Century Casinos, Inc. — Q1 2021 Form 10-Q
Reporting period: Three months ended March 31, 2021. Comparisons are with Q1 2020. The company operates casino and related hospitality, racing and betting businesses in the United States, Canada and Poland. Its casino operations in Calgary were sold in December 2020; it retained the property and Century Sports operations.
Financial performance and position
| Metric | Q1 2021 | Q1 2020 |
|---|---|---|
| Net operating revenue | $72.4 million | $87.7 million |
| Operating income (loss) | $8.2 million | $(31.8) million |
| Net loss attributable to Century Casinos shareholders | $(1.4) million; $(0.05) per diluted share | $(45.9) million; $(1.55) per diluted share |
| Adjusted EBITDA (non-GAAP) | $14.7 million | $9.6 million |
| Cash from operating activities | $5.1 million | $(1.6) million |
Revenue declined 17.4%. Gaming revenue fell 14.6%, food and beverage revenue fell 58.5%; pari-mutuel and sports betting revenue rose 5.6%. Operating expenses were $64.2 million, including $6.6 million depreciation and amortization; the company recorded no impairment charge in Q1 2021 versus $34.0 million in Q1 2020. The prior-year impairment materially affects the improvement in GAAP operating results and Adjusted EBITDA.
By segment: U.S. revenue increased 20.5% to $64.4 million and Adjusted EBITDA was $22.1 million, up from $8.8 million. Canada revenue fell 87.6% to $2.0 million, with Adjusted EBITDA of $(2.5) million. Poland revenue fell 65.4% to $5.9 million, with Adjusted EBITDA of $(2.6) million. The company attributed the sharp Canada and Poland declines mainly to COVID-related closures.
Liquidity and debt: At March 31, cash and cash equivalents were $66.0 million; cash, cash equivalents and restricted cash were $66.2 million. Working capital was $37.3 million. Long-term debt, net of deferred financing costs, was $184.4 million ($10.6 million current); principal was $193.3 million. Net Debt, a non-GAAP measure, was $127.3 million. A separate VICI Properties financing obligation was $279.3 million. Q1 interest expense was $10.5 million, including $6.9 million related to the VICI Master Lease. Capital expenditures were $1.6 million.
Material changes, outlook and risks
- COVID-19 restrictions continued to constrain operations. Canadian casino properties remained closed at quarter-end; Poland casinos closed again March 20 and were expected to reopen May 8, 2021. U.S. properties operated under varying capacity, floor and hours restrictions.
- Management estimated COVID-19 reduced Q1 revenue by $15.7 million and Adjusted EBITDA by $6.7 million in 2021. While Canada and Poland operations are fully suspended, estimated net cash outflows average about $2.5 million per month; management estimated $7.0 million would be needed to reopen those properties and cover short-term cash needs.
- Management planned approximately $6.4 million of 2021 capital expenditures, subject to reassessment or deferral. It intended to continue reducing marketing and operating costs where possible. Management stated U.S. domestic cash resources were expected to cover U.S. operating activities and commitments, but noted additional capital could be needed if conditions worsen. About $20.0 million of cash was held by foreign subsidiaries and was not available for U.S. operations unless repatriated.
- The Macquarie revolving facility had $9.95 million available to borrow. Macquarie had suspended financial-covenant testing through the quarter ending September 30, 2021; the company reported compliance with applicable Macquarie covenants at March 31. CPL had breached specified mBank cash-inflow and financial covenants in Q1; in April 2021, mBank waived compliance requirements through October 31, 2021.
- Casinos Poland has non-renewable six-year licenses; the next listed expiration was September 2022. The company also disclosed potential future Polish employment-tax exposure from disputes over employee tips; additional obligations were not considered probable or estimable.
- Century Casinos reported no material change in market-risk exposure and stated its disclosure controls were effective. Forward-looking expectations remain subject to pandemic duration, closures, demand, operating restrictions and financing availability.
Important facts for investors to verify
- Reopening status, operating restrictions and actual cash requirements for the Canadian and Polish properties, compared with management’s estimates.
- Whether operations generate sufficient cash to meet debt service, VICI lease payments, reopening costs and planned capital spending.
- Compliance with Macquarie and mBank covenants after temporary waivers or suspended testing expire.
- Renewal or replacement prospects for Casinos Poland licenses, particularly the license expiring in September 2022, and the outcome of the Polish tax matters.
- How much of the reported Adjusted EBITDA improvement reflects sustainable operating performance versus the absence of the prior-year impairment charge; Adjusted EBITDA is non-GAAP.