Welcome to Century Casinos Q2 2018 Earnings Conference Call. This call will be recorded. [Operator Instructions] I would 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 Executive Vice President of Finance, Margaret Stapleton. Before we begin, we would like to remind you that 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'll 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 filing from yesterday morning available in the Investor section of our website at cnty.com. We will now provide a brief review of the company's financial results for the second quarter and following our prepared remarks, there will be a Q&A session. We are happy to report a 6% increase in net operating revenue, driven by strong performances in Canada and Colorado. Adjusted EBITDA was lower compared to last year due to extra costs and expenses related to the licensing situation in Poland and the newly opened casino in the UK. The extraordinary burden in Poland was around $1 million and in the UK, almost all of the pre-opening and opening costs of around $0.5 million are included in consolidated adjusted EBITDA because of new SEC guidelines regarding the two opening expenses. Adjusted for both of these non-recurring effects,…

[Operator Instructions] Our first question comes from Brad Boyer of Stifel. Please state your question

Yeah. Thanks for taking my questions guys. First one, Peter, is just around the margins. If I look at the Canadian segment and the US segment, and look at the levels of revenue growth that you delivered in both of those segments, I would have expected to see a little bit more margin expansion there than what we saw. So just curious, was there anything going on there on the cost side, revenue mix side that may have flowed through negatively to the margins in those segments?

In Canada, we have an increase in the minimum hourly wage. Erwin, maybe you can say more to that.

Yeah. Well, that's exactly it. We had an increase in minimum hourly wage which is by law and it's now at [indiscernible] per hour and then it will go up to 16 on October 1 and then that's it. That was introduced by the new government that came on a few years ago. And the other part is due to the fact that we decided that particularly of our some Central City to make a marketing investment higher than usual due to the competitive situation that we find there and the same goes true also for the Edmonton Casino because of the stronger competition with regards to the Grand Villa.

Okay. And then anything around the US out in Colorado?

In Colorado, that's what I was trying to say, as far as [indiscernible] Colorado in Central City, we have one competitor that is ramping up his efforts and we try to combat that also increasing our marketing investments.

Okay. That's good to know. And then second, just around everyone's favorite topic here, Poland. It seems like things are normalizing here a little bit. Two questions here, first, and reading through the Q, it looks like there were not new licenses awarded for Plock and Poznan, which I assume was contemplated. I mean, was that a decision on your part to kind of reallocate resources to better locations? And then, second question on Poland would just be around, this eighth license is within the Marriott. Just curious, your thoughts, on the ability of that facility to support two casinos within one hotel?

With regard to Plock, we decided that we really don't want to go for it anymore because it just wasn't attractive. With regard to Poznan we applied but it was not our decision we didn't get it. However we are not really unhappy about it because of all the markets we are in Poznan historically has been the most difficult one also may be due to the fact that there is one competitor that just had no end in spending for marketing and so we are not unhappy really the way it is. Now with regard to the eight license in Warsaw we think, for us, that’s sensation because we have the big, big win and due to the competitive of the Polish gaming situation, we could have ended up getting closed instead of defer in Warsaw, so the Warsaw one is much better. The building itself easily would carry three licenses. We used to have two in the past and now the third one we are just finalizing the details on how exactly we will open it. One of the possibilities would be to make it -- put it a chase into the existing casino that we have because we still – it’s all us that we still would be – it would be great if we could have more rooms. Now we will see on how that’s possible but the more important thing with regard to Warsaw is that whenever we get a fresh Warsaw license we then interchange it in such a fashion that casino which is most successful in the Warsaw after the new six years and then we will move to the other ones, then in that case five years over the Hilton.

Okay, that's good to know.

[indiscernible] need a large building, the linked building is two huge complex towers and it has big shopping arcade underneath in the basement. Then in the basement, there is a connection across all four sections of an intersection. There is heavy foot traffic all day long, so it is complex. It’s not a problem at all such. Good to have that number.

Okay. Thanks for all that color. And then I just have two quick questions, follow-ups here. One, Peter, you talked a little bit about some of the plans for the Vietnam property, redoing some of the rooms, adding some F&B, what have you, any idea what your portion of that CapEx would look like?

The plan is to do it out of cash flow. If that's not sufficient then we are talking about a few hundred thousand dollars in fresh CapEx that we would like to put in, not more.

Okay. And then last one. Now this is for both of you guys, and it's a bit of a higher-level question. But with this year's trading where they are today and with some of the growth that you have in the pipeline and the capacity that you have on your balance sheet, fully appreciating that, the float is somewhat limited today. But have you guys ever considered implementing some sort of a share buyback to buy back some stock here? I mean, it seems like it would be a really good use of capital, given that your stock is trading at a significant discount to what kind of the forward outlook on growth would suggest.

Yeah. We have a buyback program authorized actually and what we have said and what still holds true is that we prefer to grow by new developments or acquisition. However if we do not find attractive growth opportunities within 6 or 12 months that depends on the market we are looking at, then we have serious considering to put capital towards like back to the shareholders or buyback program, that is absolutely a possibility.

Okay. Thanks for answering all the questions, guys

Thanks, Brad.

[Operator Instructions] Your next question comes Mike Malouf of Craig-Hallum. Please state your question.

Hi, guys. This is Eric Des Lauriers on for Mike. Thanks for taking my questions. I think you detailed a bit more of the one-time expenses that were included in SG&A that were now broken out into adjusted EBITDA. Could you just go over those again? I think I may have missed some of those.

No, we said that on the Polish situation, it's around $1 million that were extraordinary, non-recurring in the quarter and for the casino, it's pre-opening and opening expenses in the UK. It was close to $0.05 million. Going forward, in Q3 there will be a little bit of that in Poland, but not very much and then it’s all over and done with.

Okay. And then switching to Century Mile, it's good to hear that's still on budget and on pace for the April 1 opening. I was wondering if you guys expect any significant operating expenses or just one-time opening expenses that might cause negative EBITDA similar to the Bath casino. If you guys could just talk about that and just the overall EBITDA margin ramp for Century Mile that would be great.

Erwin, can you talk about that and perhaps referring to Century Downs, I think it was very strong from the get go, wasn’t it?

It was very strong from the get go, yeah, with regard to the revenues, but when it comes to EBITDA maybe Peggy could chime in because I don't know how that – it seems to have been some change in the accounting policies on how pre-ops are treated.

So we would expect probably Q1 of next year to have some additional expenses related to the opening of Century Mile. It's a little bit hard to quantify but you're really -- as you get close to opening, it no longer becomes pre-opening expense but operating expense. So any training and new hires of employees in the month or two before we open the property will flow through expenses.

So in other words the first quarter of results from Century Mile will not show the true EBITDA potential of it.

But there will be revenue to offset those expenses.

So are we talking about Q1 of 2019 before it opens or Q2 in its first quarter of being -- of operating?

So Q1 just before it opens we will have some expenses flowing through and then once it opens and there's offsetting revenue, it should be just normal operating expenses.

Okay. So you guys think of pretty -- from the first quarter of operations, you will have somewhat normal EBITDA margins and sort of a slow ramp up to your sustained margins after that?

Yes.

What we saw at Central Downs three years ago is that we had a very strong first quarter because it was new, everybody wanted to see it, the first two months especially were very strong and then the second quarter of operation, it slowed down a little bit. And then from the third quarter after opening it started to really ramp up to where it is now, in the EBITDA margins in the mid-40s.

Great. That’s very helpful. I appreciate it, guys. Thanks.

Our next question comes from David Bain of ROTH Capital. Please state your question.

Thank you. I just wanted to follow up quickly on the Century Mile discussion here we are just having. So with regard to the cadence to get to that 25% return after opening which I assume include some of the benefit to Hotel Edmonton. Would that be four quarters, five quarters now just in your view? I'm just trying to get a sense as to when you think that run rate could begin to the show itself.

It really is about three to four quarters out, but it does not include the benefit that we expect for Century Casino Edmonton

Okay. Fantastic. Thank you.

There are no further questions at this time, I would not like to return the call to Mr. Hoetzinger.

Thank you for your interest in Century Casinos and your participation in the call. For a recording of the call please visit the financial results section of our website at cnty.com Good bye.

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