Century Casinos, Inc. — FY2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022. Although the request identifies 2022 Q4, this filing reports full-year results; it does not provide a clear standalone Q4 income statement. Century Casinos operates gaming, lodging, food and beverage, racing and related businesses in the United States, Canada and Poland.
Financial performance
| Metric | FY2022 | FY2021 |
|---|---|---|
| Net operating revenue | $430.5 million | $388.5 million |
| Earnings from operations | $67.6 million | $68.5 million |
| Net earnings attributable to Century shareholders | $8.0 million | $20.6 million |
| Diluted earnings per share | $0.25 | $0.66 |
| Adjusted EBITDA (non-GAAP) | $103.3 million | $97.9 million |
| Cash provided by operating activities | $37.4 million | $59.2 million |
Revenue rose 10.8%. Gaming revenue was $366.0 million; food and beverage revenue was $24.1 million, pari-mutuel, sports betting and iGaming revenue was $19.6 million, and hotel revenue was $9.6 million. Operating costs increased 14.4% to $366.2 million. Interest expense increased to $65.8 million from $42.8 million, including a $7.3 million write-off of deferred financing costs following refinancing. A $7.7 million income tax benefit, including release of a $10.2 million U.S. valuation allowance, supported net earnings.
By segment, U.S. revenue declined 5.2% to $268.6 million and Adjusted EBITDA fell to $80.3 million from $95.8 million. Canada revenue increased 54.2% to $71.6 million and Adjusted EBITDA increased to $18.4 million from $9.5 million. Poland revenue increased 54.9% to $90.2 million and Adjusted EBITDA increased to $11.9 million from $2.6 million. Foreign-exchange movements, particularly the weaker Polish zloty against the U.S. dollar, affected translated results.
Liquidity, debt and capital
- Cash and cash equivalents were $101.8 million at year-end, versus $107.8 million a year earlier. An additional $100.2 million of restricted cash was held in escrow for the pending Nugget operating-company acquisition.
- Net cash used in investing activities was $103.1 million, primarily reflecting the $95.0 million purchase of a 50% interest in Nugget’s real-estate company and property investment. Financing activities provided $161.2 million.
- Year-end debt principal was $366.4 million, before $16.8 million of deferred financing costs; reported debt net of those costs was $349.6 million. Net Debt, as defined by the company, was $264.6 million, up from $81.4 million.
- The $350 million Goldman Sachs term loan carries variable-rate exposure; management estimated a one-percentage-point rate change would alter annual cash interest by about $3.5 million. The $30 million revolver was undrawn and available at year-end. The term loan matures in 2029.
- The VICI master-lease financing obligation was $284.9 million. Scheduled 2023 master-lease rent payments were approximately $27.5 million; the arrangement is triple-net and includes rent escalations and capital-improvement requirements.
Material changes and developments
- Overall revenue growth was driven by recovery in Canada and Poland as restrictions eased. U.S. revenue declined, particularly in Missouri, where the company cited the end of stimulus-related demand, economic and inflationary pressures, staffing constraints and Caruthersville operating disruption.
- Caruthersville’s riverboat became inaccessible during record-low Mississippi River water levels. The casino relocated to a protected temporary land-based pavilion in December 2022. Management reported no negative impact after the move and a positive customer response.
- The company acquired 50% of Smooth Bourbon, which owns Nugget Casino Resort real estate, for approximately $95 million. The separate approximately $100 million purchase of Nugget operations was pending Nevada regulatory approval and expected to close in Q2 2023.
- The company agreed to acquire Rocky Gap casino operations for approximately $56.1 million, expected to close in Q2 2023. VICI was to acquire the real estate, with Rocky Gap added to the master lease and initial annual rent of approximately $15.5 million.
- Construction began on a new Caruthersville casino and hotel, estimated at $51.9 million and expected to open in late 2024. A Cape Girardeau hotel project was estimated at $30.5 million, with completion expected in the first half of 2024. The renovated 36-room Farmstead hotel in Caruthersville opened in October 2022.
Outlook, risks and unusual items
The filing gives no formal company-wide revenue or earnings guidance. Management expected the temporary Alberta casino-retention increase—from 15% to 17% of slot-machine net sales, effective April 2023 through March 2025—to benefit Canadian results. Planned 2023 capital expenditures included approximately $18.2 million for gaming equipment and property renovations, in addition to ongoing development projects.
Key risks include sensitivity to discretionary consumer spending, intense local competition, staffing availability, construction cost and schedule uncertainty, gaming-license approvals and renewals, and concentration in Missouri and West Virginia, which generated 52% of revenue and 68% of earnings from operations in 2022. Most debt is variable-rate, and the company is exposed to Canadian-dollar and Polish-zloty movements without hedging. Several Polish casino licenses and U.S. casino licenses were due for renewal in 2023. The company stated it had not experienced a material operating impact from the Russia-Ukraine war but warned that continued conflict could affect Poland.
Unusual items include the substantial increase in interest expense and the tax benefit from releasing the U.S. valuation allowance. The company recorded a $2.2 million loss on the Calgary land and building sale. It reported no material pending litigation expected by management to affect financial position or results. The financial-statement audit expressed an unqualified opinion; the auditor identified the St. Albert indefinite-lived intangible-asset impairment analysis as a critical audit matter. Management and the auditor reported effective internal control over financial reporting.
Investor verification priorities
- Track operating cash generation against higher interest costs, debt service and master-lease payments, and assess sensitivity to variable interest rates.
- Verify regulatory approvals, closing dates, funding and expected returns for the Nugget and Rocky Gap acquisitions.
- Monitor Missouri operating trends after Caruthersville’s relocation, as well as progress, budgets and financing for the Caruthersville and Cape Girardeau projects.
- Review renewals of 2023 U.S. and Poland gaming licenses and the continuing effect of competition, labor availability and foreign-exchange rates.
- Distinguish GAAP earnings and cash flow from Adjusted EBITDA and Net Debt, which are non-GAAP measures defined by the company.