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Come for the Action and Stay for the Fun

Peter White interviews Peter Hoetzinger, Co CEO & President, Century Casinos, Inc.

Image: Peter Hoetzinger Vice Chairman of the Board Co CEO & President alongside Erwin Haitzmann Chairman of the Board  Co CEO

What would you say are amongst the many unique aspects that make a Century Casino stand out from its competitors?

Gaming is an entertainment business and we strive to offer the most friendly and fun guest experience in the market. That is the foundation of our continued success and it is always great to see that we are recognized for that. Our Century Casino & Hotel in Central City, Colorado, has been voted Denver’s Best Casino for the third year in a row. Our slogan ‘Come for the Action and Stay for the Fun!’ says it best.

A Century Casino is known for its special hospitality and outstanding staff. We promote fun with our employees and it flows throughout the casino; when the staff has fun – the guests have fun; we are like family to our guests and players and they love coming to Century Casino.

Century Casinos feature the latest and loosest slots and video poker in a warm inviting and easily accessible gaming layout. The table action is located in more intimate rooms separated from the slot floor where you can enjoy popular table games with dealers who create a fun experience unlike any in the market. Many of our guests create friendships while playing, which to them is as valuable as winning.

Also, guests rave about our food. Many come to a Century Casino because they heard about our great food and then fall in love with the feel of the casino. Our own Mid City Grill restaurants maintain outstanding reputations for consistent food quality and great value and selection. Most of our properties have small “boutique style” hotels, a quiet escape yet close to the gaming action.

Most importantly, Century Casinos’ player rewards and benefits are definitely some of the best in each of the markets we operate in. Daily and monthly promotions are always fun and offer great pay-outs and paybacks.

Can you explain a little more about how Century Casinos has evolved over recent years?

Erwin Haitzmann and myself formed Century Casinos, Inc. in 1992 as an international casino entertainment company with the goal to develop and operate casino resorts in well-regulated markets worldwide.

We have a great management team – you’ll hardly find another that has developed and operated more casinos worldwide. Our international focus and our casino locations, including the ones on luxury cruise vessels, make us a very attractive employer. In total, we have 1,800 employees from 32 different nationalities, of whom 51% are female. The international experience and diversity of our people enable us to cater specifically to each local and tourist market, giving all our casino resorts that special, local flavor and character.

Today, we own and/or manage 30 casinos in Canada, USA, Caribbean, Argentina, Eastern Europe and on-board luxury cruise ships, offering a wide variety of 230 popular gaming tables and over 4,500 gaming machines, hotels, restaurants, bars, show-lounges, sports and concert venues, a comedy club and even a horse race track.

Due to their convenient locations, the variety of offerings and our focus on personal service, our casinos enjoy a very high proportion of repeat visitation – more than 70% of our customers are repeat customers and members of our loyalty club! Besides the very important loyalty factor, this also allows for efficient direct and personalized marketing and promotions programs.

We have generated a compound annual growth rate of revenues of 20% since 1992. The shares of our company have been traded on the NASDAQ Capital Market since 1994 under the ticker symbol “CNTY”.

Did your newest property, the Racetrack and Casino in Calgary, Canada, get off to a good start?

Our newest property, and our third major casino investment in Canada, the Century Downs Racetrack and Casino in Calgary, opened in April this year. We have been anticipating the opening with great excitement and, so far, this new property does not disappoint at all – it is holding up to our high expectations really well.

On a total investment of approx. CAN 27 million, adjusted EBITDA for the quarter was CAN 2.9 million and the EBITDA margin was 43% in just its first quarter of operation! The casino – as most new casinos do – will ramp up further over the next few quarters. The results are very, very encouraging and confirm our vision that Century Downs Racetrack and Casino will become one of the leading operations in our entire portfolio of casinos.

Century Downs is the only horse race track in the greater Calgary area. The racing entertainment center includes a casino with 550 slots, seven video lottery terminals as well as food and beverage and off-track betting facilities. Its location offers huge potential in the years to come; situated just north of Calgary, adjacent to the successful Cross Iron Mills regional shopping mall that attracts 12 million visitors annually, it has direct off-ramp access from the major highway connecting Calgary and Edmonton, the busiest highway in Western Canada.

In general, Alberta provides an excellent regulatory and economic environment for our casino investments:

• over the past ten years, Alberta’s population has increased by 27% to over four million, the fastest growth rate of any Canadian province;

• the median income is 24% above Canada’s national average;

• Alberta has one of the lowest unemployment rates in all of Canada;

• Albertans show an above average propensity to gamble relative to the rest of Canada; and

• the number of casino licenses is limited.

In addition to our three casinos in Alberta (two in Calgary and one in Edmonton), we have also entered the off-track betting business. In May of this year, our 75%-owned subsidiary, Century Bets!, started to operate the pari-mutual off-track betting network and already generated significant revenue and EBITDA for us. Through Century Bets!, we have agreements with close to 100 racetracks throughout North America and world-wide for the sourcing of common pool pari-mutuel wagering content. And we have contracts with 14 off-track betting parlors in Southern Alberta – we are providing pari-mutuel wagering content and live video to them. In return, we retain the handle from all bets placed on horse races, minus commissions, fees and expenses. We are very pleased with the initial success of this venture.

Are there plans for Century Casinos to expand into other regions with land-based casinos?

We see substantial organic growth at our larger properties in the USA and Canada, as well as in Poland. Our focus for new projects (green field developments) lies in Asia and South America. Japan is a market we are particularly interested in, as our operating model and stimulus for international tourism seems very well suited for that market. Regarding the potential acquisition of existing casinos, we tend to favour the regional Canadian and US markets.

Because our casinos also help stimulate tourism by providing additional entertainment options and by marketing and promoting a specific market or region to our best customers at all our other casinos around the world and on the luxury cruise ships, we get a lot of proposals and projects on our table.

Erwin and I are fast decision makers and we strive to grow our business worldwide and look to continue our financial success by:

• offering our guests excellent customer service and the latest exciting casino entertainment;

• focusing on employee development and creating a positive work environment;

• adding value to the local communities through responsible operations, employment and development of business associate relationships; and

• actively pursuing the development of new gaming opportunities and reinvesting in the success of our existing operations.

And on the Seven Seas?

Operating casinos on luxury cruise vessels is an exciting niche and we are the market leaders in that niche. Currently, it accounts for about five percent of Century Casinos’ overall business and we plan to add another one or two cruise ship casinos next year.

Do you think the style and format of land-based Casinos are likely to change in the future due to the rise of online gaming through the internet and smart phone app’s?

As the land-based casino industry has grown over the last decades, it has become more than simply an entertainment past time: the casino industry has emerged as an economic mainstay in many communities and plays an increasingly prominent role in state and regional economies. Casino gaming creates jobs and reduces the level of unemployment and government assistance in communities that have legalized it and certainly has net economic benefits for economically depressed communities. Studies in the US show that those communities closest to casinos experienced a sizeable drop in welfare payments, unemployment rates and unemployment insurance. All this results in casino gaming becoming legalized and regulated in many countries that don’t have it yet, which is great for an international growth company such as ours. You don’t necessarily see all these benefits with virtual, online casinos.

By now, most industry experts believe that online casinos would enhance business at land-based casinos instead of cannibalizing it. Land based casinos were concerned online poker would take a lot of customers, but what has been found was (that) it actually brought people into the poker rooms of land-based casinos.

Technology plays such an important part in our lives and it has certainly affected our leisure time. How has it affected the offering within your casinos?

Emerging technologies are continuing to change all aspects of casino operations, creating exciting opportunities. In Marketing they opened up new marketing channels via social media (Facebook, Twitter, YouTube, mobile devices) as well as social and online gaming. Advertising and promotions inside the casinos are fully digital now, as well as the point of sales displays. On the casino floor, we see slot machines with stunning capabilities (huge, curved screens, impressive sound, 3D content, etc.), the capabilities of electronic live games continuously enhancing as well. Interestingly enough and certainly depending on the demographics we target, we experience that traditional mail still works better in many markets as opposed to emails, when it comes to drawing customers back to our casinos.

Does Century Casinos provide opportunity for manufactures and suppliers to trial their new games, in events where your GM’s and Table Games management can see the games in action and where the public are able also to play (perhaps not with real chips) and also participate in providing feedback?

Trial of slot machines and new table games has been an integral part of our operating strategy for many years. Typically, in a land-based casino, this will need to be pre-approved by the gaming commission in charge of the gaming market. Trials are time limited and pending on the feedback received, they will convert to permanent offerings or disappear. Unlike most other casino companies, we also have the opportunity to try and test new games in our cruise ship casinos in international waters on a quick and uncomplicated basis.

How has Century Casinos developed over the years its ways of providing promotions and incentives to its customers in this digital world of Facebook & Twitter?

Facebook and Twitter are integral parts of our marketing strategy. We communicate upcoming promotions and events. At the same time we are receiving valuable feedback. We commit dedicated time and resources to social media, as participants always expect quick responses to any issue raised through social media.

Q2 2015 financial results have just been published; can you provide the details on how the first half of this year has been for the corporation?

What a great first half of 2015 for Century Casinos! Already the first quarter showed excellent growth with adjusted EBITDA up 72% – and now this great second quarter. Net operating revenue was up another 20% and we more than doubled our adjusted EBITDA, which was up 116% compared to the second quarter a year ago.

But the true operational performance was even stronger: excluding exchange rate swings, on a constant currency basis, net operating revenue was up 34% and adjusted EBITDA actually was up 144%. Net Earnings for the quarter came in at $6.6 million, or 27 cents per share.

Congratulations to the entire Century Casinos team for delivering an excellent performance at pretty much all properties and at all levels.

The results generated by each region, as part of our total consolidated results, are as follows:

Canada is now our strongest market by all measures – it generated 35% of our total Revenues and 57% of EBITDA, Poland remains very solid and growing, generating 34% of our Revenues and 21% of EBITDA, closely followed by our operations in the US, which contributed 19% of Revenues and 20% of EBITDA.

Our balance sheet continues to be clean, strong and in very good shape, with a ratio between Net Debt and adjusted EBITDA of just 0.9. The book value per share increased to $5.05 as of June 30.

That great operational performance, coupled with our healthy balance sheet, puts us in a great position to continue the pursuit of new development and acquisition opportunities worldwide.