Ladies and gentlemen, welcome to Century Casinos Q1 2019 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 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 do 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 the SEC filing available in the Investors section of our website at www.cnty.com. I will now provide a brief review of the company's financial results for the first quarter 2019. Following these prepared remarks, there will be a question-and-answer session. Well, this was another very good quarter for us. Net operating revenue was up 12%, even though we were negatively impacted by exchange rates. In constant currency, revenue was up by 20%. Adjusted EBITDA increased by 2%, but that includes a full month of pre-opening costs and expenses in Century Mile Racetrack and Casino to the tune of $700,000. Our auditor say that we have to include the costs and expenses of the one month prior to opening any casino. Excluding that, what I would call, real adjusted EBITDA is $7.4 million, and that is 13% higher than last year. Earnings…

[Operator Instructions] Our first question comes from the line of David Bain with ROTH Capital. Please state your question.

Thanks so much and congratulations on the opening of Century Mile. It's great seeing it. And we appreciate the April net revenue. I think that's very helpful. And I know that at the Analyst Day, you reiterated the 20% to 25% return of project and there's a lot of margin catalysts and pattering catalysts in forward course, but I think it would be helpful to kind of get a sense as to what you see as EBITDA contribution in maybe 2Q or 3Q, just to get a sense again on sort of that how we should look at the margin ramp there?

We believe that the margin or the return that we have indicated on 20%, may be up to 25% on the investment that should kick-in in its first full year of operation that being 2020. And until then we see it ramping up to that number, pretty gradually between now and the end of the year.

So fairly minimal for 2Q and then just ramping from there as...

No, not - ramping from the get-go actually.

And then for the Bath casino, do you see that is hitting breakeven in the second half?

Difficult. It's on its way, whether it is in the second half or a little bit later, too early to say.

Again, love the opening thanks for the data point on that net revenue for Century Mile. Thanks, guys.

Our next question comes from the line of Brad Boyer with Stifel. Please state your question.

First one, just around Poland. Congrats on having Poland be a bright spot in the quarter, and not a thorn in everyone's side. So if I look at those 12% margins that you achieved in Poland in the quarter, and obviously appreciate that FX moves margins around for you guys. But, I mean, is your expectation that you're going to continue to see that margin in Poland ramp as you move further into 2019?

Erwin?

We think that, I mean, the first quarter was excellent. We made more EBITDA than in whole of 2018, and I think it would be fair to assume that if you take the times for then you have the number for the full year.

And then, I mean, the results at Century Downs continue to surprise us. Obviously, the AGLC and the likes what they are seeing as well given their decision to continue to give you guys more product there. Could you just give us a sense of what in your estimation is kind of driving the strength of that property?

Erwin?

I think that they manage it very well.

Anything more to add?

Yes, quickly. Sure. Racetrack casino provides a lot of opportunity to create extra traffic, more traffic than compared to a so-called - call it a regular casino. First of all, we had 100 racing days which bring a certain amount of customers, and at some days like The Kentucky Derby like last time 2,500 people or so. And important to note is that many of those customers that otherwise would not go to gamble. So we had the opportunity to expose our products and our gaming products to people who not necessarily seasoned sales - of casinos. But it's a percentage game. Of the 100 that come to see the race, say it's x% of those who come back, and a certain number of those will become regular. And then in connection with over and faster race in both properties, both in Century Downs and Century Mile, is where we have extra rooms that they can rent out for various opportunities like wedding parties and then birthday parties and so on. So that's another driver of traffic and ultimately driver of revenue. And to give you another example on May the 5th,such as Cinco de Mayo, for the third time in a row, an event that we're marketing together with Virgin Radio and that's a Chihuahua Race, and that where probably almost 200 Chihuahuas are racing in groups of 10, just like the horses around 50 meters or so. And every Chihuahua on that probably brings the end of '16 trends, so suddenly we have another huge crowd of people that come for the Chihuahuas, and not at all for the casino, but same thing like before a certain percentage of those will like what they see and come back. Is that helpful at all?

Yes, very helpful. I appreciate the color there. And then just lastly, like David indicated, I appreciate the color around Mile in April. I wanted to see if you could give us any sense of what you are seeing at Century Casinos, Edmonton, as we've sort of cycled through some of the weather impact that you encountered in the first quarter as a result of Northlands Park closing? And that's it for me. Thanks.

In Edmonton, we had a lower gross gaming revenue on table games side, mainly due to a decrease in the baccarat drop, but we had an increase in the slot side. And the increase in slot seats will attribute to the closing of the Northlands Park, and the decrease in the baccarat drop is probably due to a little bit of headwind from Starlight and the Grand Villa. We are working hard on regaining our market share there and we hope that we will be successful in that effort.

Our next question comes from the line of Mike Malouf with Craig-Hallum. Please state your question.

This is Eric Des Lauriers on for Mike. Thanks for taking my question, and congrats on the quarter. I was wondering if we can talk a little bit about the Northern Alberta pari-mutuel network that hit Century Mile in Q1? And specifically just how you guys are looking at the revenue breakdown of that compared to the overall revenue generated at the racetrack itself, or just the overall location itself, and whether that $3 million guide for the month of April included any of the Northern Alberta pari-mutuel network betting? Thanks.

Thank you. Can you start with that? Does it - did the number include the pari-mutuel?

Yes, it does include the pari-mutuel. It is in the racing numbers for April.

And anymore in terms of what we see as a potential there, either Peggy or Erwin?

You could probably take Q1's pari-mutuel numbers and extrapolate those out for the year.

And then just kind of wondering overall top line what you guys expect? How you expect the Century Mile revenue to ramp with the pari-mutuel betting? Obviously, that's flap a bit, but I guess what I'm looking to get is how much we should expect Century Miles top line to sort of accumulate as we look from Q2 route through 2020 if it's going to be relatively flat with that $3 million monthly run rate or we should expect some increases as it matures?

Well, you know, we have only one month under our belt now, so it's early for us to say. But definitely we expect to have a very busy summer with all the racing going on, and we know from Century Downs' success that - and as Erwin indicated just now, the racing really helps us also on the gaming and the F&B revenue. So, I think, Q3 should be particularly strong and Q4 is a little bit down certain quarter here. On the one hand, we should be ramping up toward next year nicely. We should have operational headaches under control by the end, but Q4 could be a little bit weaker than Q3. Overall, I think, 2020 we should be there at those 20% to 25% EBITDA returns on the investment.

And then last one from me, I appreciate the color on the GBP2 betting limit over the U.K. as it relates to the Bath casino. Could you also provide some color on the, say betting regulations that kind of requires some owners' financial disclosures to - from the casino placings and the overall impact of that? Thanks

Yes, the problem there is that, first of all they came into - in effect after we opened and yes, they are pretty onerous. Whenever a player reaches GBP20,000 in table drop, slot coining or winnings or losses, we have to - we are required to ask for lot of detailed financial information from that player, including income and so on. And some players our hesitant to give - to provide that, so it takes like on a one-on-one basis, a lot of talking and discussions and that really slows the ramp-up down. But on the other hand, it's a level playing field for all the casinos in the U.K., and so one by one we are commencing players and players are coming back, but it's a very, very slow process.

Our next question comes from the line of John DeCree from Union Gaming. Please state your question.

Just wanted to maybe go big picture, and as we maybe talked a little bit about this recently, but now that Mile has opened, obviously plenty of work to do in ramping that up, and still a big focus. But just wondering if you could kind of talk high-level about the strategy from here, the balance sheet is obviously in great shape, additional M&A or projects that you're thinking of, so if you could kind of give us a little insight as to what might be next for Century that might be helpful?

Yes. We've - couple of months ago, so when we were very comfortable about how Century Mile is shaping up, we started to look around. And what we are seeing is that there is very limited, if at all, attractive greenfield situations out there. And so we are focusing on the M&A side. And we do see in North America especially in the U.S., quite a lot of attractive opportunities out there. Some of the larger companies do not really focus on assets that produce between $10 million and up to $20 million EBITDA. So, it's too small for them. But, of course, it would be meaningful for us. And we are zooming in on the field trying to get a deal that is beneficial for Century Casinos, and in, you know, our history, we've always tried to not play too much, and to keep the balance sheet on a conservative level. So that the challenge is to find those opportunities that offer great potential for us at a price that conforms to our conservative approach. Now we believe that there are the ones or others out there, and I think we've said it before, we are very hopeful and - to have something presentable to you guys before the end of this year.

Our next question comes from the line of Brad Boyer with Stifel. Please state your question.

Yes. Coming back here guys. John got me thinking about something else, but Peter, just curious if you could provide some perspective obviously without giving any way - giving away any of your deep dark secrets for competitors, but give us some perspective on sort of what you are looking for as it relates to the next potential acquisition for Century Mile. Are you looking for something that is kind of a larger full-scale resort type amenity with the hotel? There are some of those out there in that range of EBITDA that you described. Are there certain market characteristics, tax rate, presence of tribal, competitors in the market, anything like that, that can you give us a flavor of sort of how you go about thinking through where that acquisition might take place? Thanks.

Yes, Brad. We want to stay with some parameters that we have also used in the past and that includes that we believe that where we are best in our operating approach is to cater to locals market, and we define that as within a 75-mile radius. So, it's very unlikely that you see us going to a full destination type of target. Secondly, we like markets where the number of casino licenses is limited. And thirdly, and that's the only deviation from the past is that we want to grow into units that are largest, the largest we have today or even larger.

Thank you.

And there are no further questions at this time. I'd now like to turn the call back over to Mr. Hoetzinger for closing remarks.

Thanks, everybody, for your interest in Century Casinos, and for your participation in the call. For a recording of the call, please visit the Financial Results section of our website at cnty.com. Goodbye.

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