Century Casinos, Inc. (CNTY) Q3 2012 Earnings Report, Transcript and Summary

Welcome to the Century Casinos’ Q3 2012 Earnings Conference Call. [Operator Instructions] I would now like to introduce our host for today's call, Mr. Peter Hoetzinger. Mr. Hoetzinger, you may begin.

Thank you, operator. I am happy to have all of you joined us for this call following the release of our third quarter of 2012 earnings a couple of hours ago. With me on the call today are Erwin Haitzmann, Chairman and Co-CEO of the company and Margaret Stapleton, Executive Vice President of Finance. Before we begin, I need to remind you that in our remarks today we will be discussing forward-looking information which involves a number of 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 may 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 in the 10-K and 10-Q filings, all of which are available in the Investor section of our website at cnty.com. In the third quarter, we managed to increase net operating revenues by 3%, earnings from operations by 4% and earnings before income tax by 14% in the year-over-year comparison. Adjusted EBITDA fell 9% on lower depreciation expenses compared to Q3 of last year. All our properties posted solid results in the quarter with the single exception of Calgary. Even though that casino saw table drop increase significantly by 58%, and also slot coin-in by 8%, lower hold percentages as well as a decrease in F&B revenue, coupled with higher marketing costs, led to a decline in EBITDA, but more about that…

[Operator Instructions] Our first question comes from the side of Todd Eilers with Roth Capital.

Wanted to start off on the Calgary property. In the Q I believe or maybe in the press release you guys mentioned lower table game hold there. How material was that? And I don’t know if you can quantify the impact there versus maybe what you would consider normal hold? And then also in terms of marketing costs there, any plans to possibly ratchet that back a little bit to help improve margins?

Yes. Todd, this is Erwin Haitzmann. First of all, with regard to the lower hold, the lower hold is only caused one game which is called EZ Baccarat. That’s the game – that's actually the only version of Baccarat that is offered by all casinos in the market. And this game has 2 types [ph], one is called PANDA and one DRAGON. And with this 2 tie pits [ph], that game is very volatile. Very volatile, but nevertheless, very attractive for both players and also us as an operator. But the volatility means that if we had held somewhere the expected hold, then the revenues would have been about $150,000 to $200,000 higher. And I will also say that this game is so attractive all over town that it has the highest increases and looking at the drop, we are number 3 in town. And we have almost doubled our drop compared with last year in that game. At game securities and usage [ph] always we’re 100% on it and watch everything close and even closer. We’re confident that everything is fine. It’s just a game with high swings. But we feel confident we should continue to do what we are doing and the statistics will level out. Secondly, with regard to the marketing costs, we have decided already a month ago that we will lower marketing costs, we have significantly [indiscernible] with a whole marketing approach that has started already. One of the things Peter has mentioned already, we had found that in Calgary, completely opposite to Edmonton, the shows had not done anything significant for the revenues of the casino and that probably has to do with the fact that on days when shows take place, parking has become a problem. If we had another 600, 700, 800 cars, and you may remember that our showroom in Calgary holds up to 1,100 people, that meant that it was difficult for the regular customers to park. So after thorough analysis we have finally decided to discontinue all shows in Calgary and as Peter said before, we will convert the showroom into indoor covered VIP parking.

Okay. Also wanted to ask you about Casinos Poland, was a bit below expectations or at least our expectations for the quarter, and I believe you mentioned that there were -- the cause for a little weakness there was the opening of 2 new casinos. Was that the only issue or were there any other one-time items? And then it sounds like we've gotten off to a good start to the fourth quarter. Any sort of one-time items or things we need to be aware of for the fourth quarter?

No one-time items, no, it was only the new casinos, with changes [ph] that took a little time to take on.

Okay. And were those 2 new casinos, were they existing licenses that the company already had that they…

New ones.

Brand new, okay. Okay, that’s helpful. And then can you maybe give us a sense for, I don’t know if it’s material or not, but how much kind of corporate expense might have hit the quarter related to the Casinos Poland agreement to take an increased ownership interest there, and should we expect an uptick in corporate expense in the fourth quarter related to that transaction as well?

The expense was not more than $100,000 and we don’t see any reason for an uptick. The organization is in place at Century to handle.

[Operator Instructions] And it appears we have no further questions. So I’d like to turn the call back over to our presenters for any closing remarks.

Thanks, everyone, for your interest in Century Casinos and your participation in the call. For a recording of the call, please visit the financial assigned section of our website at cnty.com. Thank you.

This concludes today’s conference call. Thank you for attending.