projects, is that intended to be funded entirely out of cash on hand or do you have financing lined up for those projects?

The hotel project in Cape Girardeau, we finance with cash at hand. And for the one in Caruthersville, we have not made the final position, but it'll be several like cash on hand and financing sources.

Thank you. We will move next with Chris [ph]. Please go ahead. Your line is open.

Yes. Hi. Could you please focus and simplify? I'd like you to identify the one, two, three critical variables that we should monitor for corporate earnings modeling in the fourth quarter and then going into next year. Thank you for answering my question.

Yeah, I would say that the progress in this Missouri is an important one to watch as you've seen in Q3 or kind of an impact that has, then continued success in Colorado is very important. And we're switching. There is secondly on a great path as we said, and we would like to see that continuum. So we are watching those three markets with high interest because they're very critical to our success.

Are you providing any guidance with regard to sales or really any of the key parameters of the corporate results?

Oh, no, historically the company has not provided guidance. We have a handful of excellent research reports that are out there on CNTY [ph], and I would encourage you to get a hold of one or more and read through.

And it appears that we have no further questions at this time. I would like to turn the call back over to Peter Hoetzinger for any closing b remarks.

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.

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