Century Casinos, Inc. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024. Century Casinos operates gaming, lodging, food and beverage, racing, sports betting and iGaming businesses, primarily in North America, with operations also in Poland. Comparisons with Q1 2023 are affected by the Nugget and Rocky Gap acquisitions, the end of ship-based casino operations, and prior-period one-time income.
Financial performance and position
| Metric | Q1 2024 | Q1 2023 |
|---|---|---|
| Net operating revenue | $136.0 million | $108.5 million |
| Earnings from operations | $8.3 million | $18.4 million |
| Net loss attributable to Century shareholders | $13.5 million; $0.45 per share | $1.2 million; $0.04 per share |
| Adjusted EBITDAR (non-GAAP) | $21.3 million | $26.1 million |
| Net cash from operating activities | Used $11.5 million | Provided $12.3 million |
Revenue increased 25.4%, but operating costs and expenses rose 40.1% to $127.7 million. Operating margin, calculated as earnings from operations divided by revenue, fell to approximately 6.1% from 17.0%. Interest expense increased to $25.8 million from $17.6 million; the company reported a $15.7 million pretax loss and a $4.0 million income tax benefit. Adjusted EBITDAR is a company-defined non-GAAP measure and excludes, among other items, Master Lease expense; it is not a substitute for GAAP earnings or cash flow.
At March 31, cash and cash equivalents were $136.5 million, down from $171.3 million at year-end; working capital was $90.8 million. Cash, cash equivalents and restricted cash totaled $136.8 million. Operating cash use and $19.5 million of investing cash use drove the quarterly decline. Management attributed weaker operating cash flow primarily to taxes paid related to the Canada real estate sale and increased interest expense. Approximately $80.8 million of cash was held by foreign subsidiaries, and $19.9 million of cash on the balance sheet had been funded by VICI for the Caruthersville project and remained unspent.
Debt under bank borrowings and other agreements was $342.0 million in principal, or $328.5 million net of deferred financing costs; net debt, as defined by the company, was $205.5 million. The Goldman term loan carried a weighted average rate of 11.56% and matures in 2029; $30.0 million was available under the revolving facility. The separate VICI failed-sale-leaseback financing obligation was $654.8 million. The company reported compliance with applicable Goldman financial covenants at quarter-end.
Material changes and operating drivers
- U.S. revenue increased 44.7%, primarily reflecting the acquired Nugget and Rocky Gap operations. Those properties contributed $33.3 million of Q1 revenue and a combined $5.9 million net loss attributable to Century shareholders. U.S. Adjusted EBITDAR declined 3.2% to $19.1 million.
- Canada revenue increased 11.0%; the higher slot-machine revenue retention rate contributed to growth. Segment Adjusted EBITDAR rose to $5.1 million from $4.6 million.
- Poland revenue declined 15.4%, and segment Adjusted EBITDAR fell to $0.8 million from $3.3 million. License-related closures affected operations, although certain casinos reopened after receiving new licenses.
- Q1 2023 included $3.5 million of cost recovery income, a $0.6 million Calgary sale earn-out and $1.1 million of equity-investment earnings that did not recur in Q1 2024. Q1 2024 also bore higher depreciation and acquisition-related operating costs.
Outlook, risks and contingencies
No formal full-year earnings or revenue guidance is provided in the supplied filing text. The company expected the Caruthersville land-based casino and 38-room hotel project to finish in Q4 2024, at an estimated total cost of $51.9 million; approximately $24.5 million of spending was expected for the remainder of 2024. The Cape Girardeau Riverview hotel opened April 4, 2024. Management estimated it could add $10–$12 million in annual net revenue, net of an estimated competitive impact from the Walker’s Bluff Casino.
Management cited inflation in wages, benefits, insurance, utilities, maintenance and food costs, staffing challenges, adverse weather, foreign-exchange volatility, and economic uncertainty. It reported adjusting operating hours, table-game availability and hotel rooms at some locations to mitigate staffing constraints. Competition could pressure results in Missouri, Colorado and West Virginia; potential Central City competitors could open in late 2024. At Nugget, management said cost-saving measures began in Q2 2024.
Polish gaming licenses are time-limited and not renewable. The Krakow license was due to expire in May 2024, and the company had applied for a replacement but had not yet received it at the filing date. The Wroclaw casino was expected to reopen at a new location in Q3 2024, and a full Katowice gaming floor was expected in Q2 2024. The filing states that pending or threatened litigation is not expected to have a material effect; certain acquired Nugget and Rocky Gap contingencies were estimated at $0.1–$0.2 million. The Master Lease is long-term, triple-net and difficult to terminate; estimated remaining-2024 cash rent was $42.5 million, excluding the expected $4.2 million annual rent increase related to Caruthersville after project completion. Management cautioned that additional financing may be needed and may not be available on acceptable terms.
Important facts for investors to verify
- Whether operating cash flow improves after the unusual Canada-sale tax payments and how cash balances and foreign-held funds evolve.
- Execution, final costs and opening schedule for Caruthersville, and realized revenue contribution from the Riverview hotel.
- Progress on Polish casino licenses and reopening plans, particularly Krakow and Wroclaw.
- Whether acquired properties’ operating performance and announced Nugget cost measures improve profitability amid higher interest and lease costs.
- Future compliance with debt covenants, access to liquidity, and the cash burden of the Goldman debt and VICI Master Lease.