William Pfund - Investor Relations Kevin Sheehan - Chief Executive Officer Mike Quartieri - Chief Financial Officer.

Barry Jonas - Bank of America Mike Malouf - Craig-Hallum Capital Michael Pace - JPMorgan Dan Politzer - JPMorgan Joe Stauff - Susquehanna.

Good day and welcome to Scientific Games Corporation Third Quarter 2017 Investor Conference Call and Webcast. [Operator Instructions] Please note this event is being recorded. I would like to turn the conference over to William Pfund, Investor Relations. Please go ahead, sir..

Thank you, Francesca. Good day, everyone. During today’s call, we will discuss our third quarter 2017 results and operating performance, followed by a question-and-answer period. With me this morning are Kevin Sheehan, Chief Executive Officer and Mike Quartieri, Chief Financial Officer.

Our call today will contain statements that include forward-looking statements under the Private Securities Litigation Reform Act of 1995. These statements involve certain risks and uncertainties that could cause actual results to differ materially from those discussed during the call.

For information regarding these risks and uncertainties, please refer to our earnings release issued late yesterday, the materials relating to this call posted on our website and our filings with the SEC, including our most recent annual report on Form 10-K filed on March 3, 2017 as well as subsequent reports filed with the SEC.

We also will discuss certain non-GAAP financial measures this morning. A description of each non-GAAP measure and a reconciliation of each non-GAAP measure to the most directly comparable GAAP measure can be found in our earnings press release as well as on our website.

As a reminder, this conference call is being recorded and a replay of this webcast and the accompanying materials will be archived in the Investors section of our website at scientificgames.com. Now, let me turn the call over to Kevin..

Thanks, Bill. Good day, everyone and thanks for joining us. Our third quarter results were very strong and marked our eighth consecutive quarter of year-over-year increases in both revenue and attributable EBITDA. Our team is achieving solid improvement in each of our business segments and our momentum continues to build.

It is truly gratifying to see how the team is driving performance and achieving consistency in delivering results. Let me share a few key highlights from each of our business segments that together delivered 7% top line growth.

In gaming, a major highlight was the exceptional strength of our replacement unit shipments, up 30% over the prior year’s and with an average selling price 5% above the prior year. This growth is more than offset by the impact in the quarter from fewer casino openings and expansions than a year ago.

I remind everyone that the third quarter is traditionally the company’s seasonally slow period for domestic unit shipments, and yet we shipped more units in the third quarter than the preceding quarter, which was a very strong quarter for us, as you’ll recall.

In gaming operations, we believe we have begun to stabilize the erosion in the installed base of wide area progressive, premium and daily fee participation gaming unit machines. On a quarterly sequential basis, the footprint increased by 105 units, which is the first sequential increase in more than 3 years.

We have significant work ahead of us with more of the older units on the casino floors to replace, but we have devoted significant management and creative talent to putting together a strategy and a product plan that will build momentum. Many of these products were showcased at the recent G2E show in Las Vegas.

At the show, we demonstrated a significant breadth and depth of innovative new products that will be launched in the year ahead to support our target of growing the overall category. These products were headlined by 3 James Bond themed games showcased in our new Gamefield 2.0, TwinStar J43 high-reels and TwinStar V75 cabinets.

Importantly, the feedback from our customers on the pipeline of new products is outstanding. In our lottery business, where we provide more than 70% of the U.S. instant games, we helped our U.S. customers grow retail sales in the third quarter by more than 6% year-over-year.

We did this by providing our customers with not only the broadest offering of these new games available but also innovative games, such as the WILLY WONKA GOLDEN TICKET. The GOLDEN TICKET game has been picked up by a total of 16 lottery states to-date, 12 of which having launched and became the highest indexing $10 game in half of those states.

We support our comprehensive product portfolio offering with a wide range of supporting services and advanced technology.

From an innovative new cashless retail payment solution to the preeminent technologies and services that advance our customers’ success through proprietary cooperative services program, offering a fully integrated instant products management program.

For those lotteries using our CSP services, our sales performance has meaningfully outpaced the industry’s per capita sales. More recently, we were awarded a 10-year contract with a 5-year renewal extension to provide the lottery system and technology for the Kansas Lottery that will replace a long-time competitor.

We won the contract, as with the Arizona contact a year ago, based on our advanced technologies and services. Our Interactive business, rapid sustained growth remains the name of the game.

By leveraging our large library of authentic gaming experiences, continually working to provide the best player experience and introducing new differentiated apps to expand our player audience, we achieved a 35% increase in revenue over the prior year period at our B2C social gaming business during the third quarter.

Now a real excitement is the upcoming acquisition of NYX Gaming. This acquisition is both strategic and financially compelling with it being accretive and leverage neutral in Year 1.

As we position Scientific Games to take advantage of the future digital transformation opportunities, NYX’s leading capabilities in digital platforms and sports betting is a perfect complement to our significant strength in digital content.

Following the transaction’s closing, Scientific Games will be ideally positioned to help our customers, whether they are lottery or gaming customers, take advantage of the new digital iLottery, iGaming or sports betting opportunities.

Overall, our strong third quarter performance is further evidence of the value provided through our organization-wide focus on innovation that develops player engaging content to drive customer revenue and technology-focused solutions that enhance customer productivity.

By focusing on innovation, differentiated products and helping our customers grow, we build the momentum and consistent performance that enable us to deliver the financial results, cash flow and deleveraging that our investor base wants. I’m confident that our future remains bright. Now let me turn the call over to Mike..

Thanks, Kevin. Good day, everyone. As Kevin noted, our results were strong and our momentum is continuing to build. Consolidated revenue increased 7% and attributable EBITDA rose 10%. Importantly, we experienced growth and improvement in each of our business segments.

Our year-over-year margin improvement resulted from a more profitable mix of revenue, improving business processes and by remaining disciplined in our cost management. Now, let me turn to our operating segments.

First, our Gaming business, revenue grew by $6 million over the prior year despite no major new casino openings compared with several in the prior year.

The AEBITDA margin improved to 48.7%, a 190 basis point improvement over the year ago quarter, and as a result, segment AEBITDA increased by $11 million, reflecting the improved margin and higher revenue. Table products revenue experienced double-digit growth during the third quarter, up 11% year-over-year.

The increase reflected both organic growth due to a revenue increase from our installed base of shufflers, proprietary table games and other table products as well as a benefit from the DEQ acquisition that was completed in Q1. Gaming Systems revenue was $62 million, up 8% from $58 million in the year-ago quarter.

The improvement largely reflected higher hardware sales of the new iVIEW 4 display unit. Revenue from gaming machine sales increased 2%, largely reflecting a 30% increase in U.S. and Canadian replacement units.

The increase of 899 units in replacement sales more than offset the lower level of shipments for new casino openings and expansions, which was down 493 units domestically. Overall, in the U.S. and Canada, we shipped a total of 4,662 new gaming machines, including 3,932 replacement units, 251 units for casino expansions and 479 VGTs to Illinois.

The decline in international shipments to 2,940 from 3,938 a year ago primarily reflected a decrease in shipments to new casino openings. Only 30 units were shipped in this year’s third quarter compared to 949 units in the year-ago period. Also contributing to the revenue growth was a 5% increase in the average selling price for the quarter.

And our used-game sales revenue increased, reflecting a convert to sale of VLT units in Maryland.

This favorable performance reflects the breadth of our innovative content portfolio and the strength of the TwinStar family of cabinets, particularly the strong performance being generated on casino floors by the games on the TwinStar J43 cabinet along with continued solid sales of Pro Waves, Dualos and other platforms.

While we expect continued favorable year-over-year performance in replacement units in what we expect to be a seasonally strong fourth quarter, I would note, just as a reminder to everyone, that the fourth quarter last year included 1,633 units globally for new casino openings while this year is expected to include shipments only to the Montreign Casino in the New York Catskills.

In gaming operations revenue, revenue was down 4% year-over-year and about 1% on a quarter sequential basis. Although the installed base of wide area progressive, premium and daily fee participation gaming machines was down 602 units year-over-year, the installed base increased by 105 units on a quarter sequential basis.

While we view this stabilization in the installed base, it does represent the first sequential unit increase since the acquisition of Bally.

We are still experiencing a relatively high level of churn in the installed base from older units being retired even as we continue to install more of the innovative new Gamescape cabinets as well as other new participation game content.

And at the recent G2E show in early October, we showcased a deep pipeline of new participation games to be launched during the next 12 months to build on this momentum through 2018, including the 3 James Bond themed games that headlined our booth, as Kevin noted.

The daily revenue per unit per WAP, premium and daily fee participation units was essentially flat year-over-year. The footprint of other participation and leased units increased 805 units year-over-year, driven by additional VLTs in New York gaming facilities and the ongoing rollout of VLTs in Greece.

On a quarter sequential basis these expansionary factors were largely offset by a decline resulting from the convert to sale of VLTs in Maryland.

As you recall that, when casinos first opened in Maryland, they were not allowed to purchase their gaming machines, it was only later that the laws were changed to enable casinos to directly purchase gaming machines, including a convert to sale of the units already on their floors.

Year-over-year, daily revenue declined $0.67 per unit and $0.30 on a quarter sequential basis, largely reflects the impact from the lower yield in VLTs in Greece. Turning to lottery, our revenue increased $16 million or 9%.

Segment AEBITDA was up 15% compared to the year ago quarter, reflecting the strength of the revenue as well as a more profitable revenue mix and lower operating costs. Instant game revenue grew 3% globally. An $8 million or 9% revenue increase in the U.S.

was partially offset by a $4 million or 10% revenue decrease in international markets, primarily reflecting the timing of new game launches in certain countries. The solid U.S. growth included higher year-over-year sales of licensed games, partly reflecting revenue related to the multi-state WILLY WONKA GOLDEN TICKET instant game.

Year-over-year, services revenue increased, primarily reflecting higher multi-state revenues in the U.S. due to a large Powerball jackpot that occurred in the third quarter compared to a year ago. Concerning this year’s hurricane storm activity, lottery retail sales were impacted in Texas, Florida and Puerto Rico during the third quarter.

We estimate the total impact from hurricane-related impact within the lottery segment at approximately $1 million of loss to AEBITDA in the third quarter. To put that in perspective, that’s essentially offset the benefit of the large Powerball jackpot during the quarter.

There are still serious difficulties facing Puerto Rico as well as an impact on the performance of VLT gaming machines across the Caribbean. We are still working hard to mitigate the impact in what we believe will still be the seasonally strongest quarter overall.

Turning to our Interactive segment, revenue continued to grow rapidly, driven by ongoing strong momentum in our B2C social gaming business. Segment revenue increased 31% year-over-year to $111 million, and segment AEBITDA increased 71%, reflecting year-over-year margin expansion.

We continue to execute on our strategies that leverage our extensive library of gaming IP and content to deliver rapid top line growth in a healthy and growing overall marketplace. As a result, our B2C social gaming business revenue was up 35% year-over-year.

Strong contributions to our results were posted in our more established apps, such as Jackpot Party Social Casino and Quick Hit Slot as well as our newest app, 88 Fortunes, that was launched in the first quarter of 2017.

Additionally, we are pleased by the growth already being achieved with the Bingo Showdown mobile game app that was acquired as part of the Spicerack Media acquisition in the second quarter of 2017. The addition of the social Bingo app is highly complementary to our existing game portfolio and we continue to expect good things in the future.

Turning to cash flow and the balance sheet, operating cash flow at $110 million was down $41 million from the prior year.

Our earnings performance improved dramatically as incremental net earnings adjusted for non-cash adjustments doubled year-over-year to $127 million from $62 million a year ago but was more than offset by unfavorable changes in the timing of working capital accounts that totaled $107 million.

These changes included a $37 million increase in accounts receivable, which largely reflecting a growth in our revenue this year as well as a sizable cash receipt in the prior year quarter of several previous quarter sales activity related to our Northstar Illinois joint venture; $30 million related to the timing of interest payments, largely due to the timing and favorable refinancing of our term loans; $30 million in timing related just to overall vendor payments, whether that’s through AP or prepaid and a $19 million improvement in inventory.

On a year-to-year basis, through September 30, 2017, we have achieved $138 million reduction in net debt, but that’s only part of the story on a run-rate basis.

During the same period, we also incurred about $52 million in costs primarily related to our refinancing activities to lower our future interest costs and paid approximately $58 million for the accretive tuck-in acquisitions that are enhancing our cash flows.

As a result of our operating improvements, our growth and our ongoing focus on de-leveraging, our net debt leverage at September quarter end declined to 6.7x trailing 12-month AEBITDA, down from 7.4x in the year ago period.

Before taking questions, I would remind everyone that our commitment remains focused on executing operating improvements and capitalizing on smart opportunities that grow our business and reduce our leverage. Now, let’s take our first question. Operator, please open up the lines..

[Operator Instructions] The first question comes from Barry Jonas of Bank of America. Please go ahead..

Great. Hi, guys. You saw another quarter of really strong replacement unit growth, which was ahead of our expectations as this is typically a slower quarter. Recognizing you are the first to report, I am wondering if you have any thoughts on how much of this is from share gains, overall market growth or maybe just some pull-forward on Q4? Thanks..

Yes, I would say – none of it is pull-forward of Q4. That’s very important to me is that we let our quarters fallout naturally. As you may know, in years past, maybe that wasn’t the case, but I would say that it’s the product portfolio we have and I don’t want to talk about share – market share, because that’s never a winning thing.

I think if you look back to when the acquisitions took place our natural share was probably quite a bit higher than where we are today. So, our goal is to just to, over time, reprove ourselves in the market that we have this broad portfolio of very exciting product offerings. And you’re right. It was a 30% natural year-over-year increase.

I wouldn’t suspect anyone else would have that kind of an increase, but I hope they do because that would mean the industry is very healthy. And then, I think, the other big important point was the 5% year-over-year growth on the pricing. So that was the strong momentum as well, and some of that was the mix of some of the machines.

Our growth is driven by the continuing ongoing strong performance of the pro WAVE and the increasing shipments of the newer TwinStar family of cabinets.

And our outlook for the market is it’s kind of – the market is quieter going forward, up a bit, but we think that, that leaves us a little bit of room to prove ourselves as we continue on that journey.

Does that cover enough for you?.

Yes, that’s great. Thanks.

And then just one other question, can you give us an update on the Italian scratch and win contract renewal? I guess, could we see any changes in the current structure with both, one, the government and then two, with your JV partners? And then lastly, how are you thinking about financing your portion of a license fee? Thanks..

Yes. So, this is an interesting development that we think is a very big positive for us that the Italian government issued a decree calling for a 9-year renewal of the concession. So we have to wait through that 60-day period. And under that decree and the way it would be structured, we would be just renewing based on the same terms that we have today.

As far as the cash, I think the way I look at it is that, this is the incentive to trying to drive this now is that it puts some cash in the Italian government earlier – about a year earlier than they otherwise would be getting it. So, that’s what’s driving it, which is a good thing.

And as far as our company and I think when you listen to Mike’s comments, which was a very important one, I want to make sure he articulated the way he did was that our free cash flow was constrained by two very important things, we bought a bunch of tuck-in businesses that – each one, by the way, is doing better than our business case and we also paid to strengthen our prospective business on the income statement by taking out – or by making our interest rates more efficient.

So, those are all positive things. And then when you look at that for 9 months and you look at that cash flow, it’s significantly beyond anything, I think anyone expected from us in 2017.

And as we move forward, our game plan is the virtuous circle of driving the top line to enable us to have a little bit of premium up there and then a continuing journey on the cost side of the equation, because there is still opportunity – synergistic opportunities of bringing these big businesses together that gives us some runway for probably the next couple of years, to be honest, to buy the time to get through it all, which is a positive thing, because you are going to get a bid every quarter type thing.

And then that ultimately leads you to higher EBITDA and then disciplined management of that will enable us to have some strong cash flow prospectively as well. So, we intend to – obviously, you can’t look at it in a silo, because we have a variety of other things that we are using our cash for.

But at the end of the day, all of these activities are going to continue our journey. That 6.7x is still a level I am not happy with, but it’s probably a point below when I came and I think we want to get to that next – bring that number down into the next – to a 5 something in the foreseeable future.

And then I think you guys aren’t going to be talking about our cash flow as much, because we will be really a powerful company and keeping our razor focus on all of our business operations..

Yes, yes. Perfect. Well, thanks so much guys..

Thank you..

Take care..

The next question comes from Mike Malouf of Craig-Hallum Capital. Please go ahead..

Great.

Thanks for taking my questions and not to keep harping on cash flow, but can we just get – when you talk about the working capital changes that were sort of evident in this quarter, can you give us a little bit of insight as you move into the fourth quarter whether or not you think that these might actually reverse on it and that we could see actually quite a bit of cash flow relative to the third quarter coming into the fourth quarter? And then just as a quick follow-up on that, on your CapEx expectations, has there been any change given some of the acquisitions that you have done? Is there any change with regards to CapEx needs besides the Italian lottery contract that was already mentioned? Thanks..

Yes, I will start with your second question regarding CapEx. There is no change in the guidance that we are putting forth right now. The acquisitions we have made, as we said, have been really tuck-in acquisitions that are not CapEx intensive. So we’re still within that range that we provided previously.

In regard to the working capital, I think it’s a sizable change from a year ago, but I think the year ago had some specific items to it.

As I had mentioned, the $37 million decrease in receivables, which was really associated with the state of Illinois finally getting appropriations bill passed that then allowed them to pay us through the joint venture for our instant tickets that we had provided for a number of previous quarters for that.

So you got a large benefit last quarter – I should say, last quarter being Q3 of ‘16 and then the favorable refinancings that we have been able to have done has changed the dynamic of the timing of the accruals from interest payments perspective.

So you take those two things out, the rest of its just normal timing differences associated with what we experienced in the prior year..

And look, I was just going to say, there is still a little bit of a lesson learned here that in – as we continue down our path, we get a little bit of eyes wide open as to, are we doing enough to raise the focus on asset and liability management? So I think that’s one of the things that we’ve learned from this quarter, that hopefully we’ll manage a little bit better prospectively.

But I think with Mike’s comments, most of it was the one-offs that created the change..

Yes, I was going to add, if you look at each quarter throughout ‘17, we have had a relatively flat working capital. I mean, it’s been positive for the first two quarters. It’s a little negative in Q3. But on a year-to-date basis, with all the growth in the company, our net working capital is down $6 million.

So in general, I think we are keeping our focus on working capital throughout ‘17 and I don’t expect any material changes in Q4. The only, I think, wildcard that’s somewhat outside of our control is really around the timing of sales and the collection of receivables.

So if there is a heavy amount of sales in the last few weeks of December, obviously, with 30-day terms, you are not able to collect that funds within the period before the end of the year..

Okay, great. Thanks for the help..

You’re welcome..

The next question comes from Michael Pace of JPMorgan. Please go ahead..

Hi, thanks. Good morning.

Question for Kevin, I would love to hear your big picture thoughts on the NYX acquisition, how much of this was based on your belief of what happens with iGaming and sports betting or was that just the icing on top of the cake there? And then I would love to hear your view on how you think iGaming and sports betting plays out in the U.S.? Thank you..

Wow, that’s a complicated question, but let me take a shot at it. I have to tell you before as you guys know when I came into the company I had not had any industry experience. So I did receive from some of the – from some people some thoughts as to what they believe would be the next steps that we need to take and this is one of those steps.

It was on every list that I received coming in that was trying to be helpful. They would say, Kevin, this is where we need to be moving our business in the future.

And when you think about it, well, let me step back too and say, we looked at, I would say – I don’t want to say it, because I could be wrong by a couple, but up to 10 different companies in this space, and for a variety of reasons, one would be not interesting because – or the multiples would be ridiculous.

So at the end of the day, along comes this company, NYX, and it was like a perfect marriage by the way. And it’s funny because the CEO, Matt Davey, was saying to me at dinner one night, hey, Kevin, you guys were always the perfect marriage for us and we just hoped you came along when our stock was $10.

So you look at what we have with our products and our inventory of games and stuff like that, and then you look at what they have with the platforms, and you can see the art of the possible with that acquisition.

So to be able to buy that company, amazingly, at an accretive basis for us and as – on a credit-neutral basis like, what were we missing? So that’s why we went after this very long and hard. And they happened to have a couple of other exciting pieces to it with their sports betting platform. And this is a real business.

They took 2 billion bets last year. So we are getting a lot of stuff that when you look at the massive puzzle of what this company should be, there is a lot of pieces that fall into the future state here. And I am really excited.

And the team at NYX is made up of a bunch of overachievers, proven executives and we have a very similar entrepreneurial culture to us. So, I think it’s going to be a very, very successful tenure – well, will be a very successful tenure together.

And we are ready to start making inroads on the business as we tee this up to get to a closing hopefully at the top of the year..

Okay, maybe an easier one for you then. You recently won I guess a Kansas Lottery contract and I am curious why you think you guys won that? Were you the low-cost bid? Were there other reasons? And just to set signs of further things to come maybe in that business..

Yes. The two states that we referenced in the formal part of the call were both won and we were not the low bidder. I think we were the high bidder in one of them actually.

The way I think the success formula for the states is not to look at price solely because that’s a huge mistake, and if they do that, that hurts the industry, by the way, because we’ll all be fighting to get to the bottom of the heap.

The way they are looking at it, which I think is intellectually the right way to look at it, is to say, who can provide the best outcome, and what are the tools that enable us to get to that point? So with the Sci Games proposition, and when that gets rated against anyone else in the industry, we fare very, very well.

And that’s why we are winning many of these deals. It’s because of what we can do for their performance as opposed to what is the actual – just plain pricing kind of thing. So the sum of the parts together is a better outcome for the states because we drive the top line better and more effectively..

Thank you..

The next question comes from Dan Politzer of JPMorgan. Please go ahead..

Hey, good morning guys. Thanks for taking my questions. So first, I just want to touch on your gaming segment, where replacements were obviously up nicely around 30%.

What are your high level thoughts here as to where we are in the cycle? And I mean, have you noticed – is this a sustainable pickup? Is this widespread among your customers or is this being driven more by a single large buyer?.

Yes. I had said since I started here and I can be completely wrong by the way. When I looked at the industry, as again as somebody from the outside coming in, you saw that after – a couple of things, after the economic downturn and after the Caesars bankruptcy that they stopped investing at the levels they had been.

And then, when they stopped, in turn, other players stopped as well. So the average age of machines on the floor started to significantly increase. So to me, the opportunity here is that, as the economy, whether it’s benign or whatever it is, as we look forward, is an improvement. The employment rates are an improvement.

The economic outlook and the tax reform could be an improvement. The bankruptcy being complete and restarting them, that then, hopefully, improves and enhances the growth profile of the other guys. I don’t think it’s going to be a Herculean change, but I do think on the margin it’s going to help build what has been the rate of change in the past.

And when you think about that, I think that improves all of us as games suppliers for the foreseeable future, but not a big step up. I think it’s going to be a little bit better..

Okay.

And then just on kind of the customer mix is it pretty dispersed or is there any one buyer that’s really driving this V-shaped inflection?.

Yes. No, it’s funny, we thought that would come up us a question to say, oh my God, there is one person that is like 80% of the growth and it’s not. It’s really a healthy mix. And again, it really goes back to these great games that we are rolling out. And what happens is it’s word of mouth.

And when you have these games and Casino A puts them on the floor and then their spending goes up, then Casino B, C and D say, oh my God, I got to jump in and that’s what’s kind of spiriting this..

Got it.

And then turning to operations, your gaming ops side, could you just discuss the backlog there and how sustainable is one quarter? It’s one data point, but is there any discernible turn here as far as the stabilization?.

Yes. So I talked a little bit about this last quarter and it’s an important point.

And when the companies came together, Ballys and WMS and you saw what the expectations were and what ultimately happened, I suspect and I am not – I don’t have authoritative answers on this stuff, but the feeling I got is that the capital expenditure is probably skewed more towards selling machines.

And as you know, you sell one machine you make a lot of profit. You build a machine for the game ops you are getting a fee stream, to me, a critically important fee stream. But nevertheless, from around the acquisition date until we launch the Gamescape, there was no new platform. So, that’s really the opportunity we have.

And Gamescape, obviously, with first WILLY WONKA and then The Simpsons and as we field the – the right opportunity is we will rollout Seinfeld in the top of the year some time.

And the key thing is that continuing that opportunity is to get – and we have got 5 or 6 different platforms that we will be rolling out, some based on the James Bond Gamefield 2.0 and we are very excited that we are going to reclaim or move back towards our rightful share.

By not building for those 3 years, I think we did a little bit of damage to ourselves and I think this is something – hopefully, there is a lot of the old stuff that’s out there and as you know, the casinos are getting disciplined about that, but as we get through that and with the momentum of this new stuff coming, it will – it should dwarf the coming back of the old games, because we did really get hit with a very big number of machines this year coming back.

That was a little unexpected. But the good news is that the Gamescape is doing significantly better than what we thought as well, so it kind of muted each other.

But the look forward from the Kevin’s view of the world is that, we’ve got the right stuff coming and it’s going to be successful based on what we have seen from the G2E show and our feelings from the guys in the company that have been building machines.

There’s some really cool stuff coming, and if we had a lot of time, I’d talk to you about the next opportunities and getting new people onto the floor, which I think is something I’m very excited about that I think we’re going to continue to push for.

We have to remember who our current demographic is, but we’re missing a lot of people that could fall into that suit..

Okay, thanks for that.

And one last quick one, on your balance sheet, can you just give us a quick refresh on what optionality there is left as far as the 2022 tranches? What’s kind of the timeline there to refinance and how you are thinking about that?.

Are you talking about we have the 7% that we are obviously thoughtful about those things, can be taken out in the end of the year type thing and then our 10%, Mike could give you....

Yes, I mean I think we are going to be cautious and look at the market and take advantage of any opportunities that are available to us. The 7% become callable outside of the make-whole provision in January of ‘18 and the 10% are callable just outside of the make-whole provision in December of ‘18.

So we are going to watch the market and take advantage of opportunities as they present themselves..

Alright. Thanks so much, guys..

The next question comes from Joe Stauff of Susquehanna. Please go ahead, sir..

Okay. Thank you. Good morning, everyone. I just wanted maybe just to follow-up on some of the questions that were asked before and just specific ones that maybe I just wanted to add on for clarification. So on the demand, especially the strong demand for replacements and Kevin, you indicated that it was more broad versus chunky.

Is there any clarification you can give us of whether or not it was maybe more Vegas concentrated versus regionally? Is there any further commentary you can give us on that?.

It was really across the network..

Okay.

And the Italian lottery decision, obviously, it’s always difficult to anticipate government decisions, but is that largely a decision the Italian government in the 60-day period that will get you into kind of mid-December and then there would need to be a payment? Under the proposed terms, there would need to be a payment – a smaller payment made prior to year end?.

Yes, a ouple of points there. Yes, it’s in mid-December would be the date that the decree has to be approved and so that’s that 60-day period. And if that happens, then there is a – this is the opportunity to Italian government.

They would then have a small piece at the end of ‘17 and then a piece in ‘18 and the difference is that if they let it go and just go out for bids and blah, blah, blah, those economics wouldn’t come for at least a year further out. So, I suspect that’s part of the reason for this is to accelerate some of the cash for them..

Got it. And then….

And remember, we are just – yes, just we are renewing on the same. The intention would be the same sort of deal at least 20% active there..

Right. And that the expiration period would still run to 2019 and then renew for 9 years after that.

Is that accurate?.

Correct..

That’s correct, yes. And this is a long-term relationship that goes back to 2001..

Right, okay.

And then three quick ones, on the game ops side, is it your expectation that you would launch the James Bond game sometime, I guess, in later 2018?.

Well, our goal is to get it – this is my debate with my team that’s developing the games, so of course, you want to make sure that these first games are kick-ass, because as you start a new generation of stuff, you want to make sure you are off on your best foot.

So right now, where we are looking is toward the end of the second quarter and we are working towards trying to move that a bit forward towards the – somewhat closer to the beginning of the second quarter. So, it’s somewhere in the second quarter is where we see it today..

Okay. Thank you.

And then just on the NYX deal is it fair to assume that NYX will try to get their shareholder vote done before year end, obviously, that would kind of put you on a pathway to close this sometime in the first quarter?.

Yes and we are looking for early first quarter..

Okay, thanks a lot..

This concludes our question-and-answer session. I would like to thank you and to turn the conference back over to Kevin Sheehan for any closing remarks..

Yes, just guys, thanks for joining us today. We appreciate the support and the following. As you can tell, I am really highly energized by the progress we have made in the last year and excited by the significant opportunities ahead for us.

As we look to the remainder of ‘17 and into next year, we remain disciplined and focused on execution and executing our priorities. We continue to act smartly as we maintain focus on de-leveraging and in identifying additional opportunities that will generate incremental cash flows and value.

We look forward to updating you on the additional accomplishments and fourth quarter performance at our next conference call. Thanks and have a great day..

The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect..