Shareholders question Century Casinos' profitability during conference call
A Raucous Earnings Call
The usual polished demeanor of a quarterly earnings call was shattered on Thursday, as two disgruntled shareholders of Century Casinos took the stage to voice their concerns. These investors didn't mince words, launching a barrage of criticism at the company's management over their business decisions during the March 13 call.
One investor, going by the name of Mike, expressed his frustration, "I've seen the stock go down. Very rarely does it go up." He questioned whether it was the right time for a fresh face as CEO who deeply understands the American market. "It's a string of disappointments, quarter after quarter. There's no sense of hope that this company can turn things around," he bluntly stated.
Driven by anger, Mike advocated for the immediate divestment of the company's Polish and Canadian assets and a refocus on United States properties, labeling the current holdings as unnecessary "nonsense." Surprised by the intensity of the commentary, Century executives responded that they were indeed considering divestiture.
Co-CEO Peter Hoetzinger attempted to clarify matters, admitting that the overseas real estate had been sold, and a withdrawal from Canada was "under serious consideration." However, exiting Poland proved to be more challenging due to a joint-ownership agreement. He also highlighted that the war in Ukraine had hurt business, but a new casino in Wroclaw was now gaining momentum. Sadly, the Cracow casino had to close after the license renewal was denied.
The second investor, referred to as J.T., suggested that it would be beneficial if shareholders witnessed strong insider buying of the stock. In response, Co-CEO Erwin Haitzmann explained that it was an attractive idea, but insider trading laws and regulations created restrictions.
Earlier, Hoetzinger informed Wall Street analysts that Century's underlying fundamentals remained relatively stable, particularly the upper-tier customers who were spending slightly more.
Hoetzinger outlined the impressive performance of the Century Caruthersville, with 27% growth in revenue and 32% higher cash flow since re-opening. While February had seen a 47% and 64% surge in revenue and cash flow respectively, these figures narrowed to 12% and 12% in February, with revenue still up 20% in March. The growth was primarily driven by high-end customers, as Century Caruthersville was attracting patrons from 70 miles away, expanding its customer base as planned.
Hoetzinger foreseen "further margin improvements over time" and shared that they were actively investing in property upgrades to enhance their reach. The expanded Century Cape Girardeau was also showing steady growth in revenue and occupancy, bringing in a fresh and diverse group of players, some from 75 miles distant.
Hoetzinger acknowledged minimal concerns about Alberta tariffs and slot bans affecting Canadian casinos, anticipating only a one percent dent in business. He emphasized that their offerings provided a refreshing alternative.
With Missouri sports betting in the public comment phase, Hoetzinger revealed that discussions were underway with a potential operator, but it was still unclear how many licenses they would secure. He mentioned that they expected to take a revenue percentage from a third-party operator instead of managing sports wagering themselves.
In Colorado, Hoetzmann admitted to seeing "significantly different results" than in Missouri, with carded play up 12% but uncarded play declining. He speculated that it could be due to casual, uncarded play moving to nearby rival Chamonix, but admitted there was no solid data to back that claim. Century has responded by improving access to their Cripple Creek property, designing a more grand entrance that faces Chamonix.
Other challenges in the Rocky Mountain State included the departure of two sports betting partners, Circa Sports and Tipico. West Virginia and Maryland had experienced a tough quarter, with revenue dropping seven percent. Upper-crust play had risen one percent, but lower-end gamblers were visiting less frequently.
At Maryland's Rocky Gap Resort, casino play was down, but all other income centers were reporting increases. Century was attempting to cut costs by 18% at Rocky Gap. In West Virginia, carded play remained unchanged, while uncarded play dropped 10% on weekdays, particularly during the weekdays. The company was trying various incentives to encourage midweek play, with mixed results.
Century's Nevada operations struggled due to low slot holds, resulting in reduced revenues by 10%. However, the company noted an increase in younger players and had made cuts in staffing, overtime, and F&B comps. Hoetzinger expected double-digit cash-flow growth in 2025.
Responding to a question about allocation of capital, Hoetzinger voiced uncertainty due to unpredictable consumer sentiment. Retiring debt seemed beneficial but was put on hold due to economic uncertainties. Hoetzinger reported running numerous economic scenarios, but revealed that they weren't yet clear about the future.
In conclusion, the earnings call was marked by investors' frustration about the company's performance and financial health. While specific details for Q1 2023 were unavailable, general fears encompassed financial performance, market competition, economic factors, and regulatory challenges. Companies like Century Casinos might employ strategies such as operational improvements, adapting to market changes, diversifying revenue streams, and financial management to alleviate these concerns.
- The frustrated investor, Mike, suggested a refocus on United States properties in the American market, as a means to turn around Century Casinos' business Finance.
- In the midst of growing concern over Century Casinos' financial health, Co-CEO Erwin Haitzmann recognized the attractiveness of strong insider buying in sports, abiding by insider trading laws and regulations.
