Executive Summary / Key Takeaways

• Century Casinos is transitioning from an intense capital expenditure cycle to a phase focused on cash flow generation and deleveraging, leveraging significant recent investments in its North American portfolio like the new Caruthersville land-based casino and Cape Girardeau hotel.
• Despite facing macroeconomic headwinds impacting the low-end consumer and specific market challenges (weather, sports betting loss, competition), the company's operational improvements and strategic initiatives are expected to drive significant EBITDA and free cash flow growth in 2025.
• Management projects 2025 Adjusted EBITDAR between $150 million and $160 million and anticipates generating positive free cash flow of $25 million to $30 million, supported by sharply reduced capital expenditures ($16 million estimated for 2025).
• The company is actively pursuing the divestiture of its Polish operations to simplify the business and provide capital flexibility, while also planning opportunistic share buybacks given the current stock valuation.
• Key factors to watch include the ramp-up performance of the new Caruthersville facility, the stabilization of consumer spending (particularly the low-end segment), and the execution of cost control and marketing initiatives across the portfolio.

A New Chapter for Century Casinos: From Investment to Return

Century Casinos, Inc. (NASDAQ: CNTY) stands at a pivotal juncture, concluding a multi-year period of significant capital investment and strategic acquisitions to embark on a phase aimed squarely at unlocking value through enhanced operational performance, robust cash flow generation, and balance sheet strengthening. Founded in 1992, CNTY has grown into a diverse casino entertainment company with operations spanning North America and Poland. Its history reflects a shift from ground-up development to strategic acquisitions of existing properties, notably the 2019 purchase of three casinos from Eldorado (now Caesars (CZR)) and the subsequent acquisitions of the Nugget Casino Resort in Nevada (2022), Rocky Gap in Maryland (2023), and the Canadian Portfolio (2023). These later acquisitions, particularly those integrated into the Master Lease agreement with VICI Properties (VICI), have reshaped CNTY's operational footprint and financial structure, positioning the company for a new era.

CNTY operates within a highly competitive global gaming landscape, facing off against industry giants like Caesars Entertainment, MGM Resorts International (MGM), Wynn Resorts (WYNN), and Boyd Gaming Corporation (BYD), as well as regional and niche players. While larger competitors often boast greater scale, extensive loyalty programs, and more advanced digital platforms, CNTY has carved out a position focused on regional and mid-market properties. Its strategic approach has centered on identifying value in potentially undermanaged assets and implementing operational improvements and facility upgrades to drive performance.

While CNTY may not highlight proprietary core technology in the same vein as a tech company, its strategic investments have focused on enhancing the physical and operational aspects of its properties to create competitive differentiators and improve the customer experience. Recent initiatives include:

• Facility Upgrades: Significant investments in properties like the Nugget have included upgrading the slot floor with over 120 new machines, refreshing restaurants, repainting exteriors, and enhancing signage and display packages. These improvements aim to modernize the guest environment and directly impact gaming revenue and customer satisfaction.
• New Amenities: The addition of hotels at Cape Girardeau (69 rooms) and Caruthersville (38 rooms, doubling capacity) and enhancements like a beach access area at Rocky Gap are designed to expand the company's catchment area, attract new customer segments (including multi-night stays), and drive ancillary revenue from lodging and food & beverage.
• Operational Efficiency Enhancements: The transition to a new land-based casino in Caruthersville offers significantly more efficient operations compared to the old riverboat and temporary location, with a nearly 50% increase in gaming positions. Similarly, the elimination of table games at Colorado properties is projected to yield expense savings close to $1 million annually, expected to offset revenue decreases.
• Marketing and Loyalty Programs: Initiatives like revamping database offers and implementing new loyalty programs (e.g., Winners' Zone at the Nugget) are crucial for driving visitation, increasing spend per trip, and fostering customer loyalty, directly competing with the sophisticated programs of larger rivals.
• Entertainment and Events: Actively working to increase the schedule of concerts and special events at properties like the Nugget is a direct strategy to boost visitation and revenue, leveraging existing facilities like the outdoor venue.

The "so what" for investors is that these investments and operational adjustments are intended to be the engine of future growth and profitability. While not "technology" in the digital sense where larger players like MGM or CZR may have advantages in areas like online user acquisition costs or platform speed, CNTY's focus on tangible property enhancements and operational fine-tuning represents its core strategy to improve the guest experience, increase capacity, and enhance efficiency within its specific market segments. The success of these initiatives, measured by metrics like increased visitation, higher spend per trip, improved margins, and ultimately, cash flow generation, is central to the investment thesis.

Performance Under Pressure: Macro Headwinds and Transitional Impacts

The first quarter of 2025 provided a snapshot of CNTY's performance amidst ongoing macroeconomic pressures and the tail end of its transitional period. Net operating revenue for the three months ended March 31, 2025, decreased by 4.1% to $130.4 million compared to $136.0 million in the prior year period. This decline was felt across all segments: United States (down 2.9%), Canada (down 9.9%), and Poland (down 4.7%). Adjusted EBITDAR also saw a decrease of 5.2% to $20.2 million from $21.3 million year-over-year.

Management attributed the Q1 2025 performance challenges primarily to external factors, including significantly more severe weather across North America, one less operating day compared to Q1 2024 (a leap year effect), and the loss of two-thirds of the sports betting income in Colorado following the cancellation of two agreements in 2024. These headwinds were estimated to have impacted Q1 2025 EBITDAR by around $2 million compared to Q1 2024. Despite these pressures, the company managed to maintain its operating margin consistent with the prior year quarter.

A closer look at the monthly trends within Q1 2025 reveals a positive trajectory emerging from the weather-impacted start. January saw EBITDAR of $3 million, February improved to $6.5 million, and March delivered a solid $10.5 million, representing an 8% increase over March 2024. This trend continued into April 2025, with initial estimates showing a 5% increase in EBITDAR year-over-year. Management is encouraged by these recent trends, noting improvements in consumer behavior and spending patterns since mid-March.

Segment-specific performance highlights the impact of recent investments and market dynamics:

• United States: Revenue decreased, but the new Caruthersville property, which opened in November 2024, showed promising initial results in its first full quarter of operation, with gaming revenue up 17% and visitation up 23% compared to Q1 2024. The facility is currently operating at a 43% EBITDAR margin, with management expecting further improvement as operations are optimized. The Cape Girardeau hotel, opened in April 2024, continues to ramp up, driving visitation and F&B sales. The Nugget in Nevada, after a challenging 2024, turned EBITDAR positive in Q1 2025 due to cost-cutting measures, with management focusing on increasing group/convention sales and leveraging a new loyalty program. Colorado properties faced headwinds from weather, sports betting loss, and construction, but the elimination of table games is expected to yield cost savings.
• Canada: Revenue and EBITDAR decreased, impacted by weather, the shorter quarter, and FX headwinds (6.5% decrease in CAD/USD average rate). Lower table hold also contributed to the revenue decline. Management views Canada as performing "all right," with Q2 2025 starting flattish. Potential competition near Century Mile and the ongoing process around online gaming legalization are factors to monitor.
• Poland: Revenue and EBITDAR comparisons are distorted by casino closures related to the non-renewable licensing process. While some licenses were not re-awarded, key casinos have reopened, including a significant one in Wroclaw in October 2024. Management expects Poland to return to a normal annual EBITDAR run rate of $10 million to $12 million. The process to divest the Polish operations is ongoing, with renewed interest from potential buyers.

Overall, the recent financial performance reflects a company navigating a challenging external environment while simultaneously absorbing the initial impacts and costs associated with bringing major new investments online. The sequential improvement within Q1 2025 and the positive start to Q2 suggest that the benefits of these investments are beginning to materialize, albeit against a backdrop of volatile consumer spending, particularly among lower-tier customers.

Strategic Path Forward: Cash Flow, Deleveraging, and Portfolio Optimization

With the bulk of its major capital projects completed, Century Casinos is now firmly focused on leveraging its enhanced asset base to drive cash flow and strengthen its financial position. The company's balance sheet as of March 31, 2025, shows cash and cash equivalents of $84.7 million, down from $98.8 million at the end of 2024, reflecting continued investment activities in Q1. Total principal debt outstanding was $339.6 million. Net Debt stood at $254.9 million, an increase from $205.5 million a year prior, primarily due to decreased cash holdings. This resulted in elevated leverage ratios, which management expects to decrease significantly towards the end of 2025, targeting well below 6x Net Debt to EBITDA and well below 7x lease-adjusted.

A key driver of this expected improvement is the projected sharp reduction in capital expenditures. After investing approximately €110 million across the portfolio in recent years (including VICI funding), CNTY estimates remaining CapEx for 2025 at approximately $16 million, including $1.8 million for growth projects and the remainder for maintenance. This dramatic decrease in CapEx, combined with the anticipated revenue growth and operational efficiencies from the new and improved facilities, is expected to translate into a substantial increase in free cash flow. Management projects positive free cash flow generation of $25 million to $30 million in 2025, a significant shift from recent periods of negative cash flow.

The Master Lease with VICI Properties represents a significant financing obligation, with interest expense of $16.4 million in Q1 2025. Cash payments under the lease, including CPI escalators, were $14.3 million in Q1 2025. The deferred $4.2 million in additional annual rent from the Caruthersville project will begin to be paid over a six-month period starting in December 2025. The Goldman (GS) Term Loan, with an outstanding balance of $336.0 million and a weighted average interest rate of 10.43% in Q1 2025, is a focus for potential repricing or refinancing when market conditions are favorable.

Portfolio optimization remains a strategic priority. The company is committed to divesting its majority stake in Casinos Poland. While the process has faced delays, management reports renewed interest and ongoing discussions with the minority partner for a potential 100% sale, aiming to complete it within the coming months. The possibility of divesting Canadian operations is also under consideration as they become a smaller part of the overall business. These divestitures would simplify the company's structure and provide additional capital for deleveraging or other strategic uses.

With a solid cash position ($84.7 million, though $41.7 million is held by foreign subsidiaries) and no debt maturities until 2029, CNTY has flexibility in its capital allocation. Management plans to balance debt reduction with opportunistic share buybacks, viewing the company's stock as an attractive investment at current valuations.

Risks and Challenges on the Horizon

Despite the optimistic outlook for cash flow and deleveraging, Century Casinos faces several pertinent risks. The most immediate challenge is the continued volatility and weakness in consumer spending, particularly among the lower-end demographic that constitutes a significant portion of the customer base at properties like Mountaineer, Rocky Gap, and Central City. Macroeconomic factors such as inflation, interest rates, and general economic uncertainty could continue to suppress discretionary spending, potentially impacting the ramp-up trajectory of new facilities and overall revenue growth.

Competition remains intense across all markets. In Colorado, the new Chamonix hotel may impact uncarded play at Cripple Creek. In Canada, a competitor's potential relocation near Century Mile poses a future risk. The growth of iGaming in states like Pennsylvania and West Virginia could continue to draw away unrated play from land-based casinos like Rocky Gap. CNTY's smaller scale and potentially slower pace of digital innovation compared to larger rivals like CZR and MGM could put it at a disadvantage in attracting and retaining certain customer segments.

Operational risks include successfully optimizing staffing and operations at the new Caruthersville facility to achieve target margins, managing potential disruptions from remaining CapEx (like elevator upgrades at the Nugget), and effectively executing marketing and loyalty programs to drive visitation and spend in competitive markets.

In Poland, the non-renewable nature of gaming licenses introduces uncertainty, as obtaining new licenses before expiration is not guaranteed, potentially leading to future closures and revenue loss, although core licenses have been secured recently. Access to and cost of future financing could be impacted by global economic conditions and credit market availability, although the company currently has no near-term debt maturities and some revolver capacity.

Conclusion

Century Casinos is navigating a critical transition, moving past a period of significant investment and disruption towards one focused on realizing the benefits of its enhanced asset base. The successful opening of the new Caruthersville land-based casino and the Cape Girardeau hotel, coupled with operational improvements across the portfolio and a sharp reduction in future capital expenditures, lay the groundwork for substantial improvements in Adjusted EBITDAR and free cash flow in 2025.

While macroeconomic headwinds and competitive pressures, particularly impacting the low-end consumer and requiring continuous operational vigilance, present ongoing challenges, management's guidance signals confidence in the company's trajectory. The strategic focus on cash generation, deleveraging, and potential portfolio optimization through the Poland divestiture aims to strengthen the balance sheet and enhance shareholder value. For investors, the story hinges on CNTY's ability to execute on its operational efficiency initiatives, successfully ramp up its new facilities, and demonstrate resilience in a dynamic consumer environment, translating its recent investments into sustainable profitability and cash flow growth.