Julia Boguslawski - Chief Marketing Officer & EVP of IR David Lopez - CEO Kimo Akiona - CFO.

Steven Wieczynski - Stifel Chad Beynon - Macquarie Capital Carlo Santarelli - Deutsche Bank Barry Jonas - Bank of America David Katz - Jefferies.

Good day and welcome to the AGS Fourth Quarter and Year End 2017 Earnings Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to AGS's Chief Marketing Officer and Executive Vice President of Investor Relations, Julia Boguslawski. Please go ahead..

Thank you, and good afternoon everyone. Welcome to AGS's fourth quarter and full year 2017 earnings conference call. With me today are David Lopez, CEO; and Kimo Akiona, CFO.

We posted a slide presentation reviewing our key operational and financial highlights for the fourth quarter and full year 2017 which can be found on our investor relations website, investors.playags.com. Now I will quickly cover the Safe Harbor.

Today's call is to provide you with information regarding our fourth quarter and full year 2017 performance, in addition to our financial outlook. This conference call includes forward-looking statements.

Any statements that refer to expectations, projections or other characterizations of future events including financial projections or future market conditions is a forward-looking statement based on assumptions today.

Actual results may differ materially from those expressed in these forward-looking statements and we make no obligation update our disclosures.

For more information about factors that may cause actual results to differ materially from forward-looking statements, please refer to the earnings release that we issued today, as well as risks described in our annual report on Form 10-K and our perspective stated January 25, 2018, particularly in the section of these documents titled Risk Factors.

Our commentary today will also include non-GAAP financial measures. We believe that the use of these non-GAAP financial measures provides an additional tool for investors to use in evaluating ongoing operating results and trends.

These measures should not be considered in isolation from, or as a substitute for financial information prepared in accordance with GAAP, reconciliations between GAAP, and non-GAAP metrics for our reported results can be found in our earnings release issued today. Please refer to our filings with the SEC for more information.

With that, I'd like to turn the call over to David Lopez..

Hello, everyone and welcome to our first earnings call since going public on January 26, 2018. For those using the slide deck, please turn to Slide 2. I'll start by providing a brief overview of our fourth quarter and the fiscal year 2017 operational highlights along with an update on some of our strategic initiatives.

I'll close out with a longer term view of our business outlook and growth drivers filed by review of some annual guidance metrics.

I'm pleased to announce that both, the fourth quarter and the year were punctuated by records across in nearly every key performance category; revenue, EBITDA, recurring revenue, EGM and table units to name a few, all soared to new highs.

Slide 2 shows that Q4 revenue of approximately $57.7 million was up 35% year-over-year and adjusted EBITDA grew to approximately $26.4 million, up 20% over last year. Although we achieved record sales revenue in the fourth quarter, I'm pleased to report that we also achieved record recurring revenue of $45.2 million which grew 20% year-over-year.

These double-digit gains and revenue in EBITDA were underscored by the continued performance of our core ICON cabinet, the tremendous growth of our premium Orion Portrait cabinet, and the inclusion of the Rocket Gaming and In Bet assets from our strategic acquisitions in the second half of the year.

For the full year 2017, total revenue grew 27% year-over-year to $212 million of which 80% was recurring. Adjusted EBITDA of approximately $107 million grew 25% year-over-year.

We're proud of our performance in 2017 and in the fourth quarter ending an eventful year where we achieved many major milestones which are listed on Slide 3 and include the launch of our most successful product to-date, the Orion Portrait cabinet in the first quarter which received several industry awards for innovation.

Our corporate culture was recognized at a national level for making AGS one of the best and brightest places to work. AGS achieved over 5% chip share in the second half of the year according to the [indiscernible]. We ended 2017 with a record 2,565 sold EGMs which is over 5x of what we sold in fiscal 2016.

And finally, we've broken the positive EBITDA territory with two emerging business, tables and interactive in Q4 and in December respectively.

In addition to the 2017 milestones I mentioned, we started 2018 with a bang, completing a successful initial public offering followed by immediately repricing our term loan to save over $6 million in interest expense annually.

Our focus has always been to grow this company in a sustainable and responsible way and we continue to execute on our strategic growth initiatives to drive long-term value creation for our new shareholders. With that, I'll now provide an update on our segment performance for the quarter.

Turning to our EGM segment on Slide 4, we ended the year with a total recurring EGM base of 23,805 units, up 14% year-over-year. Approximately 1,800 recurring units were added in the fourth quarter driven largely by the acquisition of Rocket Gaming's Class 2 footprint of approximately 1,500 gains.

Nearly $4.4 million of 2017's recurring revenue came from our yield optimization efforts to-date. In addition, we upgraded 1,600 of our legacy machines in the field this year with our latest high performing products.

This initiative serves to grow the recurring revenue on these units and protect our base, as well as support our loyal long-term customers by providing them with more profitable products. We sold approximately 700 EGMs for a total of $12.4 million in the sales revenue for quarter, up 150% over the prior year period.

What's most notable about the 700 units is that it wasn't one or two sizeable orders that drove volume; the largest sales order to a single property was for just 28 units. That's why when people ask me, where are you placing EGMs, my answer is just about everywhere and this quarter is a great example of that.

We placed ICON's and Orion's in California, Nevada, Louisiana, Mississippi, Arizona, Indiana and Iowa to name more than a few. Roughly 60% of the sold units were Orion Portrait and the rest were mostly ICONs. EGM performances headlined by Orion and we see no signs at the moment to slow them down.

It's still such a new product for us and has plenty of runways ahead in 2018 and beyond. As of Q4, we had more than 1,900 Orion Portrait's installed with roughly 40% sold, 48% on lease and 12% on trial. Average performance has been over 2x house average, and we are consistently installing a significant number of these games every week.

River Dragons and Funa-Funu [ph] are two of our top performers on Orion and additional Xtreme Jack flat titles have been off to a really good start including Fireball, Xtreme Jackpots and Gold Dragon, Red Dragon and Xtreme Jackpots.

We feel that the best content is yet to come and our plan is to launch around 15 titles into the market this year for Orion Portrait. The Q4 online survey highlighted AGS's casino owned game performance at 1.8x house average leading the non-Big 4 and all suppliers.

Our leased game performance stayed above 2x house average taking the second spot after aristocrat. And target predict exactly how we think will fare the rest of the year on these surveys but I can tell you that we continue to put out high performing content that should help us maintain one of the top positions in both of these categories.

Moving to our Cable segment on Slide 5; in the fourth quarter we reached an important milestone in our cable game business by achieving positive EBITDA and a large part due to the recognizing a full quarter of contributions from the In Bet assets that we acquired in October.

Revenue had a new high of $1.6 million in the quarter with nearly 100% of that being recurring and the In Bet assets contributed about 40% in the total. Units declined to new highs with approximately 2,400 different table products in the marketplace ranging from premiums games, side bets, progressives and table signage.

Buster Blackjack and Bonus Spin were the largest installed contributors in the fourth quarter in addition to chase the flush and dye block showing good traction. We've been making the progress, integrating all the In Bet assets and are starting the market Super 4, Royal 9, Blackjack Match and Jackpot Blackjack.

Just yesterday we received GOI approval to play stacks in multiple jurisdictions. Stacks is our newly launched 5-level progressive jackpot system with an innovative must hit by progressive that has been very popular and widely adoptive feature on slots for many years.

This product just received Casino Journals Top 20 Most Innovative Gaming Technology Product Awards for 2017. Like tables we also turn the corner in our interactive system becoming EBITDA positive in December and reporting significant EBITDA improvement in fiscal 2017 compared to 2016 as you can see on Slide 6.

We reported $1.9 million in revenue in the quarter which was all recurring and which was up 2% year-over-year, as well as nearly breakeven EBITDA up approximately 90% year-over-year. The main driver of our Q4 results were the continued stability of B2C revenue even in the phase of optimizing marketing spend as we expand our B2B business.

Ad revenue is strong in Q4 benefiting from seasonality with the spike in holiday [ph]. Average revenue per daily active user or ARPDAU increased by 10% to $0.54 in Q4 due to marketing optimization efforts and increased attention on player engagement and retention.

New online slots launched in the quarter including Great Gorilla, Buffalo Jackpots and Golden Guard [ph]. In addition, we continue to have fruitful meetings with many of our existing LAN-based customers who have a significant AGS presence on their floors and are looking for social casino solutions.

With the level of interest we are seeing and the overall sales activity, we believe we have a few agreements in the works that will materialize throughout the year. With that, I will now hand over the call to Kimo for a discussion of our financial results..

Thanks, David and good afternoon, everyone. As David noted earlier, our results for the quarter and full year were impressive and Slide 12 in the appendix provide a comprehensive operational summary.

For the fourth quarter 2017, total revenues were up 35% to $57.7 million of which $54.1 million were from EGMs, $1.6 million from table products and $1.9 million from interactive.

The increase in revenues were fuelled primarily by a substantial increase in EGM equipment sales and increase in our EGM installed base, as well as an increase in our domestic revenue per day or RPD.

Revenue for the fourth quarter also included approximately $1.1 million of EGM recurring revenue from our recent Rocket Gaming assets acquisition that was completed on December 6, as well as $0.7 million of table products recurring revenue from our In Bet acquisition that was completed back in August.

Total adjusted EBITDA for the fourth quarter 2017 increased $4.3 million or 20% to $26.4 million.

The increase was primarily from our EGM segment that increased $3.3 million on increased revenues, both table products and interactive also increased by $0.5 million each on increased revenue in the table product segment and optimized user acquisition spend for interactive.

Total adjusted EBITDA margin for the four quarter of 2017 was 46% compared to 52% in the prior year period. The decrease is primarily due to the timing of the annual G2E Show which took place in the fourth quarter during 2017 as opposed to the third quarter during 2016.

As well as the increase in EGM equipment sales revenue which carries a lower margin than our leasing business. The fourth quarter capped off a record year for AGS with total revenues up $212 million that grew $45.1 million or 27% year-over-year.

Similar to the fourth quarter, revenues increased due to substantial increase in EGM equipment sales and increase in our EGM installed base and our domestic RPD, and an increase in table product revenues. For the year, total adjusted EBITDA was a record at $106.8 million that increased $21.5 million or 25% year-over-year.

The increase in total adjusted EBITDA for the year was primarily attributable to the EGM segments growth in revenues, table product revenue growth, as well as optimized user acquisition spend in interactive.

For the year, total adjusted EBITDA margin was 50% for 2017 as compared to 51% in 2016, the decrease is attributable to the large increase in EGM equipment sales revenue which carries lower margins than our leasing business. Turning to our EGM segment; gaming operations revenue increased 19% in the fourth quarter to a record $41.7 million.

The year-over-year increase primarily reflects a larger domestic installed base that grew by over 2,000 units or 15.2%. Approximately 1,500 of the unit increase was from the Rocket Gaming asset acquisition, and the remaining organic increase was led by increases in Texas, Nevada, Florida and California.

Domestic RPD for the fourth quarter also increased by 10.4% to $25.88 compared to the fourth quarter of 2016 driven primarily by our optimization initiative, as well as the roll out of our new premium Orion Portrait cabinet.

Our international installed base also grew by over 800 units or 12% year-over-year contributing to the growth in revenue which was offset slightly by $0.15 or 2% decrease in our international RPD. Revenues from our EGM equipment sales grew $7.4 million or 148% to $12.4 million for the fourth quarter of 2017.

We sold 697 units at an average sales price of $17,650 compared to 260 units sold in the fourth quarter of last year at an average sales price of $15,100.

Unit sales increased due to the continued success of our ICON cabinet, as well as our newly released premium Orion Portrait cabinet and represents our continued success at penetrating the Class 3 market in which many customers prefer to buy rather than lease EGMs.

The increase in the average sales price was driven by the pricing of our premium Orion Portrait cabinet. On a quarterly sequential basis, unit sales were down 145 units or 17% as the third quarter represented our highest ever quarterly unit sales that included a significant sale to a single customer.

Now turning to table products; revenues increased nearly $1 million year-over-year primarily due to $0.7 million in revenues from our In Bet acquisition, as well as growth in both progressives and Side Bets.

The table product installed base increased by 900 units to 2,400 at the end of the quarter driven by approximately 500 In Bet units, as well as organic growth primarily in Side Bet, most notably, Buster Blackjack.

The fourth quarter saw the first quarter in which table product segment contributed positive EBITDA of nearly $0.2 million which was an increase of nearly $0.5 million year-over-year. For interactive, revenues remained relatively flat at $1.9 million for the quarter as we continue to optimize user acquisition spend in our B2C business.

This optimization initiative allowed us to achieve near breakeven EBITDA for the quarter. And as David mentioned previously, we are focused on leveraging our LAN-based relationships in order to grow our B2B business.

Moving to our capital structure update on Slide 7; total net debt which is a principal amount of total debt less cash and cash equivalents was $649 million as of December 31, 2017. During the fourth quarter 2017, we increased total debt by $65 million in additional term loans primarily to fund the acquisition of the Rocket Gaming assets.

And as a result of the IPO, the exercise in full of the underwriter's allotment option and the settlement of our [indiscernible] notes all subsequent to year end. Our pro forma total net debt decreased by $171 million to $478 million.

In February, we're also able to successfully reprice our first lean term loan from 550 basis points to 425 basis points over LIBOR which will reduce our annual cash interest expenses by over $6 million. Capital expenditures were approximately $14.6 million for the fourth quarter 2017 and $57.5 million for the full year.

The $57.5 million was comprised of $42.8 million for growth machine CapEx, $8.9 million for intangible CapEx, $4.9 million for corporate CapEx and $0.9 million for maintenance CapEx.

Moving forward, our capital allocation strategy will remain consistent as we continue to prioritize our free cash flow to pursue opportunities to grow our EGM installed base, optimize our existing EGM installed base, as well as invest in one of our key strategic advantages which is our R&D team.

And on a final note, due to tax reform we recorded a non-cash income tax benefit of $8.1 million in our income tax provision during the fourth quarter 2017. The income tax benefit primarily represents the revaluation of our deferred tax liabilities at the new 21% federal corporate tax rate that replaced the previous 35% federal corporate tax rate.

And as a reminder, we currently do not pay U.S. federal income cash taxes and tax reform helps to further extend this. With that, I will now turn the call back to David for closing remarks and to run through our high level expectations for 2018..

Thanks, Kimo. 2018 is already off to a great start and we feel very good about our levers for growth this year and beyond. I listed few of the high level as outlined on Slide 8. The first strategic initiative I'll talk about is continued penetration of the Orion Portrait cabinet and securing additional banks of ICON.

There are significant opportunity to increase penetration in Nevada, California, Mississippi, Louisiana, Maryland and New York to name a few. Slide 9 shows the markets that are still very early entry for us and based on our recent chip share numbers we have a lot of room to grow off of our 2% market share.

We plan to release 15 titles for Orion Portrait this year and feel that some of the best content is yet to come. Our continued investments in R&D including our new game development studio that opened in Sydney 6 months ago are vital to ensuring the long-term success of our current and future cabinet launches.

The second initiative is, new market entry for EGMs and table games. Just last month we reported that we received our license to place products in commercial casinos in Ohio [ph], in the next 90 days we should be making our first shipments of Orion, ICON and Big Red [ph] and we'll also plan to place some table products in Ohio within the year.

We are in the early stages of our Orion rollout in Ontario and expect to ramp mid-year. We're also currently going through an approval process in Alberta and believe these jurisdictions will be promising in 2018.

We feel good about getting our Massachusetts license this year and hopefully, our Pennsylvania and Colorado licenses sometime in the near future. Our sales team is telling us that we have pent up demand in all these markets given that people are much more familiar with the AGS story and products at this point.

The third initiative centers on new products to drive growth. Just 3 weeks ago, we went live at [indiscernible] with our new Orion Flint [ph] cabinet which you will see a picture off on Slide 8. This installed service is an internal field trial for us as we evaluate initial performance and we expect the full commercial launch will happen in May.

Orion Flint [ph] is a new configuration that builds off Orion's unique design in it's format fulfilling the fastest growing cabinet category on the floor. At 69-inches tall and 28-inches wide, the smart footprint and ideal sidelines enabled players to preview the rest of the floor.

We look forward to positioning this new offering as a core plus product which sits in between our core and premiums categories and plan to provide approximately 20 titles throughout 2018.

For tables, we believe growth drivers for the first half of the year will be distribution of our In Bet assets, as well as continued momentum from bonus spend and Buster Blackjack and more placements for Chase to Flush and Dye Block [ph].

Bonus spend will not only grow in new markets like New Jersey, Ohio, Connecticut and Mexico but we are seeing existing locations and their footprints like Golden Nugget and Fox Woods [ph].

For the second half of the year we look forward to the rollout of our highly anticipated desk as single bench card shuffler, we expect to submit the shuffler to various labs like GOI in Q2 for approval and then move into unit production.

Interest in stacks is extremely high for us with a planned launch in Nevada in early April followed by a subsequent push into additional jurisdictions. We believe our newly launched B2B interactive business will also drive growth in 2018.

We have several additional signed agreements in the works and we're working on integrating with other third-party content providers to provide more game options for our B2B customers. We are also currently developing our real money gaming strategy for 2018 execution, we believe this will drive opportunities towards the backend of 2018 and beyond.

For the final initiative for 2018 highlights our opportunities for international expansion. Just last month our video bingle [ph] cabinet touched ground in The Philippines. Later this month we expect that these initial units will make their debut at several local gambling halls.

Assuming market acceptance as positive, we believe that units will ramp in the second half of the year.

We were always selective about which international jurisdictions to enter and The Philippines made sense for us given the development of the lower cabinet for the potential Go Live to Brazil and because of participation model which helps drive further recurring revenue.

Speaking of Brazil, we received an update just last week on the status of the revised incentive bill which did not make it out committee; at this point installed but the process has not stopped.

There are still several avenues for approval that are being explored, it's apparent that there is considerable interest in Brazil for the legalization of regulated gaming but we will have to wait for the legislative process to play out.

If you turn to Slide 10, you will see that given the many opportunities across all segments that I just covered, we believe that we're in position in 2018 to produce between $124 million and $130 million in EBITDA.

Because of our many growth opportunities and the demand for our products specifically in EGMs, we believe the right way to think about annual CapEx is approximately $55 million to $60 million.

Our work during 2017 has proved that we are focused and have the right priorities and the right people in place to ensure the long-term success of the business.

We entered 2018 energized by the opportunities in front of us and excited to deliver against our plan for Class 3 market share gains, continued industry leading gain performance, and new market entries, as well as new product introductions.

The last thing before we move to Q&A; I want to thank all our new shareholders for their support and confidence in AGS, as well as the entire AGS team, all 570 employees around the globe who made 2017 an absolute historic year for us and are working to deliver an even better 2018. With that, we'll move to Q&A portion of the call..

[Operator Instructions] And your first question will come from Steven Wieczynski of Stifel. Please go ahead..

I don't know if this is for David or Kimo but when you look at the guidance for this year, it's not a huge huge spread from a $124 million to $130 million but I guess if you look at the midpoint there of $127 million, what would get you to the low end of that range, and then what would get you to the high end of that range and potentially even exceeding the high end of that range?.

So I think that the range is pretty reflective of our level of confidence. You know where all the analysts are and where we were before, the year started off very strong for us, we feel great about our visibility at the first half of the year. So I think that if things continue as expected, we'll be in that midpoint pretty comfortable.

The downside of that range, you're talking about $124 million; I think that's where some things would probably have to go back but the business -- comfortable with the business, comfortable with our performance, I'm very comfortable with the products that we have that we're releasing in the rest of the year and we have a lot to look forward to.

There is a lot of positives, I don't really see anything on the horizon that would really drive us to that low end but obviously, I can't predict the economy and things like that that could affect us..

I would just add to -- Steve, to your point on what could maybe drive it towards the higher end; we have some pretty significant new product launches this year, so depending on market acceptance of Orion and the Texas Shuffler, for example, those could be things that if they received really well could drive kind of further growth than we were anticipating..

So if I hear you right, if you guys came in at $124 million, you would be -- it sounds like you'd be pretty disappointed?.

I will be disappointed, that's fair to say Steve..

And then second question; I guess when you look to through the rest of 2018 and you talked about this a little bit Dave but when you looked through the rest of the year, what markets out there -- did you guys think you will see the most growth out off?.

Some interesting questions; we've been dissecting our last quarter and our last 6 months and sort of looking at the year ahead and really trying to say to ourselves, what is going to drive business first if we were to like choose a few jurisdictions.

And you know, I think that we'll pick the usual suspects, it's going to be California, it's going to be Nevada, it's going to Florida, it's going to be Texas; jurisdictions like that, we have Ohio opening up.

We have some -- we have great opportunities but if you look back and even in the prepared remarks, if you look how Q4 shook out, we're pretty diverse in the way we spread across all jurisdictions and casinos, I think the staff was in Q4 the largest sale we had to anyone customer, largest placement was like 28 units, be off by a couple there.

But the fact of the matter is it's really spread across the board and that's reflective -- if you look at sort of our wide space opportunity, we have great opportunities across the United States, Class 3 jurisdictions and we always say conservative growth in Class 2 but we see it, we see continued growth in Class 2, we always speak conservatively about that like it's going to be a very small number but we're comfortable with what we see on horizon there, and so I would hesitate to really pick any jurisdictions but I think it's going to be across the board for us we're having a lot of success, games are working everywhere..

The next question will come from Chad Beynon of Macquarie. Please go ahead..

I wanted to start with the backlog; I know in S1 you kind of laid out what was out there right now and in your prepared remarks you mentioned some of the Orion's that were on-trial.

I'm wondering if you're willing to give us an update on the backlog if you've able to replenish that? And then also in your guidance, if you assuming that there is any change for sale gains versus lease given that you're probably seeing slightly higher purchased gains versus least in Class 3 markets? Thanks..

I'll sort of start with the second half of the question which is, if you look at our mix we do see that things are shifting, especially in Class 3.

With the fact that we're deeper into that than we are into Class 2, we do see that shift, we talked about that on the road, I think we gave you like a 70-30 type mix; 70% of everything that goes out the door becomes an eventual sale, 30% sticks as a lease. We think we'll stay pretty consistent with that.

As long as the backlog goes, sort of staying away from specific numbers because I don't have them in front of me and I certainly don't want to wing it here on the call but backlog is strong, I think that it's robust, nothing has really changed there, if anything it's gotten stronger.

Again, the first half of the year -- I don't remember ever having this much visibility, forget about AGS, it's my 20th year in gaming, I don't remember having this much visibility as far as I've had -- as we have out on Horizon.

So I feel really good about the backlog, I feel really good about the products that releasing and I think Julia sort of pointed out something when Steve asked this question about we're pretty conservative on some of our new product launches and that's only going to be sort of icing on the cake for us on top of it.

So backlog is still strong, certainly no negative change there, I'd say it's stronger than it was when we're out on the road and I expect that to continue to build..

And then Kimo, if you could help us with interest expense, maybe just kind of a ballpark based on the refinancing -- kind of -- what you're projecting based on where your current yields are and the debt on the balance sheet; if you could help us with that for 2018?.

For interest expense, I would say you could look to it -- for it to be somewhere around the $40 million range or so, now we don't have the note-picking interest anymore, that's been settled, lowered our interest rate when we refinanced or repriced our term loans; so I'd say it be somewhere around there, that's what I would use.

And then, sorry, what was your second part to your question, Chad?.

That was $40 million for 2018, you kind of let out the CapEx.

And I just want to confirm this, you're not expecting to pay any cash taxes for 2018 or the upcoming years?.

Confirmed, yes. We do not expect for pay cash taxes..

The next question will be from Carlo Santarelli of Deutsche Bank. Please go ahead..

David, as you think about -- obviously, the recent Ohio approval, but you kind of lay out for folks maybe what's on the horizon next in terms of new potential jurisdictions and maybe talk a little bit about how you foresee the experience of going into a new state, how long it generally takes to kind of get up and running and ramped? And do you feel you have the scope in personnel right now to attack more markets aggressively, should you get a slew of approvals here over the next 4 to 6 quarters?.

So when I think about the new jurisdictions and what's coming online, again, probably back in the prepared remarks a little bit as we were probably lulling you sleep there with them, is that we're looking forward to a PA and Colorado approval, sometime relatively soon this year.

Massachusetts I guess comes later in the year, no predicting specifically when those come, I don't have a crystal ball, I wish I did on how these jurisdictions do their work but Ohio and the new jurisdictions -- we have pent-up demand, so it's not going to be something where we have to go in and introduce ourselves and really get them comfortable with the product, they've seen the product, they've seen us at the show, there are some of them have been to Las Vegas, seen it in the showroom.

The beauty is they get the -- all these guys get the [indiscernible] report and they see how we're performing there in our core games, in our premium games; so the demand is there both on the slot and the table side.

So we just look forward to getting those approvals and when we get them it just depends on the jurisdiction how long it really takes to get in the door but you're talking weeks to a couple of months to get in the door and actually place products but the demand is there, certainly it's going to be there in Pennsylvania, we know it's there in Ohio, Colorado has been waiting very patiently, the customers in these jurisdictions love the product, they can't wait to get it.

And I'm sorry, one more end to your question there?.

Yes, just in terms of sales personal etcetera; as these things come online, do you foresee having to kind of staff up or do you feel you're at a pretty comfortable place right now to take on more optionality I guess?.

So we really just added 2 to 3 people in the last like 90 days and honestly, we've been really fortunate.

I think we've been fortunate going way back when we picked up our Senior Vice President of Sales, Robert Parry a number of years ago and we continue to have good fortune, recruiting hard but also I think that the Company and the culture is sort of bringing people in the front door and we've just brought on a couple of rock stars that we're really excited about, they're just sort of were activated of the rock turf very recently, they hit the ground running, I'm excited about it.

Do we need to add what our philosophy has been, and I've talked about this on the road and I've talked about it what potential and existing shareholders as we add a sales person, we keep adding sales people, we monitor the team, we monitor commissions, we monitor productivity and if we see that we're -- we add another one and we keep doing that.

And I think not only do we have great sales people but now with Robert and others, we have great sales leadership that pay attention in these things and are really dialing it in..

The next question will be from Barry Jonas of Bank of America. Please go ahead..

First one, just on the guidance; is it fair to say from a seasonality perspective, you think it will be fairly even over the next four quarters? I think some of your larger peers have talked about backend loaded but maybe they have some larger company specific issues that you fortunately don't have?.

So what I would say is that we're rather smooth across the year with a little bit of choppiness, right. And we can predict some of the choppiness, we know that when some of our bigger customers come in with their orders, that it can create some chop in those numbers, we're relatively flat across the year as far as sales go.

I think Q4 is a decent proxy going forward for units but the bottom line is that when force free [ph] comes in and they come in the way they do, we know that creates a little bit of chop within our quarter but if you removed that from the scenario we're very consistent across the quarters..

Any update on discussions with the checkers [ph] about renewing that contract?.

Nothing specific at this time but we are active in those discussions, we've just -- our head of the slot -- our product division just had conversations most recently.

Again, as I said before and I think it's reinforced where our conversation is very confident of how that will be priced and what the terms will be, this is one of our greatest relationships and quite honestly they are one of our best partners in the world as far as the customer goes.

So we have no concerns there, we're very confident how that's going to go..

David, any general thoughts on the M&A environment; do you see some opportunities for more inorganic growth?.

So as far as M&A you're talking about?.

Yes..

It's organic or inorganic? I'm sorry. If you said inorganic growth, and I'm sorry Barry, we've lost you at this point. I'm going to go with inorganic growth and you're talking about M&A.

When we -- the way we look at M&A is sort of the way that Apollo [ph] has taught us to look at M&A for the last 4 years which is, if there is something out there in our space or very close to our space, we take a look, we do a lot of diligence, we've put a lot of time in.

We kissed all the fronts if you will, we're looking for footprints all the time. And I think for such great examples of where we've looked at deals, more than 3x or 4x or 5x and gone back and done the deals on iteration line 6. So it's a matter of discipline that we've look at everything.

At AGS, we do something I think that I've never done at any other company that I've worked at and we pretty much do tons of diligence, tons of research; it's got to meet the criteria for us, it's got to meet financial criteria, it has to meet the criteria of fit for the company, and then it just can't become a distraction, of course it can become a distraction to our current business and the huge growth opportunities that we have and of course, we monitor the culture, we look at cultures as we look at companies, as it's something that could sort of damage what is an egg -- it's our fragile egg of culture for the company.

We're very mindful of that when we look at M&A opportunities. I hope that answers the right question because I think he got lost on the line..

The next question will be from David Katz of Jefferies. Please go ahead..

You've covered a lot of topics and I just wanted to ask specifically about the Rocket acquisition. It certainly adds to the installed base but does it also present opportunity for increasing the win per day specifically on those units? And then I have a follow-up..

If you think about and you saw obviously, you're very aware and familiar with our roadshow deck and how we viewed our optimization opportunities and you're absolutely spot-on with your question, it's a great question.

Those units; we'll monitor them obviously like our own leased space because it's now our leased space but we believe they create really great opportunities for us to optimize and make that extra dollars per day if you will.

So where we put that into the offer; like we say we've got a team of nerds that analysis this every day, every week, they are all over it, they are great at what they do and so we'll just prioritize the ones that are doing, sort of below the levels that we want them to do, we optimize, we go in there, we put our new great content in and it all goes through the -- obviously all drives top and bottom line success for us..

And growth within Class 2; is it -- are you suggesting that you think there is incremental unit growth in expansion of the domestic Class 2 business or are you expecting to replace other Class 2 providers in markets where you already operating?.

So I think it's a little bit of everything, it's like what's it going to be? Is it going to be expansion in California; that could be one of the scenarios. Now I don't say expansion of units but maybe some California operators will look to flip some Class 3 to Class 2, that can create an opportunity for us.

Oklahoma continues to expand, it's not a dead market, it's still a bit of an emerging market, there is a lot of opportunities in Oklahoma, we believe we will get our fair share in Oklahoma.

We've had some success in Texas, that is Class 2 as well but across the board if you think about it -- do we steal some share from time to time, yes, maybe the case but I think it's more about expansion in Class 2 and potentially the conversions of some Class 3 to Class 2 in jurisdictions like California..

And just to add to David's point about some of that Class 2 expansion; we know a couple of different things with year that are coming online, so even with the checkers [ph] I think they have two or three expansions planned so that should give us an opportunity to add more units.

Also, I think [indiscernible] and then of course, we have the 4 wins opening this year; so we do have opportunities to grow that Class 2 footprint in addition to growing the recurring revenue through yield optimization as David mentioned..

We have 4 wins I think between our games and the Rocket Games we did between 13% and 14% of our share of that floor if you will which is pretty great, and that's pretty good considering our 2% market share we're obviously outstripping that considerably by a shift share.

And as you can see, depending on jurisdiction, we even beat our 5% shift share; so things are looking good. Thank you..

And ladies and gentlemen, this will conclude our question-and-answer session, as well as AGS's fourth quarter and year end 2017 earnings call. Thank you for attending today's session. At this time you may disconnect your lines..