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Joseph Jaffoni - Investor Relations Blake Sartini - Chairman, President, Chief Executive Officer Stephen Arcana - Chief Operating Officer Charles Protell - Chief Strategy and Chief Financial Officer.

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Chad Beynon - Macquarie Patrick Schultz - SunTrust John DeCree - Union Gaming.

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Presentation:.

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Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to the Golden Entertainment’s Fourth Quarter 2016 Earnings Conference Call. At this time, all participants are in a listen only mode. [Operator Instructions] Please note that this call is being recorded today March 13, 2017.

Now, I would like to turn the conference over Joe Jaffoni, Investor Relations. Please go ahead, sir..

Thank you very much Sandra, and good afternoon everyone. By now, everyone should have access to our fourth quarter, 2016 earnings release, which can be found on the company website at www.goldenent.com under the investor section.

Before we begin our formal remarks, we need to remind everyone that the discussion today will include forward looking statements within the meaning of the federal securities laws.

These forward looking statements, which are usually identified by the use of the words such as will, expect, believe, anticipate, should or other similar phrases are not guarantees of future performance.

These statements are subject to numerous risks and uncertainties that could cause actual results to differ materially from our corporate working statements and therefore, you should exercise caution in interpreting and relying on them.

We refer all of you to the risk factors in our recent SEC filings, including our most recent form 10-K as updated by our subsequent quarterly reports on form 10-Q for a more detailed discussion of the risk that could impact our future operating results and financial condition and other forward looking statements.

During today's call, we will discuss non-GAAP financial measures, which management uses and believes are useful in evaluating the company's operating performance. Financial results before August 2015 did not include the results of Sartini Gaming.

Sartini Gaming was merged with a subsidiary of the company on July 31st, 2015 and its financial results were included beginning in August 2015.

Because of the merger, management believes it is helpful to provide comparisons on an unaudited combined basis where the results of the company are combined with the pre-merger results of Sartini Gaming for the relevant period. We have provided that information in the press release issued earlier today.

The combined presentation does not conform with GAAP or the SEC's rules for pro forma presentations. These measures should not be considered in isolation or as a substitute for our financial results prepared in accordance with GAAP.

A reconciliation of these measures to the most directly comparable GAAP measure is available on our fourth quarter 2016 press release.

On the call today, we have Blake Sartini, the Company’s Chairman, President and Chief Executive Officer, Steve Arcana, the Company’s Chief Operating Officer and Charles Protell, the Company’s Chief Strategy and Chief Financial Officer. Blake and Charles will provide prepared remarks, after which, we will open the call to questions.

With that, it’s my pleasure to turn the call over Blake Sartini.

Blake?.

Thanks, Joe and good afternoon everyone. Welcome to our fourth quarter call. The fourth quarter kept off an extremely active and successful 2016 for Golden Entertainment, as we delivered record financial results across our business.

Over the course of the year we continued our strategic inspection of our distributed gaming business for two significant acquisitions in Montana and the opening of five new wholly-owned taverns in highly attractive Las Vegas locals market. Also we’ve gained additional traction with our whole scale casino operations in Nevada and Maryland.

Finally, we strengthen our senior management team with the appointment Charles Protell as Chief Strategy and Finance Officer. Charles will go through the numbers in more detail in a few minutes.

But let me first say that is deep industry and financial expertise has been a welcome addition to Golden Entertainment and will no doubt service well as we continue to pursue growth. We entered 2017 as a leading provider of distributed gaming services operating the largest footprint in Nevada and the second largest footprint in Montana.

In total we operate more than 10,000 devices in nearly 1000 locations including a growing base of wholly-owned taverns in Las Vegas.

Our strong market position is the direct result of 13 successful acquisitions completed over the past 15 years including the two key Montana acquisitions which together added approximately 2,900 gaming devices and 300 locations to our footprint in 2016.

We are a leader in negotiating, financing and integrating accretive acquisitions and the combination of our scale and leadership in both Nevada and Montana has created strong barriers to entry. Turning to our branded taverns we've been able to generate excellent returns and see no reason to slower pace of investment in new wholly owned locations.

Our locations branded SPTs, Sierra Gold and Sean Patrick's typically offer 15 gaming devices along with a quality food and beverage experience. They attract a strong mix of millennials and Gen X customers and we build a robust active customer database.

Further, a respected digital industry trade source recently work with Golden Entertainment’s mobile app and honorable mention in their annual entertainment campaign competition. They offer another tool for us to drive brand loyalty while emulating a customer’s taverns experience to increase presentation and gaining volume.

Finally, as with our third-party distributed gaming segment our dominant position in our wholly-owned tavern division was a significant barrier to entry within the Nevada restricted gaining market.

Looking at the market, Las Vegas welcome the record 42.9 million total visitors and more than 6.3 million business travelers in 2016, both signs that Las Vegas remains one of the premier tourist and business destinations in the country.

Major league sports continue to recognize Las Vegas as an attractive potential market for expansion and we are hopeful that the NFL's Raiders follow the lead of the NHL’s Golden Knights who will have their first game at T-Mobile Arena in Las Vegas later this year.

Overall, we firmly believe that our locals oriented gaming establishments provide Golden Entertainment with a substantial opportunity to benefit from continued long-term growth in the Las Vegas market.

On the casino front, our operations in Pahrump, Nevada and in Rocky Gap, Maryland, continue to benefit from an enhanced focus on cost controls, discipline management and more profitable marketing initiatives.

Additionally, all of our properties are benefiting from prudent capital investments and operates better further enhance their attractiveness thus celebrating the guest experience. I quickly like to touch on the current environment at Rock Gap. As you are all no doubt aware late 2016 a large property opened in the Washington DC market.

While it is still early, we believe Rocky Gap reserve quality offering and Western Maryland location has largely insulated us from competitive pressures posed by properties in the Baltimore and DC area.

And we have seen our business volumes remain strong in particular the states release of gross gaming revenues for the first two months of 2017 show Rocky Gap with the year-over-year gain of 11.8% in January and a 13.9% rise in February.

As we look to 2017 and beyond we believe Golden Entertainment is well-positioned to deliver another year strong results as we leverage our extended scale and more efficient operations.

In our distributed gaming business we will benefit from a full year of ownership with our Montana operations and we will also continue to aggressively expand our branded tavern business in Nevada.

Through the planned opening of seven new taverns in Nevada, the first of which will open this week, we expect the benefit from a market that continues to see positive underlying microeconomic trends with unemployment in the valley at a nine-year low, growing population levels and significant Las Vegas Strip presentation.

Our Nevada taverns are attracting a younger demographic than traditional casinos and we are effectively monetizing this patronage through our active database and target marketing. We are well-versed in identifying these sites and expect to deliver adjust EBITDA and margin growth in the year ahead.

Finally, we expect continued steady organic growth at our casinos as we further improve operations in 2017. In closing, we remain focused on further improving our existing operations while seeking expansion opportunities and current and new markets with an eye towards adding scale to our distributed gaming and casino businesses.

We believe Golden Entertainment is very well-positioned to deliver on these goals, which support our efforts to create a new long-term value for shareholders. With that, I’ll turn the call over to Charles..

Thanks, Blake. Before getting to the results, let me remind you that the fourth quarter represents the first period in which the year ago comparison also includes the full results of Sartini Gaming, which was merged with the subsidiary of the company in July 2015.

The 2015 full year financials presented in our earnings release include what we believe to be helpful comparison on an unaudited combined basis where we our results with the premerger results of Sartini Gaming. In the fourth quarter, Golden Entertainment generated record net revenues of $105.4 million, representing increase of 21.9% over last year.

Adjusted EBITDAI in the quarter was $12.2 million, up 29.1% year-over-year. For the full year net revenues were record $403.2 million, up 16.7% year-over-year, while adjusted EBITDA grew 20.2% over the prior year to a record $48.6 million.

For distributed gaming segment, net revenue during the quarter was $81.2 million, year-over-year increase of 28.3%, while adjusted EBITDA of $11.5 million with a 28.1% from a year ago, as we benefited from our two acquisitions in Montana as well as opening of five new calibers in Las Vegas.

In our Nevada distributed business, our primary focus was and remains driving financial performance by shifting our mix towards higher margin, wholly-owned tavern allocations from chain store locations.

Our existing chain store locations typically operate at a lower volume and margin levels, and we are working to manage these locations to maximize profitability. As our same store locations come up for renewal we have been aggressive in managing underperforming locations out of the portfolio and we expect this to continue over the coming years.

This will lead to increase margins that provide us with the ability to redeploy capital into a high return margin owned taverns. In 2017, we plan to open seven new tavern locations and are working to build a pipeline of potential new locations for 2018 and beyond.

In Montana, we acquired Wyoming Gaming at January 2016 and Amusement Services in April 2016, and we saw healthy growth in both businesses over the balance of the year. Today, we have approximately 70% of the overall Montana market giving us a strong platform and substantial room to expand organically and through acquisitions over time.

Finally, we are currently monitoring other potential new distributed gaming jurisdictions and our ethically pursuing the chance to expand the new markets that are considering legislation to enable our unique business model.

Moving on to the casino segment, for the quarter, net revenues were $24.1 million, a year-over-year increase of 4.3% while casino adjusted EBITDA of $5.5 million was up 13.9% over the prior year period.

In Pahrump our three-casino saw combined adjusted EBITDA growth at a rate in excessive revenue despite significant construction disruption related to recent investments in two of our three properties. We recently completed renovations at Gold Town which included the bingo room as well as addition to restaurants and liquor store.

The nugget renovations include a complete refurbishment and new bingo room and a new sports book. As a result our business volumes have responded favorably. Looking to 2017, we are targeting the slot [ph] for refresh at the nugget and expect our business to improve throughout the year particularly as the lap the construction disruption of 2016.

At Rocky Gap, demand with the property and our efforts to optimize a gaming four [ph] resulted in us increasing the number of gaming devices while he further improve the overall guest experience, the interior operates and expanded parking which is allowing us to better accommodate patrons of peak periods.

We also made several requirements to our marketing strategy as well as re-launch our royalty program at the property. These efforts allowed us to drive adjusted EBITDA and margin in 2016 and positioned us to further differentiate ourselves in a competitive market.

Looking to the year we expect the benefit from our new [Indiscernible] slot room open in December and our revised marketing efforts. In addition, legislation has been proposed in Maryland that could reduce our tax on slot revenue exchange for us purchasing the machines on our floor which are currently own by the state.

Quickly looking at our corporate and other expenses, adjusted corporate expense is up 10.3% year-over-year in the fourth quarter to $4.8 million. This has driven primarily by continued merger related integration activities and increased professional service fees.

As a percentage of revenues corporate expenses declined quarter over quarter and we expect corporate expenses to stabilize as we move into 2017. For the quarter ended December 2016 Golden Entertainment reported net income of $10 million or $0.44 per diluted share compared to $23.4 million or $1.06 per diluted share in a prior year period.

Note that the results for 2015’s fourth quarter included a $23.6 million gain on the recovery of compared notes receivable, where there are results for 2016’s fourth quarter included $5.1 million income tax benefit related to release of some of our valuation allowance again our deferred tax assets.

We continue to benefit from our net operating loss carry forwards with approximately $76 million of NOLs at year which begin to expire in 2032. These will be applied against her future taxable income resulting in little to no cash income tax payments over the next several years.

Looking under balance sheet we had $46.9 million of cash and cash equivalents at year end, total debt outstanding of $185.7 million including $150 million at senior secured term loans and $30 million of revolver borrowing. As a result, the company's gross and net beverages at year end stood at $3.8 and $2.8 respectively.

The company’s senior secured term loans and revolving credit facility maturing July 2020 and our weighted average cost of borrowing is approximately 3.3% during 2016. Capital spending for the fourth quarter was $6.4 million which brought our total year capital expenditures to approximately $31 million.

As we look to 2017 we expect to fund capital expenditures of approximately $26 million as well as scheduled debt amortization of $12 million from our operating cash flows. As Blake mentioned, we continue to see healthy macroeconomic trends across our businesses with a particular strength in Nevada.

It’s important to note that our distributed gaming assets directly benefit from a healthy locals economy, which in turn is driving by construction activity, increased employment and strong visitation.

In summary, our company is well-positioned for successful 2017 as we plan to further leverage our portfolio of leading distributor gaming in casino assets, strong balance sheet and attractive the cost of capital to increase value for shareholders.

We expect to continue executing on our organic growth plan while evaluating additional M&A opportunities which could further increase our scale in both our distributed gaming and casino segments. We are optimistic about our future and look forward to another active year in building our business in existing and new markets.

That concludes our prepared remarks. Operator, please open the lines for questions..

[Operator Instructions] And our first question comes from the line of Chad Beynon with Macquarie. Your line is now open..

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[Operator Instructions] Our next question comes from the line of Patrick Schultz with SunTrust. Your line is now open..

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And our next question comes from the line of John DeCree with Union Gaming. Your line is now open..

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At this time there appear to be no further questions. I’d now like to turn the call back to Mr. Sartini for any closing remarks..

Thank you operator and thanks to everyone for joining us today. We will report updating everyone on our continued progress as we report our first quarter results in May. Thank you..

Ladies and gentlemen, thank you for participating in today’s conference. This does conclude the program and you may all disconnect. Everyone have a great day..