Joe Jaffoni – Investor Relations Blake Sartini – Chairman, President and Chief Executive Officer Charles Protell – Chief Strategy Officer and Chief Financial Officer.

Chad Beynon – Macquarie David Katz – Jefferies John DeCree – Union Gaming.

Good day, ladies and gentlemen, and welcome to the Golden Entertainment Fourth Quarter 2017 Earnings Conference Call. At this time all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will be given at that time.

[Operator Instructions] As a reminder, this conference call is being recorded today, March 15. I would now like to turn the conference over to Joe Jaffoni, Investor Relations. Sir, you may begin..

Thank you very much, Takia, and good afternoon, everyone. By now everyone should have access to our fourth 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 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 or 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 description 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 measure is available on our fourth quarter 2017 earnings release. On the call today, we have Blake Sartini, the company's Chairman, President and Chief Executive Officer; and Charles Protell, the company's Chief Strategy Officer and Chief Financial Officer.

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

Blake?.

the remodel of 317 hotel rooms, a new gastro-brew food concept, which will be linked to an all new state-of-the-art race and sports book; a new casino view lounge, which will be one of the most unique experiences adjacent to a casino floor in all of Las Vegas; a remodeled and upgraded tower experience at the top of the tower on the observation deck and thrill ride levels, which will include a new bar along with fresh new finishes throughout spaces; exterior hardscape and landscape upgrades and improvements will also be made; a new state-of-the-art exterior signage package, which will include the tower and hotel high-rise, a new player reward center and a new VIP hotel registration area.

Phase II is slated to begin in Q1 of 2019 and include the remodel of 452 hotel rooms and suites, a new steak house, modest casino remodel creating a new look and feel while minimizing disruption to the current gaming floor, other aesthetic upgrades throughout the facility and all new Starbucks outlet.

Phase III will begin in 2020 and include our continuing room remodel program, including 364 rooms and suites; a noodle bar plus a new undifferentiated food hall concert; a remodel of the top of the world restaurant and lounge space; a complete refresh of the current showroom; and all new casino space, which we're calling our adrenaline concept, targeting a younger visitor demographic, included will be a new casino bar, all new and fresh retail outlets and a complete remodel of the area, which is in close proximity to the entrance and exit to the tower thrill rides.

The final phase will also include approximately 50,000 square feet of convention space to be added in the current mezzanine level of the facility.

As the project moves forward through the summer of 2021, we are faced the construction activity to minimize disruption to our current operations and to ensure that we continue to serve our guests at the highest level.

When complete, we will have remodel over 1,100 rooms or approximately one-half of our room base at the Stratosphere touch every part of the property inside and out and added new amenities, including convention space.

We expect our master plan development for the Stratosphere to generate a return on invested capital of approximately 15% to 20% when finished. In addition to the Stratosphere's existing footprint, we have the ability to develop approximately 16 acres of excess owned real estate surrounding the property.

We believe this also has enormous long-term potential for expansion, though this is not part of the initial master plan we are announcing today.

Complementing this exciting development opportunity within our portfolio, we currently have approximately 700,000 active players across our various rewards programs, which includes our rated distributed gaming players.

With patrons from our legacy properties becoming customers at our newest facilities, part of cultivating crossover play across all our properties will be the implementation of a single loyalty card program later this year.

Our casino and distributed gaming operations teams are currently working with key technology partners to install the needed infrastructure for this card. And our marketing teams are developing a highly compelling, value-added offering for all of our players.

Finally, our 2018 capital plan also includes the continued development for high-return, wholly-owned tavern platform as well add six new taverns this year, two of which have already opened, bringing our total portfolio to 63 traditional taverns here in Nevada.

Our branded taverns consistently generate high returns, and our investment in new locations complements our casino and distributed gaming offerings in Southern Nevada.

For our newer investors, our locations generally operate under the PT's Pub, PT's Gold, PT's Place, Sierra Gold and Sean Patrick's brands and typically offer 15 gaming devices along with a high-quality food and beverage experience.

These venues attract a strong mix of millennials and Gen X customers and we boast robust active customer database, which we believe will have the high adoption rate for our new one card program.

We remain confident that these local oriented gaming establishments provide Golden Entertainment with another very unique and substantial opportunity to benefit from the projected long-term growth of the Las Vegas market.

In closing, we're proud of our 2017 accomplishments and are committed to driving further growth in 2018 that will in turn further enhance value for our shareholders. With that I will turn the call over to Charles..

Thanks, Blake. Golden Entertainment generated fourth quarter net revenues of $184.3 million, up 75% year-over-year inclusive of 73 days of operations of American Casino assets, which we acquired on October 20th. On a same property basis, net revenue grew 2.4% when including the American properties on a combined basis for the entire quarter.

Adjusted EBITDA for the quarter was $29 million, up 139% year-over-year and rose 3.6% on a same property base.

To give you a sense of our current scale and the performance of our assets for the full year of 2017, net revenue grew 6.2% to $843 million when including American properties on a combined basis while adjusted EBITDA rose 13% to $158 million.

It's important to note that these combined numbers exclude the impact of our targeted $18 million of synergies, $14 million of which are already achieved and what we reflected in our 2018 financials as well as a half year impact of our swap tax reduction in Maryland implemented in July.

Like other operators, our Q4 financial results were impacted by the tragedy on October 1, primarily at the Stratosphere. We estimate this impact to be between $2 million to $3 million of Q1 EBITDA mostly based on the client on occupancy and room rate at the Stratosphere experienced in November and December.

As for our casinos in total, fourth quarter net revenue was $101.2 million, up over 300% from prior period due to the acquisition of American. Adjusted EBITDA of $28.8 million is also up significantly due to the acquisition.

Notably on the same facility basis, revenue and EBITDA for our casinos segment were up year-over-year by 2.4% and 9.9%, respectively, for the quarter. For our Nevada casinos during the fourth quarter, Aquarius, Decatur, Boulder and Pahrump also helped the revenue-adjusted EBITDA growth, which was partially offset by the softness of the Stratosphere.

Even so, our Nevada casinos grew at the same-store fourth quarter revenue and EBITDA by 2.4% and 7.6%, respectively. With poor weather on the East Coast, net revenues at Rocky Gap still grew 2.3% in the quarter to $15.5 million. While fourth quarter adjusted EBITDA grew 29.8% year-over-year to $4.2 million.

This reflected both the flow-through on the revenue growth as well as the slot tax reduction following our investment to purchase gaming devices previously owned by the State of Maryland. In our distributed gaming business, total net revenues during the fourth quarter were $82.9 million, a year-over-year increase of 2.1%.

Adjusted EBITDA of $11.1 million was down 3.1% from a year ago as growth in the Nevada distributed business was offset by weakness in Montana, which saw some of the impact from extreme cold in December as well as higher operating cost, primarily related to increased labor and opening of a new satellite office.

Net revenues from our Nevada distributed operation grew 2.3% in the quarter, $67.8 million, while adjusted EBITDA grew 2% year-over-year to $9.5 million. On Montana, we slightly improved net revenues to $15.1 million, generating $1.6 million of EBITDA, which reflected the items that I just mentioned.

We expect our Montana operations to recover in Q1 and are active in evaluating further opportunities to consolidate which we still see as a fragmented distributed gaming market in the state.

Looking at corporate and other expenses, in the fourth quarter, the impact to adjusted EBITDA from corporate was $10.9 million in the quarter compared to $4.8 million in the prior year, with the rise attributable to the American acquisition.

Near term, we expect our corporate expenses to run between $11 million and $12 million per quarter and then trend lower in the back half of the year as we realize our full level of synergies with the American transaction.

For the fourth quarter, we reported a net loss of $13.4 million or $0.53 per diluted share inclusive of higher interest expense related to our acquisition and a loss on extinguishment of debt compared to net income of $10 million or $0.44 per diluted share in the prior year period.

Moving into balance sheet, as of December, we have cash and cash equivalents of $91 million and total outstanding debt of approximately $1 billion, bringing our net leverage ratio to 5.2 times on a combined basis, inclusive of $18 million of synergies.

In January, we raised approximately $25 million as part of a marketed equity offering, further lowering our net leverage to five times. Our $100 million revolver remains undrawn.

Before we move on to Q&A, I want to provide some perspective on our full year 2018 outlook given the transformation and the scale of our business as a result of American acquisition. We expect full year 2018 consolidated adjusted EBITDA to be in the range of $184 million to $190 million, including the full run rate of targeted synergies.

As we execute on $80 million in planned capital expenditures over the course of 2018, including the first phase of our Stratosphere redevelopment plan that Blake outlined, we still expect to reduce our leverage, targeting 4.5 times to 4.75 times net leverage by year end.

Total 2018 capital expenditures, including maintenance CapEx of $20 million, Stratosphere renovations of $32 million, a new tavern and other capital projects of $28 million. In addition, we did not anticipate being a cash taxpayer this year.

In closing, the anticipated growth of our operating cash flow following American acquisition allows us to fund the investment on our existing portfolio, reduce leverage and preserve liquidity to pursue new strategic opportunities that can further enhance shareholder value. That concludes our prepared marks.

Operator, please open the line for questions..

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

Great thank you guys. Good afternoon..

Hi Chad..

Hi Chad..

Thanks for the color on the Stratosphere renovation. Just wanted to go on to a couple of details there. So the $100 million, you're certainly getting a pretty good bang for your buck given that you are touching 1,100 rooms.

Can you just run some math on what we think you can do with those ADRs given that there are $62? It feels like your 15% to 20% return might even be conservative, if you're able to increase these room rates where I think most expect and then there is obviously the rest of the projects that you kind of outlined and that sounds like you're going to get a good return there.

So I guess I'm not looking for you to already raise your – raise the bar, but could you just kind of help us think about how you're thinking about the returns? And maybe a little bit more detail on the hotel room side versus what this does to the overall property. Thank you..

Yes. Thanks, Chad, and it’s Charles. No, but I think that we could tend to agree with you in that regard when you look at what other people put out there in terms of their expected return on investment either in room or other mendates, But we view it as holistic project.

I think as we've stated many of the folks here on the phone and as you've seen in presentations we have on our website, our whole goal is to move up the ADR property can earn based on the investment, not only the rooms, but the amenities around it. So we think we can get to this – to the goals that we've outlined.

And I don't think that we want to comment on raising the target anymore as you said..

Okay. Completely understand. And then the casino business, for the fourth quarter, on a same-store basis, you noted that it was up 10% year-over-year even despite the $2 million to $3 million impact in Las Vegas. Can you help us think about flow-through, I guess, in the regional markets in Southern Nevada on the Strip and in Laughlin.

I think the back half of year, particularly in the regional markets, was quite strong, and it has started pretty strong in January.

Is there any reason why the flow-through shouldn't be as strong, I guess, in the first half of 2018 or 18% if the revenues continue to track what we've seen in the fourth quarter and the back half of the year?.

The answer is no. We expect the flow through to be the same..

Okay great.

And then the last one from me, just given that you will be occupied with this, you noted what your leverage – what you planned for your net leverage to be by year-end at 4.5 times to 4.75 times , if there are opportunities for tuck-in acquisitions on the distributed gaming side, do you still have the gunpowder to make some of these accretive acquisitions as they come along either in Nevada, Montana or something as attractive in Illinois?.

We do, and we've actually – we thought about our strategy around capital structure in terms of using the cash flow that's being generated by the portfolio to reinvest in the portfolio reduced leverage and keep dry powder in the form of excess cash in our revolver capacity to fund those type of tuck-in acquisitions we’re looking at..

Okay, thank you very much. Best of luck.

Thanks Chad..

Sure..

Thank you. [Operator Instructions] Our next question comes from the line of David Katz of Jefferies..

Hi good afternoon gentlemen. .

Hi David..

I wanted to just take that last issue a bit further in terms of where the boundaries are in terms of what you would consider in terms of strategic alternatives? I mean, you do have a transformative acquisition that's being integrated at this point.

What would be your tolerance on further acquisitions?.

So I mean, look the space is very active right now. You've seen from other announcements, I would echo from comments from others that there is certainly a lot of activity going on. We'll see if the paybacks narrow a bit and then maybe even more deals get announced in the future in the space.

But I would say, for us, we have the appetite to expand both within our casino business and our distributed gaming business, and we're seeing those opportunities in bite sizes for us that fit into parameters we've outlined.

As we've said to you in the past, from our perspective, we are not doing deals that are not going to be accretive to our shareholders, and we certainly aren't looking to increase the leverage. .

Got it.

And in terms of the technology investments that you're making and some of which you've outlined in the release and some of which we've discussed, can you just talk about the timing over which we can start to see some benefit and return and with ADR left, RevPar left from specifically the technology investments that you're making?.

Yes. As far as the one card system that Blake just outlined we expect by the end of the year to have that installed without the portfolio. So we'll be seeing the pickup of that in 2019 as we've integrated the plan from that perspective..

Got it. And one last one.

As much of the investment community may or may not have been through the Stratosphere in some time, thinking about how – what other tactics or strategies you have to attract attention to the property, which is not placed in the middle of the Strip, whatever other details you can share to that end, I think, would be helpful? And that's it from me. .

Yes David, I think as we mentioned in our prepared remarks, the development that is encroaching further and further north on the Las Vegas Strip, we feel, is going to benefit that property significantly in terms of both car and foot traffic and just simple visibility in terms of how close those projects are.

I think the tower speaks for itself in regards to the tallest building in west of the Mississippi, in fact. And it's an iconic building already from – visible from everywhere in the valley. What we're planning to do, as I said in my prepared remarks, is really kind of reposition that property to remain relevant over the next several decades, I guess.

With an upgrade to the exterior certainly, you'll see a big difference in the look and feel of the property from the exterior, including signage.

And the amenities that we will place within those – within the facility are designed to create are designed to create more of a resort experience for those staying in the 2,400 rooms, of which half will be upgraded at the end of this development process, along with other amenities we're adding.

So I mean, there is not going to be anything transformational in terms of what we're looking at other than programming that property from the exterior end to be much more appealing to people that are either traveling, staying or visiting in Las Vegas. .

Thanks..

Thank you. Our next question comes from the line of John DeCree of Union Gaming. Your line is now open..

Hey guys, how are you?.

Hi John..

Wanted to circle back to the renovation and then redevelopment plan of Stratosphere. I apologize if I missed this, Blake, in your prepared remarks.

But I was wondering if you could kind of give us kind of a time frame for when some of the renovated rooms come online over the next – do you expect that would be done in 2018 or will that flow into 2019, given that's a high ROI project? And just wanted to know if you guys had somewhat of a time line there?.

So in regards to the rooms specifically, we will have a portion of the rooms, give or take, three quarters of the rooms done probably around September, October time frame. So of the 317, we're talking about remodeling in 2018, three quarters of 317 total will be done for the year.

Approximately 75% of those will be done probably early Q3 and the remainder will be done at the end of the year. So the full impact of 317 rooms, you can count on it in 2019. But again we’ll have call it, 90 days of the rooms that will have been done over the summer.

Going forward, we plan to target the room models at the same times of the year to minimize disruption. The shoulder periods would be the summer and the end of the year of 2019, same in 2020. So there is a bit of a lag effect, but we're sensitive to the disruption. The property rent is currently a very high occupancy rate.

And we're sensitive to that as we reposition these rooms going forward..

Good, that’s helpful. Appreciate that. Wanted to, also, ask about the kind of leisure demand as it relates to Stratosphere. You've talked a little bit about how the Strip was impacted as a whole post October 1.

Was wondering if you guys have a sense, I know 1Q is a tough comp as well for lot of convention business through town last year, but if you guys have a sense on kind of how that leisure demand is coming back as it relates to the Stratosphere so far in 2018?.

Yes I think John it’s Charles. We saw the same impact that others did in January. And we saw that start to mitigate a bit in February. And March is looking to be even more on track. So we're optimistic about Q1, but we still show the same trends within the Stratosphere that others have on the Strip..

Helpful, thanks guys. That’s it from me. .

Thank you. I'm showing no further questions in queue at this time. I would like to turn the conference 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 our first quarter results in May..

Ladies and gentlemen, thank you for your participation in today's conference. This concludes today's program. You may now disconnect. Everyone have a great day..