Phoenix Motor Q1 2023 Earnings Call Transcript

Quartr
Provided by Quartr
May 9, 2023

There are 6 speakers on the call.

Operator

Good day, everyone, and welcome to the Century Casinos Q1 2023 Earnings Call Webcast. Later, you will have the opportunity to ask questions. Please note today's call will be recorded. I will be standing by should you need any assistance.

Speaker 1

It is

Operator

now my pleasure to turn the call over to Peter Hoetzinger. Please go ahead, sir.

Speaker 1

Good morning, everyone, and thank you for joining our earnings call. Questions. With me on the call are my Co CEO and the Chairman of Century Casinos, Erwin Heitzmann as well as our Chief Financial Officer, Margaret Steberton. Questions. As always, we would like to remind you that we will be discussing forward looking information, which involves several risks and uncertainties that may questions.

Speaker 1

Actual results to differ materially from our forward looking statements. The company undertakes no obligation to update or revise the forward looking statements, questions 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,

Speaker 2

questions. Thank you.

Speaker 1

Thank you. Our non GAAP performance and liquidity measures to the appropriate GAAP measures I will now provide an overview of the results of the Q1 2023. Questions. We delivered record 1st quarter net revenue and record Q1 adjusted EBITDA. Net revenue was $108,500,000 an increase of 5%.

Speaker 1

Adjusted EBITDA was $26,100,000 a 9% increase. We are particularly pleased that each Simply, one of our reportable segments showed revenue growth compared to Q1 of last year. So it was an excellent start to the year for our company, Once again demonstrating the strength of our business model and the resilience of our diversified portfolio. Questions. Our strategy of focusing on increasing play from our core customers and managing our business efficiently has delivered record results.

Speaker 1

We generated solid business from our core customers, especially in January February. As you get lower in the database, We didn't perform quite as well. We saw that in March and also going into April. Hence, our focus on increasing questions. On the expense side of the business, questions.

Speaker 1

We continue to see inflationary impacts. We are dealing with cost pressures, whether they be wage pressures, insurance cost increases or utility cost increases across questions about our teams are effectively managing through them. Wage inflation is largely normalized, questions. The promotional environment across all our markets remains relatively stable. It is Pretty disciplined, and we continue to envision a very rational marketing approach for all of us going forward.

Speaker 1

Nothing unusual, and we are not seeing competitors do anything unusual either. Looking at segment results. Our Colorado business had a solid quarter with revenue up 3%. While Central City was down a little, Quipro Creek was up on revenue as well as EBITDA. Questions.

Speaker 1

The overall EBITDA margin of Colorado came down to 30% from 32% in Q1 of last year due to higher utility and labor costs. We saw a slight increase in guest count and in trips, but with a slightly lower spend per trip. From an age standpoint, the number of trips increased significantly from the younger demographic, the under-forty age group. In Cripple Creek, we will complete our employee housing project this summer, providing accommodation for 30 employees. Questions.

Speaker 1

In this tight labor market, especially in Trickle Creek, a small historic gold mining town with a population of less than 2,000 and at an elevation of 9,200 questions. Moving on to West Virginia. Revenue at our Mountaineer Casino, Racetrack and Resort grew slightly by 1.5%. Sloth play was strong. It was up 7%.

Speaker 1

Questions. Our analysis indicates that most of this was due to a loss in crossover play from sports betting since Ohio went live on January 1 this year. EBITDA was under pressure by higher expenses related to horse racing and insurance. The hotel and F and B departments questions. We are still experiencing staffing challenges, resulting in limitations to hours of operation and availability of hotel rooms.

Speaker 1

In the casino, we saw high single digit increases in guest count and number of trips, questions. In Missouri, revenues are up a bit despite a difficult comp. For example, Q1 of last year questions. At the very end of the quarter, the threat of severe weather, But all in all, it was a good quarter for Missouri. The EBITDA margin sits at 44%, down just 1% from last year's 45.

Speaker 1

We saw a flat number of trips, but with a slightly lower spend per trip. Those properties had some negative impact, not only related questions. Normalizing the hold percentage to prior year questions. It was different in Corrado Sui, where the 70 plus age group showed strong growth, most likely because of the casino moving from the riverboat questions. Construction of the new permanent land based hotel questions.

Speaker 1

And casino development in Corrado, Spain 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 machines, which is a 20% increase in gaming positions compared to the old riverboat. But most importantly, it will provide significant operational efficiencies. It will be much more convenient for our customers, and it will increase our engagement area. Questions.

Speaker 1

A new development in Southern Ingres, over an hour away from Cape Girardeau, questions. We expect it to open with a temporary casino this summer. With that in mind, we have taken steps to create more excitement around our Capshirado casino and have started construction of a 69 room, 6 story hotel. It is on track for opening early next year, questions and we transformed the property to a full resort estimation offering gaming, dining, conferences, concerts, events and more. Moving north to Canada.

Speaker 1

All four properties showed solid gains in the quarter, increasing revenue by 3% EBITDA by 14%. We achieved these strong results even though access to our property in Edmonton was impacted by road construction. Questions. The Sanctuary mine race, you know, posted the largest gains and doubled EBITDA compared to last year. Questions.

Speaker 1

As reported during last earnings call, effective April 1 this year, the Alberta Gaming Commission questions. Has increased the operators portion from slot revenues by 2% for the next couple of years, giving us a nice dose for the rest of this year and next. Questions. Finally, some color on our European casinos in Poland. They had another great performance.

Speaker 1

Revenue was up 17%, EBITDA was up 24%. Masinos Poland has been able to more than compensate for inflation related expense increases questions. Swapcoinin was higher, CableDrop was higher and so was SMB revenue, questions. As mentioned previously, the war in the Ukraine is not impacting our results negatively, All right. With that, let's have a quick look at our balance sheet.

Speaker 1

As of March 31, we had $103,000,000 in cash and cash equivalents and $365,000,000 in outstanding debt. The net debt to EBITDA ratio was 3.5, the lease adjusted net leverage questions. These ratios will improve if we look at it on a pro form a basis, including the NAKID and the Rocket Gap transactions. Questions. As reported, we closed the Nuggets transaction on April 3.

Speaker 1

Now we own half of the Nuggets real estate and 100 percent of the operating company. We also have an option to buy the other half of the real estate. With the closing of that transaction, we anticipate that an immediate impact to net income as we have been paying interest on the $100,000,000 that we borrowed Climate's acquisition without any income from the market to support it. The market is a full service Resort destination with over 1300 hotel rooms and suites, a casino with 850 slots and 29 tables, This location on I-eighty provides unmatched exposure in the Reno Sparks area, and we plan on taking full advantage of that with a new attractive facade and signage. We are more than excited than ever by the potential for improvements.

Speaker 1

Questions. The immediate focus will be on the Demi floor as well as on raising the potential for synergy effects across all operational departments. We implemented small operational changes already and are seeing good results with significant year over year revenue growth, questions, especially in the market's group and convention business. For this year and going into next, the market is expecting record business from group and convention questions. Several new high spending groups have allowed us to increase our casino comp criteria, leading to better overall profitability.

Speaker 1

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 commence results in 2023. In Maryland, we expect to close the Rocket Gap acquisition in July. We paid a $56,000,000 with cash on hand. After rent expenses, we expect Rocket Gap to generate more than $10,000,000 in additional questions and includes an 18 hole Jack Nicklaus golf course, a 5,000 square foot event center, several meeting spaces, a spa and several outdoor activities. The property consists of over 25,000 square feet of gaming floor, 630 slot machines, 16 tables, questions.

Speaker 1

With the Rocket Garden market acquisitions, questions to generate over 80% of our EBITDA in the U. S. As we move further into 2023, 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, which is probably the most important takeaway from the results of the Q1. Looking ahead, we have positioned our company for strong growth for years to come questions with the NAKID and Rocky Gap acquisitions and our 2 Missouri development projects, all of which we expect to drive a material increase in EBITDA and free cash during the coming years.

Speaker 1

In conclusion, this was another strong quarter for our company, further demonstrating the resilience of our business and the strength of an efficient operating model based on driving play from our core customers. Questions. 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. Questions. Thank you for your attention.

Speaker 1

And operator, we can now start the Q and A session.

Operator

Thank questions. Questions. Our first question comes from Jeff Stancho.

Speaker 3

Great. Thanks. Good morning, everyone. Thanks for taking our questions. Helpful commentary earlier in the call regarding March April trend.

Speaker 3

Peter or Erwin, whoever wants to take this, can you just frame out a bit more the pullback that you called out in some of the lower income demographics in the database. I guess what percentage of the database does this cohort constitute questions or even better, what percentage of your revenues? And then just sort of what sort of income band does this group fall into to

Speaker 1

the extent you have looked at things this way? Thanks. It was, as you said, more on the lower end. And it was I don't it's not a trend because we saw it in The last few days in March and then going into the 2nd week of April. But from like from the 3rd week of April on, it came back.

Speaker 1

So you had it was about a 3 week period of softness. So far, we're not seeing it continuing. Maybe it has to do with the tax refund season. We're hearing that the refunds are about 10% lower this year, so that maybe we'll have to do something with it. Do you have additional color on that?

Speaker 4

We don't no, no, we don't have the details

Speaker 3

questions. That's helpful. I appreciate that commentary and forward sort of I tend to agree with your point there, Peter, on some of the timing For your Canadian assets, really quite nicely quarter on quarter. Can you just expand a bit more on kind of what's driving that?

Speaker 4

Questions. I think it's just a good management, right? What might be mentioned is that in the year over year, COVID has been lifted only, I think it was the end of February last year. Questions. So that has influence as well.

Speaker 3

Okay, perfect. Very helpful. Thank you both. I'll pass it on. Congrats on a nice

Operator

Our next question comes from Chad Beynon.

Speaker 5

Questions. Hi, good morning. Thanks for taking my question. Wanted to ask about just kind of the balance sheet and capital allocation. On recent calls, questions.

Speaker 5

You've mentioned that there's really no need to monetize anything, whether it's selling operations or some land value, which you might not be getting credit for. But now that the nugget has closed, how are you thinking about, questions. I guess just really revisiting that question with some real estate, either to build or sell on that. Questions. And then on the international operations with Poland, if that still makes sense to operate into the future.

Speaker 5

Questions. Seems like there's a disconnect with where the stock is trading versus what the business and

Speaker 1

the asset value is. Thank you. Thanks, Jes. Yes, we are evaluating debt constantly also in light of the high interest we are paying on our debt. And yes, you're right, we're sitting on real estate in Colorado and Canada questions.

Speaker 1

And also partly on the market. So there's some very interesting discussions going on, and It's something that is pretty high on our list to make The value the land value that we still have is questions. I think it's fair to assume that this is given so it's only with the 1st small consumers in Canada and, plus, in Colorado, it's

Speaker 5

questions. That's great. Thanks, Peter. And then just with the rare weather that we saw in the Q1 questions and even the Q4 in Reno. You hadn't assumed operations at that point, but wondering if questions.

Speaker 5

Those lost trips from over the mountain led to pent up trips questions or were those just simply lost during the period and maybe went elsewhere? Trying to figure out if Q2 questions and maybe into the summer period, could benefit from how bad the weather was prior to that? Thank you.

Speaker 1

Questions. Yes, this is a question. It's a nugget. Can you address me?

Speaker 4

Yes, absolutely. I mean, nobody knows for sure, but our guess would be Maybe half of the trips are lost and the other half were both like pent up demand and then there were more people coming and that might well continue. But with regard to the numbers, I think it's important to say to point to what Peter said anyway during his presentation questions. With regard to group business conferences, we expect 2024 to be a very strong year for the nuggets.

Speaker 5

Questions. Good point. Thank you both

Speaker 2

very much. Thank you, Tweed.

Speaker 4

I'm sorry.

Speaker 5

Okay. Got you. Thank you both very much. Appreciate it.

Operator

Our next question comes from Edward Engel.

Speaker 3

Questions. Hi. Thanks for taking my question. The Caruthersville property had a nice bounce back in the Q1. Questions.

Speaker 3

Just wondering, was that a steady trend throughout the quarter? And I guess, does that kind of put this property on track to maybe start growing revenue versus the order facility and then, is the cost base, is it should it be a generally a higher margin Property 2 since it's been relocated to land.

Speaker 1

Sorry?

Speaker 4

You can help us stand. I'm not sure I understood the question as well.

Speaker 3

Could you provide property, I mean Yes. I guess, since Cloudersville has been moved into the temporary pavilion facility, is it possible to see revenue and margins Higher than it was when it was

Speaker 2

on the river? Yes, yes, could be. One of

Speaker 4

the things are is, for example, that it's now easier accessibility is easier And I mean, there's a whole it's just no comparison. I mean, actually, let's say, we were told there wasn't a single customer that has missed the ship. Questions. It's not so much better even if it's only temporary.

Speaker 3

Okay, helpful. And then questions. Is it fair to assume that for the month of April, since you took over the nugget, it's been a relatively clean month in terms of not many big snowstorms or anything, I guess? If so, is it possible to give us maybe some sort of EBITDA margin, that you're kind of seeing that property run rate at right now?

Operator

Our next question comes from Jordan Bender.

Speaker 3

Great. Thanks for taking my question. Questions. You mentioned kind of the uptick in your properties in Colorado. 1 of your competitors in Cripple Creek is undergoing a renovation.

Speaker 3

How much of questions that is maybe just business you're taking from that property versus maybe structurally taking some of these people in building loyalty from those customers. Thank you.

Speaker 4

This is Erwin again. We have a very strong customer, a loyal customer base in Colorado. In equipment, particularly with regard to the construction going on from questions. But it's not substantial. I think we are standing on our own.

Speaker 4

Even after they are open, we are very confident that we will continue

Speaker 3

Okay, great. Thanks. And then on my follow-up, Peter, you kind of walked through some of the puts and takes in the margin within the quarter. Within the U. S.

Speaker 3

Business, is this kind of the right way to think about that margin progressing through the rest of the year, just given Some of the renovation and then some strength in some other properties as well.

Speaker 1

Yes. I mean, we're getting into some stronger quarters now, summer. So we would hope that questions. Margins will go up a bit from here for the rest of the year.

Operator

Our next question comes from David Bain.

Speaker 2

Awesome. Thank you. Just a follow-up on that previous question. So if we were to look at year over year in 2023, it looks like margins were off, it's like 170 basis points or something just on a consolidated basis. Is that kind of year over year?

Speaker 2

Is that something to sort of look for that sort of trend? Or should should we start from a new baseline of where we are and see margins sort of going down from 1Q?

Speaker 1

No, they should not go down from 1Q, Dave. They should go up a little bit from this quarter As we're heading into the summer season.

Speaker 2

Perfect.

Speaker 1

And yes, as the revenue grows, As I said, we had some hold impact on slop and paper hold in Carrasil and Cap Ferrado. Without that, we would have been at the same margin as last year. And going forward, yes, a little bit higher from May June on. Questions.

Speaker 2

Okay, perfect. And then just we're trying to refine our nugget model based on last year's $27,000,000 I'm trying to understand questions. If there is a percentage weighting that's typical on a quarterly basis and then I understand that the strength will at the convention. I didn't hear much on the, unless I missed on the entertainment calendar and kind of the CapEx, investments like the slot floor, when that could take hold. And just your overall sort of cadence or ramp as we look at the next several quarters, Steven, year, that would be really helpful.

Speaker 1

I don't think that he's in Reno right now. Okay.

Speaker 4

We have a strong entertainment calendar for the remainder of 2023 And also a strong group business calendar. We will we ordered 100 new slot machines, And we expect most of them to come in starting mid May. So that should have a positive impact on the second quarter. And then in addition to that, we're looking at a series of what we call quick wins on the grower to make things nicer questions to improve on the layout of the slot machines, how they are laid out, do a lot of work on the slot score. And there is, we think, quite some upside, a lot of upside potentially, in fact.

Speaker 4

And so From many angles, this looks very good.

Speaker 2

Okay, great. And that those investments that you make, are those I mean, Given your the patronage, does it take a while for them to sort of understand that there's those improvements that have been made or

Speaker 4

Yes. Ken, first of all, I think everybody in the floor knows already that there is a new ownership, and we hear nothing but positive and The building the outside of the building to be repainted. So pretty soon, they will start painting, and then everybody will again see that something's happening. We put on new signage on the 2 towers. So we'll have 4 new signs, large ones, better.

Speaker 4

We brightened the rate of the NAGI slightly. We made the funds more negligible, all of which will be coming in the next month. And We will think that it just will signal the new spirit. Then we also completely revamped the marketing approach, and we're in the middle of working on that. We will continue what is there now, but we will, in addition, focus more on the locals market.

Speaker 4

We think there is Certainly upside as well.

Speaker 2

Right. Thank you, Arun. Thank you, Peter.

Speaker 4

Thanks, sir. Thank you.

Operator

Questions. We have no further questions in the queue at this time. I would now like to turn the call back over to today's speakers.

Speaker 1

Questions. We appreciate everybody joining our call today. For a recording of the call, please visit the Financial Results section of our website at cnty.com.

Speaker 2

Questions.

Speaker 1

Questions.

Remove Ads
Powered by Quartr
Earnings Conference Call
Phoenix Motor Q1 2023
00:00 / 00:00
Remove Ads