Good day, everyone, and welcome to the Century Casinos Q3 2023 earnings call and webcast. [Operator Instructions]. Please note today's call will be 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 morning, 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'll 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 release and SEC filings available in the investor section of our website at cnty.com. I will now provide an overview of the results of the third quarter of 2023. After that, Co-CEO, Erwin Haitzmann; and CFO, Margaret Stapleton, will join me for a Q&A session. We delivered a record third-quarter net revenue of $161 million, an increase of 43% over Q3 of last year. The increase came from the additions of the Nugget in Nevada and Rocky Gap in Maryland and offset to some extent by weaker retail customer and a bit of construction disruption at both Missouri properties. We also delivered a record third-quarter adjusted EBITDA of $33 million, up 19% over last year. These results reflect the value of our strategic focus on our core customers and the benefits of our recent M&A activities. In addition, our multichannel business model with revenue streams from casinos, hotels, groups and conventions, racetracks on and offline sports betting as well as iGaming provides great diversity and stability. With the Rocky Gap and Nugget acquisitions, we operate a US casino portfolio that reaches from east to west.…

[Operator Instructions]. We will now take our first question from Chad Beynon.

Good morning. Nice results, Peter, thanks for the prepared remarks. Wanted [Technical Difficulty] going really well now that you've had your hands on that property for a couple of quarters. Could you just talk about anything else in terms of market trends, maybe bookings at the conference center? I believe you said that the high end continues to do well everywhere. But at Nugget, I think you said all segments were up or flat. So are you taking market share? Are you growing the property? I'm just trying to get a sense of how this continues to grow. Thanks.

Thanks Chad. This is Erwin. Thanks for your questions. Concerning the market trends, I think it has to be said that Reno is very competitive and continues to be but we can hold our ground from everything we can see. And we certainly see potential to increase our market share. Bookings for '24 are solid and stable and so are for the hotel service. And also it is for the conference center as well. With regard to shows in our outdoor venue for that hotel, now thousands of visitors where we have booked about half of the shows that we plan to do with the other half are probably coming on during the next months. These bookings are not dependent on us alone. They are much depend on the team areas of various artists and how well they can fit Reno into their traveling schedule.

Great. Appreciate it. Thanks, Erwin. And then just going back to your comments on the retail or the low-end customer, I think you said it hasn't changed. It has been a little bit of a drag across the portfolio, but wanted to ask what percentage of your business is made up of this group of customers? And do you expect for it to flatten out? Is anything changing in terms of promotions towards that lower end? And do you believe at some point this can start to be flat from a year-over-year perspective based on what you're seeing in the trends? Thank you.

I think in a simplified version, we are taking a two-pronged approach. The first one is that we focus on the higher end of the market, and then that's really where the majority of our focus lies. And I think for good reason. And the second part of that would be to keep incentivizing the lower end of the market and testing which things we can do there what makes sense and what doesn't make sense. So it's obviously much more sensitive on the lower end because the headcount is much higher. And if you have spent too much too quickly, you could quickly burn your sales. So once again, the number one focuses on the high end. And we're trying to maintain as much as possible on the low end. And probably with the lower end will only change when the economy trends like inflation go the other way.

Okay. And what's rated as a percentage of the database roughly.

It depends very much on where you draw the line. And that's a little bit subjective. But then you mean number of customers or in revenue?

Either or. I guess in customer base.

In customer, I would say it's probably anywhere between 30% and 50% in revenue --

I think the question was how much of our place is rated?

Yeah, that's a different question. In the Nugget, we have 69% rated, and that compares to pre-COVID of 67%. Okay, so rated play has actually gone up during COVID in Q3 of 2020 when the Nugget was only 59%.

Appreciate it. Thank you, guys.

We'll take our next question from Jordan Bender. Jordan, your line is now open.

Great. Thanks for taking my question. Just looking at the balance sheet, as we sit here today, you have plenty of cash sitting here. You've gone through what might be the best uses of cash for the business. But with your debt now over about 11% and it seems like you have the cash on hand to get through most of these projects that you've talked about in the call, wondering is it make sense to start paying down debt more rapidly here to generate that free cash flow.

Certainly, as we said in the call, we have about $25 million maintenance CapEx on an annual basis. And on top of that, we intend to spend about $35 million for home for projects throughout our properties, including Nugget between $10 million and $15 million. So that's already $60 million there. And then we'll see how it goes in the next couple of quarters. Like until the first quarter, I don't expect any major debt repayments. We'll be reinvesting in our properties first.

Understood. And then switching to Poland, it looks like you have maybe two licenses that have expired. Just thinking back a couple of years when that happened. The machines get turned off, but you continue to pay your employees. So was there any impact at least during the third quarter from that? And maybe just any update around the process of getting those licenses back online and any timeline there? Thank you.

And I was about to say that there was no impact out of that in Q3 because the closes only came in in Q4. And with regard to the process, the only answer we can give is we really don't know. All those licenses should have been awarded already. There hasn't been yet. It could happen any day in week now, but we really don't know.

As you know, they have had elections in Poland and no new government has been formed that's holding the process up. Unfortunate, but it has to do with a little bit of those effect into politics.

And just to confirm what those assets are closed, you still continue to have to pay those employees? Correct?

Yeah. The labor laws in Poland differed significantly from the labor laws in the United States or in North America for that matter. And it's basically the only option to just keep paying them.

Okay. Thank you very much.

We will take our next question from C.K. Dell

Yeah. I have a strategic question. I missed the first part of your presentation. But the strategic question in my mind is have you taken on a lot of this new capacity and acquisition of during a period when interest rates were very low and now, you're faced with a seemingly prolong period of operating losses based on the very high level of debt that you've taken on that. Could you possibly address that so that I could understand it better?

We have acquired three properties at the end of 2019, and we have taken on debt at that time. And then we made another major acquisition which we signed in February '22. And at that time, when we entered into that transaction -- we closed that a year later, but when we entered into the transaction in February '22, we entered into a new loan facility with Goldman Sachs. And that is what we are faced with. Now on the one hand, in a way we were fortunate to get it done at the end of February '22 because a few weeks later if you recall in March, end of March, the debt markets pretty much closed for some time because of the Russians invading the Ukraine. But we could and so we could close the transaction after licensing a year later. But now we are pleased with those terms. We are free to repay the term loan anytime soon as we find something better out there. But for now, we are faced with that rate we are paying. So for 6-plus and it is what it is.

We'll take our next question from Jeffrey Stantial.

Anyway starting off here, I just wanted to drill on the margins a bit more specifically focusing on the US segment. Peter or Erwin, can you disclose for us what same store margins were year on year for the US region in aggregate? And then unpacking that decline? I was hoping you could just frame out in your mind whether qualitatively or putting some numbers behind it, how much is some of the structural inflationary pressures you called out labor and utilities versus how much is more that one-time headwinds with the new assets and the construction?

So in the United States, in Q3 of 2022, we had a EBITDA margin of 30%, and in Q3 of '23, our margin was 26.1%. And the margins differ from casino to casino. With regard to separation the cost side, which really hit the integration costs for the two new properties, now within the Rocky Gap, we still have some construction disruption, which also leads to some either lower revenues and costs. And if you know, Cape Girardeau hotel, we will be opening in Q2 of next year and Colorado Springs in Q4 of next year. And that will be [indiscernible] and all of that will be digested and then hopefully the synergies start to kick in step-by-step on. And with regard to labor costs, utilities, insurance, so the most structured ones. As Peter said earlier, we don't think that there will be any further increase in those.

Okay, great. That's helpful. Thank you, Erwin. And then corelated to that, Peter, I wanted to follow up on one of your comments towards the end of the prepared remarks. I think you noted that you think OpEx or margins will be roughly stable from Q3 moving forward. Inflationary pressures are moderating, though, still impactful. So I guess is the net-net of that of your inflationary pressures continue to develop pressure margins, but conversely, some of the one-time headwinds are going to roll off those dynamics roughly offset each other. Am I thinking about things the right way or can you just expand on that a bit further?

I would say, I think you're on the right track thinking that. We think the same way.

Okay. Perfect. That's helpful. Thank you. And then if I could just squeeze in one more. I want to follow up on one of Chad's questions earlier. We did here one of your peers that operates in Reno talk to some elevated promotional activity from a couple of competitors in that market, some higher free play, more aggressive room comps, things of that nature. Are you seeing similar to that factor in your results during the quarter? Just any thoughts on that dynamic?

Yeah, we see some of that in particular from one or two of the so-called smaller operators that don't have a hotel attached. Some of them go quite proactive if not to say they're shifting to the market. And we would just have to observing that. We are not going that aggressive.

Okay. Understood. That's helpful. Thank you very much. I'll pass it on.

It appears we have no further questions. I will now turn the call back over to your presenters for any additional or closing remarks.

All right. Thanks, everybody. We appreciate you joining our call today. We will talk again after the first quarter, but I'm sure we'll see each other at some conferences between now and day. Thank you. Goodbye.

Ladies and gentlemen, this concludes today's conference call. You may now disconnect.