Good day, everyone, and welcome to today's Century Casinos Q2 2023 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. You may register to ask a question at any time by pressing star one on your touchtone keypad. Please note, this call may be recorded. It is now my pleasure to turn today's program over to Peter Hoetzinger. Please go ahead. Good morning, everyone. 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. 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. 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 releases and SEC filings, available in the investor section of our website at cnty.com. I'll now provide an overview of the results of the second quarter 2023. After that, there'll be a Q&A session. We delivered record second quarter net revenue of $136.8 million, an increase of 23% over Q2 of last year. The increase came from the addition of the Nugget Casino Resort in Nevada, which we took over on April third. The revenue increase from the Nugget was offset to some extent by construction disruption at both Missouri properties. Excluding the Nugget, to do a like-for-like comparison, revenue was down 1%, which is not bad at all considering the Missouri disruption. Adjusted EBITDA for the second quarter was $29.3 million, down 2%. In most of our operating segments, we faced a difficult comparison to last year. This was most pronounced in April and May, which accounted for all of the quarterly year-over-year decline. As you may recall, early last spring, we saw a temporary surge in business after mask mandates and other COVID restrictions were lifted. June's year-over-year variance improved sequentially, performing better than last year. During the quarter, core customer trends remained solid, but as we get lower in the database, we didn't perform quite as well. Unrated play continues to drag. The decrease in EBITDA is not surprising, as we are in a particularly transitional stage with lots going on at the same time, triggering extraordinary legal, compliance, and consulting costs and expenses. Our local management team said to carry extra burdens with the two construction projects in Missouri, as well as the integration of the Nugget and preparations for the takeover of Rocky Gap in Maryland. As you know, both Nevada and Maryland are new gaming jurisdictions for us, resulting in additional one-time set up efforts and costs for compliance structures. All that will soon be behind us, and we look forward to being able to fully focus on managing the new properties in the most efficient and profitable manner. With these two acquisitions, we're adding approximately $180 million in revenue and approximately $50 million in adjusted EBITDA to our company, significantly increasing our scale and customer base. On top of the operational distractions we had to deal with, we continue to see inflationary impacts on the cost side of the business. I mean, cost pressures, whether they be wage, payroll benefits, insurance cost increases, or utility cost increases across the board. Increased expenses in Poland also had a notable impact on company-wide expenses. Inflation in Poland was close to 20% at certain times during the quarter. On average, it was 16%. These increases had an even larger impact in U.S. dollars due to a 4.2% exchange rate increase during the quarter. The promotional environment across our markets is heating up a bit as well. Slowly but surely, we see some of our competitors becoming more aggressive. That's nothing unusual, but it is noticeable. As you said, coming out of COVID, we weren't going to be able to maintain those high margin levels, but we are going to stay in that neighborhood, and we think we can live up to that once we get the aforementioned distractions out of the way. Looking at segment results, let's first discuss the Midwest segment with our Colorado and Missouri operations. Revenue was down 3%. As a consequence, EBITDA was down 11%. Not a bad result at all, considering heavy construction going on at both Missouri properties, the segment was up against the very strong second quarter of last year. Table and slot told were also lower this quarter. We saw a lower number of trips, mainly from lower-end and age 50-plus players. The spend per trip was essentially flat. The overall EBITDA margin of the segment sits at 39%, down from a high of 43% in Q2 of last year. In Cripple Creek, Colorado, we will complete our employee housing project this summer, providing accommodation for 30 employees. In this tight labor market, especially in Cripple Creek, a small historic gold mining town with a population of less than 2,000 and at an elevation of 9,494 feet, we are certain that gives us a competitive advantage. In Caruthersville, Missouri, the structure of the new permanent land-based hotel and casino development is progressing according to budget and schedule. We plan to open in Q4 of next year. The new property will have a total of 74 hotel rooms, 12 gaming tables, and over 600 slot machine, which is an increase of 20% in gaming positions compared to the old riverboat. Most importantly, it will provide significant operational efficiencies, it'll be much more convenient for our customers, and it will increase our catch in the area. That project is fully funded by VICI at an 8% cap rate. About an hour away from Cape Girardeau, a new development in Southern Illinois is expected to open with a temporary casino later this summer. With that in mind, we've taken steps to create more excitement around our Cape Girardeau Casino and are developing a 69-room, 6-story hotel building. It's on track for opening in the first half of next year, and we'll transform the property into a full resort destination, offering gaming, dining, conferences, concerts, and more. Total project cost is approximately $31 million. We fund that with cash on hand. As of June 30, 2023, we have spent approximately $12 million. The balance will be spent between now and the 2Q of next year. While construction disruption will continue into the 3Q, we are confident these investments will help drive long-term growth for our Missouri operations. The East segment currently includes the Mountaineer Casino Resort in West Virginia. Going forward, it will also include the Rocky Gap Casino Resort in Maryland. Revenue was down 5%, EBITDA down 20%. Revenue in April and May was down 9% due to a decrease in the number of trips and spend across the lower end of the database, mostly during the week. Some of it was due to a loss in crossover play from sports betting since Ohio went live on January 1 of this year. We're also hearing that some of it was due to the end of federal COVID subsidies. Some customers told us they had some fears because of the government defaulting on the debt ceiling, which only ended in early June. June revenue was growing again, up 4% compared to June of last year. EBITDA was under pressure by higher expenses related to horse racing and insurance. The hotel and F&B departments are still experiencing staffing challenges, resulting in limitations to hours of operation and the availability of hotel rooms. Continuing to the West segment, which includes the newly acquired Nugget Casino Resort in Reno, Nevada. As reported, we closed that Nugget transaction on April 3rd. We now own half of the Nugget's real estate and 100% of the operating company. We also have an option to buy the other half of the real estate. Let me tell you, we are more excited than ever with that acquisition. The first 3 months under our ownership, we increased revenue by 16% over Q2 of last year, and I'm happy to report that that great revenue trend has continued into July as well. The steep increase in revenue was driven by a strong convention and hotel business and improvements in slot revenue, with 120 new slot machines on the gaming floor, which we added during the quarter. The number of trips to the casino was up, and so was the spend per trip. The majority of the increase came from the high-end segment. For the second half of this year, the Nugget is expecting record business from group and convention sales. Several new high-spending groups have allowed us to increase our casino comp criteria, leading to better overall profitability. Group room nights, ADR, and banquet revenue are pacing ahead for the rest of the year, and we expect to generate record overall group and convention results in 2023. EBITDA for the quarter was down 2%, mostly due to transition integration costs and expenses in April and May. June EBITDA was already better than last year. The takeover from a private owner proved a bit more cumbersome and triggered a bit more expenses than anticipated, but that will be behind us shortly. Improvements to the facade and signage are underway as we speak, and more improvements will come on the slot floor as well. With that, we briefly move to our international operations in Canada and Poland. In the Canadian segment, our four properties in Edmonton and Calgary, saw revenue essentially flat in the quarter. EBITDA was down 8%. The comparison to last year was tough, due to of last year was the first full quarter without COVID restrictions. Also, access to our property in Edmonton continues to be impacted by road construction, which will continue throughout the coming winter season. There may also have been some impact on our revenues by the Alberta wildfires, when the province declared a state of emergency in early May. In Poland, revenue was up 8%. So far, so good. Inflation in the first half of the year was 16%, triggering significant cost increases in payroll, rent, utilities, and insurance. Inflation has come down since a little bit, it's now at 11%. As mentioned previously, the war in the Ukraine is not impacting our results negatively, and we have no significant number of employees or suppliers from the Ukraine. All right, let's have a quick look at our balance sheet. As of June 30, we had $109 million in cash and cash equivalents, and $364 million in outstanding debt. During the quarter, we entered into agreements for VICI to acquire the real estate assets of our Canadian real estate portfolio for approximately $167 million USD in cash. Simultaneously, with the closing of that transaction, our Canadian casinos will be added to our existing Master Lease, and annual rent will increase by approximately $13 million. The transaction is subject to customary regulatory approvals and closing conditions, and is expected to close in the third quarter. After payment to the minority owners of Century Downs in Calgary, and after fees, taxes, and expenses, we will net approximately $115 million. We plan to use a sizable part of that cash to pay down our revolver and term loan. On a consolidated basis, our net debt to EBITDA ratio was 3.5 as of June 30. The lease-adjusted net leverage was 4.9. Subsequent to the end of the second quarter, we funded the Rocky Gap acquisition with $30 million borrowed from our revolver and $30 million from cash on hand. If we look at it on a pro forma basis, including the Rocky Gap acquisition and the Canada real estate transactions, our net debt to EBITDA ratio will go down to 2.6, and the lease-adjusted net leverage will be at 5.0. We closed the Rocky Gap acquisition 2 weeks ago on July 25th. Rocky Gap is a full-service resort, less than 2 hours from the Baltimore and Washington, D.C. metro areas, and includes an 18-hole golf course designed by Jack Nicklaus, a 5,000 sq ft event center, several meeting spaces, a spa, and several outdoor activities. The property has over 25,000 sq ft of gaming floor, 630 slot machines, 16 tables, 198 hotel rooms, and 5 food and beverage venues. We expect an easier transition compared to the Nugget. However, increasing costs for wages and payroll benefits, as well as for insurance, will pose quite a challenge to keep EBITDA to where it currently is. With the Rocky Gap and Nugget acquisitions, we operate the U.S. casino portfolio that reaches from east to west. On a pro forma basis, we generate over 80% of our EBITDA in the U.S. For the next 12 months, we will give our full attention to integrate and operate the Nugget and Rocky Gap casino resorts as best as profitable as possible, to increase our cash flow generation and to further strengthen our balance sheet. We do not plan any major M&A activity until the second half of next year. At that time, we will have Nugget and Rocky Gap fully integrated, and both of our Missouri construction projects will be done. We will be ready for more acquisitions, ideally on a larger scale. As we move further into 2023, the economic uncertainty that persists today makes it difficult to predict where consumer trends are headed, but for the most part, our core customer continues to be resilient. Looking ahead, we have positioned our company for strong growth for years to come with the Nugget and Rocky Gap acquisitions and our two Missouri development projects, all of which we expect to drive a material increase in revenue, EBITDA, and cash flow in the coming years. Many of you have followed us over quite a long time, and you know we are not taking a quarter-by-quarter look. Our company and the way we are thinking, we aim to deliver a lot of growth over the next two years because of the pipeline we have. That's a very strong pipeline of great new operations and projects that just joined our portfolio or will come online next year. They all make sense in any economic environment. Nothing about the current economy makes us want to change our plans for executing our growth strategy. 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 all for your attention. We can now start the Q&A session. Operator, go ahead, please. Absolutely. At this time, if you would like to ask a question, please press star and one on your telephone keypad. You may remove yourself from the queue at any time by pressing star and two. Once again, that's star and one to ask a question. We will first go to Jeff Stantial. Your line is open. Great, thanks. Morning, Peter, Erwin, thanks for taking the questions. Maybe starting off here on some of the cost pressures that you called out in the release and in your prepared remarks. You know, just bucketing it all out, there's the construction disruption in Missouri. There's higher costs alongside your recent acquisitions, and then there's a continuation of some of the inflationary pressures that you've been seeing. Is there any way that you could sort of frame out for us how much each of these impacted adjusted EBITDAR or margins during the quarter? I guess, you know, on a year-on-year basis. You know, really, what we're just trying to better understand is how much of this is, call it, more one-time in nature, versus how much of this should we be flowing through to our model into the back half of the year and into 2024? Thanks. Yeah, it is, is it about half, half, Erwin? About half is, is, is, one time, and half is- Exactly. call ongoing. Would that be your impression? That's exactly what I would say. Yes, it's about 60/60. Okay. Then, and sorry, just to be clear, when you, when you say half, you're saying half of the year-on-year adjusted EBITDAR decline? Yes. Yes. Is that what you mean, Erwin? Yeah, that's what I would say. Sorry, just to stay on this subject for one more second. I think you called out same-store revenue growth in your prepared remarks. What was the same-store EBITDAR decline? We did not disclose that. Okay, that's no problem. I think I could calculate that from, from your disclosures. Anyway, moving on here. Yeah, yeah. for my follow-up, you know, your comments on, on the promotional and the marketing environment, you know, specifically competitors starting to tick back up a little bit, and how much their, you know, how much their marketing was, was interesting. You know, can we just unpack that a little bit further? You know, is there any specific markets that you would really call out here? You know, with some of this sequential change of behavior, is this something you saw, you know, post-COVID already from some of your competitors, and then it settled back down? You know, what I'm getting at, is this, is this sort of a flare-up, or, or is this something more structural in response to the macroeconomic environment that we're in? Thanks. I think This is Erwin. The Missouri properties suffered a bit from the South Illinois competitors, and Mountaineer from Ohio. Erwin, can you add to that? Yeah, in Poland, we just found it necessary to up our marketing efforts in response to what our competitors have been doing. Okay, understood. That's, that's really helpful. Thank you both. I'll pass it on. We will go next to Jordan Bender. Your line is open. Great. Thanks for taking my question, and good morning. I guess you called out, you know, the lower end of the database, some of the unrated play, maybe causing headwinds in the quarter. Can you just kind of remind us how much of that play makes up your revenue in the quarter, or roughly? And then, you know, kind of looking at that same segment of the lower end and the unrated play, maybe how does that kind of look into the first week of August here as well? Thank you. I would, I would say that the unrated, it depends on the casino, but the, the, the percentage of the unrated play would be between 30%-40%, or conversely, 60%-70% rated play. We are seeing, we are seeing a little bit of improvement in the unrated segment and also in the, in the lower in the segments with lower casino activity, we also see some rebound. Okay, great. It's good to hear. Then just kind of touching back on the margin question a little bit. You talked about the time frame to get back to your post-COVID margins. You know, this quarter seemed a little bit bumpy. I mean, is the back half of the year kind of the right way to think about this, or are we not going to see your post-COVID margins until all the renovation, until all the acquisition integration is done, maybe towards the middle half of next year? Thank you. I think it's hard to say. Our estimate would be that within the next... Sorry, Peter, you want to go ahead? No. Okay. Sorry. Our, our assessment is that within the next 6-12 months, we should be able to to see the effect of of synergies and and certainly these one-time things most of them have gone away already and the rest within, we think, the next 2 months or so. Okay. Thank you very much. We will go next to Chad Beynon. Your line is open. Morning. Thanks for taking my question. Peter, I know you don't give, give guidance, but you have some nice, nice growth here, and when, when the projects open up, leverage should come down. You said currently 2.6 net debt, 5x lease-adjusted debt. Where do you want this to get to before you start considering other inorganic opportunities? Thanks. Net debt to, to EBIT below three is fine. Lease-adjusted, we want to, we want to be somewhere in the around four. That's, I think, where we would feel most comfortable. Okay. Then another one, just on the margin. You mentioned wage pressure and a few other items there. Generally speaking, how many months or quarters are we into these increases? Meaning, are we starting to lap some of those bigger expense item creeps, or do we have another quarter or two until we anniversary, you know, some of the, some of those bigger items that, that put pressure on margins? Yeah, we have another quarter, if not 2. Okay. It, it's mainly the, the labor piece that, that you saw increases, I guess, starting closer to the beginning of the year? Insurance, yeah, and, and utilities. Okay, great. Thank you very much. Appreciate it. Yeah, that's it. Once again, again, if you would like to ask a question, please press star and one on your touch tone keypad. We will go next to Edward Engel. Your line is open. Hi, thanks for taking my question. Once the sale lease back from Canada does close, in the third quarter, any kind of commentary you can give on what you would do with that cash? Would that go mostly to delevering or, or debt paydown, or could some of that go to some sort of capital returns? Thanks. Yeah, we will, we will net about $115 out of that transaction, which we expect to close in September. A sizable part, we have not decided exactly yet, but a sizable part of that will go towards debt paydown. We are paying currently, I think it's, it's around 11.5% or so, all in on our, on our term loan. We will use quite a lot of that cash to pay down debt. Helpful. Thanks. Then, of the one-time cost you kind of talked about related to the acquisitions. In the second quarter, was all of that in Nevada, or did some of that trickle into the East segment as well? Both. Most of it in Nevada? I think, yeah, but also, but also in some of it to Rocky Gap. Peggy, do you have mostly any chance? Of corporate side, yeah. Yeah, on the corporate side, we had some additional expenses related. Yeah to Rocky Gap as we worked on the pre-transition and licensing and things like that. Okay, helpful. I guess, would it be similar to assume of these kind of one-time costs you saw in 2Q, you'll see about similar in 3Q, maybe, maybe a touch less, but about similar? Yeah. No, less. That's the way to put it, yeah. A little bit less. Okay. Helpful. All right, well, thank you. Once again, if you would like to ask a question, please press star and one on your telephone keypad. We will pause a moment to allow questions to queue. It appears we have no further questions at this time. We appreciate everyone joining our call today, and look forward to talking to you again in early November or at G2E in October. Thank you and goodbye.