Release Date: August 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Century Casinos Inc (CNTY, Financial) reported a 7% increase in net revenue for Q2 2024, driven by the addition of Rocky Gap in Maryland and strong performance in Canada.
- Construction at Caruthersville is progressing ahead of schedule, with a soft opening planned for mid-November, promising enhanced gaming options and amenities.
- The company's operations in Alberta, Canada, delivered solid performance, with revenue and EBITDAR growth of 5% and 7%, respectively.
- The newly acquired Rocky Gap Casino Resort in Maryland contributed to a 60% revenue increase in the East segment, with EBITDAR nearly doubling.
- Century Casinos Inc (CNTY) has a strong liquidity position with $123 million in cash and no debt maturities until 2029, providing financial stability and flexibility.
Negative Points
- Adjusted EBITDAR decreased by 6% year-over-year, impacted by construction disruptions and temporary closures in Poland.
- The Nugget Casino Resort in Reno experienced a 23% revenue decline due to renovation disruptions and lower slot and table hold.
- Non-rated play was down 10% across the portfolio, attributed to macroeconomic factors and consumer spending shifts.
- Two casinos in Poland remained closed during the quarter, significantly impacting revenue, although one is expected to reopen in October.
- The company's leverage is elevated due to recent acquisitions and investments, with traditional net leverage at 4.6 times and lease-adjusted net leverage at 6.5 times.
Q & A Highlights
Q: Can you elaborate on the revisions to 2024 and 2025 revenue and margin expectations?
A: The revisions are primarily driven by the Nugget Casino and stabilization work there. Alberta is performing well, and Poland is expected to contribute significantly once casinos reopen. Rocky Gap and Mountaineer are facing challenges due to local economic conditions, but improvements are anticipated with upcoming developments.
Q: How do you balance potential stock buybacks with opportunities for acquisitions, especially with rumors of large-scale M&A in the industry?
A: At current stock prices, we see no better investment than our own stock. Our focus is on generating cash and deciding between stock buybacks or deleveraging. We prioritize internal growth and cash generation over external acquisitions for the next 12 to 18 months.
Q: Is the decline in unrated play weakening, and when do you expect to face easier comparisons?
A: We believe the worst is behind us, but improvement depends on consumer sentiment and interest rate reductions. The higher-end market remains stable, but the lower-end, affected by economic conditions, needs improvement.
Q: What is the status of the Polish asset sale, and have you seen increased interest?
A: Yes, there is increased interest due to favorable lease terms and strong performance of open casinos. Several new parties have shown interest recently, and we expect to proceed with the sale within the next six to 12 months.
Q: What is Century Casinos' strategic focus, and what are you good at?
A: Historically, we have developed casinos from the ground up and focused on value acquisitions. We aim to acquire properties that are neglected by current ownership and improve them. Our success with previous acquisitions supports this strategy, and we believe recent acquisitions like the Nugget and Rocky Gap have similar potential.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
