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 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 investor sections of our website 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. Secondly, we released a $10.2 million valuation allowance, resulting in an income tax benefit. Even so, last year's second quarter performance was heavily fueled by government stimulus payments, and even so, we are now facing higher costs compared to last year, we still managed to maintain the same 27% EBITDA margin. On a sequential basis, comparing to Q1 of this year, revenue was up 8% and adjusted EBITDA was up 25%. The continued focus on our core customer and a streamlined cost structure contributed to these strong results and margins and allowed us to continue our operating momentum from previous quarters. The promotional environment across all our markets remains relatively stable. I'd call it disciplined and rational for the most part. Not much has changed in the last several quarters. Marketing spend continues to remain below pre-COVID levels and is expected to continue at its current run rate moving forward. Reductions in advertising, direct mail, and promotional expenses appear to be sustainable and have not had any negative impact on gaming volumes. In spite of some macroeconomic challenges, we've not noticed any meaningful shift in customer behavior as we look at July and into August. The customer trends we've experienced in the first half of the year seem to be continuing. The geographic diversity of our portfolio with locations in hyperlocal drive-to markets with a loyal customer base has proven extremely resilient. Resilient, not only considering the pandemic, but also considering changes in oil price and the CPI. With high confidence in the underlying trends of our customers' behavior, which has not changed since we reopened two years ago. Our U.S. operations in Colorado, West Virginia, and Missouri saw an 8% revenue decline over Q2 of last year. The main reason for this is the stimulus payments our customers received last year, which greatly supported last year's results, particularly in Missouri. While other Missouri casinos fared better when comparing with last year, a closer look at the Missouri results reveals that our properties have done better than most if you compare current results to pre-COVID times. Our Missouri locations were less impacted by COVID restrictions in 2021 because the restrictions ended or were limited in late 2020 or early 2021. With the government stimulus money released also at that time, our casinos saw extraordinary growth last year. Therefore, as stimulus money was exhausted, our casinos did not carry that record-breaking volumes of last year into this year. Most of the other casinos in Missouri and Illinois continued significant COVID restrictions throughout the entire 2021. Those casinos were unable to generate the maximum benefit from the stimulus payments and continued with little revenue growth last year. For these properties, operations normalized this year, and therefore revenue numbers increased over 2021. All in all, regional casinos performed differently last year. While we experienced a decline this year from last year and some others experienced an increase. We see that the overall growth from 2019 is still larger with our casinos compared to most others in Missouri. What's also very interesting is that win per visit from our regulars has actually increased by 1% compared to last year. We were not able to keep all the new patrons who came to the properties last year to spend their stimulus checks. We did retain about 20% of the headcount and about half of the revenue they generated last year. It seems that there is some upside in these numbers. Other than gaming revenue, everything else was up, including revenue from sports betting, pari-mutuel, and iGaming, as well as hotel and F&B revenue. The outlook for the second half of the year is quite positive. Coin-in continues to normalize to prior year as the stimulus impact tapered off during Q3 of last year. Revenue per patron continues to remain strong so far in July and the beginning of August. We do project it higher for the third quarter compared to last year. In Canada, all four operations had a good quarter and came back strongly after the heavy COVID restrictions had been lifted. Adjusted EBITDA almost reached 2019 levels, but we still have not seen the full potential yet, because after a couple of years of staying home, many people are keen to travel out of Alberta, while attend outdoor festivals and events which were shut down the last couple of years. Our casinos in Poland continued its great performance, with revenue up 24% and EBITDA up 57% over 2019. While the results in Poland are consistently strong, it is difficult to find a buyer right now offering an attractive price because of the war in the Ukraine. Anyway, timing of the sale is not really the most important issue for us, as we have an excellent management team in place at Casinos Poland. Further, there is no need for any CapEx or investment from us. Quite the opposite, cash is flowing from Poland to us. Let's now look at our balance sheet and liquidity. We have $96 million in cash and cash equivalents, plus $100 million, which we keep in escrow for the closing of the Nugget OpCo transaction once Nevada licensing is complete. Outstanding debt totals $370 million, which includes $349 million under the Goldman Sachs credit agreement, of which $100 million is in escrow for the Nugget, and $15 million related to a long-term land lease for Century Downs Racetrack & Casino in Canada. Now some commentary on our growth projects. We are working on expanding both our Missouri operations, as already reported. During the quarter, on June 8, Governor Parson signed Senate Bill 987 into law, effectively allowing us to bring the Caruthersville riverboat casino on land, utilizing a non-floating structure. Caruthersville is the last remaining riverboat casino on open water in Missouri. The new development will include a newly designed casino with 20% more gaming positions, as well as a hotel. It will provide significant operational efficiencies. It'll be much more convenient for our customers, and it will increase our catchment area. While preparations for the project are substantially complete with a budget of $47 million, we are considering optimizing the construction timeline in order to minimize supply chain challenges. Our clear intent is to deliver this project based on a high return on investment. It is the same with the hotel project at our casino in Cape Girardeau. Planning, design, and preparations are substantially finished, but budget discipline and a high return on investment are the guiding principles of the final decision when to actually commence construction. In Nevada, we already invested $95 million and now own half of the Nugget Casino Resort's real estate. We will close on the purchase of 100% of the operating company as soon as licensing is complete. That'll be another $100 million, which we have in escrow already. We are very excited about the Nugget transaction, and we see considerable upside once we can operate it. With the Nugget, we purchased an existing operation with a long operating history. That means there's no development risk, no risk of construction delays or anything like that, and no risk of cost overruns. We do not expect any extraordinary replacement CapEx in the next years, other than upgrading parts of the slot floor and some improvements to the facade. The acquisition also offers good potential to generate synergy effects as we integrate the standalone property into our portfolio of 17 casinos. With these opportunities for growth throughout the next year and beyond, we are confident our company is very well-positioned for continued long-term success. The second quarter was another great performance of our company and the entire team. Our diversified portfolio continues to generate robust EBITDA growth, and our operating strategy and tight focus on the right customer are producing strong and sustainable margins. We recognize we are in a period of economic uncertainty with some headwinds facing our business, but there are positive signals as well. Unemployment is near record lows across the country, and our customers continue to benefit from strong wage growth. Consumers are showing a continued willingness to spend on entertainment. Our customer trends in the second quarter and so far in July and into August remain consistent with what we have seen over the last three quarters. Especially the high end of the database, the truly gaming-centric customer continues to perform very well. However, while these signs are encouraging, there's a flip side to it. A strong job market and growing wages are good for our customers, but they also mean increased labor expenses. Supply chain issues, higher gas prices and utility costs, and increases in the cost of goods and services are all impacting both us and our customers. Having said that, our local management teams have done an excellent job managing through these challenges. They continue to deliver strong results. Our company-wide margins during the second quarter stayed the same as last year, even increased from Q1 of this year, despite the higher costs we are experiencing across the business. We will continue to execute on our business plan by growing organically and by identifying and acquiring promising assets in stable drive-to markets in the U.S. In our M&A strategy, we will remain prudent with pricing and valuation. We will continue to dedicate resources to capture synergies and provide time to digest the acquisitions and recognize value. With that discipline and our strong balance sheet, we are confident to find further opportunities to deploy capital in a manner that consistently builds shareholder value. On behalf of the company's management and board, I'd like to thank our team members, our guests, and our stockholders for their continued loyalty and enthusiasm. I thank you for your attention, and we can now start the Q&A session. Operator, go ahead please. Thank you. Ladies and gentlemen, at this time, we will conduct the question and answer session. If you would like to ask a question, please press the one followed by the four on your telephone now, and you will be placed in the queue in the order received. If you find that your question has been answered, you may remove yourself from the queue by pressing the one three on your phone. We are now ready to begin. Once again, that is one four on your telephone. Our first question is from Jeffrey 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. You know, any notable sequential changes in either direction as you progressed through April through June, either on the top line or with respect to margins, and any color on into July would be helpful as well, you know, breaking out U.S. versus Canada versus Poland. Thanks. Erwin, do you have any data on that? How the quarter progressed? Erwin? High-level qualitative. And so- is fine as well if you don't have the numbers on hand. I have all the numbers, but the question is how much shall I go through all of them? Why don't I group them by state to begin with, and if you would like to know more, then we go into the property by property, if that's fine for you. Yeah, by region is fine, and then just, yeah, I was more wondering qualitatively, you know, did the consumer feel like it picked up? Did it drop off? You know, did cost pressures get better, get worse? Just more kinda like qualitatively how things progressed through the quarter, if that makes sense. Yeah. Sure, sure. In Colorado in April, we made $4.1 million in net operating revenue. May, $3.8 million. June, $3.7 million. In July, north of $4 million. In Missouri, we went from $10.4 million, and that's all the second quarter of this year of 2022. From $10.4 million in April, $9.6 million in May, and $9 million in June, and in July, north of nine million, significantly north of $9 million. In West Virginia, $9.9 million, $10.5 million, $9.3 million, and in July, around $11 million. 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. In Poland, we went from PLN 7.1 million in April to PLN 8 million in May, PLN 6.6 million in June, and more than PLN 7 million in July. That is for net operating revenue. Is that good enough for you so far? Yeah. Yeah, we can leave it there on kind of the top line, really encouraging trends into July specifically. You know, moving. Thank you. Moving on to my follow-up. Yeah, thank you, Erwin. Moving on to my follow-up here, you know, I wanted to drill into your comments at the end on potentially staying nimble on your two projects, the Boat to Land at Caruthersville and the hotel at Cape Girardeau. You know, can you just talk about kinda what, where are the pressure points right now from a supply chain perspective? Is it labor? Is it certain raw materials? Kind of what's you know, what are the different pressure points at the moment? And kind of once you do get started, what are some of the things you're exploring to help, call it, hedge, you know, further inflationary pressures to the extent, you know, 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 may be one, but not necessarily. If something's not available, it's not available, not even for a high price. We think that we may have seen the peak of supply chain challenges with regard to price already. Then we see the prices come down already. We're really going, so to speak, from week to week and making an assessment and just look at the time when it's the right time to start. Labor is not the problem. Our suppliers would all be ready to go. The high cost pressure of the material is what we think that that's just waiting a little bit and going on a week-to-week assessment is, we think, more intelligent approach here. Perfect. That's very helpful. Thank you. 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.? You know, if you go back to early COVID, clearly there was a number of assets that came on sale as a direct consequence of some of the pressures going on in the market. Would you say that, you know, the collapse that we've seen in the public market year to date has flowed through at all to the M&A markets, whether in terms of expectations or the number of sellers at the table, or do things feel fairly stable? Thanks. No, Jeff, it's fairly stable. I mean, all the regional operators do see the same thing, namely that the customer trends are still holding up very, very nicely. There are no fire sales out there. Multiples also have not come down significantly because the underlying trends are very solid. It's a pretty stable environment. There's not too much out there. It's a bit quieter compared to two or 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 hasn't 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? Could it happen as early as the fall when maybe people get back from vacation, or would you kind of expect a slow progression? Yeah, if I may start. Come back in. Sorry, Erwin. Go ahead. No, no. Okay, shall I? Yes, it's difficult to project, Peter. Absolutely agree. Our assessment of the situation is that we think there's a very high chance that these markets come back in Q3 and then at the latest Q4. Yes, I wanted to add 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. Getting into from September onwards or October onwards, so then, it is, so to say, high seasons for indoor entertainment activities. If I may add to that, it 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. 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? Yeah. Peggy, right? Yes, we are. It's an equity investment. That's just your share of the income? It wouldn't be the cash portion. That's right. Okay. There's a difference between the cash. Okay. 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. Morning. Thanks for taking my question. I was wondering if you're seeing any impact at your, I guess, either Missouri properties from the new expansion down in Arkansas. Mm-hmm. 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. Your license for the Hilton Lac-Leamy 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. 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 moves? Peggy, 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 my question. 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 pre-pandemic levels? Thanks. To answer that all across the board, A, it continues, and B, it's pretty much back to normal in some areas, even like 1%-2% above what it was. Okay, got it. In your prepared remarks, you also noted that you were able to maintain margins despite facing higher costs. It looks like volumes remained strong heading into 3Q. Is it fair to think that margins can be maintained at this, you know, 27% range? Would be our assessment. Okay, thanks. Thanks, Aaron. Thank you. Our next question is from the line of Kenneth Wolvenowitz. It is a private investor. Please go. Hi. Good morning, guys. I've been watching your company for, I guess, 7 or 8 years, and I see it growing steadily, and I see your book value is going back up, and the price of the stock really does not reflect as much as I think it should be worth. However, I do have one observation, and I'd 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 would 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? Peggy, please. Hi, Kenneth. Corporate and other doesn't really have revenue streams flowing into it for the most part. It's your corporate overhead expense. You know, you have to have accounting, you have to have human resources, compliance, executive management. 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 Macquarie loan. I see. Peggy, does it also include all the costs for the, like, the stock exchange reporting and the auditors and everything? Auditors, stock exchange, all of those expenses. Yeah. I see. Does the running of the ship casinos come from that zone too? It is, but that's a very immaterial number. We're down to just one casino on a ship. Okay. I would expect that one is a heading would be kind of the, what's the good word for it? It's the dustbin where necessary expenses that go in there. It's just one of those things that you have for accounting, I suppose, right? Mm-hmm. That's correct. Okay. I was happy to see your company doing better and I'll still be holding your stock. Thank you very much. Thank you. Thank you. Thank you, Kenneth. Thank you. There are no further questions at this moment. I'll turn it back to Mr. Hoetzinger for any closing remarks. Thanks. 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. 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.