Business Overview and History

Century Casinos Inc (CNTY), a leading casino entertainment company, has demonstrated resilience and adaptability amidst a dynamic industry landscape. With a diverse portfolio of gaming and hospitality operations across North America and Europe, Century Casinos has navigated through various challenges, emerging as a stronger and more focused organization.

Incorporated in 1992, Century Casinos has steadily expanded its footprint over the past three decades. The company began operations in 1996 with the acquisition of a casino in Cripple Creek, Colorado. In 2006, the company opened casinos in Central City, Colorado, and Alberta, Canada, followed by the acquisition of a 33.3% ownership interest in Casinos Poland Ltd. (CPL) in 2007. In 2013, Century Casinos increased its stake in CPL to 66.6%, securing a majority ownership.

Between 2015 and 2019, the company further expanded its presence in Alberta, Canada, by acquiring an additional casino and developing two racing and entertainment centers. A significant milestone came in December 2019 when Century Casinos added three properties to its United States portfolio through the 2019 Acquisition, which included two casinos in Missouri and one in West Virginia. This acquisition was accompanied by a triple net lease agreement, the Master Lease, with subsidiaries of VICI Properties Inc. for the real estate assets.

In 2022, Century Casinos acquired a 50% equity interest in Smooth Bourbon LLC, which leases the land and building for the Nugget Casino Resort in Reno-Sparks, Nevada. The company further expanded its operations in 2023 by acquiring the Nugget Casino Resort and Rocky Gap Casino, Resort & Golf in Flintstone, Maryland.

Throughout its history, Century Casinos has faced various challenges, including navigating changing gaming regulations in different jurisdictions, the impact of the COVID-19 pandemic, and competition from new gaming facilities in its markets. Despite these obstacles, the company has consistently grown its operations through strategic acquisitions and development projects while managing its debt and lease obligations.

Financial Snapshot

For the fiscal year 2024, Century Casinos reported revenue of $575.92 million, a 4.7% increase from the previous year's $550.21 million. However, the company's net loss attributable to shareholders widened to $128.17 million, compared to a net loss of $28.20 million in 2023. This was primarily due to a $43.72 million goodwill impairment charge related to the Nugget Casino Resort in Nevada.

The company's quarterly performance has been mixed, with Q4 2024 revenue declining 4% year-over-year to $137.8 million, and adjusted EBITDAR decreasing 17% to $21.1 million. The weaker results were largely attributable to macroeconomic headwinds and inflationary pressures impacting the lower-end consumer segment.

Century Casinos' annual operating cash flow for 2024 was -$3.30 million, with annual free cash flow at -$64.29 million. The company's debt-to-equity ratio stood at -114.31 as of December 31, 2024, reflecting the impact of recent acquisitions and investments on its balance sheet.

Operational Highlights and Challenges

Despite the challenging industry conditions, Century Casinos has demonstrated operational resilience. The company's disciplined approach to cost management and capital allocation has helped mitigate the impact of macroeconomic pressures.

One of the company's notable achievements in 2024 was the successful opening of the new land-based casino and hotel in Caruthersville, Missouri. The $51.9 million project, funded through a partnership with VICI Properties, has exceeded initial expectations, with revenue and EBITDA up 27% and 32%, respectively, since its November 2024 debut.

Meanwhile, the company's other Missouri property, Century Casino Hotel Cape Girardeau, also performed well, with revenue and EBITDA increasing 11% and 7%, respectively, driven by the ramp-up of the new hotel.

However, the company's East segment, which includes the Mountaineer Casino in West Virginia and the Rocky Gap Casino Resort in Maryland, faced more significant challenges. Revenue for the segment declined 7%, and EBITDA fell 29%, as these properties have a higher exposure to the lower-end consumer segment.

The company's West segment, anchored by the Nugget Casino Resort in Nevada, also experienced a 10% decline in gaming revenue, though disciplined cost management led to a 46% increase in EBITDAR.

Geographical Diversification and Growth Initiatives

Century Casinos' geographic diversification has been a key strategic advantage, providing a buffer against regional economic fluctuations. The company's operations span three reportable segments: United States, Canada, and Poland.

In the United States, the company's Midwest and West segments have shown resilience, offsetting the challenges faced in the East segment. The company's focus on improving operational efficiency and capitalizing on growth opportunities, such as the successful Caruthersville project, demonstrate its ability to adapt to changing market conditions.

In Canada, the company's casinos have faced some headwinds, with revenue and EBITDA declining 7% and 17%, respectively, in the fourth quarter. The company is closely monitoring the competitive landscape and regulatory developments in the region, particularly the potential legalization of online gaming and sports betting.

In Poland, the company's Casinos Poland subsidiary has experienced disruptions due to licensing delays, leading to the temporary closure of several locations. The company remains committed to the Polish market and is actively engaged in discussions with its minority partner to find a resolution.

Financials

Century Casinos' financial performance in 2024 reflects the challenges faced by the company in various markets. While overall revenue increased, the company experienced a significant net loss due to the goodwill impairment charge related to the Nugget Casino Resort. The company's ability to manage costs and optimize operations in the face of macroeconomic pressures will be crucial for improving its financial position in the coming years.

The United States segment was the largest contributor to the company's revenue, generating $419.67 million in net operating revenue in 2024, representing 72.8% of the company's total. The Canada segment contributed $76.32 million (13.2%), while the Poland segment generated $79.90 million (13.9%).

Gaming revenue remains the primary driver across all segments, with the United States segment generating $293.70 million in gaming revenue, followed by hotel revenue at $47.67 million, and food and beverage revenue at $45.55 million.

Liquidity

The company's liquidity position remains an important focus area, given the ongoing investments in property improvements and potential future growth initiatives. Century Casinos' management team continues to closely monitor cash flow and debt levels to ensure sufficient liquidity for operations and strategic investments.

As of December 31, 2024, the company had $98.77 million in cash and cash equivalents. Century Casinos also maintains a $30 million revolving credit facility, which remained undrawn at the end of 2024. The company's current ratio stood at 1.58, and its quick ratio was 1.53, indicating a relatively stable short-term liquidity position.

Looking Ahead

As Century Casinos navigates the evolving industry landscape, the company's focus on disciplined execution, operational optimization, and strategic growth initiatives positions it well for the future. The successful opening of the Caruthersville casino and the ramp-up of the Cape Girardeau hotel demonstrate the company's ability to capitalize on opportunities and drive shareholder value.

However, the company continues to face macroeconomic headwinds, particularly the impact on the lower-end consumer segment. The company's management team remains vigilant in monitoring market conditions and implementing cost-saving measures to mitigate the effects of these challenges.

While Century Casinos has not provided explicit numerical guidance for the current or future periods, management has expressed a positive outlook for 2025 and beyond. The company expects significant EBITDA and cash flow improvements in 2025 compared to the previous year, citing the returns from recent growth capital initiatives. Additionally, the company anticipates easier comparisons for most of the current year due to the absence of renovation disruptions experienced in the previous year.

Furthermore, the company's geographic diversification and ongoing investments in its property portfolio provide a solid foundation for long-term growth. As Century Casinos continues to execute its strategic plan, investors will be keen to see the company's ability to navigate the dynamic industry landscape and deliver sustainable financial performance.