Joe Jaffoni - IR Blake Sartini - Chairman, President and CEO Charles Protell - Chief Strategy Officer and CFO Ned Martin - Chief Administrative Officer.

Chad Beynon - Macquarie John DeCree - Union Gaming.

Good day, ladies and gentlemen and welcome to Golden Entertainment, Incorporated Third Quarter 2017 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded today, November 8, 2017. Now I'd like to introduce your host for today's conference Mr. Joe Jaffoni, Investor Relations.

Sir?.

Thank you very much James, and good afternoon, everyone. By now, everyone should have access to our third quarter 2017 earnings release, which can be found on the company's website at www.goldenent.com, under the Investors 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 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 risks 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. 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 measures is available in our third quarter 2017 earnings release.

On the call today, we have Blake Sartini, the Company's Chairman, President and Chief Executive Officer; Charles Protell, the Company's Chief Strategy Officer and Chief Financial Officer; Steve Arcana, the Company's Chief Operating Officer; and Ned Martin, the Company's Chief Administrative Officer.

Blake and Charles will provide some prepared remarks, after which we will open the call to your questions. With that, it's my pleasure to turn the call over to Blake Sartini.

Blake?.

Thank you, Joe and good afternoon, everyone. Welcome to our third quarter conference call.

Charles will review our quarterly numbers in more details shortly but I wanted to spend a few minutes at the beginning of the call giving you an update on our operations, as well as some additional color on our plans for integrating the American Casino & Entertainment Properties which we acquired on October 20.

On a macro level what we have said about the Las Vegas economy over the past several quarters remains true today. Even as the city and our businesses endured the shooting tragedy on 1 October, we remain confident in our positive outlook for the balance of this year and beyond.

Currently many resort operators are focused on reinvesting in our properties on the Las Vegas Strip, which we are also evaluating within our own properties.

In addition to the many construction projects we understand to be underway in Las Vegas just be getting resorts world product and the Las Vegas convention center expansion alone represent billions of new dollars of investment on the north end of Las Vegas Boulevard.

Further, the biggest Golden Knights NHL team has gotten off to a resounding start with a winning record and overflow attendance which we feel is only a preview of what will be our cities reception for the readers when they ultimately move here in 2020.

Our strong third quarter results reflect continued growth across Golden's portfolio of distributed gaming and casino businesses. We had very active quarter delivering consolidated and adjusted EBITDA growth of 20.1%. These results demonstrate our continued efforts to both diversify our business and bring greater efficiencies to outstanding operations.

During the third quarter our Nevada distributed gaming business continued its momentum driven by both the strength of the locals market and our success in actively managing our revenue mix towards more profitable wholly owned and valuable third-party locations.

Our new wholly owned taverns continue to perform very well representing an attractive opportunity to expand our Las Vegas presence as we steadily grow our portfolio. We opened our 57 branded tavern locations in September.

The fourth new location opened in 2017 and we remain on pace to open two additional new taverns by the end of year and expect to open our 60th tavern in early 2018.

In addition to our anticipated continued organic growth, we continue to see accretive opportunities for smaller distributed gaming acquisitions in Nevada building on our leading market share in the state.

To that point on November 1, we completed the acquisition of the smaller Las Vegas route operator with approximately 30 locations and 300 gaming devices. We expect the acquisition to add incremental EBITDA of approximately $2 million on a total investment multiple of less than two times.

These locations will required through a bankruptcy process highlighting the importance of gaining scale and distributed gaming, as well as our ability to continue to do so even in our home market here in Nevada.

Turning to Montana, our adjusted EBITDA margins continue to expand as we benefited from our two acquisitions in 2016 and delivered further operating efficiencies. Since entering the market last year we have set the stage for long-term growth by establishing a significant local platform to build additional scale and expand our state-wide presence.

We recently offered a new proprietary gain to our third-party locations that has initially shown higher win per unit performance then our current location averages.

We believe that this game could eventually become 10% to 15% of the approximately 3000 machine portfolio that we have in the state and meaningfully drive increased revenues from our existing and new locations.

Turning to our casino operations first in Pahrump we saw significant adjusted EBITDA improvement in the quarter as we completed efforts to right-size marketing expenditures while increasing market share.

We are encouraged by Pahrump's financial contributions to our portfolio for this quarter and see this performance continuing into the fourth quarter. In Maryland, our Rocky Gap casino resort again delivered another quarter of significant adjusted EBITDA growth.

As we noted on the second quarter call, we purchased a previously state-owned gaming devices on our casino floor on July 1 which resulted in a 10% reduction in our slot desk.

We continue to operate this property successfully in a competitive Maryland market and believe that Rocky Gaps superior resort amenities continue to create and reinforce customer base. Finally and most significantly, our $850 million acquisition of American Casino & Entertainment Properties was completed on October 20.

This transaction vastly increased the scale of our company and diversified our already unique portfolio of assets before properties we acquired the Stratosphere Tower casino and resort, the locals oriented Charlie's Decatur and Arizona Charlie's Boulder highlight and the market-leading Aquarius Casino and Resort in Laughlin all dramatically expand our footprint in Southern Nevada which I believe is the best gaming market in the country.

Our immediate focus is to successfully and efficiently integrate these properties with our existing operations and we are off to a great start. I want to thank all of our team members for their efforts which so far has resulted in a smooth ownership and operational transition and we look forward to the future of our newly combined company.

In closing, Golden Entertainment enters 2018 as a much larger and much more diverse organization which we believe positions us well for continue to increase shareholder value. With our unique asset diversity across distributing gaming and traditional casinos, I am excited to continue to execute on our strategies going forward.

With that I'll turn the call over to Charles..

Thanks Blake. Golden Entertainment generated net revenues of $108.3 million in the third quarter representing an increase of 3.9% over last year.

Adjusted EBITDA in the quarter was $15.1 million up 20.1% year-over-year and our distributed gaming business total net revenues during the third quarter were $80.7 million a year-over-year increase of 3.2% while adjusted EBITDA of $11.2 million was up 6.5% from a year ago as we primarily benefited from continued margin expansion of our Nevada operations.

Net revenue from our Nevada distributed operations grew 4% in the quarter to $65.7 million while adjusted EBITDA grew 7% year-over-year to $9.1 million. Our results demonstrate our continued adjustment in the portfolio mix towards more of our wholly-owned branded taverns and profitable third-party locations.

As Blake mentioned, we recently acquired a small route operator for total investment of approximately 3 million and we expect that these operations will immediately begin to contribute 2 million incremental annual EBITDA to our distributed gaming business.

In Montana, distributed gaming operations generated net revenues of $15.1 million and adjusted EBITDA of $2 million in the quarter as we improve margins throughout these operations after acquiring two separate Montana operators last year. Moving on to our casinos.

For the quarter net revenues were $27.5 million, a year-over-year increase of 6.1% while adjusted EBITDA at $8.9 million was up 37.1% over the prior year period. Property net revenue is 10.2% in the quarter to $8.7 million and grew adjusted EBITDA of 46.3% to $2.7 million.

As previously discussed in Pahrump we made adjustments to our marketing plan while increasing market share in the quarter. Net revenues at Rocky Gap grew 4.3% in the quarter to $18.8 million, while adjusted EBITDA grew 33.6% year-over-year to $6.3 million.

In addition to the continued overall growth in the Maryland market, our adjusted EBITDA results reflect the impact of the 10% slight tax reduction from the state we received in exchange for purchasing previously state-owned gaming devices.

Looking at corporates and other expenses in the third quarter impact to adjusted EBITDA from the corporate expense was up year-over-year to $5 million and in line with our expectations as we continue to scale up our business and growth.

For the third quarter, Golden Entertainment reported net income of $8.6 million or $0.36 per diluted share compared to $1.3 million or $0.06 per diluted share in the prior year period. As for our balance sheet at the end of the quarter we had $42.9 million of cash and cash equivalents and total debt outstanding of approximately $175 million.

Note in October we completed the refinancing of our existing credit facilities with the closing of our acquisition of American.

Based on our expected year-end pro forma combined EBITDA of approximately $180 million which includes pro forma synergies of $18 million and the estimated full year impact of the Maryland slot tax reduction anticipate pro forma net leverage to be approximately five times a year. That concludes our prepared remarks.

Operator, please open the line for questions..

[Operator Instructions] Our first question comes from Chad Beynon with Macquarie. Your line is open..

Thank you guys for taking my questions and the prepared remarks. Just wanted to start with American Casino obviously it's incredibly early and you talked about the focus is integrating the property obviously a lot going on in the market with respect to the shooting.

Can you just talk about cancellations what you've seen in the fourth quarter and anything just to kind of point out, I don't really want to start on that note but we had some questions from clients just on what the impact could be? Thanks..

Yes Chad. Obviously the horrific event on the first set affects on all of us, it is incredibly early as we took ownership of these properties in October. I will say that we have seen some near-term reconstruction if you will within - in particular the Stratosphere.

Other properties we haven't seen really anything but we're seeing that wane as the quarter goes on and we are very, very positive on the first quarter fully recovering next year. The event was unfortunate I think a lot of us dealing with the same issues..

And Chad I just would add to that so that kind of delay the suspense for everyone, we will be filing an 8-K tomorrow and currently with our quarterly numbers it will show the third quarter results who are American, the folks will have that.

As far as the fourth quarter goes, we're very confident that we will be at the $180 million in pro forma EBITDA that we've continued to advertise the consistency of that as you all know from having followed our investor presentations is approximately $103 million higher than American portfolio.

The business remains on track for that even through the results that we’re seeing through October..

On a more positive note on the quarter you had pretty significant flow through and margin expansion within the casino segment both in Pahrump and Rocky Gap.

Could you talk about if this is sustainable if you have any targeted goals for margins and if you're able to offset inflation in these regions given where unemployment and just some color around that would be helpful?.

Yes in Maryland the margin is certainly sustainable we think it is Nevada too but we’ll come to that in a second. I mean keep in mind that margin improvement is not only from the operations but there is the impact of slot tax reduction which is an impact in revenues but is impacting our margin.

So I would expect that margin to continue in the foreseeable future.

On Nevada Casino side our second quarter margin was impacted by some of the marketing strategies that we pursued at Pahrump and we feel that has been rectified and we see that based on the margins we have here and the continued growth in market share that we have for our locations that are in Pahrump.

So we're comfortable with these margins in the way that they are progressing looking forward to the end of year..

My last question is with respect to the Pennsylvania bill that was ratified, could you provide your view on some different parts of the bullet points that were in the bill how you see that and if you think it's an opportunity for you to expand your business into Pennsylvania?.

We think it’s a opportunity. I mean look we’re excited that distributed is now part of the discussion when it comes to gaming expansion in a major way.

So the truck stop pieces that is but obviously we’re most focused on from the expansion of our business on the distributed side and we intend to play a meaningful role on that and in this state and other potentially states..

[Operator Instructions] Our next question comes from John DeCree with Union Gaming. Your line is open..

I wanted to just briefly ask about the bolt-on acquisition that you had just talked about the small route operator in Nevada.

It’s relative to the size of the pro forma business now my team relatively small but these things can tend to add up over time and lot of discussion about you guys entering Pennsylvania and Illinois but at home in Nevada I was curious how much more of this type of stuff might be out there and how frequently an opportunity like this comes along if you'll be able to kind of keep adding a couple of these in the coming quarters or years?.

We think we will. I mean that’s opportunistic right it's a bit of function on what is that opportunity side and price. So Nevada for us is fairly unique, we obviously have a very large market share within the state and we have numerous avenues to grow then our open necessary to another jurisdiction.

What I mean by that is we’re vertically integrated here. So we have our tavern business, as well as our third-party location so wholly owned as well as third-party. We see opportunities across the spectrum from not only building our own new taverns but acquiring taverns, as well as in this case acquiring what was a third-party route operator.

So that is fairly unique to us based on our position I'd say across all of those opportunities we're usually the first call just based on our market-leading position.

So the benefit cost is that we should add very accretive EBITDA although it maybe medium smaller than the size of opportunities that we're focused on now with the portfolio and the acquisition of American.

But we still think that it’s important to highlight that even at 40 % plus market share in our home state here in Nevada we see opportunities for growth organic and inorganic..

So John I would just add quickly that the opportunity for that growth along with where Charles has outlined has been natural fragmentation of the route distributed business in terms of critical mass right in Nevada and Montana.

Most of these operations are smaller fragmented across the state which allows from I think more of these opportunities coming our way in the future given our scale of size..

That's make sense, that's helpful.

And to kind of jump over to Illinois, your license - relatively recently large BGT market I was wondering if you guys had any update or plans on how you might approach Illinois from here?.

We’re evaluating ways to participate in that market. We’re excited about it that the distributed gaming market is still growing and there are still opportunities to consolidate that market. So we’re excited about it but we are taking our time to evaluate the right entry point with the right opportunities in that jurisdiction and others..

I'm showing no further questions in queue. So I’d like to turn the call back over to Mr. Sartini for closing remarks..

Thank you, Operator, and thanks to everyone for joining us today. We look forward to updating everyone on our continued progress as we report fourth quarter results next March. Thank you..

Thank you. That does conclude today's conference. Thank you very much for your participation. You may all disconnect. Have a wonderful day..